Indian Agriculture: Small is Not Inconsequential

Thanks to the Annual Budget 2015–16, agriculture is once again on the agenda of every discussion about required policy interventions. The signals are clear – the government wants better returns for farmers by linking them to the market and by providing them with better infrastructure. Subsidies, in current form, are likely to go. The shift from subsistence farming to commercial farming is slowly becoming a reality and being considered as the major way out for improving the state of agriculture and farmers in country. The ‘Make in India’ philosophy of the government is encouraging the processing and marketing of agricultural products rather than direct consumption. Increasing marketability is the focus rather than increasing production. However, we, in India still face the challenges of numerical dominance of small and marginal farmers, and access of organized market to those small farmers. 

According to an estimate, more than 99% of the raw materials for industries are being produced by smaller farmers, and 90% of the marketed surplus is being handled by the private sector which, again, is dominated by the not so organized players. Lack of infrastructure, both for scientific production and for marketing of agricultural produce is a well known and well discussed issue.  And only 7% of agricultural produce are processed for further value addition. Now what options do we have by which most, if not all of the existing players in agriculture production and marketing are benefited?

The first answer has been tried in different parts of the country – contract farming. By definition contract farming is forward contract wherein the producer farmer agrees to produce and sell their produce having specified quality at agreed upon price to the processor/middle men/industry.  Unfortunately, in spite of many successful case studies it has failed to meet the market expectations. There could be different reasons however, small size of farms and large number of such farmers have been among the major factors considered responsible for not turning contract farming into a revolution. If successful, it has the potential of removing many limitations of Indian agriculture. 

Second, which is being encouraged by successive governments, is commercialization of agriculture. Commercialization makes agriculture production, processing and marketing riskier.  Seventy five percent of total contribution by agriculture in our GDP comes from the high value products. Higher costs of inputs mixed with lack of skills of using high valued inputs, inefficient processing because of inconsistent supply uniform raw materials, fluctuating prices of raw materials, comparatively less usage of improvised technologies in production and packaging, and challenges in marketing these perishable products with changing customers tastes make it too risky for everyone involved in the process. It can, however, be argued that this is not something specific to India and there have been similar conditions in many other countries. They however, have succeeded. Why can’t India overcome these issues? Unfortunately, assumption that as farmers’ paying capacity increases other supporting services like, information and advisory services, credits and banking, and insurance will cope and meet the farmers’ requirements is misleading one.  Sadly, failure of these services along with all ready dilapidated extension services resulted in series of many unwanted events like, crop failures, demand and price crash of many products, and ultimately farmer suicide. Small and marginal farmers who constitute the majority were the worst sufferers.

Lack of strategic investment in agriculture has been another concern. Although, overall expenditure including subsidies has been continuously rising but the money has not reached where it should reach: where it will have maximum impact. Expenditure because of subsidy on fertilizers, warehouses, cold storages, agriculture implements, are required and welcome but this cannot give us appropriate return on investment unless our farmers’ capacity is built to produce and market their produce efficiently. In spite of the ever spreading network of banks and increasing emphasis on financial inclusion in the country, only 15% of small and marginal farmers have their accounts in banks. Access to credit in most parts of the country is still a problem and dependence on money-lenders or trade middlemen makes agriculture a non-profit venture for most of the small farmers. 

Till now the major focus of removing rural poverty has been on agriculture. However, the country is witnessing changes in consumption patterns both in urban and rural areas. The demand is shifting towards protein based food like, milk and milk products, meat, poultry, vegetables and fruits from that of cereals. These rich food products have better production efficiency, return is higher than that from growing traditional cereals or millet based crops after investing the same amount of resources (manpower and economic). We have a successful cooperative model of Amul, which is not only inclusive but also provides access to market to individual livestock owners. Regrettably, we are not able to replicate the success of Amul for other products. 

Till the time, both, policy makers and the market stop looking at the small and marginal farmers as consumers, and start considering them as the partners, growth in agriculture will remain skewed in favor of large farmers. Although numerically stronger, small and marginal farmers lack negotiating power. Lack of information, resources, and negotiating power render them weaker in agriculture production, processing and marketing system.  If farmers and rural India has to be empowered and a “Make in India” campaign has to be successful, we just cannot then afford to ignore the small and marginal farmers who constitute 80% of total farming population.

