Final Report on Public Private Partnership for Integrated Agricultural Development (PPP-IAD) in Karnataka

Submitted to the Karnataka Agricultural Price Commission (KAPC), Bangalore, Karnataka, India.

By Foretell Business Solutions Pvt. Ltd, Bangalore

October 2017 Acknowledgement

The study on “Public Private Partnership for Integrated Agricultural Development (PPP-IAD) in Karnataka” for Karnataka has been carried out at Foretell Business Solutions Private Limited, Bangalore, as proposed and suggested by Dr. Prakash Kammaradi, Chairman of Karnataka Agricultural Price Commission (KAPC), and the study would not have reached to this stage without his active support and co-operation. We would like to thank Dr. Parameshwarappa and Dr. Chandhrasekar, the officials from the KAPC for the kind support for the study.

We are benefited acutely from the officials in various departments while carrying out this study. At the outset, we would like to thank Dr. Humbarwadi, ex-chairman of Karnataka State Agricultural Marketing Board (KSAMB) for the valuable suggestions and support in completion of the study.

A number of officials from Karnataka Agricultural Price Commission (KAPC) and Karnataka State Agricultural Marketing Board (KSAMB) helped us especially in providing secondary information related to the study. We would like to thank the officials from Food Corporation of India (FCI) and Karnataka State Warehousing Corporation (KSWC) for their valuable information and suggestions. We would like to mention the managing director of Rashtriya e- Market Services Limited (ReMS) Mr. Manoj Rajan for his co-operation for discussions while carrying out the study.

We thank Mr. Hanumana Gowda, Head of the Karnataka Farmers’ association; as he focused us some very valuable points from farmers’ perspective. We thank Mr. G.H. Ramesh, General Manager of Karnataka State Warehousing Corporation (KSWC); for providing us primary source of information of Warehouses existing in Karnataka. And lastly we thank Mr. G.C. Ragunandhan, Quality control manager of Food Corporation of India, Bangalore for his cooperation. We thank all the persons who provided direct and indirect support in completion of the study.

Foretell Business Solutions Pvt. Ltd. #146, Gopal Towers, 1st & 2nd Floor, Ramaiah Street, Near Anjenaya Tech Park, HAL Airport Road, Kodihalli, Bangalore - 560 008, India. Tel: +91 80 25276152/53, Fax: +91 80 25276154

Contents

Chapter 1 Introduction

Chapter 2 Secondary Research

Chapter 3 Potential opportunities in Karnataka for notified or identified crops Chapter 4 Findings Chapter 5 Recommendations and Suggestions

Annexure 1 Public Private Partnership for Integrated Agricultural Development (PPPIAD) – Guidelines

Annexure 2 Presentation on PPPIAD for important Agricultural Commodities in Karnataka

Annexure 3 Workshop on PPPIAD – Karnataka State – 2016

Annexure 4 List of FPOs in the State of Karnataka

Annexure 5 Food parks locations in the State of Karnataka

Public Private Partnership for Integrated Agricultural Development (PPP-IAD) in Karnataka

Chapter 1

Introduction:

Amongst the major Agriculture and Horticulture crops such as Paddy, Ragi, Jowar, Maize, Tur, Bengal Gram, Groundnut, Sunflower, Soybean, Cotton, Copra (edible), Onion, Tomato, Potato and Dry chilly, Karnataka remains fourth position in terms of area in India. As per the Agriculture census 2010-11, the total number of marginal and small farmers in Karnataka was about 38,48,834 and 21,38,208 respectively. The agriculture survey during 2010-11 stated that, the area covered under small farmers was about 30.2 lakh hectares which was higher than the area covered under marginal farmers (i.e. 18.5 lakh hectares) despite the total number of small farmers was lesser than the total number of marginal farmers in Karnataka.

Aggregation of farmers into farmer group or Producer Company or a society is prominent way to reduce the risk and strengthen the livelihood of the small and marginal farmers. Some of the benefits to the farmers through aggregation are,

• Cost saving on inputs as a result of aggregation and direct purchase from input producing companies. • Better price for the produce as a result of bulking. • Sharing of knowledge and best practices resulting in higher productivity.

In India, over 70% of the farmers are smallholder farmers and in Karnataka the total area covered under smallholder farmers is high. Aggregation of farmers may be possible way as it retains farmers’ land-ownership and yet helps to stay economically viable. From inputs suppliers as well as output purchasers’ point of view, organizing farmers into groups is beneficial as it provides them large market and reduces overall transaction costs.

Various ways in which farmers are grouped are as given below;

(a) Corporate farming is an agriculture operation in which companies own or influence agricultural practices that involves the production of food and food-related products on a large scale. Roles of companies involved in corporate farming are in influencing agricultural education, research, public policy through funding initiatives and so on.

Key Features of Corporate farming;

• Consolidation of small farm lands into large land holdings • Enhancement in agricultural productivity • Introduction of Value-added products The operation tends to aggregate farmers as it is exceptionally large scale and that can be a farmer group or the group of farmers aggregated by the company. This is the system for the production and supply of agriculture / Horticulture produce under forward contracts between producer/supplier and buyers. This is the commitment to the producer/seller to provide an agriculture/Horticulture commodity of certain type, at a specified time for a pre-assured price with the buyer.

Benefits of corporate farming:

The farming is definitely synonymous with large outputs that lead to economies of scale. Economies like India have resorted to corporate farming in a bid to lure multinationals into investing in the agriculture sector to reform it through industrialization. Countries like US, UK have already witnessed this business phenomenon in agriculture sector with a proof of highly developed food industry with well-developed agriculture system. The merits are;

• Low agricultural wastages: Timely harvesting of the crops help in avoiding wastages. This result to increase yield produced from the same inputs. The final output leads to decrease in food prices from consumers’ end. • Better quality yield: Usually corporate are in better are in better position to protect crop through extensive use of pesticides and fertilizers. This resulting to minimal damage of crops and better yield. • Dissemination of technology: Industrialization in agriculture has helped rapid production of crop to meet the needs of the company and revived the importance of agriculture in GDP. It contributes to the development of exports, increase in agriculture production through the use of advanced technology which has boosted the agriculture scenario in developed and developing economies.

Limitations of Corporate farming:

As agri-business is widening their horizons, the livelihood of many farmers has been affected. The farming community is affected the most under corporate farming.

• Lower profits for farming households: In economies thriving on corporate farming, farmers face problems of reduced profit or increased cost. They are forced to enter into contracts with corporate for growing contracted crops on their farmland and these corporate buy their quoted price. They are left with low decision making control. • Reduced Nutrition: Using high amount of insecticides and pesticides to prevent the damage of the crop results reduction in the nutritional value of food. Usage of food additives colouring agents, chemicals and hormone injection to speed up the process of crop maturity, such genetically modified crops lack nutritional content as compared to organically grown crops. • Higher environmental cost: Mechanization of agriculture through the use of technology has although increased the pace of all the production processes. It has made it difficult for the environment to cope up with this speed. It interferes with the natural and biological processes of the environment. • Risk of Monopolistic economies:Corporate farming is not as rosy as it seems. It tends to encourage food production by only a handful of large companies. This promotes monopoly or oligopoly in the market.

(b) Co-operative Societies: one of the largest movements globally with a legacy spanning over a century. Under the Government of India Act of 1935, Co-operatives were categorized under the provincial subject and the Multi-unit Co-operative Societies Act was enacted in 1942. There are different types of Co-operative societies operating in India with different activities; • Production Co-operatives deal with agricultural and industrial production, such as Farming Co-operatives, processing Co-operatives and Industrial Co-operatives. • Marketing Co-operatives engaged in marketing of agricultural produce, such as Agricultural Marketing Co-operatives and Consumer Co-operatives. • Service Co-operatives provide necessary services for their members, such as Co- operative credit societies and Co-operative Banks.

➢ Farming Co-operative Societies have been developed for ensuring food and employment security in rural India and it was supported with financial resources to develop land and water resources for agriculture. During 1955-56, the total number of Farming Co-operative societies in India was over 1000 which covered about 1.9 lakh members. The Government of India provided financial resources to boost the co- operative societies and hence, there was a sharp increase in the total number of Farming Co-operative societies in the country as well as the members. Farmers enrolled in the Farming Co-operative societies received more benefits through collective farming in which the area increased during the time when the number of Co-operatives increased. The farmers benefited through the Government policies and attained collective growth in agriculture.

