Mar 03 2014

New Age Agri Marketing Solutions!

(Information, Infrastructure and Institutions)
This was the title of a very interesting workshop organized by Pravesh Sharma, the managing director of the Small farmers Agribusiness consortium (SFAC) in collaboration with Reuters Market Light (RML) and National Commodities Exchange (NCDEX) at FICCI‘s conference hall in New Delhi on 25th February . This brought together an entire range of stakeholders – from resource institutions engaged in training farmer producer organizations to those providing them marketing support to information providers, aggregators, state government officials, young entrepreneurs, established agribusiness groups and those engaged in policy making and implementation of FPOs and giving a new direction to the APMC acts in the country.

The ball was set rolling in the Keynote address by Ashok Gulati, the Chairman of Commission for Agricultural Costs and Prices (CACP) who has been very forthright and categorical in his views regarding minimum support prices, but even more importantly, about policy related ‘non-price recommendations’. Some of these were articulated in his address. Markets existed to ensure price discovery, and facilitate transactions on the best possible price for producers and consumers. Traditionally markets were defined by natural geographies – but over time, the spatial domain of markets is determined by the political economy. Thus we have created barriers by assigning areas for market yards, besides of course, intra state, interstate and international boundaries. A natural corollary to this was that the smaller the market area- the greater was the price volatility, and vice versa. Groundnut was a classic example with prices fluctuating from Rs 5000 -5300/MT in the previous year to Rs 3200/MT this year against the MSP of Rs 4000/MT. Gulati’s point was simple: if there was a clear, long term trade policy – the range and variation would not set alarm bells ringing. In the absence of clear policy, there are knee jerk reactions which add to complications on account of the interplay of ‘optics’ with ‘key players’ who can see through the game. This does not mean that governemtn will leave everything to the markets. On the contrary, government policy must be calibrated to ensure that the farmers do not lose out in the bargain. Thus when the government launched the national food security mission to raise production of cereals and pulses, and the mission proved to be successful, the restriction on exports should have been eased before the inventories piled up to unmanageable levels which apart from issues of warehousing and logistics, also led to severe price distortions as stocks held by FCI and other state agencies is information in the public domain. Gulati was forthright in holding that by keeping open borders, markets will respond with greater transparency. Giving the analogy of the pond and the ocean, he wanted agricultural markets to be as wide and open as possible. He then went on to discuss the role of IT and logistics in expanding the spatial and temporal reach of the farmers produce. Better roads and commercial vehicles, including refrigerated vans made it possible for produce to cover three to five hundred kilometers overnight. Warehouse Receipts (WHRs) made it possible for farmers to hedge their stocks against market risks, especially in the aftermath of bumper harvests. Price support operations had to be the last resort, rather than the entry point for mopping up farm surpluses. In fact, if government could support the creation of warehousing space – price support operations may not be required as farmer organizations and agribusinesses could take long term positions as well. He envisaged government’s role as a regulator, rather than as a service provider. Last, but not the least, he pointed out that the entire policy debate was focused on cereals which accounted for only one fifth of the total value of agricultural produce in the country. The future of agriculture, nay the key to prosperity of farmers lay in high value agriculture which was being undertaken mostly by marginal and small farmers. Whether it was milk or horticulture or dairy products or poultry, the issue was ‘perishability’ and lack of any large scale institutional interventions (except for milk co-operatives). However, on the positive side, as these commodities were not the major contributors of revenue to the market committees, their exemption from the ambit of APMC laws was comparably easier, except of course predominantly urban based APMCs like Azadpur and Bengaluru.

The three takeaways, in his own words were Information, Infrastructure and Institutions! The Inaugural address was delivered by former Union Agriculture Secretary and the Chairman (Designate) of NDDB. He said that while farmers were responding to changing consumer patterns and demands, markets and intermediaries had not kept pace with the developments because ‘rent seeking’ was entrenched in the architecture of the existing markets. However , this had to change – both on account of farmers coming together to make their own producer groups, but also because there was a steady, but certain shift towards integrated value chains. Government’s focus on High value Agriculture, cold chain infrastructure, food processing and agricultural exports had set a virtuous cycle in motion. Food standards had made it necessary to ensure traceability, and this in turn led to ‘quality’ being recognized as an important parameter with regard to price fixation. Apples were no longer apples, but produce of Kashmir or Himachal and were further classified according to the colour, characteristics and quality. He mentioned that there had been several successful models in the country – from organic vegetables from Sikkim to ginger from Mizoram, orchids from Kalimpong and Basmati from Punjab- the issue was regarding their scalability. He also advocated the need for a stable trade policy regime in the best interest of the farmers.

In the technical sessions that followed, there were presentations from state governments of Karnataka, Maharashtra, Andhra Pradesh and Tamil Nadu on the steps taken by them to encourage innovative solutions to agricultural marketing. Karnataka had introduced a single license for the entire state , thereby increasing competition manifold, besides making e- trading possible, even for those whose production or trade was outside Karnataka – thereby making it a true ‘Rashtriya market’. Maharashtra’s success in partnerships with the private sector had been acknowledged by the World Economic Forum, Andhra’s Ryuthu (farmers Market) was being replicated in several cities across the country, and Tamil nadir as the first to actually roll out modern agricultural terminal markets. Then there were sessions on FPOs and how young entrepreneurs had actually built quality value chains – be it for organic produce from Sikkim or tomatoes for niche Italian restaurants in Mumbai. The remarkable feature was the involvement of the young professionals in this space, and if the trend continued it could transform the way we looked at the potential of the rural hinterland.

SFAC has promised to come out with a summary of the Recommendations, besides placing the presentations on the net. Yours truly will keep you posted on when this happens, and looks forward to an engaging discourse on this subject over the coming weeks!