The growth of organized retail and the potential for India to become an important exporter of fruit and vegetables provide significant growth opportunities for small-scale farmers and the Indian rural economy. In 2001, the latest year for which figures are available, there were approximately 25.4 million Indian fruit and vegetable farmers. Some 70% of the farmed plots of less than 1ha. It requires an average of around 150 farmers to service a supermarket produce department year-round. Given the number of organized fresh produce outlets already on the ground and those on the drawing board, the organized retail sector could conceivably involve several million small-scale farmers over the next few years.
There are a number of serious barriers, however. It will require the active involvement of both government and private sector to dismantle these barriers. Policies will need to change. Small-scale fruit and vegetable farmers will need assistance to be able to meet the needs of organized retail and export markets. Supply chain infrastructure will need to be improved.
The policy constraints limiting the efficiency of agricultural value chains are well known. These include the Agricultural Produce Marketing Committee Act, taxation and delays at state border crossings, frequent arbitrary policy changes particularly on the part of state governments, the need to expand irrigation coverage, poor road networks and rural power shortages. Correcting the policy deficiencies will require strong political will on the part of both the Union and state governments.
The two primary requirements for enabling fruit and vegetable farmers to take full advantage of the opportunities from the growth of organized retail and export demand for fruits and vegetables are, first, to provide the farmer with assured market access and, second, to enable farmers to meet market requirements. Both these can be satisfied by directly linking groups of farmers with organized retail and export buyers through long-term partnerships. Such partnerships should include commitments by the buyers to purchase the farmers’ produce, to furnish farmers with technical extension services, to provide essential post-harvest infrastructure, to engage with the farmers in crop planning measures and to establish mutually agreeable pricing formulae. The farmers, in turn, must commit to sell their produce to the buyers (as long as the agreed upon terms and conditions are met) and to adopt the buyers’ technical production and post-harvest recommendations.
The India Growth Oriented Micro-Enterprise Development (GMED) programme sponsored by the US Agency for International Development and managed by ACDI/Voca, a Washington, DC-based economic development consultancy, is an example. The programme, through a pilot project with ITC Ltd, has been able to largely overcome the belief on the part of organized retailers that small-scale (1-5 acres) farmers could not be effectively integrated into organized, fresh-produce supply chains.
GMED helped ITC organize three vegetable farmer clusters in Punjab, Maharashtra and Andhra Pradesh to supply fresh produce to its retail outlets; introduced packages of simple, inexpensive production and post-harvest practices to ITC extension workers for transfer to cluster farmers; designed farmer loyalty programmes; and helped develop ITC’s fresh produce supply chain. The results for the farmers concerned included significant reductions in production costs, sizeable improvements in productivity and product quality, and significant growth in net income.
Based on the success of the pilot programme, ITC recently went on an expansion programme aimed at opening 500 retail fresh-produce outlets in 50 Indian cities over the next two-three years. ITC intends to involve at least 100,000 farmers and 1,500 extension agents to support its fresh-produce supply chains.
GMED is currently extending this approach to 6,000 small-scale farmers in six Indian states, in partnership with ITC, Radhakrishna Foodland, a 5,400-member farmer cooperative in Maharashtra, the Baif Research Foundation and the Federation of Farmers Associations in Madhya Pradesh. GMED is currently discussing the application of this approach to other fresh produce supply chain operations with several other major corporate players in organized retail.
The most important lesson learnt is that small-scale Indian fruit and vegetable farmers can be successfully incorporated into organized retail and export supply chains. It is possible to foster loyalty among farmers who partner with organized retail and export firms, provided the partnership benefits both parties. The ITC pilot programme also showed that the most important single element in building farmer loyalty is the provision of competent technical extension services on an ongoing basis and to improve farmer productivity and product quality, resulting in higher farm family incomes.
Don Taylor of ACDI/Voca is project manager for the US Agency for International Development (USAID)-sponsored Growth Oriented Micro-Enterprise Development programme. Comments are welcome at email@example.com