Advantages of Co-operative Farming:

• Consolidation of small units of land: Co-operative farming enables the group of small farmers to consolidate the small units of land for better utilization and to employ the improved method of cultivation. • Machinery utilization: A co-operative society has the financial support for purchasing machineries for farming purpose easily. Farmers enrolled in the Co-operative farming are eligible to utilize machineries which can increase the productivity. • Supply of Inputs:Timely distribution of Agriculture inputs like fertilizer and seeds can be done efficiently through co-operative farming. • Remunerative price for the farmers: A Farming Co-operative society has the bargaining power in the market in which the produce can be sold at maximum price and hence, the farmers enrolled in co-operative farming are able to receive better income. • Convenience in Administration: It is advantageous for distributing subsidies and dissemination of modern methods of production.

Limitations of Co-operative Farming:

• Income distribution: Re-distribution of income to the non-land holding farmers is low and it is indulged in developing capitalist farming as the work style replicates joint-stock farming. • Production control: The basic role of Co-operatives is to market the available supply in effective way and it is not legal to control the production level. • Market power: Influence on basic price level of the produce or supply chain is low. There is a lack of acquiring the financial abilities to deal effectively with other firms or concerns in the market place.

(c) Producers Organization: A Producer Organization (PO) is an entity formed by primary producers, farmers, milk producers, fishermen, weavers, rural artisans and craftsmen. It can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. The main aim of PO is to ensure better income for the producers through their own organization. In agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs. It is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.

The ownership of the producer organization is with its members. One or more institutions and/or individuals may have promoted by the PO by way of assisting in registration, mobilization, business planning etc. The ownership control is always with members and the management is through the representatives of the members

Source: NABARD

Ways in which the PO is different from Co-operatives:

The most common model to integrate farmers with the value chain is the producer’s cooperatives which enable farmers to organize themselves as collectives. As cooperatives have largely been state promoted with a focus on welfare rather than to do business on commercial lines, it has not been a very pleasant one in India.

The Government of India (GOI) through an amendment, enacted the producer companies Act in 2002. The objective of the formulation of producer companies was to formulate a legislation that would enable incorporation of Cooperatives as companies along with the conversion of existing cooperatives into companies.

The need to organize the farmers especially the small holders with a basic purpose to collectivize small farmers or producers for,

• Backward linkage for inputs like seeds, fertilizer and pesticides etc. • Forward linkages such as collective marketing, processing etc.

Key differences between producer companies and co-operatives;

• Government control: Cooperative society is highly patronized to the extent of interference; for producer companies, it is minimal and limited to statutory requirements. • Borrowing power: It is restricted for cooperatives; Producer Company has more freedom and alternative in terms of borrowing power. • Relationship with corporate: It is entirely transaction based for cooperatives; producers and corporate entity can together float a producer company.

Chapter 2

Secondary Research

An overview:

With objective to aggregation and for sustainability, some of collective farming model was undertaken in few places of India that includes pilot trial and existing successful models.

As the producer companies are entitled to integrate with corporate, there have been a successful pilot trials which involved private sector or corporate with the farmers’ organizations along with the respective state government. Corporate involvement with the Farmer Producer Organizations (FPOs) or farmers’ groups in a specified location delivered a beneficial value chain integration as well as remunerative price to the farmers.

With the scope to reduce the marketing risk exclusively, “Three-tier structure model” exists in Indian States. The model consists of three segments namely 1) Primary co-operative society 2) District co-operative society and 3) The State Federation. The primary co-operative society receives the produce from the registered growers’ or producers’ directly and the input supply and other assistance are provided by the District co-operatives while the creation of marketing linkages is handled by the respective State federation. The model is clearly designed in which the middlemen involvement is avoided.

Case: 1Evolution of Private Public Partnership for Integrated Agricultural Development (PPPIAD) in Maize in Maharashtra:

Maharashtra is the first State in India to implement projects under the Public-Private Partnership for Integrated Agriculture Development (PPPIAD). In 2012, with collaboration with the Maharashtra State Department of Agriculture, project on Maize under PPPIAD was implemented by United Phosphorus Limited (UPL), Monsanto India Ltd and Pioneer (PHI Seeds Ltd) in different districts of the State as a trial basis.

➢ United Phosphorus Limited (UPL):

UPL initiated a PPPIAD project on Maize in three districts include Aurangabad, Ahmadnagar and Jalgaon in Maharashtra during 2012-13 as a pilot trial with objectives to enhance the productivity through hybrid seeds and advanced technologies, to mobilize farmers into groups and federate groups into producer companies, to enhance the value of maize by primary processing and value addition and to provide effective market linkages.

The components towards objectives include,

• Providing farmers a kit of all inputs to be used for effective and profitable crop cultivation. • Demonstration to farmers through these input kits to disseminate agricultural best practice model. • Dissemination of knowledge about crop management to the farmers. The range of partners collaborated in the project was State Government of Maharashtra, United Phosphorus Limited (UPL), Maize growing farmers in the targeted areas and procurement agencies. The core target of UPL was to improve maize cultivation in the targeted districts through dissemination of knowledge to the farmers about crop management and to conduct demonstration programs to educate the farmers about agricultural best practices model.

The total budget for the project was 852.8 lakhs in which about 87% of the budget was allocated for providing Agri inputs (i.e.) majorly seeds and the remaining 13% was allocated to extension activities. As per the agreed ratio, the State Government of Maharashtra contributed about 620 lakhs for providing agri inputs and UPL contributed 112.8 lakhs and 120 lakhs to provide both agri inputs and extension activities respectively.

The hybrid seed variety allocated for maize in the targeted area was “PAC 740” and the price of the seed was Rs. 185 per kg which was sold to the State Government of Maharashtra at a subsidized price of Rs. 120 per kg. And hence, the remaining Rs. 65 is the contribution from UPL for providing seeds to the maize growers.

UNIMART, a venture of United Phosphorus Ltd (UPL), one of the most innovative agri extension activities, was established which is the chain of farm advisory and solutions centers. UPL provided the entire extension activities through UNIMART in the targeted area and the activities include,

• Farm advisory services • Visit at farmer field – on field solutions • Library – ready reference for farmers for the field problems • Market price of vegetables & other crop produce • Farm advisory at toll free phones • Farmer training

The agri extension activities helped to adopt modern farming methods which replaced the traditions methods. Similarly, the initiatives taken by the State Government of Maharashtra and UPL helped to increase the productivity of maize in the targeted area.

PPPIAD covered Productivity before PPPIAD (qntl/acre) area (qntl/acre) District 2008-08 2009-10 2010-11 2012-13

Aurangabad 11 10.6 14.6 24

Ahmednagar 12.6 10.9 11.3 20 Source:(2008-11) Special Data Dissemination Standard Division, Directorate of Economics and Statistics, Ministry of Agriculture, Govt. of India. For year 2012-13: FICCI survey

As per the above table, productivity was increased sharply in PPPIAD covered area when compared to the previous seasons. The factors helped to achieve a hike in productivity include the replacement of old practices with new practices. Particular Old practice New practice Farmer awareness on use of Land preparation Less importance to soil health micronutrients to improve soil health Plant to plant and row to row Seeds and Sowing Random spacing maintained Soil testing based fertilizer dose Fertilizers Unbalanced applied Insecticides, weeding and Less awareness about spray Awareness about spray schedule intercultivation schedule increased Scope for maize harvester, Harvesting and threshing Manual awareness about drying and storage promoted Procurement meeting for market Transportation and marketing Sold at Mandi linkages Average yield/acre 11-14 qntl/acre 22-24 qntl/acre Source: primary survey by FICCI

The approximate Cost of Cultivation in the area covered under PPPIAD project was about Rs. 16,285 per acre. The productivity in the two districts (Ahmadnagar and Aurangabad) ranged between 22 to 24 qntl per acre and the farmers received the price that ranged between Rs. 900 qntl to Rs. 1150 qntl. And hence, the income of the farmers ranged between Rs. 19,800 to Rs. 27,600 per acre. Thus, through the PPPIAD project income of the farmers in the targeted area was enhanced as it was the core objective despite the price did not meet the MSP of Rs. 1310 per qntl.

