Coastal Management: Sen, H.S., Ghorai Dipankar, Karmakar, P.G., Majumder Anirban (2014). Value addition to farm produce under changing contexts in India: A sine qua non for resuscitating Indian agriculture Value addition to farm produce under changing contexts in India: A sine qua non for resuscitating Indian agriculture. Indian Journal of Agricultural Sciences. 84(11), 1295-1302.

Value addition to farm produce under changing contexts in India: A sine qua non for resuscitating Indian agriculture

H.S.Sen¹, Dipankar Ghorai^2*, P.G. Karmakar³ and Anirban Majumder⁴

1. H.S.Sen (Lead author) - Former Director, Central Research Institute of Jute & Allied Fibres (ICAR), Barrackpore, West Bengal, India 700 120. Mailing address: 2/74 Naktala, P.O. Naktala, Kolkata, West Bengal, India – 700047. Ph. No. : 91 9874189762. E-mail id: hssen.india@gmail.com

2*. Dipankar Ghorai (Corresponding author) - Subject Matter Specialist, Krishi Vigyan Kendra, Central Research Institute of Jute & Allied Fibres (ICAR), Burdwan, West Bengal, India -713403. Mailing address: Krishi Vigyan Kendra, Bud Bud, Burdwan, West Bengal, India – 713403. Ph. No. : 91 9433122515. Fax: 91 0343 2513651, E-mail id: dipankarghoraikvk@gmail.com

3. P.G.Karmakar - Director, Central Research Institute of Jute & Allied Fibres (ICAR), Barrackpore, West Bengal, India 700 120. Mailing address: Krishi Vigyan Kendra, Bud Bud, Burdwan, West Bengal, India – 713403. Ph. No. : 91 9330993914. E-mail id: pgkcrijaf@yahoo.com

4. Anirban Majumder - Joint Block Development Officer, Govt of West Bengal, Narayangarh, P.O. /P.S. Belda , West Midnapore, West Bengal, India -721 424. E-mail id: nirban2003@yahoo.com

The dwindling growth of agriculture and allied sectors has been a major concern keeping in view of continued decrease of its contribution to the country’s overall GDP. The evidence strongly suggest need for increasing productivity at a rate seemingly very difficult to attain with the help of improved practices at hand. It is, therefore, imperative in this context to exploit value-addition of all agricultural commodities for which a master plan be developed not only to encourage farmers towards increased profitability with direct access to market in agricultural sector, but also to solve to a great extent the problem of unemployment in the rural areas.

Key words: Value addition in agriculture, present status, factors, prospects, FDI in retail, master plan.

There is no denying that, despite a rapid decline in its share in the gross domestic product, agriculture remains the backbone of Indian economy although some hard facts are required to be swallowed in the context of changing socio-politico-economic background in the recent times. Average size of land holding is shrinking fast, and the disguised employment/unemployment is rapidly being fostered in the bosom of agriculture. Notwithstanding the fact that more than 60% of India’s population is still dependant on agriculture, the percent share of agriculture to overall GDP has seen consistent downfall from 35.7% in 1980-81 to 14% during 2011-12 (Tyagi, 2012). In the wake of large scale industrialization, rapid urbanization, mass urban shift and diminishing productive capacity of soils, India’s food as well as economic security may be seriously questioned in not-so-distant future. The fact that many policy alternatives concerning agriculture, fully or partially, are being politicized, rather than realized without proper understanding of the hard and real facts, is only adding to the woes.

With this background in mind, it is obligatory that an appropriate, alternate and supplementary strategy be developed so as to reverse the existing trend. We discuss below the possible options under the changing socio-politico-economic scenario of the country.

The changing socio-politico-economic scenario in India

The changing socio-politico-economic scenario, in this context, is crucially important and needs reference as it can be instrumental in determining the course and paving the way for resuscitation of Indian agriculture.

Social scenario

India has got a social framework where the rural womenfolk and youth remain vastly unengaged. Apart from household activities and minimal work relating to crop production and primary processing, their work power is grossly unutilized. There is no denying that neither they are financially capable nor technologically equipped adequately to develop own entrepreneurship for self-sustenance, but can be organized through apposite training and guidance to form Self Help Groups (SHGs), Joint Liability Groups (JLGs) or Common Interest Groups; and with financial assistance from rural banks they can develop a profitable entrepreneurship whereby not only their family income is augmented but in the long run can catapult income of the society. This is where value-addition may come into business since primary and secondary level of processing, or even tertiary level, to a small extent, essentially involves procurement of raw materials from nearby areas, and selling the products to the local markets directly through effective market linkage without involvement of intermediaries thereby endowing rural folks with tremendous employment opportunities.