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Agri-tourism: A 'Made in India' Business Option for Farmers

I was attending an international conference at the Institute of Rural Management on Agribusiness immediately after having visited few villages of Madhya-Pradesh.  As my memory was fresh with varied exciting experiences of rural lives, I thought if such experiences could be made available to urban populace it will not only be new and charming to them but will also be quite fascinating. I decided to attend one of sessions where an expert from Sri Lanka was to present a paper on Agri-tourism based on his experiences across the World. The session was quite enriching and I started wondering about its vast potential in India.

What an idea! Of Agri-tourism!  Farm owners make money, non-farm owning villagers make money, the area around villages make money, and local products gets recognitions and new customers. Local village based economy booms. Urban tourists get an entirely new feel and taste of rural life and culture. Tired of the fast, glamorous, commotion filled life urban customers can experience the serene and peaceful surrounding of rural India. There exist added benefits which include knowing and seeing various food products which they may have never seen in their raw form before, experience their cultivation in live field situation and all this at a much lower cost.  

Based on statistical figures it was proven than Asian countries, particularly in the South Eastern region like India have more to gain from such initiatives as the tourist in-flow has been continuously increasing at higher rate than that of Europe; even the number of domestic tourists is on the rise. The preference of urban and international tourists for pristine, serene and scenic place is well established by now. Agri-tourism in this context presents great opportunity for various stakeholders in tourism industry. 

Agri-tourism is more beneficial for farmers as it helps them to increase their income sources rather than them just being dependent on farming especially when increasing income through increased production and better prices is not in the hands of farmer. It not only helps in maintaining a regular cash flow for the farmers but also in selling their products and experience. For a young city-born tourist ploughing a field with a tractor attached to the harrower is fun but doing the same with a bullock-pulled plough is an intriguing and memorable experience. Also listening to the nuances of agriculture and experiencing the same in field is a valuable learning experience which any urban tourist will cherish, therefore, agri-tourism is a wonderful mélange of relaxation, education, distinctive experiences and fun.

To make it more attractive, the site for agri-tourism should have a typical rural and farming environment, something worth seeing (eg. standing crops in the field) and something worth doing (eg. any farming operation in which the tourist can participate). For example, if the setting is big banana farms in banana growing village where regular operations are going on, tourists will like to see banana plants, its flowers and various sizes of the fruit. If they are explained about and shown vegetative reproduction system of plant and various usages of the trunk like vegetable for rural people, fodder for animals, rope from the trunk fiber, it will be an interesting addition to their existing knowledge about bananas. If the tourist gets an opportunity to help with harvesting, washing and packaging the/she will not mind paying extra money for such experience but while returning they would certainly like to have ripened banana for their own consumption.

Interesting examples from different parts of the world are worth mentioning and following. At one of the agri-tourist spots in Japan if the consumer visited a vineyard he would need to pay less to eat grapes but when he decided to select and harvest grapes on his own he had to pay more. The principle is admirable, it states that the more experiential delight you indulge in, the more you have to pay. In Vietnam, when you visit agri-tourist sites and decide to cook selected products you pay much higher than that for just visiting seeing farming practices.  

But yes, to see it turning into a functional enterprise one needs to be as cautious as launching a new tourism venture. Accommodation and food for tourists need not necessarily be urbane but should be clean and hygienic. Making an attempt to provide real experience of local culture is welcome but it should not be thrust forcefully on foreign tourists who may not appreciate the new experiences. Planning opportunities for hand-on experiences of farming practices is a very crucial decision as it should neither affect crop life-cycle nor the quality of farming operations which will otherwise negatively affect overall productivity of the crop. Holidaying in farms, farms tours, and farm entertainment can be planned when tourists’ inflow is known and many neighboring farmers could collaborate to practice and promote agri-tourism.

There are several models of agri-tourism depending upon varying levels of importance given to agri-tourism over farming. However, in the context of emerging economies like, India, this option should always be considered as additional source of income.  With increasing popularity and creation of better infrastructure at village level one may consider transforming agri-tourism as the complementary source of income to that of income from farming.