United Phosphorus Limited (UPL) conducted about 27 procurement meetings to create market linkages to the farmers in the targeted area.

Market linkages created by UPL through procurement meeting:

Project covered Quantity procured (in Block Procurement agency district metric tons) Jaikisan Agro Industries 120 Ahmadnagar Sangamner Local private traders 170 sangamner, Songaon Kopergaon Local private trader 90 Ashvi Local private traders – Rahata 60 Rahata Local private trader 5 Pachora Local private traders – 100 Kathari Brothers Jalgaon Local private trader – Jamner 10 JP Bohara Chalisgaon Local private traders 100 Aurangabad Sillod/Kannad/Fulambri Local private traders 1500 Total 2155 metric tons Source: FICCI report Results or outcome of PPPIAD project on maize by United Phosphorus Limited (UPL):

✓ Productivity increased by about 9 to 10 quintal per acre in the area covered under the project as the seed variety was tolerant to drought conditions. ✓ Income of the farmers increased sharply when compared to the season when the project was not implemented due to increase in productivity. (i.e) Cost of Cultivation was Rs. 16,285 per acre and the farmers earned about Rs. 19,800 to Rs. 27,600 per acre. ✓ Market linkages created by organizing about 27 procurement meetings. ✓ The agencies procured maize in the targeted area at Rs. 950 to Rs. 1150 per quintal in which the price fluctuation depended on the awareness about maintaining moisture content. ✓ Even though the price was lesser than the MSP, income of the farmers increased due to productivity enhancement. ✓ Farmers group were created in which the farmers enrolled in the project in the targeted area received benefits.

Case 2: Monsanto India Limited:

Monsanto’s PPPIAD project in Maharashtra aims at bringing a substantial improvement in maize supply chain by bringing end-to-end solutions to maize growing farmers. Through PPPIAD project Monsanto provided diversified maize hybrid seed portfolio suited to diverse agro-climatic conditions. The project covered about 10,000 hectares of maize growing areas in the districts such as Sangli, Nasik, Buldhana, and Pune as a trial during 2012-13 kharif season.

Primary objectives of the project by Monsanto:

• Ensuring supply of high yielding hybrids. • Enhanced crop management through MFAS (Mobile Farm Advisory Services). • Enable end user linkage with starch / poultry feed industry.

Department of Agriculture, Government of Maharashtra has a major role in identifying the beneficiaries through the project in the targeted areas. Monsanto disseminated the awareness for distribution of high quality corn hybrids a\s per agree village-wise schedule.

Monsanto Limited’s PPPIAD project on Maize:

Stakeholders Responsibilities

• Project sponsor • Identification of beneficiaries Department of Agriculture, Government of • Distributions of inputs Maharashtra • Subsidize the high quality inputs for small and marginal farmers • Project management • Supply of high yielding corn hybrids • Crop management support through Mobile Farm Advisory Services (MFAS) Seed supplier (Monsanto) • Field demonstration through centre of excellence trials • Storage and dispatch of seeds to distribution points • Marketing linkage with starch, poultry feed End user industry industry Source: FICCI survey

The total budget of the project was about Rs. 501 lakhs and about 88% of the total budget (about Rs. 440.88 lakhs) was allocated for Agriculture inputs (that includes seeds and micronutrients), 10% (about Rs. 50.1 lakhs) to extension activities and the remaining 2% (about Rs. 10.2 lakhs) was allocated for logistics. Monsanto’s PPPIAD project aimed at improving maize productivity in the targeted districts through extension activities.

Stakeholders’ contribution:

• Government of Maharashtra – Rs. 309 lakhs exclusively for providing Agri-inputs • Monsanto India Limited: ▪ Rs. 131 lakhs for Agri-inputs ▪ Rs. 50 lakhs for Extension activities ▪ Rs. 11 lakhs for Logistics

Government of Maharashtra contributed about 62% of the total budget, followed by Monsanto 38%.

The amount of Rs. 440 lakhs which was allocated for Agri-inputs includes 76% for seeds and 24% for providing micronutrients. Monsanto provided the hybrid seed varieties such as Pinnacle and DKC 8101 in all the targeted districts; it also provided another variety named 900 M Gold in Buldhana and Sangli exclusively.

Monsanto’s contribution in providing subsidized seeds in PPPIAD:

Offer price for Monsanto Actual price Monsanto Hybrid seed PPPIAD farmers contribution to (Rs/kg) contribution (in %) (Rs/kg) prices (Rs/kg)

Pinnacle 260 160 100 38

900 M Gold 195 134 61 31

DKC 8101 190 134 56 29 Source: Primary survey by FICCI Agriculture official from the Department of Agriculture, Maharashtra, distributed the inputs to the beneficiaries in conjunction with the respective head of the village (Sarpanch). Monsanto provided the extension activities such as Resource and training, Beneficiary awareness and distribution support, Promotional advisory services, Centre of excellence and Post harvest support. On the other hand, the logistic cost includes planning and distribution of seeds to the farmers in the targeted areas covered under PPPIAD program.

Improvement in productivity level of Kharif Maize in PPPIAD covered areas in Buldhana and Nasik district:

PPPIAD covered Productivity before PPPIAD (qntl/acre) area (qntl/acre) District 2008-09 2009-10 2010-11 2012-13

Buldhana 12.12 8.76 9.72 24

Nasik 11.56 9.08 13 30 Source: (2008-11) Special Data Dissemination Standard Division, Directorate of Economics and Statistics, Ministry of Agriculture, Govt. of India. For year 2012-13: FICCI survey

During 2012-13, productivity of maize in Buldhana and Nasik increased by more than twice respectively from the previous year due to improvement in availability and quality of agri-inputs.

The core aim of the PPPIAD project in Maize is to improve the income of the farmers by adopting modern agronomic practices.

Connectivity to market:

One of the core components of the project includes creation of ground level market linkages. Approximately 2993 metric tons of maize was procured by different procurement agencies under PPPIAD project.

List of procurement agencies involved and quantity procured:

Name of procurement agency Quantity procured (in metric tons)

Sahayadri Agro Vet, Kupwad, Sangli 190

Baramati Agro 1600

Godrej Agro 650

Baramatitalukakharadivikrisangh 168

Sandhambhor Poultry 340

NAFED 45

Total 2993 Source: FICCI survey Price received by the farmers for the produce in Buldhana and Nasik district:

Average price received by the District farmers (Rs/per qntl)

Buldhana 970

Nasik 1070 Source: FICCI Survey

The central Government fixed the Minimum Support Price (MSP) for Maize at Rs. 1175 per quintal during 2012-13. Though, the farmers in the PPPIAD covered area received a price which was lesser than the MSP, their income per acre increased sharply due to sharp increase in productivity.

Results or outcome of PPPIAD project on Maize by Monsanto India Limited:

✓ Productivity in the area covered under PPPIAD project increased to an average of 24 quintals per acre. ✓ Income of the farmers (per acre) increased due to productivity enhancement ✓ Mobile Farm Advisory Services (MFAS), one of the components of Monsanto’s extension activities, covered about 16,807 farmers in Maharashtra and it also provided faster dissemination of technologies. ✓ Market linkages were created in which approximately 2993 metric tons of maize was procured directly from the farmers by different procurement agencies.

Recommendation for PPPIAD project for Maize: (case 1 and case 2)

• Improving crop production and productivity:

Quality of seed accounts for about 20% to 25% of productivity and hence, timely availability and distribution of quality seeds to the farmers is necessary to increase the crop production and productivity.

• Enhancement in area for Rabi maize by water conservation:

Supply of maize is dependent on about 77% of the production during Kharif and hence, water management advisory services to be also included under PPPIAD project to overcome critical crop stages.

• Improving post harvest management and marketing:

Buyers also to be included in the PPPIAD project along with the agri input companies, right from the beginning, and hence, the post harvest losses can be reduced.

