A series of GOI’s agricultural market reform policies aim at demolishing a monopoly market system of APMC model (mandi) and promoting entry of the private sector including farmers into the marketing and processing business in order to stimulate market dynamism, reduce the costs and increase farmers’ income. With progress of the policies, GOI expects that the public sector steps down from a primary operator of the business and changes its roles in providing supporting services to the private sector who is going to play a vital role in the business as shown in the following table.
Public investment in agricultural marketing and processing business, especially for egetables and fruits, shall be selectively made in accordance with a basic strategy as stipulated below.
Efforts should be made to maximize the opportunities for farmers’ benefit through “Market-In” based Supply Chain Development under Market Reform which the Government of India has announced at the conjuncture of COVID-19.
(a) In line with the GOI’s market reform policies
Agriculture sector in India reforms by the Government of India is supposed to facilitate private firms to participate in agriculture supply chains. The Project should make use of the opportunity of the reform to invite private investment in the State. Partnerships and collaboration between farmers, private firms (including Agri-tech) and government agency should be strategically promoted.
The Project shall invest in plans which will contribute to enhance the roles of public sector after understanding the principle idea of GOI’s policies and the role-sharing between the public sector and the private sector.
(b) Market-In Approach:
Planning of marketing should be developed based on market demand and the project activities range from production stage, pre/post harvesting stage, processing stage, distribution stage to retailing stage. These activities should be planned in an interrelated and integrated manner.
(c) Supply Chain Approach:
The project activities range from production stage, pre/post harvesting stage, processing stage, distribution stage to retailing stage. These activities should be planned in an interrelated and integrated manner.
(d) Collective Marketing by FPO
It is important to motivate farmers to aggregate of producers into KVA cum Farmer Interest Groups and clusters with the vision to collectivizing viable clusters into Farmer Producer Organization (FPO) to gain from economies of scale and promote better management of risks, with business skills and experience. The Project focuses on establishment with primary processing and storage unit for better quality control and promotion of FPO through training program on post-harvest handling and value addition, business management etc.
(e) Consistency with farmers’ support program (Component-2)
Component-2 of the Project focuses on vegetable crops including spices, potato etc. Component-4 also shall focus on marketing and processing of those crops. The Project, however, considers reality that a definite segmentation of target crops, such as distinguishing between vegetables and fruits, is not always a reasonable manner in terms of marketing.
(f) Synergy effects between similar schemes and projects
No project in agricultural marketing and processing accomplish its objectives only with linkage within agricultural sector. It needs a cross-sectional linkage with other economic sectors for making expected achievements. There are many similar schemes which has already been implemented in Himachal Pradesh, e.g. Mega Food, PM FME, SMFP, MIDH, etc. The Project shall pay a serious attention to knowledge and information obtained by the schemes for effective and efficient operation of the Project. In addition, a similar project named “Himachal Pradesh Horticulture Development Project (HPHDP)” supported by the World Bank is under implementation at present. As the Project shares a common ground with HPHDP in terms of supply-chain and agribusiness development, the Project shall pursue high synergy benefit with HPHDP.
Possible sub-components of Component-4 are outlined in accordance with the 4 strategies discussed above
Strategy-1: To mobilize and incubate FPOs as a business entityFPOs shall be mobilized and empowered as a federation of village-based KVAs. As planned in Mega Food Park scheme, FPOs are core units in developing a cluster of agricultural marketing and processing industries. Empowerment of FPOs as an independent business entity, therefore, must be the most real challenge of the Project. As shown in the Growth Framework in the following table, considerable efforts should be strategically taken for a long-time to encourage FPOs to be a self-standing, competitive and sustainable business entity to increase bargaining power in the marketing activities. While a continuing public intervention should be well arranged in accordance with the development stages of FPOs, the intervention in the beginning stage (in the Seeds - Early Stage) must be crucial for incubating independent FPOs.
Farmers themselves should add value to their produces if they will achieve diversification of distribution channels of agricultural produces and increased income as envisaged in GOI’s policies. For arranging an opportunity to achieve them, FPOs should develop and manage a facility to aggregate and handle their produces as shown in the following figure.
