- Different Strokes!

By Sanjeev Chopra
At the outset, it is important to make a clear distinction among the different segments in agricultural business: the large corporate houses and organised players, on the one hand, and farmers’ organisations like primary Co-ops, farmers’ clubs, SHGs and JLGs, on the other. In fact, it is the latter that finds itself at a 'policy disadvantage' The last two decades have seen several large corporate houses enter agribusiness in big way - from Spencer's to Del Monte, Tatas to Mahindra and ITC to PepsiCo. The Government of India has announced several concessions for investments in this sector, and the Ministry of Food Processing (at, both, GoI and State Government levels) have been launching special campaigns to attract investments in this sector. Mega Food Parks have been announced, and 'anchor investors' have taken the lead in attracting other players to the Food Park. Business houses with interest as diverse as Bidi manufacturing to cement industry are trying to enter into JVs to get a foothold in this new sunshine sector.
However, much of this buzz has not 'affected' farmers' organisations, many of which now find that, in comparative terms, it is more difficult for them to get into value addition and processing sectors than their counterparts in the private sector. This is because the corporate sector is regulated by provisions that are far more liberal than those which govern the functioning of the co-op societies or farmers’ organisations. Having said this, it may be noted that the reasons for the stunted growth of farmers’ organisations is not because of legislation alone. Farmers’ organisations, including co-ops, are affected by the general economic environment of the domain and region, and management systems and practices play an equally if not more important role. This author has pointed out that Amul has become a global brand name and ushered prosperity for its members not because, but in spite of legislative polity. The main factors in the success of Amul include excellent management practices, an exceptional leadership, domain expertise in dairying and proximity to a large market.
The Amul success story has obviously not been replicated in other domains, and the success in other regions has also been limited. In most parts of India, and for most cereals, oilseeds, pulses, fruits, vegetables et al, agriculture production grew in substantial measure during the last few decades, but farmers’ incomes were not commensurate with this increase, largely because they were out of the purview of 'value addition'. It has to be understood that the way agricultural commodities are transacted is changing. Farmers are producing essentially for the market. There is increasing standardisation (post harvest sorting, grading, primary storage and quantity lots) which producers have to do on their own to get better price realisations. Thirdly, farmer organisations that played a stellar role in the early years of the Green Revolution by providing essential inputs like credit and fertilisers through their network of primary credit societies, could not replicate the same for post harvest management for several reasons, which will be examined later. Meanwhile, the phase of liberalisation in the nineties saw the dismantling of control regime in several sectors of the economy, but the agricultural and rural sector was left largely untouched by reform. It has, however, resulted in making it much easier for the larger firms, including MNCs, to enter into food processing and agricultural commodity trading business, but the barriers to co-operatives and farmer organisations continue to be as stringent as before. Producer Organisations, Farmers’ Interest Groups and Commodity Groups promoted by Nabard, Mother Dairy and state/apex federations have climbed on to the bandwagon.
Abundant Yields: Constant to Low returns
Even as the agricultural production in the country shows a graphic increase in the thirty year period from 1975 to 2005, the realisation for the farmers per crop per hectare has not shown a commensurate increase. In fact, in certain years, there has been stagnation, and a decline in real price realisation for the farmers. Thus, even as the input prices rose, and the dependence of the farmer on external inputs increased, the price recommendations from CACP did not keep pace with the increase in manufacturing and services sector. These years witnessed an increase in farmer indebtedness, decline in the ratio of public investments in agriculture and thousands of farmers’ suicides which finally led the government to adopt a slew of measures that brought the focus back to the farmer. These include the Loan Waiver, RKVY, NFSM and controlling fertiliser prices at substantially high costs to the exchequer. However, the realisation that profitability in agricultural sector comes not from production, but post harvest management and value addition has yet to become the 'cornerstone of the new policy paradigm'. More money is made by the several intermediaries in the potato trade than the grower. Most of these transactions are informal, and the financial gains of the intermediaries are perhaps not recorded anywhere. By the time the central and state governments can announce the MIS; the commodity is already out of the hands of the farmer. Lack of capitalisation at the level of PACS and /or SHGs inhibits the capacity of these organisations to make effective interventions, and offer competition, or pro-competition to the private intermediaries.