• Direct procurement centre at village level and development of market infrastructure:

PPPIAD project created effected market linkages between farmer and buyers through procurement meetings. It can be upgraded by opening procurement centres at village level during appropriate seasons, as an initiative to strengthening the entire value chain on maize.Maize has the highest post-harvest and storage losses about 20 percent among the cereals and so the market infrastructure for cleaning, grading, drying and storage to be developed which can reduce post-harvest losses.

• Encourage warehouse receipt system:

Government of India promoted pledge finance in which the small and marginal farmers are eligible to get immediate financial requirements and hence, the Negotiable warehouse receipt (NWR) to be promoted under the project.

Case: 3 PPPIAD project on Pulses in Maharashtra by Rallis India Limited:

Rallis India Limited initiated PPPIAD project on Pulses during 2012-13 in three districts of Maharashtra such as Latur, Nanded and Osmanabad. The total budget for the project was about Rs. 128.26 crores that covered 32,000 hectares of area along with 35,962 farmers or beneficiaries.

Intervention approaches taken by Rallis India Limited:

The project considered a well designed intervention approaches worked on various aspects such as Selection of farmers, Formation of farmer groups, Training and capacity building, Field demonstrations and dissemination of knowledge towards appropriate package of practices for the production of Pulses.

• Selection of farmers: Rallis India Limited has been working with the farmers in this region since 2011-12 and had established some linkages with them. For the PPPIAD project in 2012-13, farmers with minimum of 1 hectare of land were included as per the agreed terms. But, in some cases, farmers with 0.5 hectare of land have also been selected for the project. And hence, the total number of farmers or beneficiaries covered under the project was 35,962. • Formation of farmer groups: Rallis initiated efforts to make the farmers realize the benefits of forming farmer groups in terms of long run. Meetings were also organized in the villages in the targeted districts to form farmer groups in which the benefits available under the various government schemes for farmer groups were disseminated.

• Training and Capacity building: The core aim of training and capacity building program was to increase the knowledge and awareness level of the farmers towards best practices. Rallis conducted about 200 training programs across the targeted three districts. Short trainings, field visits and regular connect with the farmers have been undertaken at regular interval. • Procurement and back support: The PPPIAD project mainly focused on two aspects such as enhancing the production through better inputs and creating marketing linkages. Rallis had established procurement centres in Latur and the produce was directly procured from the farmers at a higher price when compared to local Mandis. Rallis procured Tur while Urad, Gram and Channa are sold in local mandis. Rallis facilitated the opening of zero balance bank account for all the farmers in the targeted areas and the farmers received the payments directly to their bank accounts.

Farmers in the targeted area used certified seeds (new and high yielding varieties like BSMR 736, 853) as well as their own seeds. It has been found that the farmers used an equal ratio of certified seeds and their own seeds. Government of Maharashtra distributed the seeds to the farmers from the Maharashtra State Seeds Corporation (MSSC) under NFSM scheme at subsidized rate with a subsidy of Rs. 12 per kg. Rallis India Limited has taken up certified seed production with the farmers in the area covered under the project and it was provided with a subsidy of Rs. 10 per kg.

Training and exposure visits enabled the farmers realize the best method of practices and the productivity of pulses in the targeted areas increased by about 30% to 50% with the adoption of best practices.

Maximum and Average yield of pulses in the targeted areas during 2012-13

Average yield (in quintal)/per Highest yield (in quintal)/per Crop hectare) hectare) Tur (Arhar) 19 40

Urad 16 23

Moong 10 17

Gram 21 35 Source: Annual Progress Report by Rallis India Ltd. and Survey with farmers

Project cost and share:

Particulars Amount (in crores) Project cost : Rs. 128.26 crores Sanction (in Actual (in Intervention cost 115.77 Particulars crores) crores) Company Company investments 9.89 12.53 7.66 share Company overheads 2.59 Farmers share 54.65 16.76 Other Govt. Total cost of project 128.26 44.34 12.86 schemes Subsidy for farmers RKVY share 16.74 13.28 from the Government 61.08 of Maharashtra Total 128.26 50.56 Contribution from farmers and Rallis 67.18 Procurement value of Rs. 18.23 crores is not India Limited included above

Source: Annual Progress Report by Rallis India Ltd. PPP project 2012-13

Results or outcomes from the PPPIAD project on pulses by Rallis India Limited:

✓ Productivity increased about 30% to 50% across the project covered areas through proper dissemination of knowledge toward best practices and timely distribution of seeds. ✓ Rallis India Limited created effective market linkages in which the farmers enrolled under the project received better incomes. ✓ The project helped for collective farming through the creation and strengthening of farmer groups with the long term aim of sustainability and sharing of resources.

Recommendations for PPPIAD project on pulses in Maharashtra:

• Modification of project design by including all farmers in a village which could create an impact at a village level. • Project approval time to be ensured such that the inputs are made available to the farmers at least one month before the sowing time. • Rallis India Limited procured Tur (Arhar) exclusively and it can be expanded by covering Moong, Urad and Gram at taluk level. • Private procurement agencies to be encouraged procuring the produce more from the farmers as well as storage. • Institutional and financial support for setting up processing centres for pulses is required. • Campaigns can be undertaken to disseminate the information on government schemes and delivery mechanisms. Case: 4 Anand Three tier structure:

The Kaira District Co-operative Milk Producers’ Union (Amul) is headquartered at Anand. It’s an economic organizational pattern to benefit the small producers who collectively work towards an integrated approach in order to economy of a large scale business. The whole operation is professionally managed so that the individual producers have the freedom to decide their own policies. The adoption of modern production and marketing techniques helps in providing those services that small producers individually can neither afford nor manage.

It has succeeded to this extent because in Anand Model it involves self development of people because their interest are safe in their hand. The Anand model cooperatives have removed the middleman, so the producers came in direct contact with the consumer.

The Three tier structure:

• Primary Village Co-operative Society • District Union: District Union • The State Federation

Primary Village Co- operative Society: It has a village diary cooperative society (DCS) is formed by milk producers themselves and any one can become a member of DCS. Each DCS has a milk collection centre where members take milk every day. Milk is tested with payments based on the percentage of fat and SNF.

District Cooperative Milk Producers: This Union is owned by dairy cooperative societies. The Union buys all the societies milk and then processes and markets fluid milk and milk products. It also provides a various range of inputs and services to village cooperative societies and their members like, feed, veterinary care, artificial insemination to sustain the growth of milk production, provides consulting services to support village cooperatives.

The State Federation: It is the apex marketing body responsible for marketing of milk and milk products of member unions. This federation also plays a role in overall development of the district unions.

The pattern here shows: Establishment of direct linkage between milk producers and consumers by eliminating the middlemen. The milk producers have control over procurement, processing and management. And lastly everything is professionally managed. Maximizing farmer profit and productivity through cooperative effort is the hallmark of the Anand Pattern.

Case:5 Farmer Producer Organizations: Coconut Three Tier Structure

Coconut plays an important role in the social and economic lives of people in India, especially in the South Indian region including Kerala, Karnataka, Tamil Nadu and Andhra Pradesh.

In earlier days, leaves of coconut tree were used to thatch huts. The dried leaves are still used as firewood and trunk of the tree is used for making furniture. Husk, shell, kernel and water of coconut are also used in manufacture of various value-added products. Thus each and every part of coconut tree finds use in some form or the other and is rightly described by the old Philippine saying that one cannot find a man who knows all the uses of coconut tree. Under the recent survey it has been found that 98% coconut farmers in the State are small and marginal.

Coconut Development Board (CDB) is a statutory established in 1981, under Ministry of Agriculture Government of India, by an act of Parliament, for integrated development of coconut cultivation and industry in the country with focus on productivity increase and product diversification. The focus areas under CDB in 12th Five Year Plan focused on areas like:

• Farmer Producer Company • New Investment in Coconut Industry. • Promotion of value added products in coconut • Development of new technologies in coconut • Enhancement of export of coconut products and by-products • Reducing cost of production of coconut • Productivity enhancement of coconut

Under the Producers Company the Coconut Farmers Producer Organizations thus formed have a three tier structure consisting of Coconut Producers Society (CPS), Coconut Producers Federation (CPF) and Coconut Producers Company (CPC)

1) Coconut Producers Society (CPS): CPS is formed by associating 40-100 coconut growers in a contiguous area with range of 4000-6000 yielding palms. Farmers with a minimum of 10 palms are only eligible to be a part of thissociety. This is under the assumption that surplus coconut after domestic use is only generated incase the number of palms is more than 10. Once the society is formed, it is registered undercharitable societies act and also with Coconut Development Board.