As an example, processing of minor millet in Kolli Hills, Tamil Nadu, India depicted the efficacy of SHGs in mobilizing the market chain through value-addition where the entire ‘Farm-to-Fork’ distribution is managed by SHGs, mostly run by tribal women (Gruere et al., 2007). The system (Figure 1), apart from getting rid of the intermediaries, effectively disbursed the money involved in the process equitably among the different village strata.

National Bank for Agriculture and Rural development (NABARD) and Indian Council of Agricultural Research (ICAR) through its Krishi Vigyan Kendras (KVKs) are instrumental in empowering rural womenfolk through SHG formation, promotion, and linking them to banks. With a modest beginning as Pilot Programme by linking 255 SHGs with banks in 1992, NABARD has reached to linking of 6.95 million saving-linked SHGs and 4.85 million credit-linked SHGs, thereby covering 97 million households(Narang, 2012). Following the cues of Bank of Agriculture and Agricultural Co-operatives of Thailand, NABARD has launched a pilot project on JLG to offer bank funds to small and marginal farmers and village artisans. In this context Govt. of India’s endeavour is noteworthy in launching ‘Swarnjayanti Gram Swarozgar Yojana (SGSY)’ by Ministry of Rural Development where during 2010-11. The number of SHGs formed under this programme has already crossed 2.5 million and is having nearly 30 million women under its fold (Sarkar and Dhar, 2011)^.In order to improve upon the rural strata further, model of Town and Village Enterprises (TVEs) of China, which represents middle ground between private and state ownerships, may be an example to follow with suitable modifications to involve surplus rural labour in industrial activity concerning primary processing of the agricultural produce, and finally effectively linking them to urban units for secondary processing, product development and marketing(Fu and Balasubramanyam, 2003).

Political scenario

Decision and policy making in changing Indian political scenario, where more political parties are emanating every now and then, has been disquieting of late and as such many policy matters face fervent filibustering for reasons other than development. It is indicated here that neither the authors intend nor this article has a scope to discuss the changing Indian political scenario. The authors are of the opinion that any policy that has a direct bearing to the socio-economic state of the country must be made after mustering people’s opinion in large scale and all public fora should be used in this regard. Delimiting Foreign Direct Investment (FDI) and forward trading per se in retail sector, which include agricultural retailing in a major way, have a direct bearing on the present topic.

Poor marketing linkage and marketability of produces have been dragging Indian agri-economy backwards for some time now. In absentia of an effective marketing and retail chain, with intermediaries dominating, Indian farmers are often duped off remunerative returns. Presently Indian farmers realize less than 1/3rd of the price paid by ultimate consumers whereas in other developed countries the proportion is 2/3rd or more (Gupta and Gupta, 2012). We need to revamp this situation for broad welfare and developmental objectives of the nation. By involving domestic or foreign players in agri-retail through ‘Contract Farming’ or ‘Partnership Farming’, this worsening situation can be given a fillip to some extent. While doing this it is of utmost importance that there should be policies/mechanisms/watchdogs to uphold farmers’ interest. Agricultural retailing in an organized form, apart from diminishing food wastages worth US$ 13 billion annually (https://www.dnb.co.in/Food Processing/overview.asp), can render Indian farmers better-off by some degree in the long run. The authors are of personal view that any policy options concerning agri-retail, be it FDI or creating value chain through PPP involving multinationals, should be welcome towards this end. Only thing that should essentially matter is that there should be adequate social and economic safeguards for Indian farmers and rural workforce, and as such the policy may be fine-tuned. In such large scale investments, the industries in India should be convinced and roped in as a matter of priority. But there is no denying that while debating issues relating to agri-retail, there are other issues that should have been properly mended for farmers’ welfare like creating farmers’ cooperatives, developing effective market chains, and empowerment of Indian farmers, etc.

