Global Food Security Initiative, India Regional ForumFebruary 19 2013, Mumbai, India

FINALREPORT

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On February 19, 2013 the Global Food Security Initiative (GFSI) held its first Regional Forum in Mumbai, India. In the aftermath of the 2012 Global Food Security Forum (GFSF), held in Rabat, Morocco, the GFSI Mumbai aimed at identifying successful agricultural models and best practices from India, some of which could be replicated or adapted to further agricultural development in Sub-Saharan Africa.

The GFSI Mumbai brought together nearly 30 high-level Indian experts and practitioners in a highly interactive, workshop-like setting. Through a combination of presentations and open discussion on specific topics, this carefully selected group engaged in productive information-sharing and knowledge-building.

By means of introduction, the Boston Consulting Group (BCG) – a global management consulting firm with in-depth India and agribusiness expertise – shared its perspective on “Indian Agriculture as an Engine of Opportunity.” In its presentation, BCG showed that agriculture formed a significant growth opportunity for India, but that several constraints across the value chains – access and efficient use of inputs, farming techniques, logistics and processing facilities – slowed down the sector’s expansion. Solving such a complex problem would require action on many fronts, from policy reforms to technological innovation.

Following this introductory presentation, participants’ discussions were structured around three main topics:

This report summarizes the content and output of the discussions organized during the GFSI India Forum. It is structured around the 7 main takeaways that emerged from the contributions of the speakers and the debates among participants.

Smallholder ecosystems, which focused on agricultural best practices that sustainably improve productivity within smallholder ecosystems in India. These include enhanced agricultural production techniques, soil management, use of inputs and crop selection

Institutional and market linkages, which focused on key practices that strengthen the links between Indian smallholder farmers and their environments. These include transportation/logistics, access to market information, and collaborative organization structures

Financing solutions, which focused on financing and risk management mechanisms (e.g., micro-insurance) instrumental in the development of smallholder agriculture in India?

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M. Mhamed Ibnabdeljalil, EVP of Sales, Marketing and Materials Procurement, the OCP Group, giving the opening speech

Participants during the afternoon session of the Global Food Security Initiative – India Forum

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Takeaway #1: The frontier between Agriculture and Agribusiness is an artificial one

In India, agribusiness GDP is twice as large as agriculture GDP. In other words for every dollar of agricultural output, India generates two dollars in agribusiness. This ratio compares unfavorably to the

United States (where the ratio is 10-to-1) but also, more surprisingly, to Brazil (3.7-to-1).The agriculture and agribusiness sector are therefore tightly linked – efforts in growing one should result in positive spillover on the other. Recognizing this interdependence and permeability is critical to moving to a “higher gear” (see exhibit). GFSI participants embraced this insight, arguing that the best way to

improve smallholder farmers’ revenue was to integrate them within the agribusiness value chain. Through a process known as disintermediation, farmers can face fewer middlemen and get closer to markets. Representatives from Pepsi and Tata gave examples of how their organizations had direct bridges with smallholder farmers. To support these new partnerships, the multinationals organized guaranteed crop purchase programs, supplemented by capacity building efforts and financing solutions. This type of “win-win” collaboration offers a model of success for both agriculture and agribusiness.

Agribusiness growth

2010

2010

~10,000

2020 (E)

~17,000

2020 (E)

~36,000

2010

~17,000

~52,000

2020 (E)

~140,000

Economic growth

Agriculture growth

1

23

Economy (Rs. billion)

Agri-GDP (Rs. billion)

Agribusiness (Rs. billion)

~10%

~8%

~5%

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Takeaway #2: Farmers today are autonomous agents of change

GFSI participants pointed out to numerous policy deficiencies within India’s agricultural policies (for instance, around agricultural subsidy schemes), as well as

difficulties in advocating for reform. In face of such challenges, however, participants also outlined that “farmers are no longer waiting for these [changes] to happen”: across the country, smallholders are organizing themselves into cooperatives and contract farming groups, collaborating to share the cost of farming equipment (e.g., tractors, irrigation), procuring

inputs at more competitive prices, accessing storage facilities, supplying larger clients, etc. (see exhibit)

Acknowledging this level of self-empowerment is important. Instead of speculating about smallholders’ needs, policy makers and other outside stakeholders need to focus on meeting their specific requests – mainly around education/training, financing, access to inputs and use of technology. GFSI participants agreed that this approach was conducive to increasing smallholder productivity while boosting rural incomes.

Storage+ Large produce provide access to better storage facilities+ Can negotiate better rates

Inputs+ Afford to go to beter markets to procure better inputs

Traders+ Reduce reliance on traders+ Better bargaining power

Credit+ Can get better interest rates from banks as collectively group has lower default rates

Farming techniques+ Can afford exposure to better farming techniques

Farming equipments+ Collectively, can buy equipments+ Share it across larger farmers leading to better asset utilization

Corporate+ Can partner with corporate to supply produce directly

Producer organization

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Takeaway #3: Storage and waste need to be addressed as priorities

About 50% of global food produced goes to waste. While some of the food waste occurs at the level of the retailer or end consumer, considerable wastage also happens

upstream, both in farming/harvesting (sub-standard farming techniques, poor used of inputs, …) and in post-harvesting (inadequate or insufficient storage and transportation). In the meantime, India is expecting a 50MT food shortage by 2020, a gap that will lead to imports worth ~$80B.