The Objectives of CPS is based on the following points:

➢ A non-subsidized, knowledge based, farmer centered approach in organizing farmers. ➢ Total inclusive growth of farmers ➢ Facilitation, handholding, nurturing empowering and finally leading to sustainability ➢ Group Approach. ➢ Development of common Infrastructure. ➢ Reduction of wastages. ➢ Disintermediation of supply chain. ➢ Product diversification including by product utilization. ➢ Enhanced production, productivity. ➢ Market development

2) Coconut Producers Federation (CPF): CPF is formed by combining 8-10 CPS. A CPF would have around 1,00,000 palms under it.CPF is also registered as a charitable society and further registered with CDB

The main activities and objectives of CPF are as follows:

➢ To ensure integrated socio economic advancement of member CPSs ➢ To undertake pooling and collective marketing of the produce of CPSs ➢ To make available good quality seedlings to CPS ➢ To disseminate latest technologies in production, procurement, processing and marketing ➢ To undertake R&D activities in coconut based farming ➢ To help members get credit facilities at lower interest rates ➢ To train friends of coconut trees (FoCT) and ensure their service for CPS ➢ To identify good quality mother palms ➢ To undertake measures for coconut based product diversification and value addition ➢ To form more CPS in the operational area of CPF, if found necessary

3) Coconut Producers Company (CPC): 8-10 CPFs would join together to form a CPC. A CPC would consist of around 10,00,000 yielding palms. The Producer Company is wholly and fully owned by the farmers.

The main objectives of CPC are as below:

➢ Logical scaling up of CPS and CPF to PC for ensuring sustainable income ➢ Development of coconut farmers. ➢ Decision making for sustained development of stakeholder (farmer) ➢ Capacity building and trainings for representatives from CPF and CPS ➢ Venturing into product diversification, processing and export. ➢ Brand building and market development

CDB’s Role in Farmer Producer Organizations

CDB has taken up the task of facilitating formation and hand holding of FPOs duringits initial stages. There are various fronts in which CDB is currently supporting FPOs.

Product Basket of Coconut Being a zero wastage product, the product basket from coconut is enormous. Be it husk, shell, kernel or water, each part of coconut can be used to derive numerous value added products. Given below is a list of value added products from coconut: ➢ Tender Coconut Water ➢ Coconut Vinegar ➢ Desiccated Coconut (DC) ➢ Coconut chips ➢ Spray Dried Coconut Milk Powder ➢ Virgin Coconut Oil (VCO) ➢ Ball Copra ➢ Coconut shell charcoal ➢ Activated Carbon ➢ Coconut wood products ➢ Husk & coir ➢ Coir Pith ➢ Other products: 4% fat ice cream, coconut body lotion etc. ➢ Neera and its value added products

Note: Neera is a sweet, oyster white coloured juice obtained from the unopened inflorescence ofcoconut palm. Neera is a rich source of sugars, minerals and vitamins which makes it anexcellent health drink. It also has a very low Glycemic Index which makes it diabetic friendly.

Going forward, CDB plans to form 100 Producer Companies, 1000 CPFs and 20,000 CPS’ in the country. The purpose behind the same is that at least 10% of total production happening in coconut sector should be through Producer Companies. Thus the need of the hour is to organize this sector in such a way that the bargaining power rests with farmers. Farmer Producer Organizations intend to do the same. With the proper support from government, FPOs have complete potential to benefit all stakeholders namely the government, farmers and the consumers.

Case:6 White Onion: PPPIAD Maharashtra (Jain Irrigation Systems Ltd, Jalgaon)

Jain Irrigation Systems Ltd (JISL) established a state of art onion & vegetable dehydration factory in Jalgaon & process white onions & other vegetables in 1994. It developed a a dehydrator white onion variety (JV12) after a continuous & rigorous research, developments & field trials & introduced it with growers in the region through contact farming and buying back entire produce for processing.

Objectives - • To increase farm productivity, reduce cost of production and minimize losses in supply chain. • To implement JAINGAP to promote sustainable agriculture. • To help in capacity building of the farmer with an integrated approach to develop sustainable agriculture. • Buy back, value added by processing & market to complete the value chain.

Achievements of the PPP-IAD project: • 19.645 MT seed was supplied to the selected 2208 farmers. • Area covered was 1957.9 Ha against a target of 2000 Ha which is about 98% of the targeted area • About 82% of the total area cultivated was sown directly by planter • Cost of cultivation reduced by Rs. 7000 to 8000 / Acre by mechanization. • Area under Micro Irrigation System (MIS) was about 85% of the total area cultivated in this project. • Implemented JAINGAP- a food safety, traceability & quality management systems for entire white onion cultivated area. • 100% of white onions produced (35392 MT) in this project was procured directly by the company.

Impact of PPP-IAD project implementation: • Financial assistance provided through PPP-IAD project helped many small & marginal farmer to buy the planter • Many farmers rented their planter which created an opportunity to develop village level agri. entrepreneur. • Partnership approach due to PPP-IAD project has increased the confidence of the growers. • Efficient & 100% procurement by company has made the farmer to build trust with a win pricing mechanism. • Implementation of JAINGAP has created awareness among the growers about food safety, workers welfare, personal hygiene and environment protection. • GHG emission was calculated to be 2390.3 Kg/Ha and about 64.3 Kg/MT of onion produce.

Under Value Addition by Processing & Marketing Jain Irrigation has two processing plants one is at Jalgaon, Maharashtra and another at Badoda, Gujarat. The various dehydrated products offered by Jains to its customers are as follows

:

Sliced Onion Custom-made Granulated Large Chopped Standard Powder Diced Onion Toasted Powder Standard Chopped Toasted Minced Small Chopped Fried Onion Kibbled Onion Toasted Chopped Minced Premium Powder Ground

Efforts to Make Agriculture More Sustainable through PPP-IAD: • Development of Variety: JISL has developed its own high solid variety suitable for Dehydration. • Supply of quality seed • Developments of onion planter for direct sowing • Judicious & Efficient use of Resources • Maintaining Biodiversity • Soil to soil sustainable cycle

Observations on secondary research:

• Private sectors or players with the involvement of the respective State Government targeted a specific crop on a specific location as collective farming model under the project named “Public Private Partnership for Integrated Agricultural Development (PPPIAD)”. • The value-chain includes Farmers producer organizations or farmer groups, the Department of Agriculture from the respective State Government and the private sector. The responsibilities of the stakeholders are clearly designed in which the middlemen involvement is entirely avoided. • The project targets to grow a particular variety of the crop as per the requirements such as processing grade, export quality standard etc. and relative seeds are provided accordingly. • Initiative or components such as Extensional services (resource training, beneficiary awareness and distribution support, advisory services, etc.), modern irrigation facilities and sowing methods, increase in the utilization of Government schemes with the support of the respective State Government, Post harvest management and so on are well established.

As per the observation on secondary research, potentiality of a particular crop at a specific location is well utilized that benefited the targeted farmers. Karnataka plays a major role in Indian agricultural sector as well as the crop potentiality is highly visible and hence, the potential opportunities of the crops can be utilized by a re-designed or effective collective farming model.

Chapter 3

Potential opportunities in Karnataka for notified or identified crops:

Dry chilly, Maize, Tur (Arhar), Onion and Tomato are five important and sensitive crops grown in Karnataka. These crops are ‘important’ as large numbers of small farmers grow these crops and ‘sensitive’ due to wide swings in the farm gate price (many a times sold below the support price) which adversely affects the farmers’ income. These five important crops constitute around 20% of the total cultivable area in Karnataka during the year 2014-15.

Opportunities in these crops can be focused from the stage of pre-production to consumers end. In between there are management of production, technology, post-harvesting, marketing, value- adding, yield improvement, employment, etc.