Economic scenario

The post-liberalization period, since 1991, in Indian economy saw tremendous growth in most sectors and India emerged as a big player in controlling Asian economy. However, of late, the graph is plateauing with signs of money devaluating, increasing trade deficits and fall in FOREX reserve since 2007-08 onwards (Figure 2) thus resulting in, most significantly, slowing down of overall economic as well as agricultural growth. Contribution of agriculture and allied sector to the overall GDP at factor cost at constant prices (2004-05) has fallen from 53.7% in 1950-51 to 16.2 % in 2011-12 (Anonymous, 2013; Figure 3). Industrial reform protagonists may argue that since independence industry and services sectors saw cascading growth in India for developmental reasons and accordingly their contributions were amplified several times. However, the hard fact remains that there has been, on the contrary, very low increment in growth rate (slope of 0.0169) of GDP in agriculture over a period of 62 years since independence (Anonymous, 2013; Figure 4a). Scrupulous scrutiny of primary data revealed that although their had been a slight enhancement in the said rate from 1950-51 to 1990-91(Figure 4b), an appreciable decline was evident in the post-reform era, since 1991-92 to 2000-01 (Figure 4c), which is suggestive of the fact that in the milieu of globalization, liberalization, industrialization and commercialization - cultivation got lost. Our policy makers’ apathy towards agricultural development to a very large extent coupled with farmers’ antipathy to embosom improved technology to some extent is the root cause for this. However, this worsening situation was resurrected marginally over the period 2001-02 to 2012-13 (Figure 4d). The issue remains that as to whether this trend, if at all it persist, is sufficient to meet the future target. In such changing scenario a brief discussion on Indian agriculture, which once propelled Indian economy and later becoming almost subsistence farming, is entailed.

India has now about 17.1 % of the world population thriving on 2.6 % of land and about 4 % of world’s share of water resources (Singh et al, 2013). The per capita availability of agricultural land has declined from 0.48 hectare in 1951 to 0.16 hectare in 1991 and is likely to decline further to 0.08 hectare in 2035 (Pandey et al., 2010). Thus per capita availability of land is expected to be about 6 times less in 2035 as compared to that at the beginning of the post-independence era. Near stagnation of total area under cultivation (141 m ha net sown) along with unprecedented land area under degradation (nearly 147 m ha constituting nearly 44.7 % of the total geographical area), sharp decrease of per capita availability of land, and steady decrease of per capita availability of cereals down to nearly 145 kg per annum in 2004-05 from 161 kg per annum in 1994-95 (Rao, 2012) are factors of great concern. Although per capita availability of food grain has increased in later years but there had been wide fluctuation in between the years and per capita food grain availability basically remains static over a longer frame of time. But the fact remains that per capita income in the country is rising which implies that purchasing power of people is also increasing and a large chunk of earnings is generally spent in procuring food items. Therefore per capita food grain availability also need to be increased (Annonymous, 2014). The sharp decrease in per capita availability of land has been caused by almost unstoppable increase of the population combined with increasing proportion of small and marginal farmers, as well as the rising proportion of non-agricultural employment seekers with time – all pointing to the excessive pressure on land. In fact, to add to the woes, there are also evidences of cultivable lands going out of farming in many areas due to various reasons other than agriculture (Anonymous, 2012a; Figure 5).

Future needs to combat the changing scenario

There has been a sharp rise in food grain production during India’s Green Revolution of the 1970s enabling the country to achieve self-sufficiency in food grains and stave off the threat of famine. Agricultural intensification in the 1970s to 1980s saw an increased demand for rural labour that raised rural wages and, together with declining food prices, reduced rural poverty. The trend later sustained, although at a much slower rate, the agricultural growth in 1990s, which reduced rural poverty to 26.3 percent by 1999/00. Since then, however, the slowdown in agricultural growth has become a major cause for concern for the country(Singh and Pal, 2010). Thus it is now a matter of concern to remain self- sufficient during the next two decades. Under these circumstances, a concomitant increase in productivity is necessitated in order to feed the swelling population. Recently, Indian Council of Agricultural Research (ICAR) has projected that the agricultural productivity needs to be more than doubled by 2050(Anonymous, 2013).

The trend is likely to be further compounded in future, apart from the usual trends indicated above, mainly for two reasons, viz. (i) as soon as the WTO regime, which is imminent, becomes fully operational in this country it might discourage the farmers much more than at present, if the government does not take adequate measures for their protection against financial losses, owing to fierce competition with the world market, after careful consideration of pros and cons, and (ii) if displacement of fertile agricultural lands by industries continues, and most agonizingly by State’s provocation or even indifference, in certain instances, particularly in the absence of firm land use policy of the Government of India or its States.

In full consideration of the future technological advancements to take place it does not still appear to be very much optimistic to meet the projected food requirement in this country with the help of agricultural production system per se at hand. Estimate by ICAR puts the projected requirement of food grain in India by 2030 to 345 million tonnes from the present level of 263 million tonnes in 2013-14 depending on alternative scenarios of population which would be tough to achieve unless some radical reform measures are undertaken (Anonymous, 2011).