Figure 3.0.1 Concept of FPOs Collection Center
The formation of FPOs should be made where the momentum is growing as a result of raising Farmer’s awareness and enhancement of Farmer’s capacity through intervention of the Project at initial stage. The Collection Centers will be made after formulating FPOs in along with business plan made by themselves.
In order to maintain the assets created under the Project and develop business of FPO, the Corpus Fund shall be provided. The fund would be managed by PMU in the form of fixed deposit based on the business plan; the interest accruals shall be used by the FPO. The SHG’s/other groups can also avail loan for processing and value addition activities on the similar terms and conditions and the details of operation and maintenance of corpus funds shall be framed in consultation with PMC expert.
Local agribusiness operators are expected to play an important role in FPOs development as a business partner. As well as FPOs, the agribusiness operators need to be empowered as an independent business entity. It is expected to leverage support from the existing Govt. schemes, e.g. SMFP.
The Project plans to provide the matching opportunity through business matching study, event and workshops for agribusiness operators irrespective of nationality, Japanese or Indian, to connect to individual farmers or FPO as well as connecting to agribusiness operators which have different type of business with necessary information and assistance to facilitate a contract farming, a joint-venture business operation, etc.
For the support for collaboration between farmers, buyers and private agribusiness operators the Project plans to prepare demonstration farm in the Center of Excellence for demonstration of agribusiness companies’ services or technologies in order to encourage matching between farmers and the abovementioned companies. In addition, the project provides the support such as disseminating information about agribusiness in the state, intermediating FPOs and agribusiness operators, introducing available government schemes, etc.
Though diversification of agricultural marketing is progressed with GOI’s policies, mandis must remain having a leading role in supply-chains of vegetables and fruits. Even though, it is reported that many mandis have a problem of poor facilities and equipment in their proper operation. The facilities and equipment of selected mandis located at transaction hub centers should be modernized.
The number of mandis may be revised depending of the result of the report.
While 19 mandis in HP have introduced eNAM, it is reported that they are facing a lot of challenges to enjoy smooth implementation of eNAM. The challenges should be supported with the following countermeasures. A proposal has already given to GOI (GOI will take necessary measures).
As private intermediators called as CAs (Commission Agents) organize an auction at mandis, they should be empowered to facilitate a fair and competitive auction. CAs also have high potential to be a familiar business partner of FPOs at local revel. They should be constructively empowered to be an independent business entity.
Though eNAM has stated nationwide quality standards of major agricultural produces, vegetables and fruits need practical local standards as quality requirements from consumers have a wide range of diversity if location is different, if variety is different, etc. In addition, the quality is strongly influenced by weather conditions. As the conditions change every year, stated quality standards should be adjusted in accordance with the actual conditions. And the adjusted standards should be shared among all stakeholders before the harvesting season. In Japan, a workshop called “Mezoroe-kai” (means “eyes adjustment among stakeholders”) is organized for the purpose every year. Staff of HPSAMB related to the quality standards should be empowered to be able to fulfil such duties. The Agricultural Produce Marketing Standards Bureau will be established in HPSAMB (no need an additional support).
A market information system to ease accessibility of wide range of stakeholders contributes to promote a smooth transaction in mandis. An improved access to reliable market information must be the most powerful tool especially for farmers to overcome their weak bargaining power due to information asymmetry. Farmers also need to increase their sensitivity to market information to manage a stable market-oriented farming for long time. Mandis’ information system including manpower competence should be updated so that a reliable market information will be efficiently disseminated to farmers and other stakeholders. The Economic and Marketing Information and Intelligence Cell (EMI cell) will be established in HPSAMB by HPHDP (no need an additional support).
Mandis need to procure necessary equipment for updating the information system. The Economic and Marketing Information and Intelligence Cell (EMI cell) will be established in HPSAMB by HPHDP (no need an additional support).
As described in the principles in planning, every project in agricultural marketing and processing needs a cross-sectional linkage with other economic sectors for achieving expected results. There are various government schemes and international cooperation projects which have already been implemented in Himachal Pradesh for developing the agricultural marketing and processing industries. The project component shall be carefully planned to lead an efficient investment effect of the Project with due considerations to a good synergy with those schemes and projects.
The sub-components consisting Component-4 are narrowed down after the examination as shown below.
Producers or farmers need to be empowered the following capabilities if they will increase their income during the process in post-harvest handling and marketing.