Dry chilli:

The major dry chilly growing districts in Karnataka are Dharwad, Bellari, Gadag, Haveri, Belagavi, Raichur, Chikamagalur, Tumkur, Bagalkote and Vijayapur. The State contributed about 12% in terms of area cultivated with dry chilly in the country during 2014-15 as per the Karnataka Agriculture Price Commission (KAPC) report. Karnataka Dry chilly is in the 3rd position in terms of area with an average production of 1.18 lakh tons.

Dry chilly production during Kharif season contributes nearly 48% on average in Karnataka followed by summer season. Dry chilly of Karnataka origin, especially the varieties grown for colour, is increasingly being demanded in the international market.

Byadgi chilly which is grown in Karnataka has the second largest turnover amongst the rest of the chilly varieties in India. About 25 industries domestically and internationally involved in grinding this chilly variety into powder in order to supply it to the masala manufacturers. The Byadgi chilly variety is also indulged in oil and oleoresin extraction.

Maize:

Karnataka produces an average of 17.5% of maize in India. The State was being the first position in terms of area covered under Maize in the country during 2014-15 which was about 13.37 lakh hectares (15% in the country’s total area covered under Maize). In State level, area covered under Maize during the same period was about 11%. The major maize growing districts in Karnataka are Davanagere, Belagavi, Haveri, Chitradurga, Bellari, Vijayapur, Bagalkote, Hassan, Koppal and Shivmoga.

Despite being the largest producer of maize and size on farm level, productivity is a challenge due to weeds, insects, drought tolerance etc. In terms of area, 60% is rainfed farming and 40% is irrigated area in the State. Area under maize cultivation in Northern Karnataka covers about 52%. Maize is one of the global commodities traded at domestic and global commodity exchanges. Prospects remain viable for Maize processing in India due to more number of large scale processing players as well as poultry feeds.

Tur (Arhar):

The major Tur growing districts in Karnataka are Kalburgi, Vijayapur, Yadgir, Bidar, Raichur, Tumkur, Koppal, Chitradurga, Davanagere and Ramanagara. Karnataka produces about 3 to 5 lakh tons of Tur annually that contributes an average of 17.5% in India’s total production. As per the KAPC report, during 2014-15 Karnataka remained second position in terms of area covered under tur which was about 16.95% (7.28 lakh hectares) in the country’s total.

During 2016-17, Tur production in India increased by twice to around 4.23 million tons. In Bijapur district, Karnataka, the production reached a record volume of 3 lakh tons during the same period due to increase in terms of both productivity and area.

Onion:

Karnataka produces an average of 22 to 25 lakh tons of onion annually. As per the KAPC report, the Stated remained the second position in the country in term of area covered under onion during 2014-15 which was about 11% (1.65 lakh hectares). The major onion growing districts in Karnataka are Gadag, Vijayapur, Bagalkote, Chitradurga, Haveri, Belagavi, Chikamagalur, Bellari, Chamarajanagar and Davanagere.

Indian onion production is high during Rabi season. Kharif is the main season for onion production in Karnataka in which the state holds the opportunity for being the major supplier of Kharif onion and similarly, Bangalore Rose onion is exported in large quantities to other countries.

Onion can be processed into wide variety of products such as onion paste, dehydrated onions, pickles, oil, vinegar, beverage, sauce etc. As per the recent estimate; out of the total onion production, about 6.75% is processed.

Tomato:

Karnataka produces about 17 to 19 lakh tons of tomato each year. As per available statistics, Karnataka remained the fourth largest in terms of area covered under tomato in the country during 2014-15 which was about 10.98% (64,000 hectares). The major tomato producing districts in Karnataka are Kolar, Belgaum, Haveri, Mandya, Tumkur, Chamarajanagar and Chikkaballapura.

In India, out of the total tomato production, hardly about 1% is processed. The by-products of tomato are whole peeled tomatoes, diced tomato, stewed tomato, Crushed tomato puree, tomato sauce, tomato paste and so on.

Karnataka is the second largest producer of tomato in India after Andhra Pradesh despite the productivity of tomato in Karnataka is higher than the rest of the regions which ranges from 30 to 33 tons per hectare. With higher productivity, the prospects for processing and value-addition are highly visible for tomato in Karnataka.

Value proposition of the notified crops in Karnataka:

The identified crops such as Dry chilly, Maize, Tur, Onion and Tomato have its respective advantages as well as opportunities in various components.

• Karnataka has the popular varieties of dry chilly like Byadgi and the state is also the major producer as well. • The State remains the top producer of maize in India in which the opportunities for value-addition, poultry feeds are highly visible as the major maize processing players exist in Karnataka. • The State remains in third position in India for tur (red gram) production in which the opportunity for processing higher quantity of Tur into tur dal is visible. • In terms of Horticulture crops like Onion and tomato, the state produces higher quantity of Kharif onion while Indian onion production is based on Rabi season as well. Tomato productivity in Karnataka holds the first position among the other states.

➢ Crop-wise possible initiatives under effective collective farming model:

Under collective farming model, FPOs are indulged in aggregation of farmers in which the farmers’ risk is minimized and the Producer organizations are entitled to receive support and benefits from both the Central and the State Government. As per the FPO policy guidelines, FPOs are eligible to link with corporate or NGOs or business houses in which the producers and corporate entity can together float a producer company.

Citing the information from Small Farmers’ Agri-Business Consortium (SFAC), currently, there are about 160 FPOs (approximately) are existing in Karnataka that includes both Agriculture and Horticulture crops in which about 102 FPOs are registered. Out of the total number of registered FPOs, about 76 FPOs are indulged with the notified five crops.

Crop-wise approximate number of FPOs in Karnataka:

Crop Number of FPO

Dry chilly 5

Maize 2

Tur (red gram) 25

Onion 14

Tomato 30

Total 76 Source: Small Farmers’ Agri-Business Consortium (SFAC)

As per the observation, the maize production in Karnataka is showing an increasing trend so there should be encouragement on maize crop management including the formation of new FPOs.

Possible initiatives:

• For horticulture crops such as onion and tomato, processing plants can be formed by the State Government of Karnataka in the State to encourage value-addition. • To maximize the aggregation level, the number of FPOs can be expanded in respect of the crops at potential places. • Through Public Private Partnership model, by linking the private players indulged in the crop-business (notified crops) with the FPOs as well, the crop-wise potentiality can be utilized in an effective way. • With the involvement or support of the Government of Karnataka (GOK), the opportunities on Agri-based Government schemes, contribution through various subsidy schemes, public services (including road facilities etc.) and so on can be utilized well.

➢ Estimated budget for Investment on onion and tomato processing plant:

Government of Karnataka is a large consumer of onion, tomato and potato for operationalizing its various programs with an estimated annual consumption of over 29,900 tons of onion and 11,000 tons of tomato per annum. Thus, it can consider processing onion and tomato during peak arrival season cost effectively into onion paste, tomato ketch-up etc, and start using it for its own consumption requirements. In course of time, the usage of such value-added forms of onion and tomato would result in less occurrence of price crash, thereby protecting farmers while at the same time holding prices for consumers.

Available technologies for large scale plant with processing capacity of 5000 tons of onion per annum (input basis) could be established with a capital of about Rs. 15 to Rs. 20 cr. (excluding land) based on secondary data.

A medium scale tomato processing plant with the processing capacity of 2000 metric tons of tomato per annum could be established with a capital of about Rs. 9 to Rs. 11 crores based on secondary data.

Government may consider either setting up own facility or encouraging private sector or even progressive FPOs and offer an assured buy-back and procure its own consumption requirements from those facilities.

Such an initiative would be of immense benefit to the producers and in the long-run would spur the wide spread use of processed forms of onion and tomato.

Institutions such as Indian Institute of Horticultural Research (IIHR) and Central Food Technological Research Institute (CFTRI) have come up with technologies to convert onion and tomato to paste and powder which can be stored safely at room temperature conditions for six months. These technologies are being used by some self-help groups in a small way. On the other hand, big players such as Jain Irrigation too have onion processing technologies in use for several years.

➢ Estimated budget for PPP model on Dry chilly, Maize and Tur (red gram):

As per the secondary research, budget for the PPP model on three agriculture crops dry chilly, maize and tur (red gram) depends on the size of the area covered under the project.

