Time for PPPs in Agriculture

Ch. Hira Singh Wholesale Vegetable Market at New Sabzi Mandi, Azadpur, Delhi
Watching over pineapple fruit trucks.
Photo Credit: Melissa Cooperman / IFPRI

Indian agriculture has come a long way from its earlier image of being traditional, subsistence and non-commercial. With the increasing demand for value added and high-quality products, agriculture has been adopting commercially and economically viable agribusiness solutions. In the recent past, business and investment opportunities in this sector have suddenly jumped manifold. But the response from the private sector has been likewarm.

There is a pressing need to develop a structured approach for increasing the number of bankable agri-business and agri-infrastructure projects through private sector participation for better quality and improved services. Role of private sector is immense in reinvigorating agri-food sector. We have good record of public-private partnership (PPP) in infrastructure development such as highways, ports, power and other sectors. Unfortunately, agri-infrastructure development in PPP mode was not adapted and applied in agriculture sector with the same vigor as done for these sectors.

Engaging private sector in developing and managing agri-infrastructure will bring improved technologies, best practices in operations and generate rural employment. The partnership can emerge as an important tool to induce investment and capitalize on the synergies of public and private sector. While the government continues to lead and facilitate development of agriculture sector through its policies, the entry of the private sector will induce a fresh bouquet of ideas that when scaled up can emerge as mass development models for the agriculture sector. Drawing lessons from other sectors, we are proposing few areas for developing agri-infrastructure in PPP mode.

Wholesale market development: Agricultural markets in India are thinly distributed. Existing marketing is characterized as inefficient, fragmented and unorganized. Very few markets have been developed during the last three decades; most of these are concentrated only in well off areas. The time is apt for evolving mechanisms to develop wholesale markets in PPP mode in a similar pattern of constructing and managing national highways using BOT (built, operate and transfer) approach. A model concession agreement using viability gap funding mechanism should be created by central government with encouragement to state to implement the process as per specific needs of each states. 

Warehouse and cold storage development: High price volatility is one of the major reasons for agrarian distress. Prices crash in the event of high production. Warehouses and cold storages play an important role to stabilize prices and benefit farmers as well as consumers. Development of warehouses and cold storage offers enormous opportunity for public-private partnership. Non-availability of land and low scale of business are reported to be the major obstacles for private sector response in this sector. Panchayat land, uncultivated land, government land, including some of the railways land, may be allocated on a long-term lease with annual rent by inviting bids from private sector in OMDA (Operation, Management and Development Agreement) mode as has been done for airport development and management.

Agro-processing development: The agro-processing, especially of perishable commodities, has huge opportunities as their demand in domestic and global market is rising very fast. This sector must be harnessed to meet the future demands and reduce unaccounted losses of perishable commodities. The Ministry of Food Processing and Industries committed for continued emphasis on creation of world class infrastructure for growth of food processing sector through mega food parks and Integrated cold chains. Use of PPP model for achieving these objectives and developing processing plants and linking them with micro, small and medium enterprises (MSMEs) will boost agri-processing sector. This is a lesson to be drawn from successful PPP mode in constructing airports, providing numerous services, and linking operations by various airlines.

Canal irrigation development and management:  India has large network of major and minor canals and distributaries from various rivers. Roughly 40 per cent of all irrigated area is covered by canals. Huge investment has been made to develop reservoirs, canals and distributaries. The canal irrigation system in many parts of the country is reported to be underperforming with irrigation efficiency is mere 30 per cent. The PPP model can be extended to this sector on the lines of the power sector. At first level, the irrigation department, should take sole responsibility for developing and managing the water reservoirs. This way government will have control over water for irrigation. At second level, canal management and water delivery could be contracted out to the private sector based on the performance. The contract may include canal and distributary management, water pricing and promoting efficient -irrigation methods. This will incentivize for volumetric release of water at different stages from reservoir to the farmers and eventually improve water use efficiency.