We must try and promote it. After all this option of increasing income of farmers and improving village-based economy truly reflects “Made in India”. 

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CSR Communication: It is More Than Business

Blogging after a long time, hope you like... 

It was a training session on corporate social responsibility (CSR) communication for senior managers of an international company having business interests in mining and manufacturing sector when one of the participants asked: “Why do we need to speak out all the good works we are doing?” “Given the general mistrust on corporate bodies by the public, don’t you think beating of our drums will not only make the common man but even the stakeholders think that we are perhaps trying to cover up our wrong doings,” he asked.

The questions and observations appeared relevant as in the past many CSR communication attempts had been termed as “green-washing”. But does it mean that corporations should stop communicating about their CSR activities? The answer would be a big No.

  It is time one has to appreciate that the new global marketplace is crowded, competitive, cluttered with messages and information. A company needs to not only to segregate non-business information from those purely relating to business, but make them worthy of knowing for interested audience. It is no secret, companies are evaluated based on their business performance and stakeholders’ expectations. Stakeholders feel involved and go all out to extent support to such companies whose policies and performance match their personal values and expectations. The ‘CSR communication’ is a major tool which companies can use in a most conscientious way to impact stakeholders, who besides direct employees constitute consumers, NGOs, media and civil society organizations.

 Free flow of information is a sine qua non for survival of any corporation in today’s market. For, it makes way for establishing transparency in the functioning of organizations and enhance the confidence of investors, consumers and employees. The more the companies expose their ethical and social ambitions the more they attract critical stakeholders’ attentions. Sharing information helps a company’s reputation and competitive advantage. ‘Sustainable reputation’ is key to success in business. The corporate reputation of some of the companies like Body Shop, Tatas, Unilever and ITC proves the point that socially responsible behavior matters more than advertisements.

In Indian context CSR communication makes more sense, because with effect from April, 1, 2014 any company having  net worth of Rs. 500 crore or a turnover of Rs. 1,000 crore or net profit of Rs. 5 crore needs to spend at least 2% of its average net profit for preceding three years on corporate social responsibility activities.

 No company can afford to remain insulated from what the stakeholders want. The CSR communication serves as a  means to update the stakeholders, which in turn change public perception about a company. Hence, it is always advisable that CSR communication is planned keeping in mind the sensitive elements associated with the expectations of the varying class of stakeholders. According to an estimate total expenditure on CSR activities by companies is likely to cross Rs. 10,000 crore soon. This explains the growing importance of CSR communication as a vehicle for building companies in the eyes of public. Those who plan well and move early obviously will reap rich dividends.

 As a strategy, it would always be wise to use both direct and indirect communication. Direct communication gives freedom to convey what corporation wants stakeholders to know. The challenge is to create a condition and select the medium that allows corporation to place its CSR action in context and to communicate appropriately with different audience with different narratives.

 A detailed CSR communication should cover contents related to workplace, market place, community, and other stakeholders like, NGOs, media etc. Traditional tools like, website, advertisement, company brochure, events and press release have always been used to convey messages regarding CSR. Product labels and packaging have also been found every effective.

The notion that CSR communication is the responsibility of corporate communication or PR departments of corporations will be a mistake. CSR Communication is the job of the whole organization – not in the sense that everyone should communicate with media, but they must show to the world that they believe in communicating with others. The message should be uniform and appear inside out. Happy and contended employees, customers, suppliers or any other stakeholders talking about the CSR communication will help more.

 Indirect communication has been found very effective in case of meeting objectives of CSR communication. Let media and NGOs talk about your work. Receiving and highlighting awards and endorsement by reputed agencies have been found adding credibility to the CSR agenda of the corporation. However, using it only as a marketing ploy or trying to cover up any deficiency through CSR communication will boomerang.

CSR communication is often misjudged as sanctimonious. But it can be very innovative, creative and motivating. Don’t be afraid of communicating with media. Nowadays people are aware and interested in these subjects and ask for more information. It is always good to inform the world about the good works you have been doing. After all, it helps in long term value creation. And the good news is - overall media are willing to give fair space to corporate CSR activities. 