Reducing food waste, GFSI participants agreed, is therefore critical for food security. According to the Department of Food and Public Distribution and BCG, meeting the demand for

adequate food storage alone would save ~$10B worth of agricultural produce.

Corporate players are stepping in, bringing discipline to a highly unorganized, fragmented and low-quality warehousing industry. Through strategically-focused partnerships with multiple agriculture-stakeholders, private players have been able to build scalable, stable and profitable businesses (see exhibit). In a win-win-win scenario, farmers benefit from affordable storage and timely access to market (acting as price-setters vs. price-takers), private investors reap financial benefits from this opportunity, and society at large gets economic benefits from the broader ripple effects of loss reduction.

2007

Storage

Logistics

Processing

Branding and retailing

Allied services like WRF

2008-09 2010 Plan going forward

Acquired a local warehouse player

• Tied-up with banks, stock exchanges to provide services like Collateral management, procurement

• Set up facilities for testing, certification etc.

Leases state government warehouses to expand

Launched e-spot trading of mustard in Rajasthan

Launch a full-scale electronic exchange for

agri-commodities

Build a large scale 3PL provider catering to multiple industries

Entered in primary processing of spices,

dry-fruits, groundnuts

Launched branded spices and dry fruits

Build a large scale play in retail and export of

agri-commodities

Expanded by builing own warehouses in 2 states

Expand across 5 more states in India

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Takeaway #4: Access to information is critical and will become increasingly important

GFSI participants agreed that access to information is critical to helping smallholder escape the poverty trap. Most of these farmers tap into informal channels (such as village

meetings), which relay incomplete, delayed and often inaccurate information. Left at the mercy of middlemen – who often leverage information asymmetry to extract value from them – Indian smallholders have weak market power. Similarly, as they do not receive up-to-date weather forecasts and alerts, farmers can suffer severe economic consequences from unanticipated droughts or heavy rains.

Providing smallholders with the tools to access timely agricultural prices, accurate stock levels, and up-to-date weather forecasts is the

first step in connecting them with markets. Equipped with this information, they can make better business decisions and increase their standard of living.

M o b i l e s o l u t i o n s r e l y i n g o n S M S technology,offer a promising value proposition. Nokia’s Life Tools, for instance, provides farmers localized knowledge related to weather patterns, agricultural techniques and market information. Similarly, IFFCO, in partnership with Airtel (a large mobile service provider) launched an SMS service to provide free information to a large subscriber base. Moving forward, GFSI participants called for the development of other innovative ways to improve access to information for smallholders.

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Takeaway #5: Knowledge is essential

Takeaway #6: Working in partnerships and consortiums is key to success

GFSI participants also emphasized the role of training and the diffusion of the latest technologies as key components of a successful smallholder ecosystem.

This point was illustrated in many of the presentations throughout the day. Under the Mango Tree (UTMT), an NGO that provides mainstream market access and training to small beekeeper farmers illustrates this point.

The organization provides year-long support to smallholders, sharing with them knowledge about how bees behave in each season (and how they should be cared for as a result), techniques of proper honey extraction, and so forth. Similar conclusions about the criticality of training could be drawn from the OCP Fund Pulse Project – where know-how was provided in lieu of direct subsidies – as well as from the PepsiCo and Tata initiatives.

India Forum participants were aligned with the need to harness specific expertise across the value chain to achieve more successful outcomes. Multi-stakeholder collaboration is most critical when

scaling up existing projects: broadening the geographic scope requires local know-how, while expanding to a new type of crop may demand in-depth agronomical knowledge.

The benefits of collaboration were illustrated in nearly all of the day’s case studies. In carrying out its pulses programs, the OCP Foundation works with six partners. Similarly, UTMT has stated they will need more partners to scale up their existing operations. Throughout the Forum, GFSI participants called for more similar collaboration, particularly in the form of Public-Private partnerships (PPPs).

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Takeaway #7: There’s no silver bullet to improve smallholder livelihoods

Last but not least, GFSI participants agreed that no single approach would provide a comprehensive solution to issues faced by Indian smallholders. Instead, a multi-prong approach

targeting multiple levels of intervention – technological innovation, policy reform, capacity building, public-private partnerships is necessary to develop an ecosystem for

inclusive agricultural growth (see exhibit).

This holistic approach, participants noted, also needs to be customized to local needs. Agro-climatic specificities, logistics constraints, and policy limitations all dictate what is feasible within the agricultural realm. Accordingly, adapting successful interventions – instead of replicating them with no regard for local specificities– is key to successful outcomes.

Policy and regulatory reforms

Public and Private partnership

Capacity building Key enablers

of inclusive agri-growth

• Liberalize agri procurement• Modify MSP norms• Redesign subsidy schemes• Link credit with crop insurance• Promote edible oil production

• Create agri parks with focused regulatory and policy support

• Ecosystem to encourage investments, research and agricultural extension

• Launch National Awareness program to promote best practices

• Promote land aggregation measures• Encourage R&D in high yielding seeds

Technology and business model innovation

• Develop innovative business models• Customize and transfer best-in-class

practices• Undertake joint R&D with government

bodies

B C

A

D

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