Agriculture extension: Public agricultural extension system has significantly contributed in bringing green revolution in the country. But it is its efficiency and effectiveness are now being questioned.  At present, Krishi Vigyan Kendras (KVKs) and Agriculture Technology Management Agencies are the last mile connectivity for technology delivery. Some of the KVKs are also run by private sector but majority are with agricultural universities (AUs) and Indian Council of Agricultural Research (ICAR). The AUs, ICAR institutions and KVKs have good infrastructure with land and water resources; a part of that can be allocated on a medium to long term lease (7-10 years) to the private sector for demonstrating their best practices. Private sector and public research system can also jointly undertake research for demonstration purposes. The process can also be used to incentivize private sector to use their CSR funds.

Private sector will come at its own where there is commercial viability and profit can be generated. But above-mentioned areas may have less commercial viability but high economic benefits. Therefore, these are the areas for developing public-private partnership to re-energize agriculture sector. This could mark the beginning of the next revolution in agriculture – one that is driven by institutional and governance reforms implemented via social equity based PPP process. This will require a new thinking to evolve enabling policy environment to attract private sector in developing agri-infrastructure.

This article was originally published in Business Standard

P K Joshi is the director- South Asia, International Food Policy Research Institute. Tushar Pandey is the freelance consultant in PPP and social equity related policy analysis.



World Water Week: Experimental games spark community cooperation on groundwater in India

Cross-posted from ifpri.org written by Ruth Meinzen-Dick, IFPRI

I grew up in Tamil Nadu, south India. It was a dry area, but a good well supplied our house and a few other houses around us. Then one year a farmer nearby installed a deeper well with an electric pump, and our well ran dry. That started a “race to the bottom”: As more and more farmers got pumpsets, the water table continued to fall and everyone had to deepen their wells to keep up.

Today, India faces this problem writ large. Over 60 percent of the irrigation and 85 percent of domestic water in India now comes from water below the ground. As water tables fall, wells need to be dug deeper and more pumping power is required to deliver water to users. Ultimately, groundwater becomes unavailable.

World Water Week 2017 (Aug. 27-Sept. 1) focuses on conserving and reducing waste in water use. These efforts are especially relevant for groundwater supplies, which are often overtaxed and difficult to manage responsibly.

Because well owners who take water from the same aquifer may be geographically dispersed, it is hard for them to know how much others are taking, let alone regulate their own withdrawals. And because underground water dynamics are complicated, people often don’t understand how their water use affects others.

Experimental games can help reveal what motivates people to cooperate in the use of any jointly used resource—including groundwater, as well as forests, fisheries, and surface irrigation. Until recently, no one had assessed whether these games could help stimulate cooperation as well. To investigate this issue, IFPRI partnered with the Foundation for Ecological Security (FES), an NGO in India, and Arizona State University, with support from the CGIAR program on Water, Land and Ecosystems. FES, which helps communities in Andhra Pradesh better manage their water resources, added a “groundwater game” designed by ASU experts to its program in some of the communities affected by groundwater depletion.

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Sustainable Development Goals: Strengthening rural-urban linkages is the key for India

Farmer offloading the produce at wholesale market in Lucknow.
Source:(flickr) Pallavi Rajkhowa/IFPRI

Strengthening rural-urban linkages is key to help achieve SDG-2 in India

The world is rapidly urbanising. Currently, more than half of the world’s population lives in urban areas, and by 2050, as much as 66% is projected to be urban, with much of this rise taking place in developing countries. India is no exception: 33% of the population is urban and will rise to 50% by 2050.

What does this mean for the world and India’s food security, nutrition and ability to meet the Sustainable Development Goals (SDGs)?

The International Food Policy Research Institute’s 2017 Global Food Policy Report highlights how rapid urbanisation brings unique challenges to rural and urban areas, and strong linkages between these sectors can help achieve SDG-2 (end hunger, achieve food security and improved nutrition, and promote sustainable agriculture).

