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  1. 1. Sowing Prosperity Jai Jawan Jai Kisaan
  2. 2. Problemstatement Cause of the problemsBroad problem statements Even though, In India more than 80% of the farmers are small & marginal and Indian agriculture is highly whether dependant. It is not the only problem, the level of technology infusion is quite less in agriculture. Worsen the situation, farmers are doing suicides and young population is diverting away from agriculture. Surprising by the fact that more than 50% of Indian population is still indulge in agriculture but contributing 13%to the Indian economy, it has been sense that it would quite difficult for Indian agriculture to cater to the demand of exponentially rising Indian population. We chose this topic as we felt that current policies and systems can be better implemented to not only increase the performance of Indian agriculture but also reduces the vagaries of the monsoon over the sector Reason for selecting this topic Low rate of return due to small size of farms High wastage of the perishable and food grains due to inadequate storage facilities Lower access to the Credit among farmers High dependency of farmers on whether Even though more than 50% population is indulge in agriculture but the efficiency and wage are quite low Market failure in Agriculture(unbalance in supply and demand) •Lack of irrigation facilities •Lower accessibility of irrigation technology for the farmers (Similar to cause 1) •Information asymmetry regarding the wages in the market •Efficiency is low due to lack of infrastructure(Similar to cause 1) •Absence of proper identification of the target farmers •The complication in Government processes and time taken to avail the credit to farmers is quite high. Lack of infrastructure and storage technology •Lack of accessibility to the market •Lack of appropriate and timely information about the future demand • Externalities like subsides are creating market failure •Lack of technology is the main reason •Low involvement of private player in providing the technology to the farmers 1 2 3 4 5 6
  3. 3. Infusion of technology through the use of Leasing(mechanical inputs) and Microfinance model for non-mechanical(seeds, pesticides etc) inputs. Solution 1 Production technology in agriculture Non-mechanical technology like tractors, irrigation Mechanical technology like seeds, pesticide etch Infusion through the use of microfinance model Infusion by the use of financial leasing to a farmers group •The nationalize bank and Big equipment manufacturer will participate in this scheme as the risk will be shared and the credit will be in the form of financial leasing of equipment. For the microfinance in others inputs the existing vast network of microfinance system can be used. • Not only the amount of the loan to be distributed by Government will increase(targeted loan + loan distributed by bank)but also the numbers of the farmers benefitting from the loan will increase due to extensive network of the nationalized bank and manufacturer. • • Farmers access to the credit will increase as the large network of the microfinance and nationalized banks will be used in this system. • This system can prevent the farmers loans as political agenda as the credit will be in the form of financial lease where the ownership of instrument will be with the banks and Manufacturer equally. •This system will not be gender specific as women who indulge in agriculture can approach the bank for the loan. •This system can infuse the technology in the system as leasing and microfinance will be provide the equipment and credit to the farmers. •This system will be a group process, where huge exchange of knowledge among the farmers involved as group . Merits of Proposed solution Brief introduction – This system is inspire from the micro finance model which involved in the leasing of instruments(mechanisation of farm) and agriculture micro financing(non mechanical inputs) to a group of farmers. The system will served the dual purpose , it will increase the technology infusion in the system and will also help in risk mitigation for banks and manufacturer by sharing of the risk as the ownership will be retained to the banks and manufacturer . Ultimately this system will increase the role of private manufacturer (which is the owner of most of technology) which is currently missing in present system. This system will also increase the knowledge transfer among the group of farmers. •CurrentlyGovernment distribute the loan through the multiagency network consisting of Commercial Banks (CBs), Regional Rural Banks (RRBs) and Cooperatives. So the role of other nationalized banks are quite low due to higher risk in direct credit. •Through this system, in 2012-13, Government was able to distribute only 53% of the targeted loan(308025 out of 575000 targeted) •In the current system only 13% of the farmers have access to the credit. •Near election, during the financial year 2008-09,, the Government used loan as political agenda and gave the loan waiver for small and marginal farmers.The total amount estimated was716.8 billion rupees. • Current Indian microfinance industry is women specific as more than 90% of the members are women. • There are no Government scheme regarding technology infusion. For the technology specific loans, farmers are depends upon banks where banks ask for collateral. • In current system, many barriers will come into picture as only single farmer will involved in credit taking. • Interest rate are highly subsidies(7% initial and 4% if paid fully). Existing system Why not renting as an alternative sources – In renting there will be too much risk for manufacturing due absence of risk sharing mechanism. •The repairing and maintenance will be done by Manufacturer in renting while in leasing the repairing will be done by farmer leasing equipment. •Renting is for limited time and at the time of the need renting may be unable to fulfil the requirement but in Leasing, equipment will be available for whole year.