 Think of days when thousands of companies competing for media space with all the positive and success stories coming out of their CSR stables, abolishing write-ups on scams and scandals from front pages of newspapers and prime time TV bulletins. It will be then days of consumers’ delight.

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FDI in Retail: Who is Thinking of Farmers ?

Ever since government came up with the document for discussion on FDI in multi-brand retail trade, most debates in media have veered round business, business players, effect of one business format over another and infrastructures required to make business more profitable. The debate no doubt will continue in days to come. But the farmers, original producers of foods and food products which constitute bulk of retail business, and who should be the focal point of discussions, are sadly missed out.

Though the DIPP document on its part does submit that farmers will be benefited, the argument nonetheless appears too blurred to be convincing. Further, the document is based on the premise that our ‘production (farmers’) system’ is ready to cope up with increased quantitative and qualitative demands of food products which FDI in retails is expected to generate. The fact is – it is not. It will also not be prudent to think that efficient supply chain and increased demand will infuse vigor into an already weak and sagging production system. It would rather be sensible to include farmers and existing farming system in discussions. Strong and efficient farming system is must for the success of mega-retail business in India.

Where do we stand today? According to a NSSO study, 40 percent of farmers have lost interest in agriculture. The household income from agriculture has been reducing. Eighty percent of total 12 crore farm holdings own only 20 percent land. Not only is the average land holding of Indian farmers too small, they are ‘fragmented’ too. Overall per holding agriculture productivity in our country is lower than almost all the countries mentioned in the DIPP’s document. So who all are going to benefit by the efficient back-end operations and improved infrastructure of business? Certainly not the aam Indian farmers! Instead there would be further land consolidation in favor of the already rich and resourceful farmers making room for the expanding gap between the rich and poor farmers to expand further.

It is no secret that when small and marginal farmers change their cropping pattern from cereal or staple food-based crops to high value crops (in which retailers would be interested), the quality of their nutrient intake deteriorates as they become dependent on the market for their staple food.

National Commission on Farmers has reported about the almost stagnant and decline in productivity of our farmlands. In the last ten years credit to agriculture sector has gone up by 200 percent and fertilizer subsidy by 300 percent. Yet, the productivity of rice, wheat, and pulses has almost remained constant. Now when area under cultivation is shrinking because of urbanization and industrial growth, intensive and commercial farming on limited land will have its own toll on the productivity of lands.

All efforts notwithstanding almost 60 percent arable land with no irrigation facility are dependent on rain. Increasing fluctuation in rainfall, depleting ground water level, lower and improper fertilizer usage, are issues of great concern. Rural infrastructure is another area of worry. One cannot drive high speed air-conditioned trucks carrying fresh perishable foods on roads inapt even for bullock-carts. Villages lack dependable power-supply.

“Farming is the riskiest profession” said M. S. Swaminathan, an eminent agriculture scientist. In spite of being an agricultural country our farmers are not insulated from hosts of risks. Existing insurance system is either out of reach for them or too complicated to be relied upon. Arrival of retails in a big way will certainly make farming riskier. Meeting customers’ will make farming more resource intensive farming. We need to learn lessons from the innumerable incidents of suicides by farmers being reported from across the country.

Contract farming, projected as the ‘panacea’ for many of problems the Indian farmers are facing, is yet to pass the test of time as anticipated. Instances are galore of one party blaming the other of dishonoring the contract. Though, theoretically it presents a win-win situation both for the farmers and private players, it’s implementation at the field level has been very tricky and in many cases farmers have been found on the losing side.

It is high time we appreciate ground realities and make farmers focus of our discussions as we have been making big retail waalas like, Wal-mart, Carrefour, Tesco, and unorganized retailers like mom & pop stores. The need of the hour is to first work on the ‘root’ of the business before thinking of strengthening the ‘shoot’ and expecting colorful flowers and fruits to blossom. There are still many loose ends which need to be tightened at the very early stage of the supply chain, i.e., the production stage. A word is enough to the wise. Believing that foreign investments will do all these will be like dwarf’s leap for the moon.

Still waiting for monsoon in Odisha, India ....
 
Niraj
 
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