By assuming the area covered under the project is 1000 hectares for each of the crops, the estimated budget comes about Rs. 4.04 crores for Dry chilly, Rs. 50 lakhs for maize and Rs. 4.01 crores for Tur.

Cumulatively, it comes about Rs. 8.55 crores by considering 1000 hectares for each of the crops. The budget of PPP model includes,

• Financial support from various government schemes provided by the State government. • Agri-extension activities as well as marketing linkages provided by the private sector. • Farmers’ (covered under the project) contribution toward investment on productivity and product integrity initiatives.

Note: As about 60% of maize cultivation in Karnataka is rainfed farming, the cost of PPP model for maize may increase from the estimated budget due to the needs for technology-based irrigation facilities.

Potential sponsors for dry chilly and maize:

Dry chilly:

• MTR Foods: MTR foods indulged in processing dry chilly into powder, masala and other ingredients. Vivid flavors and rich tastes are also extracted by using latest technology with age-old fine-pounding techniques. • ITC Ltd: ITC Limited – Agri Business Division – ILTD, engaged in the business of adding value to agricultural products and exports, aims to bridge the gap between farm production & customer specifications by leveraging the inherent advantages of chilli growing areas in Karnataka.

Maize:

• ADM: In India, ADM’s principal business is the processing of oilseeds into edible oils, animal feeds and feed ingredients. It also markets a range of ADM food ingredients to leading food manufacturers, provide animal nutrition products to poultry and dairy farmers, originate and trade corn and wheat, offer cargo services and warehousing facilities for businesses; and operate a training and incentive program to assist Indian farmers improve crop quality and increase yields. Operations include an office in Dharwad in Karnataka. • Cargil: Cargill inaugurated USD100m (about Rs. 680 crores) wet corn milling plant in Davanagere in Karnataka on January 2016. The USD100 million investments spread over 44.5 acres of land and has a capacity to mill 800 tons of corn per day. Cargill is focusing on improving the livelihood of 5000 farmers and their families in 23 villages in Harihara block of Davangere District.

Chapter 4

Findings: a) Current scenario of public private partnership in Karnataka Agriculture:

Over the notified crops such as Maize, Tur, Tomato, Onion and Dry chilli, Karnataka remains the major producer of maize in India. Despite the size on farm level, productivity is a challenge. In case of Tur, the state is a major producer and the quantum of arrivals in the major mandis is high. Productivity of tomato in the state is always high among the rest.

Rabi is the main season for onion production in India while Karnataka’s production is high during Kharif. Karnataka remains third position in terms of area for Dry chilli in India, especially the varieties grown in the region is known for colour and it is increasingly being demanded in - international market.

Public Private Partnership for Agriculture under State level was introduced in Karnataka during 2015 budget. In this regard, Public Private Partnership for Integrated Horticulture Development (PPPIHD) came into existence and is running successfully following the operational guidelines of SFAC.

Being a collective farming method under agriculture, producer organization is introduced from State level to overcome the shortcoming of the existing collective farming methods. The State Government taking every effort to encourage Farmer producer organizations (FPOs). b) Comparison between an individual and group of farmers:

As per the 2010-11 Agriculture census in Karnataka, agriculture area covered under Semi- medium farmers (per farmer 2 to 4 hectares) was about 33.93 lakh hectares, followed by the area covered under small farmers (per farmer 1 to 2 hectares) 30.2 lakh hectares.

Individual farmers are vulnerable farmers and facing the responsibility in terms of production to marketing as well as agriculture related risk like price volatility and supply chain management. Period during crop loss, price glut or crash, risk in marketing of the produce, an individual farmer’s inefficiency is more which results in loss.

To address the risk facing by the individual farmers, collective farming model takes place in which the farmers are aggregated and the aggregation minimizes the farmers’ risk as well as reduces the middlemen involvement.

Under Collective farming:

Corporate farming, Co-operative farming societies and Farmer Producer Organizations (FPOs) are such example of collective farming in which the farmers are aggregated.

Corporate farming considers the area size and specific crop at specific place as per the requirements and hence the possibility to cover maximum number of farmers is less despite the farmers indulged in the contract receive pre-assured price as well as inputs along with assured procurement or marketing linkages.

Co-operative farming societies designed to cover maximum number of farmers to disseminate the benefits accordingly. At present, it is not legal for a co-operative society to control over the members’ production level. Farmers or members indulged in a co-operative society receive share in returns on basis of their labour inputs and hence, re-distribution of income to non-land holding farmers is low.

At present in Karnataka, Farmer Producing Organizations (FPOs) are indulged in grouping the farmers in the major agricultural areas. With objective to aggregate maximum number of farmers, FPOs are entitled to receive support and benefits both from the central and state government. The State Government is making provisions for easy issue of license to FPOs to trade in inputs such as seed, fertilizer, farm machinery, pesticides etc. FPOs are being linked with financial institutions such as Co-operative banks, State Financial Corporation etc. for working capital, storage and processing infrastructure and other investments.

Role of State Government Institutions in supporting FPOs:

Besides encouraging State Governments to take up formation of FPOs on a large scale through Centrally-sponsored and State-financed programmes and schemes, Department of Agriculture and Cooperation (DAC) suggests the following steps to be taken by State Governments to support and strengthen FPOs:

• By declaring FPOs at par with cooperatives registered under the relevant State legislation and self-help groups/federations for all benefits and facilities that are extended to member-owned institutions from time to time. • By making provisions for easy issue of licenses to FPOs to trade in inputs (seed, fertilizer, farm machinery, pesticides etc.) for use of their members as well as routing the supply of agricultural inputs through FPOs at par with cooperatives. • By using FPOs as producers of certified seed, saplings and other planting material and extending production and marketing subsidies on par with cooperatives. • By suitable amendments in the APMC Act to allow direct sale of farm produce by FPOs at the farmgate, through FPO owned procurement and marketing centres and for facilitating contract farming arrangements between FPOs and bulk buyers. • By appointing FPOs as procurement agents for MSP operations for various crops. • By using FPOs as implementing agencies for various agricultural development programmes, especially RKVY, NFSM, ATMA etc. and extending the benefits of Central and State funded programmes in agriculture to members of FPOs on a preferential basis. • By linking FPOs to financial institutions like cooperative banks, State Financial Corporations etc. for working capital, storage and processing infrastructure and other investments. • By promulgating state level policies to support and strengthen FPOs to make them vibrant, sustainable and self-governing bodies.

Source: http://nhm.nic.in/Archive/FPO-Policy&Process-GuidelinesDAC2013.pdf

According to the framework of PPPIAD (Central) the main features include:

• Corporates to propose integrated agricultural development projects across the spectrum of agriculture and allied sectors, taking responsibility for delivering all the interventions through a single window. Each project to target at least 5000 farmers, spread over the project life. • Complete flexibility in design, but ensuring an integrated value chain approach, covering all aspects from production to marketing. Projects can span 3-5 years. • Average investment per farmer during project must be quantified, though an average of Rs. 1.00 lakh per farmer will be a desirable benchmark. Government support will be restricted to 50% of the overall per farmer investment proposed, with a ceiling of Rs. 50,000 per farmer through the project cycle. The remaining investment will be arranged by the corporate through institutional financing and its own and farmer contributions. All subsidies will be directly routed to farmers or reimbursed to project leaders after verification of asset distribution to farmers. • Key interventions which must feature in each project are: a) mobilizing farmers into producer groups and registering them in an appropriate legal form or creating informal groups as may be appropriate to the area and Project (joint stock or producer companies, cooperatives, self-help group federations etc.); b) technology infusion; c) value addition; d) marketing solutions; e) project management. • Financial assistance will be provided by the State Governments directly to corporate through RKVY window after the project has been approved by SLSC, subject to a ceiling of Rs. 50,000 per farmer or 50% of the proposed investment per farmer, whichever is lower. Subsidy to farmer for availing drip / sprinkler irrigation / mechanization / grading /shade nets etc. could be considered separately as it is a large investment. Therefore, subsidy availed by farmers for drip / sprinkler / mechanization / grading / shade nets, etc. under NMMI would not be considered as a part of this Rs. 50,000 ceiling. • Projects can also be proposed by corporates to State Governments through Small Farmers’ Agri-business Consortium (SFAC). This institution has been designated as a National Level Agency for this purpose by Dept. of Agriculture and Cooperation, Govt. of India. SFAC will act as a facilitator to link the project promoter to the concerned State Government. The role of SFAC will be to examine the proposal from a technical viewpoint and thereafter propose it for funding to the concerned State. SFAC will be restricted to being a support agency to facilitate the process of technical appraisal, coordination and facilitation; it will not be involved in implementation directly or handling funds. • An independent monitoring agency (like NABARD or other a suitably qualified consultancy firm with no conflict of interest with the particular project it is to monitor) will be appointed by the State Government to closely track the performance of the project and report to all relevant stakeholders in the State and Central government.