  4. 4. Implementation of solution • Use of mobile technology • Use of mass and print media like T.V • Use of direct communication like group interview • Awareness though the KVKs and agri research centre. • Use of existing network pvt. channels Awareness •Increase the ease in the process by less paper work • Incentivization of scheme through initial discounts in interest rate •Use of prevalent equipment brand known in particular area •Reduction in approachability barrier by going to farmer doorstep. •Help of NGO to mediate the farmers encouragement • Evaluate the acceptance of scheme among people • Evaluate the system for the availability & reach • Evaluate the system for leakage • Evaluate for the initial impact on productivity • Evaluate impact of barriers like disputes Evaluation • Provide the product to the farmers group • Provide them training for the product usage • Check for the authenticity of the farmers group • Ensure the timely delivery of the product • Lower the paper work to ensure quick deliver Purchase • Monitor the group for the regular meetings for the exchange of idea and collection of payments • Monitor them for the proper infusion of technology • Monitor the market for new technology in agri- sector • Monitor the impact of technology Monitor • Provide easy access to the services of the leased product • Make the services cost effective • Provide the incentive to the farmers making the timely payment of the product • Check for revising the option of re- leasing after completion of term After sale StepsinvolvedStakeholder Govt.mass media, channels, Kirishi Vigyan Kendra(KVKs), print media, Private channels Main stakeholder -NGO But Manufacturer, bank and Government, will also mediate this. It will be evaluate by the risk sharer Manufacturer, bank and Government Manufacturer and Government will involve here NGO, Government will involve here Manufacturer, Government will involve here Financialandhuman resource Assumptions – •Manufacture will include his operating cost, material cost and profitability in the final price •According to a system the cost of NGO per farmer group has been calculated as20000(for 8 years) •Effective interest rate will be 5%.(Normally 8% but in case of timely payment it will be 5%) •Government cost will be ( Normal interest rate (12%)- subsidized interest rate(5%) •The cost has been calculated as per group •Time take has been considered as 8 years •UseofKVKsto spreadthe knowledgeabout theproduct •UseofAgri- researchcentre, agriculture Universityto innovatenew technology •Existingmicro- financestructureto providecreditfor thenon-mechanical input •UseofDordarshan tospreadthe awarenessabout thescheme •Governmentcredit schemesfor agriculture •Existingcentral government schemesfor microfinance •StateGovt.funding agrischeme clubbedwiththis model •Nationalizedbank asapartofrisk sharingmechanism •Fundingfrom international resources •Fundingby microfinanceagencis Leveraginggovt .structure Funding Generalequipment(can beincreased)
  5. 5. Impactofsolution Increase in yield after technology infusion Accessibility(reach) of the system Number of farmers connected initially Increase in farmers’ no. enrolling for this scheme Satisfaction level of all stakeholders Used of underutilized capacity due to involvement of banks and manufacturer Use of existing channels of the banks and manufactures Utilization of waste land due to availing of technology Use of existing micro-finance channels for microfinance loan Connecting government credit scheme to increase the reach The interest rate charged can be used to invest further Rates of interest will be quite low so Govt. policy can be used to sustained it Funding from the foreign institution can be used here Some profit sharing mechanism of sharing the profitability with farmers Risk sharing among Govt, manufacturer, banks and farmers NGO mediated group leasing Regular meeting of farmers group Feedback system from all stakeholder(monitoring of satisfaction) GPS system in the Leased instrument Regular payments will be kind of monitoring system • Due to technology infusion the yield will increase Yield increase • No NPA for banks • Manufacturer risk reduction by indulging in renting or directly selling instrument on finance Risk reduction • Lot of investment will come from nationalized banks so it will be kind of utilization of resources of banks and other players Use of under utilized resources • The technology like drip irrigation can be used to improve the waste land. Thus it will add in the income of farmers Waste land improvement • Clubbing this plan with Govt.’s credit scheme will increase the utilization of credit scheme(2012-13 utilization was only 53%) Use of Govt. recourses • As most of young generation is quitting Agriculture . This increase in yield will definitely increase the faith in this profession Restoring faith • As the whole system is based on NGO mediated group leasing, there will be definitely sharing Knowledge sharing Criteria of measuring the impact Scalability of the solution Sustainability of solution Appropriate monitoring mechanism Possible impact on all stakeholder