Urbanisation comes with challenges to agriculture and nutrition. Higher urban incomes are associated with a dietary transition to more animal-sourced food, fats and oil, refined grains, and fruits and vegetables, which requires more intensive use of natural resources. Urban lifestyles tend to increase consumption of processed foods and the urban poor are often limited to cheap unhealthy foods. At the same time, as urban population grows, hunger and under-nutrition will also increase in urban areas. In addition to access to healthy and nutritious foods, access to clean water, toilets and sanitation will also be challenges to hunger and malnutrition.

Yet rapid urbanisation brings opportunities, as the rise in urban food demand from rapid urbanisation for increased and diversified food production in rural areas can contribute to improved farmers’ livelihoods. To take advantage of these opportunities, strong rural-urban linkages are needed.

Rural-urban linkages are the physical, economic, social and political connections that link remote areas to large cities through smaller towns and cities in between. Where links are strong, rural farmers can sell larger shares of produce in urban markets, labourers can migrate or commute to nearby towns for seasonal work.

In 2016, the government set a goal to double farmers’ income by 2022 and create a budget that supports the agriculture sector. It is also increasing investment in infrastructure, irrigation, education and training, and healthcare. The National Food Security Act, Mid Day Meal Scheme and Anganwadi Centres contribute to tackling food and nutrition insecurity. Nevertheless, a comprehensive policy to improve agricultural productivity, strengthen value chains, promote diversification and agro-processing, and reduce food loss and waste is necessary to accelerate agricultural growth. Moreover, such a policy is needed to increase farm incomes and spur employment in rural areas, while improving the availability of diverse, healthy, nutritive and safe foods in urban areas. In this regard, policy coordination across rural, peri-urban and urban areas will be critical.

To strengthen value chains of agricultural commodities and improve market efficiency, a provision has been made to develop e-NAM. However, to establish efficient and inclusive rural-urban value chains, institutional arrangements that support the participation of marginal and small farmers who often have little marketable surplus are further needed.

Production in urban and peri-urban areas is shifting towards resource-intensive foods such as vegetables, dairy, meat and poultry to meet the rapidly growing demands. To veer production to rural areas—thereby reducing pressure on increasingly scarce urban and peri-urban lands—rural agri-infrastructure such as cold chains, cold storage and processing facilities is necessary. Leveraging towns and intermediate cities to facilitate economic and social connections between rural and urban areas, and improving rural infrastructure is crucial.

Concerns for food safety and critical civil amenities in the context of rapid urbanisation cannot be overlooked. As food and agricultural markets develop, quality and food safety standards will become increasingly important. Rapid urbanisation without safe drinking water, drainage, housing and hygiene facilities needs to be addressed, especially considering India’s slow decline in under-nutrition.

To end hunger and malnutrition in India and beyond, we must find solutions that consider the historic, ongoing trends of rapid urbanisation. Doing so is key in India, where despite progress 15% are hungry and 39% children are stunted. Improving links between rural and urban areas is a critical start.

Shenggen Fan is Director General and P K Joshi is Director South Asia, IFPRI.
This piece was originally published in The Financial Express.

Who Wants To Quit Agriculture And Why?

Farmer in Nalanda District, Bihar. Source: Divya Pandey, IFPRI
Farmer in Nalanda District, Bihar. Source: Divya Pandey, IFPRI

Agriculture the backbone of Indian economy that engages more than 50 percent of the country’s workforce, is losing its preference as the most desired profession. Research shows that more than 40 percent of farmers dislike farming as a profession because of low profits, high risk, and lack of social status, yet they continue with it owing to a lack of opportunities outside agriculture.

A recent study on “Farmers' Preference for Farming: Evidence from a Nationally Representative Farm Survey in India” identifies factors that underlie farmer’s reasons to move out of agriculture.