The present Government of India is taking bold steps to encourage the food processing sector with special emphasis on horticultural development in the north east region where the potential in processed food production is largely untapped. The processing food segment in the country accounts for 22.2 billion US$, in a total estimated food market of about 69.4 billion US$ as per the estimate for India (Das and Amin, 2012). Food policy has been objectified to reduce post-harvest losses. Excise duties have been significantly cut or abolished in some commodities, Food Parks around the country having facilities of cold storing; packaging, etc. under single roof have been established. NABARD is also financing agro-processing infrastructure and market development. It has now given a number of fiscal relief and incentives to encourage commercialization and value-addition to agricultural produce. The retail boom in itself is a small step forward towards exploiting full benefit of value-addition of agricultural commodities, which should be the final goal (Anonymous, 2012b). The private sector in Indian industry, however, as pointed out earlier, is yet to realize the full potential in the food-retailing sector.

Value-addition of agricultural produces in India: Present status and prospects

Present status

Value-addition ─ concepts and practices ─ in India is at its nascent stage. The sector is weighed down by the problems of lack of backward linkage between farmers and processors owing to non-uniformity and inconsistent supply of quality raw materials, poor handling of produce resulting in flagrant wastages, poor infrastructure, scarce investment in organized sector, scrappy research and development (R&D), lack of adequately trained human resource, need for quality testing and certification laboratories, long chain of intermediaries contributing to high costs and inefficiencies, and outdated technologies and taxation laws. Processing of fruits and vegetables is as low 2%, milk around 35%, meat at 21%, and poultry products at 6 % in the country at present (Roy et al, 2012). By international comparison, these levels are significantly low, since processing of agriculture produce is around 40% in China, 30% in Thailand, 70% in Brazil, 78% in the Philippines, and 80% in Malaysia (Palanivelu et al., 2014). Value-addition to overall agriculture produce in India is just 20% with high end estimate putting wastage at around 55 million tonnes worth US$ 13 bn (Rs 580 bn) (Artiuch and Kornstein, 2012). It is striking that more than four dozen value-added products were being produced from derivatives of paddy in a small country like Japan, which contributed only 2 percent of the total world production of paddy at that time (Anonymous, 2002).

Prospects

India is now the second largest food producer after China and has every potential to be at the top if and when emerging problems of Green, Brown, White and Blue revolutions are passably addressed. It is now prudent that agriculture should be run as agribusiness rather than subsistence agriculture as normally believed in. The markets for processed food are likely to be manifold in 2020. The growth per annum in processed foods would be about 10%, primary processed foods 7%, and value-added foods 15%. 2.2% for fruits and vegetables, around 35% in milk, 21% in meat and 6% in poultry products(Palanivelu et al., 2014). It is a matter of record that in the field of post-harvest value-addition to raw food material also has tremendous potential for employment generation. According to an estimate every 10 million rupees invested in the food processing in organized sector generates 140 persons per year of employment, while the same investment in the unorganized Small Scale Industry (SSI) unit is capable of generating 1050 persons per year of employment(Anonymous, 2007).

It may not be out of place under this background to even regard agriculture as the largest industry in the country if properly planned and executed. It is in this context, suggested, in addition to what has been repeatedly discussed and emphasized minimizing massive wastages in food distribution should be our immediate necessity, tapping of the myriad prospects for value-addition of agricultural commodities in primary, secondary and tertiary forms, to impart longer shelf life, augment quality, enhance form, space and time utility; the latter may possibly resurrect the situation to possibly a much larger extent in the long run. Value-addition can thus play an effective role if comprehensively and properly planned and impacts fully realized. Processing facilities established in production and growing areas may assure enhanced availability of raw materials from the farming communities who become encouraged if market is assured. In addition, it may also solve the problem of unemployment by using the large rural work force. Simultaneous attention should also be given to market development for steady disposal of the items produced. Improvement of unemployment problem is also likely to be effective by doing away with the rampant interference by the middlemen by gainfully engaging themselves in constructive production and marketing chain simultaneously with conscious vigil of the society.

Need for a master plan on value-addition

Indian agriculture enjoyed the privilege of being the largest industry in India, both in terms of contribution to nation’s GDP as well as manpower involvement, in not-so-distant past; but the indifferent and decrepit outlook towards agriculture as supplier of means for living instead of an effective mean of livelihood is pegging it back and presently, GDP-contribution wise, agriculture has been pushed to 2^nd spot after services sector (Anonymous, 2014). It requires therefore that a comprehensive master plan for the country be developed by the Government of India for adopting a systematic approach on value-addition which could revamp and redeem the argi-economy scenario of the country through large scale rural entrepreneurial development in value-added agriculture. The authors are suggesting one such conceptual model plan in private-public-partnership (PPP) mode (Figure 6) that can be spared a thought by policy makers.