  6. 6. Challengesandmitigation As the concept is of group leasing then there will be issue regarding the usage limit of the instrument Usage and instalment criteria Area based usage & payment system- means the leasing instalment and the usage will be directly proportional to the area of land the farmer possess It is true that productivity of land can be increased through but still the dependency of yield on whether can’t be neglect Again due to the concept of group leasing the contribution in the regular repairing can be a issue There is can be chance that farmers can show the undisciplined regarding the leased instrument(selling in very cheap price in market) It would be quite difficult to use the drip irrigation system under leasing system as drip irrigation system is restricted to a single field Tractor is not the only instrument required in agriculture. Farmers will need other regular equipments too As agriculture is whether dependant so there can be chance of irregular payment from farmers in case of low crop The R&D investment in technology like developing draught resistance seed can really help to mitigate this problem Again this problem can be solved by the contribution in total repairing amount which is proportional to the land of individual farmer It is true that the tractor is not the only instrument in agriculture but most of other instrument depend upon tractor and usage of other instruments are so low that a rending system can be used. •Due to highly subsidize system farmers will prefer it as a single owner but still leasing in group should consider due to benefit of exchange of knowledge in group. •Use of other irrigation system The chances of these kind of irregularity will be quite less whole process from selection of group to monitoring is mediated by reliable NGOs Basic concept of group leasing is suggested to come out of this problem as group members can help each other in paying the instalment. There will be some flexibility in payment option StillWhether dependency Repairing issues Instrument selection Use of irrigation system System leakage Ensuring regular payment Unit Wise Cost Analysis Cost of Equipment( divided over a period of 8 years including interest cost) 1. Model Cost of all equipments utilized over a period of years 10,00,000 rupees EMI ( assuming 96; montly installment for 8 years at interest rate of 12%) - DEMANDED BY MANUFACTURERS 16,253 rupees EMI ( assuming 96; montly installment for 8 years at interest rate of 5%) - RATE FARMERS CAN COMFORTABLY BEAR 12,660 Cost borne by Government 3,593 rupees General Administrative Expenses ( 2 % of equipment cost) for 8 Years 20,000 rupees Total Annual Cost borne by Govt and NGO 6,093 rupees Year Additional Farmers included each year Total No of Farmers Benefitted Total Annual Cost of Scheme ( In Crore) 1 400000 400000 30 2 400000 800000 61 3 400000 1200000 91 4 400000 1600000 122 5 400000 2000000 152 6 400000 2400000 183 7 400000 2800000 213 8 400000 3200000 244
  7. 7. Infusion of technology through the use of microfinance(agriculture specific) and micro leasing as an alternative of direct credit to the farmers Solution 2 Market Failure Information Asymmetry Market Access •Information Symmetry- 1) Providing information on mobile proactively 2) Forecasting of demand for specific products to reduce price volatility in market 3) Online availability of historical data of production, market, price etc. 4) Ensuring availability of mobile to registered farmers. 5) Ensuring availability of information and product about quality seeds, fertilizers, seller etc. 6) Proposed solution Brief introduction – Market failure occurs when resources are inefficiently allocated due to imperfections in the market mechanism. Existing system Externalities •Market Access 1) Encourage co-operative approaches to marketing for smallholders 2) Improve smallholder farmers’ marketing skills through entrepreneurship training 3) Reduce market distortions to improve opportunities for all strata of agriculture worldwide 4) Policies for facilitating private sector to invest in agro processing industries. •Externalities 1) Free electricity 2) Subsidies on fertilizers •Information Symmetry- 1) Kissan Call centre, KVK and other government agencies all of them responds to issue raised by farmers. 