Photo: Bloomberg
Photo: Bloomberg

Making India’s agriculture sustainable through PPPs

With govt providing and co-financing the back-end of the value chain, and the private sector and farmers doing the rest, agriculture can still remain a primary engine of rural growth

In the years since its independence, India has made immense progress towards food security. Indian population has tripled and foodgrain production more than quadrupled; there has thus been substantial increase in available foodgrain per capita.

However, agriculture has the potential for major productivity and total output gains increase because crop yields in India are still just 30% to 60% of the best sustainable crop yields achievable in the farms of developed as well as other developing countries.

Additionally, losses after harvest due to poor infrastructure and unorganized retail has led India to experience some of the highest food losses in the world.

Several studies suggest India could eradicate hunger and malnutrition, and be a major source of food for the world, by striking a balance between calories and nutrition with a focus on better farming practices and adopting protein-based crops; encouraging food processing industry to make alternate crops worthy of consumption; developing rail and road infrastructure and cold chains; enhancing the food safety and commercial and regulatory environment.

Clearly, there is need for change and to create an enabling environment for agriculture that needs to respond not only to longstanding issues and challenges, but also to newer realities. The natural resources on which agriculture is based—land and water, above all—are becoming degraded and there is growing competition for their use. Climate change is already exacerbating this situation, making agriculture more risky, and it will have an even greater impact in the future.

A major game changer for the agricultural sector can be the public private partnership (PPP) model. PPPs, which bring together the collective power of all the stakeholders in the agricultural ecosystem—the government, private companies, and even education and research and development—can transform the sector at multiple levels. With the government providing and co-financing the back-end of the value chain, and the private sector and farmer contributions doing the rest, the agricultural sector can still remain as a primary engine of rural growth and poverty reduction in India.

The PPP model can be used effectively for the following:

Investing in smarter value chains

The government and private sector can come together, for instance, to spur the development of the food-processing industry—one of the sunrise sectors within the agricultural domain. It is important that the industry expands its mandate to go beyond just increasing the shelf life of food, preserving food nutrients and providing fortified products. Rather, the processing industry, supported by investments by the government and the private sector, can now look at providing farm extension services, enhance price realization, cut out intermediaries and improve the supply chain through forward and backward linkages.

An important role of the government, besides funding through the PPP, will also be to create an enabling environment for private investment. This needs to be done through tax rationalization, duty exemptions, increase in public spending, priority sector lending and foreign direct investment (FDI). It is steps such as these that will catalyse private sector investments in supply chain infrastructure and services, leading to a reduction in waste and greater value-addition.

Improving access to credit, technology and markets

PPPs are needed that introduce India’s agricultural sector to the state-off-the-art. Information technology (IT) and biotechnology have the potential to transform agriculture, raising its production levels and outputs. PPPs targeted at offering farmers vital information, methodologies as well as new-age tech tools are the need of the day. Technology can bring to farmers critical knowledge and guidance on matters related to crop rotation, weather patterns, fertilizer use, going organic—all at the click of a few keyboard keys, or better still, a simple text message on from their mobile phones.

Biotechnology, meanwhile, can equip growers with techniques that help them develop high-yield crops, manage pests, better utilize waste water and focus on nutrition. The beneficial impact of technology has found reflection in the remarkable turnaround and breakthroughs that have been made in the cereal production industry. This success can be replicated in crucial areas, such as oil seeds and pulses, which are highly import-intensive, through PPPs.

In the same way, PPP projects, targeted at helping farmers connect with their marketplaces and financial institutions for micro-funding, can usher in massive alterations in the rural economy.

Building farmer resilience to environmental shocks

India’s farmers are constantly threatened by adverse weather and environmental conditions that spell disaster for their produce. Extreme situations,such as flooding and droughts, constantly plague India’s farming community, and PPPs that immunize the agricultural sector against the vagaries of nature can be lifesavers. In fact, in a country where farmer suicides are common, such interventions can actually save lives. PPPs that help the agricultural sector deal with weather shocks, and enable farmers to de-risk themselves through insurance, etc., can emerge as a crucial helping hand.

While PPPs in the agri-space are not commonplace, they now need to be. A start has already been made by the Maharashtra government, which has rolled out its Maharashtra Public-Private Partnership for Integrated Agricultural Development (PPPIAD) project. PPPIAD, a successful PPP enterprise, is showing the way to other Indian state governments. Under the aegis of this initiative, Maharashtra—the first state to take this innovative path—is developing integrated value chains for selected crops through PPP and co-investment.

Catalysed by the World Economic Forum’s New Vision for Agriculture (NVA), the PPPIAD aims to develop integrated value chains. What began with 11 projects in 2012-13, now encompasses 33 value-chain programmes in 2014-15 with more than 60 participating companies. Focused on 15 key crops, the project has reached almost half a million farmers to date with a target to reach five million by 2020.

PPPs like the Maharashtra project are indeed the way to go for India’s agricultural sector. They are proving to be an important step in renewing and rejuvenating rural economies and leading them to inclusive and sustainable growth.

Siraj Chaudhry is chairman, Cargill India Pvt. Ltd.

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