The indispensability of small agricultural cooperatives in form of SHGs towards holistic socio-economic development is a well-established fact around which the proposed plan revolves. This is basically a SHG mediated farm-to-fork policy in which each step is facilitated by some public or private agencies. As has been mentioned earlier, there are copious SHGs across the country under aegis of NABARD, ICAR (Krishi Vigyan Kendras, especially), and NGOs which are either active or dormant for want of fund. All these dormant groups and selected active groups can be mobilized in the said plan. Apart from these, more SHGs are to be formed, whenever and wherever necessary, by these agencies towards broad basing of the model. The principal features of the programme are given below;

· Unlike the example given in Figure 1, where every step involved from procurement of raw materials to product development and supply is mediated by separate SHGs, there should be age/capability/gender-wise division of labour among the members of each of the SHGs in this programme.

· The steps inside dotted blocks (refer to Farmer-to-consumer chain in Figure 6) are to be carried out by suitable public or private bodies as indicated.

· All these groups are to be technologically backstopped by selected public bodies like, ICAR, NABARD, SAUs, State dept. of Agriculture, Agriculture Training Centres (ATCs) etc. and entrepreneurially oriented by private agencies like NGOs, small and medium scale agro-industries, well established argi-entrepreneurs etc.

· All necessary financial backstopping would come from Govt. of India through agencies like NABARD, Ministry of Food Processing, Directorate of Agri-Marketing, rural banks etc.

· The flow of fund would be top down from Govt. contingency fund – State – Districts – Blocks – SHGs. The formulated projects (facilitated by technical back stoppers) should be processed at district level and submitted subsequently for fund allocation to earmarked funding agencies depending on monetary implication. Each implementing district should have a dedicated cell to aid in the process.

· Suitable Indian corporate body/bodies having an effective agriculture wing and wide network throughout the country should be identified and entrusted with the job of identifying the full range of value-added products – in primary, secondary or tertiary form - and develop state-wise, location-specific and socio-economically viable appropriate protocol along with training and execution methodology for each in form of a compendium. The compendium should be very extensive and necessarily include all the projects and protocols ready to be funded by public agencies like Min. of food Processing, Directorate of Agri-Marketing, or any other as well as those with small and medium scale agro-industries. The compendium should also contain comprehensive list of agri-equipment suppliers. The feasibility of financial aiding by govt. in facilitating their (agri-equipment suppliers) service should also be considered upon.

· The packages should be obviously market-driven and its impact on socio-economy of the country should be carefully considered with lessons learnt from other countries. Private market survey organizations of repute should be adequately funded to carry out the market-feasibility study for each package and link the SHGs with various supply chains. They should also collect feedback from consumers for up scaling of the project/projects.

· Considerations should also be given on some kind of bounding, law enforcement or financial assistance, on large-scale agri-industries and wholesale/retail corporate bodies towards procuring a quanta of value added products from these rural SHGs for further facilitation of the marketing.

· The whole process should be under monitoring of a core group consisting mainly of reputed private bodies, and, if necessary, some Govt. intermediaries. This group should report to Govt. in a time-bound manner for efficient evaluation of the programme.

· This entire framework may be kept under the aegis of other noteworthy programmes of Govt. of India towards agriculture development like Rastriya Krishi Vikash Yojna (RKVY) and rural employment scheme like Mahatma Gandhi National Rural Emploment Guarantee Act (MGNREGA); or some separate programme may be initiated. The authors have mentioned RKVY in Figure 6 only to exemplify.

Epilogue

Indian agriculture is hibernating, and for some time now. We need to be pro-active to activate it. Agri-entrepreneurial development and agri-industrialization through value-added agriculture, apart from steps taken to reduce wastage of the produce, can resuscitate and rejuvenate the sector in its entirety. Time has come for a nation’s economy, once dependent on agriculture, to later become truly agriculturally-oriented to transform itself to an agro-industry driven one. This could be ascribed to the reasons that nation has 60% of its’ population making a living out of agriculture; that a nation is still endowed with some of the most productive soils and other natural resources in the world; that a nation despite being the second most productive country, is nowhere in the crop productivity map of world; that a nation is gripped with the dilemma of enhancing productivity without bothering for the farmers’ target to increase profitability for there is no mechanism to process the excess produce locally; and, that a nation is obliviously witnessing large number of farmers’ suicides, even in the most productive areas, for their produce not profitably marketed. As such our agricultural policies must be directed not at short term economic benefits for farmers, but towards long lasting mass developmental goals that can breathe new life into an impoverishing agri-economy while our policy makers should realize that “Agriculture not only gives riches to a nation, but the only riches she can call her own” (Samuel Johnson in http://www.brainyquote.com/quotes/quotes/s/samueljohn385773.html).

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