2) The farmers sows crops based on last two or three years data which fetched high price. 3) Online data is not available for farmers 4) In India only 83 % of house hold has the mobile penetration and rural penetration is only 69% 5) Government is providing information but not ensuring the availability of best quality seeds and fertilizers. 6) •Market Access 1) No cooperative successfully working at state level. 2) There are APMC markets available for selling the product but they are very inefficient. 3) Government is developingAEZ and other centres to provide opportunities to all farmers. 4) Self initiatives of private sector for backward integration to ensure availability of raw materials for there products. •Externalities 1) Appeasement policies of various sate government which has led to excessive use of ground water and same pattern of cropping. 2) Subsidies on Urea has led farmers to grow those crops only where urea is used. This has increased salinity of soil and hence affected the soil quality.
  8. 8. Implementation of solution: Information Asymmetry •Database of farmers should be maintained at state level •Mobiles phones should be made available to farmers based on data base •Dedicated department for maintaining historical records and forecasting should be set up •The price movement on daily basis should be monitored. Awareness • Shortage as well as surplus information should be available on line. •Adulterated seeds are sold in the market, to ensure best seeds as well fertilizers are available to farmers the information about the shops and centres should be available to them •The soil testing should be done at farmers door step encouragement •Small farmers should be encouraged to form cooperative. •These cooperative should than market the product •The cooperatives should try to form fruit and vegetable hypermarkets. •This would help them to market crops directly to customer •Training should be given for improving the entrepreneual skills. Evaluation •The backward integration of private players or industry with the farmers. •The private trader should engage with farmers right from sowing to selling. •A contract between both so that farmers will have guaranteed buyer and traders would have regular supply for their trade commitment Purchase •Food processing industry should be given tax incentives for setting plants in rural areas . •Opening of centre of excellence in states for R&D activities, other requirement for processing industry. •Credit facility and technical expertise for locals to open food processing industry Monitor •Avoid rolling out populist measures for farmers •No free electricity for farmers •Using Aadhar card for transfer of subsidy to farmers instead giving it to industry. •Converting Aadhar card in a card system such that the money is stored in card and the card can be used as buying agent. After sale StepsinvolvedStakeholder Govt.mass media, channels, , NGO, mobile phone companies , farmers Main stakeholder – Government, Farmers, Industry, traders, banks It will be evaluate based on results and participation of farmers Manufacturer and Government NGO,Government Manufacturer, Government Financialand humanresource • PPP model can serve as a good strategy to implement this solution • In addition to decrease in the expense burden on any party it will also lead to Multi fold improvement in efficiencies. • The overall amount on subsidy would be decreased subsequently in next few years and that money should be diverted to build capital infrastructure. • World class institutes can be partnered with to have easy access to technology and development of long term human resource in India. • Simultaneously a new generation of indigenous workforce should be developed through promoting targeted education programs. •UseofKVKsto spreadthe knowledgeabout theproduct •UseofAgri- researchcentre, agriculture Universityto innovatenew technology •Existingmicro- financestructureto providecreditfor thenon-mechanical input •Useof Doordarshanto spreadthe awarenessabout thescheme •Governmentcredit schemesfor agriculture Leveraginggovt .structure •Central Government •StateGovernment •International FinancingInvestors •Worldbankand Inter-government financingsources •PPPmodelusing bothdomesticand international corporations •Fundingbymicro financeinstitution Funding Implementation of solution: Market Access Implementation of solution: Externalities