The required roles of FPOs as a producer’s organization are not only limited in farming technology aspects but also in business management aspects to increase bargaining power in the marketing activity. FPOs, therefore, should address many issues which are not familiar with common farmers, i.e. overcoming an information asymmetry, creating a flexible and efficient cropping cum marketing system based on market analysis, building a robust organization structure and a sound financial base, etc. FPOs need a lot of trial and error processes for a certain long-time before understanding concepts of the required roles and integrating the understanding into the daily activity.
One FPO is composed of around 300 farmers who are the member of KVA. The procedure for forming of FPO is assumed as follows.
PMU will set up a special division named “Marketing & Post-harvesting” for dedicating various supporting services to FPOs. The trainings shall be provided by qualified service providers hired by PMU as well as Experts in Business Management / Service providers hired by PMU.
In addition, the corpus fund will be launched in the project to strengthening of financial status of FPOs.
The Project shall provide the members of FPO with intensive business management training outsourcing to service provider as the experts of business management such as Business Development Service (BDS) consultant, Incubator and Accelerators in the seeds and early stage of the development of FPOs within the growth framework as per Table 3.03.
In order to maintain the assets created under the Project and develop business of FPO, the Corpus Fund shall be provided. The fund would be managed by PMU in the form of fixed deposit based on the business plan; the interest accruals shall be used by the FPO. The existing FPC (HAVi) established in phase 1, SHG’s/other groups can also avail loan for processing and value addition activities on the similar terms and conditions and the details of operation and maintenance of corpus funds shall be framed in consultation with PMC expert.
The Project shall support at most 10 FPOs to develop a collection center for aggregating and primary processing of harvested crops before marketing with necessary facilities and equipments such as warehouse, Post-harvest operation hall & storage, Handling tables, Conveyors for grading, Washing machine, Pe-cooling cabinet, Weighing & packing machine, Office, Computer set, Vehicle (Truck) etc. While a basic module of the facilities and equipment to be furnished are shown in the 3.0.4, the actual components and specifications shall be determined based on FPO’s Business Plan considering actual needs (kinds of produces, volume of aggregated produces, etc.) of each FPO.
The construction of collection center shall be carried out along the main road in a place that is easily accessible by both producers and distributors and where land can be secured. From experience in Phase-1, there was a case where the construction of the collection center preceded without a clear sales plan, so it is necessary to optimize the location based on the supply chain and market development plan
/ FPO’s Business Plan considering the efficiency of production and transportation. The collection center is expected to be the core of FPO's joint collection and shipping, and has the function of primary post- harvest processing and short-term storage.
Matching FPOs with agribusiness operators
A registration system of agribusiness operators including CAs in Himachal Pradesh, the agribusiness operators in the other states who are interested in running a business in the state and FPOs in the state (not limited to the 10 FPOs) shall be operated by the Project in cooperation with MOFPI, DoH and DoA. The Project shall provide various supporting services, e.g. disseminating information about agribusiness in the state, organizing investment seminars, intermediating FPOs and agribusiness operators, introducing available government schemes, etc. to the registrants in order to facilitate a joint business operation between FPOs and agribusiness operators. Also, the Project shall provide necessary services to facilitate pilot business trials to agribusiness operators. The services shall be provided by PMU in collaboration with PMC. Trainings to staff of the Marketing & Post-harvesting division of PMU shall be actively provided on on-the-job-training basis to prepare a sustainable operation of this sub- component in future.
13 mandis listed in the table shall be modernized by the Project. The detailed design for the works shall be made in accordance with actual needs of each mandi after additional site surveys. PMU/HPSAMB shall manage all construction works including hiring local contractors. As HPHDP has a plan to modernize 9 mandis, the Project shall share a common finding about the modernization works with HPHDP.
There are almost 1,500 CAs running a business in Himachal Pradesh. As CAs are responsible for organizing a fair auction in mandi which is a public market facility in India, they shall be empowered through trainings on various subjects e.g. auction management, relevant laws and regulations, post- harvest management, market information system, business management, etc. as shown in the table. Special attention shall be paid to improve CAs’ understanding about quality standards and sanitation of agricultural produces, as well as about improving financial capabilities. The trainings shall be provided by qualified local experts hired by PMU/HPSAMB under supervision of PMC.