A PPP In Agriculture? —Part 2
Last time, the column had discussed PPPs in agriculture and the steps taken by the Government of India to ensure the practical roll-out during the next financial year. The response from the corporates and the state governments has been positive, and it is interesting to see the different set of factors that are propelling this concept.
First the corporates. As markets evolve and become more differentiated, what is being sold to the consumer is not a ‘commodity’, but a ‘brand value’, and quality of the produce is not just one of the parameters, but the most critical factor. The only way in which a ‘firm’ can have control over quality is by being part of the production process and in many cases, even the pre-production process, because quality cannot be added as a ‘preservative’ or a ‘colouring agent’. Thus the corporate which deals cannot build and sustain a brand by going to the market, or even to the farm gate, or even from an aggregator because their stakes are nowhere close to those of the brand. Often, several commodities are sold under the corporate logo, and therefore even if one of the precuts sold under this brand receive flak or criticism from the consumer, the negative spiral may get out of control. Thus the corporate would like to exercise a degree of control over the production process.
This control over production is easier when corporates can enter into the production process directly, or when they deal with large farms where production is usually mechanised. However in India, where both land, labour and energy costs are very high, the production model has to be based on the ‘marginal and small farmer’, ensuring an integration with his production system. Thus one finds that corporates ranging from Nestle to ITC are keen to join this bandwagon for this gives them the credibility and access to funnel ‘public goods’ towards production which has an assured market, and therefore assured incomes for farmers.
An elaboration is in order. State governments usually support the farmer by providing him technical inputs, including quality seeds, fertilizers, nutrients and assistance for plant protection, besides facilitating credit through the Kisan Credit Cards. These support services come at a cost, including the cost of delivery. Usually, there are limits and norms: thus usually 50 per cent of the cost of seed, or fertilizer or micro-irrigation equipment is provided. Under the proposed partnership, the delivery of these services, as per established norms, and verifiable parameters, will be the responsibility of the corporate. The corporate will also have to equal the support being given by the government through additional benefits, including delivery costs and an assured market. The farmer gains for she/he does not have to hold the land in mortgage to the corporate, or any other institution, and is also not ‘dependent’ on the corporates goodwill for the farmer is getting his/her entitlement, which was earlier being delivered by the Agriculture Department. The farmer’s gains in the following ways: she/he will not have to run around to get the mini-kits—these should hopefully be delivered at the farm gate, and more importantly, on time. The corporate will have greater flexibility with regard to purchase of inputs as payments to input suppliers could be made in cash/advance, thereby avoiding the time lag which currently afflicts most government supplies. The extension worker will also be able to establish a more realistic interaction regime with the farmer, as she/he would not be called out for census/election/enumeration duties.
Does this sound like a silver bullet? Aren’t there any challenges? Do we not need independent third party inspections to ensure that the system is not perverted? Can this be upscaled especially in regions (North-East, tribal blocks) and for commodities (other than Basmati rice, potatoes, gherkins and baby corn) and for farmers with marginal land holdings ? These are the questions that crop up, and which need to be addressed.
Yes, there are many challenges from the government system itself. This means an end, or at least a decline in the exercise of patronage at the grassroots level. All farmers engaged in that ‘commodity’ in that ‘area’ will be covered irrespective of what the Panchayat functionary or the local official thinks. This cuts out discretion, as also the ability to favour one group against another. As decision making does get centralised, the bank manager also loses his discretion with regard to crop loans. Therefore, this intervention has to be made in a non-confrontationist manner, and by engaging with these functionaries. Third party inspection and monitoring, especially by an agency like NABCONS (Nabard Consultancy Services) or the Agriculture Finance Corporation becomes important to ensure that norms are bang followed. Yes, the pilot can be up scaled because once production clusters see value in this partnership, the demand will come from the farmers themselves.
Last but not least, the state governments have to be on board for the scheme to be successful. This is sought to be achieved by anchoring this under the Rashtriya Krishi Vikas Yojana (RKVY) National Agricultural Development Programme). Corporates will submit their proposals to the state agriculture departments which will examine them and forward them to the State Level Sanctioning Committee under the Chief Secretary of the state. Once these have been approved by this Committee in which the Government of India is also represented, taking it forward should not be difficult.
How do corporates get their ‘comfort’? Do they have to run around after state governments? No. At the apex level, the Small Farmers Agribusiness Consortium will act as the nodal agency to receive the proposals, examine them and forward them to the state governments after preliminary examination with regard to the viability of the project. The SFAC has already done the hand holding for the National Horticulture Mission in the Vegetable Initiative Clusters—this is the next logical step!
By Sanjeev Chopra
(An IAS Officer, the author is Joint Secretary & Mission Director, National Horticulture Mission, Government of India. The views expressed are personal.)