  9. 9. Impactofsolution • Due to technology infusion the yield will increase Yield increase • Better flow of information regarding quantity and selling prices across various markets Price Volatility • Use of mobile and other relevant technologies on a greater and efficient level Technology Penetration • Due to increase in stability in rural income as reflected in increase standard of living Better economic returns • Using present Government policies like Aadhar to plug the leakage and better targeting of existing schemes. Efficient use of government resources •This will make farming an attractive business opportunity thus contributing to solve the national food security problem Restoring faith • Forming of a centralised record body to enable intelligent and timely use of data for improved decision making Knowledge dissemination Price difference of similar crops across different market Consumption pattern of citizen monitored to forecast the demand Number of completed agro industry projects in a year across various states Share of rural income in state GDP Decline in rural migration Diversification of crop grown Criteria of measuring the impact Use of Aadhar schemes to pin point the beneficiaries and reduce leakage Use of existing channels of government and private sector institution Formation of cooperative will enhance the productivity and coverage Use of existing mobile network and technologies Specific software application to guide the farmers in day to day activities such as mobile apps Scalability of the solution Dedicated agency for monitoring real time updates to various databases Daily record of quantity sold and prices across various markets Contribution of rural income in state GDP measured through interstate comparison Comparison of historical data Pattern of Sale of seeds Appropriate monitoring mechanism Possible impact
  10. 10. Challenges and mitigation Penetration is still low which needs to be brought to a significant level before any progress can be achieved Lack of adequate IT infrastructure Fiscal incentives for private sector to provide necessary infrastructural support such as Road, IT, telecom, water, electricity etc. The literacy level is still very low especially for women and people lack awareness about various schemes and policies of Government Inherent inhibition and stubbornness to continue using old in efficient ways of farming practices. There may be leakage in terms of incorrect information by fabricating data Investors are vary of investing in rural economy due to lack of security and extensive administrative hurdle Government leaders announcing populist measures to win support without caring about the fiscal health Because of unavailability of centres of excellence in country there is shortage of experts . Revamping of rural literacy programs both for children and adults Awareness camps at the door of farmers. Selection of few farmers in village and demonstrate them the usefulness of the technology • Educating farmers using NGO and leaders about the intended benefits and losses because of various policy initiative. • Active involvement of farmers in policy decision making . •Involvement of village panchayats in approval and setting up of development project •Amendment in regulation for investing in rural areas. Centralised computer system in association with schemes such as Aadhar may prevent such type of leakages. • Partnering with international universities to promote research and talent development in country. • Longterm approach to establish indigenous centres of excellence Rural illiteracy and awareness Switching to new technology Excessive Populist offerings Administrative hurdles for investors System leakage Unavailability of experts in concerned fields Unit of Analysis House Hold Average family Size 6 Rural Population in the Country (approx) 69% Indian Poulation (2011 census) 121 crores Number of House Holds 13.9 crores Present Mobile Phone penetration 69% Extra Mobile phone requirements (one per house) 4.3 crores Cost of operation per Family ( includes operative cost of call centers, data collection cost, maintenance cost, cost of information assimilation and dessimation etc. ) 150 rupees per family per month Estimated Cost per month 2,083 Crore per month Annual Cost assuming active season of 10 season 20,825 Crore per month Finance Analysis * Data in the aove analysis corresponds to the 2011 census where ever appliable