Farmers who express a preference for moving out of agriculture are mostly those with small landholdings, poor irrigation facilities, fewer productive assets including livestock, and follow a cereal-centric cropping pattern. They also have relatively lower access to credit, insurance, and information, and are weakly integrated with social networks such as self-help groups and farmers’ organizations. Within caste group, the dislike for farming moderates with larger landholdings.

If look in the past, over the year’s Indian agriculture faced the challenge of stagnation in arable land, rise in population with increase in demand, changing consumer preference and growing small land holder with an average size of 0.38 ha. According to the latest decennial population census 2011, for the first time in the last four decades, the absolute number of farmers in India fell by 9 million, from 127 million in 2001 to 119 million in 2011. However, a commensurate decline in the agricultural workforce did not occur. The share of agricultural workforce in the total employment declined extremely slowly from 74 percent in 1972-73 to 60 percent in 1993-94 and further to 52 percent in 2009-10.

The author’s highlights that lack of profitability, high risk, and lack of social status in farming and others in that order are few of reasons for moving out. About 67 percent disliked farming due to low profits, 18 percent due to high risk factors and remaining 15 percent based it on the low social status attached to the profession and other factors. Across the different farm land classes, low profitability remained the prominent denominator but it is relatively more pronounced among smaller farmers. Risk was directly in proportion with landholding sizes.

Study reveals that by comparing the net returns on the farms of potential quitters (those who don’t like farming as a profession) and willing stayers (those who like farming as a profession). It is as high as 25 percent in the medium (2.0-4.0 ha) farm class and 18 percent in small (1.0-2.0 ha) farm class. Importantly, the probability of quitting does not seem to be much influenced by social identity as the proportion of farmers disliking agriculture as a profession is almost similar across social classes.

The authors identifies number of pull and push factors underlying farmers’ decisions on agriculture. Pull factors mostly relate to the income opportunities outside agriculture for eg. access to non-farm business activities, higher education, income from labour/salaried jobs, while push factors are a reflection of the constrained livelihood opportunities in agriculture, forcing farmers to seek avenues outside agriculture for eg. lack of access to irrigation, farm credit, crop insurance, information on crop agronomy and modern technology. On the other way around access to irrigation and diversification of production structure towards high-value crops and livestock production make farming attractive to stay in agriculture.

These findings have two types of implications; one for the farm sector and the other for the nonfarm sector. The results point toward a tendency of possible decline in viability of agriculture as a profession. It was noted that farmers who practice integrated farming can be a signal for a greater policy emphasis for diversification toward these activities. Farmers need an improved availability of finances, inputs, information, and markets to benefit maximum from technological change and diversification. Since risk was identified as important reason for disliking farming, insurance agencies can target efforts to improve their outreach among smallholders.

Authors conclude that to improve viability of small-scale agriculture, investments and prioritization on climate smart agriculture interventions by the policymakers can be an important step towards improving the food security and rural livelihoods in addition to mitigating the climate impacts.

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40 per cent Indian farmers do not prefer farming as profession

Fighting Droughts in Bihar

Solar Panels in Nalanda District, Bihar. Source: (flickr): Divya Pandey, IFPRI
Solar Panels in Nalanda District, Bihar. Source: (flickr): Divya Pandey, IFPRI

Bihar recorded only 122 mm of rain in the month of June this year against the normal 169 mm—a deficit of 28 percent. IMD reported deficient or scant rains in 23 of the 38 districts and it had ruled out the possibility of good rainfalls till July 17th. This is the sixth year of irregular monsoon and drought-like conditions in Bihar in the last seven years.

What can government of Bihar do to deal with frequent droughts?

High cost of irrigation is a big reason why agriculture in Bihar is so vulnerable to droughts. If irrigation becomes more affordable, droughts would have much less impact on farm economy and the farmers.

At present, Government of Bihar provides cash subsidy of Rs. 25/liter on diesel to farmers in drought affected blocks to make irrigation more affordable for them. It is perhaps the largest conditional cash transfer scheme in agriculture sector in the developing world. Between 2008 and 2014, the state government allocated 17.6 billion rupees this scheme—to little effect. The scheme, though well intended, is poorly implemented.

The diesel subsidy scheme has some nice features. One, it does not distort prices. Farmers get cash subsidy. Two, opponents of cash transfers often worry that the value of the subsidy may not keep up with the price of the subsidized commodity. Not in this case. Government of Bihar promptly raised the subsidy from Rs. 10/liter to Rs. 25/liter as diesel prices increased. Three, there is much less paperwork involved in this scheme. Farmers do not have to submit proof of land ownership, and so, even a tenant can claim the subsidy if his neighboring farmer attests that he has irrigated his land.

The diesel subsidy scheme has been ineffective in spite of all these good features. We talked to 240 farmers in 16 villages of Nalanda to understand why. We found three major problems with the way the subsidy scheme works.

One, the subsidy money reaches farmers too late in the season. Only farmers in drought affected blocks qualify for subsidy. By the time a block is declared drought affected, it is often too late in the crop season. It make take much longer for the money to reach farmers.

The delay would matter less if farmers could count upon eventually getting the subsidy. But they cannot. What qualifies a block to be drought affected is not clear, transparent and automatic. This trigger needs to become automatic and transparent. Government of Bihar should outsource this decision to a technology institution like IIT-Patna or the state agriculture universities. They would track rainfall in all blocks of Bihar and declare a block drought affected in real time. Once a block is declared drought affected, all farmers there should automatically become eligible for subsidy and they should be able to collect it from their nearest bank or post-office.

Late and uncertain payments make the diesel subsidy more like a compensation for crop losses and not a conditional cash transfer, it is meant to be, to induce farmers to irrigate more to reduce the crop loss from drought.

Three, smallholders rarely get the subsidy. The transaction costs are too high for them. A farmer who cultivates 0.5 acre land is entitled to Rs. 375 in subsidy—in 3 installments of Rs. 125 each. He may have to spend up to Rs. 60-80 in transport costs and lost wages just to collect the subsidy from his block office. Government of Bihar should build a system of cell-phone based cash transfers system if it wants to reach all farmers.

Subsidizing diesel is an ad hoc measure to make irrigation affordable. Even if implemented well, it can only mitigate the impact of drought. With droughts becoming so frequent, Bihar needs programs for drought-proofing the agriculture. Economic gains from rapid GDP growth will come to a naught if agriculture remains vulnerable to droughts in Bihar. We saw this in 2009 when one big drought wiped out gains in poverty reduction from five years of double digit growth in state’s economy. The number of poor people living below poverty line (BPL) increased by 4.7 million between 2004-05 and 2009-10 even as the per capita GSDP grew at 6-8% per year. This misery is avoidable. Farm economy in Bihar can become more resilient to droughts.

The drought in 2009 was much more severe in Punjab, Haryana and Western Uttar Pradesh. Still, there was much more crop loss in Bihar mainly because farmers in Bihar pay 25-30 times more for a cubic meter of water than his counterparts in north-western India. Improving rural power supply can make groundwater irrigation affordable in Bihar too. It can be the best possible investment for drought-proofing agriculture and the most effective poverty reduction strategy for the state.

Rapidly falling price of solar panels offers another opportunity to make irrigation affordable. In 2012, the minor irrigation department of Bihar revived 34 public tubewells in Nalanda by connecting them to solar panels. Our research shows that farmers have benefited a lot from the solar powered tubewells. There are more than 5000 defunct public tubewells in Bihar. The defunct tubewells can be revived to provide affordable irrigation and drought proofing in 50 thousand to one lakh hectares of land if they are solarized and their management is turned over to farmers.

Read More Striving For Drought Proof Agriculture in Bihar, India

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