Source: http://sfacindia.com/PDFs/PPPIAD_Guidelines.pdf

According to PPPIHD Karnataka Guidelines:

• Private companies should submit the proposal for integrated horticultural development taking responsibility to delivering all the interventions jointly with Department of Horticulture, The PPPIHD program expects to cover at least 100 Ha of land and 100 numbers of farmer. • There would be complete flexibility in design of the project by companies it should be ensured that the project adopts an integrated value chain approach, covering all the aspects of marketing , Project period of 2-3 years may be proffered. • It expects to cover 1000 members which many a times may not be possible, • Key interventions which must feature in each project are: ➢ Mobilizing the farmers into formal groups. ➢ Technology infusion. ➢ Value addition. ➢ Marketing solutions – Buying back the produce of the farmers. ➢ Project management. ➢ Addressing Environmental concerns.

• Proposer Company can choose to partner with the FPO formed by the Department of Horticulture or can identify groups of farmers who will be mobilized into commodity interest groups. • Projects will be proposed by Private Partners to PPP-IHD Cell, Directorate of Horticulture, Lalbagh, Bangalore directly or through the concerned district Deputy Director of Horticulture.

For PPPIAD Karnataka modification required according to the collected data from Primary and Secondary sources are:

• There should be flexibility in covering the PPPIAD program, As PPPIHD expects to cover at least 100 Ha of land and 100 numbers of farmer which becomes quite a difficult to follow 100 Ha and 100 numbers of farmers. • For technical education and administration separate teams should work, as according to the discussion it is found that technical staffs most time goes filling the clerical details of the farmers which lead to low information flow to the farmers. • Timely availability and distribution of quality seeds to the farmers is necessary to increase the crop production and productivity as project approval time to be ensured such that the inputs are made available to the farmers at least one month before the sowing time. • Water management advisory council should be set up under PPPIAD as it is utmost necessary for environment conservation. • PPPIAD projects creates market linkages between farmers and buyers through procurement meetings so there is a need in up gradation in the procurement centers in the village level as it will initiate to strengthen the entire value chain. • As Government of India promoted pledge finance in which the small and marginal farmers are eligible to get immediate financial requirements and hence, the Negotiable warehouse receipt (NWR) to be promoted under the project.

Value preposition thus for various stages of PPPIAD are important.

Yield Value Preposition: Access to timely and better seeds from Farmers producers Company can lead to better quality of produce and thus can compete with the International market and increase in GDP in long run. The project aims at supporting the farmers right from the distribution of seeds.

Corporate Value Preposition: Availability of certain crops with various specifications in quantity and quality is an aspect of better management. Specific product requirement for an off season is also a type of value preposition. Understanding the corporate requirement and producing according to that to earn maximum profit.

Infrastructural Value Preposition: Infrastructure required for post harvest management and value addition (Collection center, Grading, Sorting, Washing, Primary processing, Pre cooling and Packing) including cold storage and refrigerated transport vehicles which reduces the post harvest losses. This will yield remunerative prices for their produce with timely marketing.

Sustainable Value Preposition: By participating in PPPIAD, the corporate gain in assured supply of the produce and Government subsidy for their infrastructural needs as permitted under the various schemes. So in the long run this makes it sustainable form of agriculture.

Chapter 5

Recommendations and Suggestions:

• The notified five crops in Karnataka have more potential opportunities in various aspects in terms of higher production and higher productivity as well as support from the state government. • FPOs are indulged in aggregation of farmers effectively in Karnataka at present and there are about 76 registered FPOs are indulged with the notified five crops. • The number of farmers covered under FPOs is depend of the size of the region and hence, total number of FPOs can be expanded with objective to aggregate maximum number of farmers and to initiate effective value chain integration. • Currently under PPPIHD, the FPOs indulged in horticulture crops are facing a difficulty in delivering the produce within a short period due to perishability despite the model is running successfully in Karnataka. • In terms of FPOs indulged in agri-crops, it has an advantage to store the produce for a long period and hence, the storage facilities can be provided efficiently by the State Government directly to the FPOs. • For horticulture crops such as onion and tomato, formulation of processing units is suggested as opportunities are visible from the institutions like IIHR and CFTRI. • Dry chilly, maize and tur are suggested to be included with PPP model for better result as the potential opportunities are highly visible. • Estimated budget for onion and tomato processing plant is about Rs. 35 crores (including other related initiatives) and the budget for PPP model on dry chilly, maize and tur by considering area coverage is 1000 hectares each, is estimated about Rs. 8.55 crores. • Some of the aspects mentioned in the central level PPPIAD policy has to be minimized when it comes to state level operation (i.e.) consideration about the number of farmers to be covered under the project.

Roles and Responsibilities of the stakeholders:

List of the stakeholders to be included in PPPIAD are as follows;

➢ Farmers / Group of farmers:

✓ Farmers to be worked as a group for the cultivation of specific crop in specific location as per the needs of the end user. ✓ Farmers / Group of farmers to sell their at least 50% of the produce to the company indulged in, at not less than the actual APMC market price. ✓ Cooperation for the contractual farming is required with mutual understanding between the corporate and the Department of Agriculture, Government of Karnataka. ✓ Farmers / Group of farmers are also subject to provide share towards required finance for the project.

➢ Farmers Producer Organization (FPO):

✓ The Farmers Producer Organization (FPO) to organize the farmers for specific crop-wise clusters with best package adoption for the entire crop cycle. ✓ The FPO to sign the Memorandum of Understanding (MOU) between the corporate and the FPO members and the MOU should specify the terms and conditions of prices of the produce. ✓ Collaborative effort from FPO and corporate can use the existing infrastructural facilities or set up collectively. Infrastructural facilities include Collection centre, Cold storage facility, Transport facility, Processing and value-addition centres. ✓ Suggestions to be received by the FPO from the corporate regarding the requirement of specific crop and specific location.

➢ Department of Agriculture, Government of Karnataka:

✓ The Department of Agriculture (DOA) would or may provide technical support or assistance to the farmer members either directly or through suitable technical institutions / organizations. ✓ The DOA to provide basic statistics of the crops such as area, production and productivity, varieties grown in each places etc. to the corporate. ✓ The DOA to organize crop seminars, field and exposure visits and Human Resource Development (HRD) activities to upgrade the technology. ✓ The DOA would extent the subsidy to the farmers / FPO / Corporate towards infrastructural facilities as per the Detailed Project Report (DPR) submitted by the corporate. ✓ As per the approved DPR, the Department would provide the required finance for the project.

➢ Corporate / Proposer company:

✓ The corporate in its profile should produce the company’s last three years performance and annual transactions. ✓ The corporate should provide the inputs which are absolutely necessary for proper growth and development of the crop to reduce the cost of cultivation. ✓ Corporate shall enter into MOU with the farmers / FPO for procurement. ✓ It is expected that the corporate will buy back at least 50% of the estimated produce from the farmers not less than the APMC market price. ✓ The prices shall be fixed by the corporate with mutual consent of farmers / FPO. ✓ The payment shall be made to the individual beneficiary farmers through FPO or through directly to the beneficiary bank account as per the agreement on MOU.

References

Sites referred

• http://nhm.nic.in/Archive/FPO-Policy&Process-GuidelinesDAC2013.pdf • http://sfacindia.com/PDFs/PPPIAD_Guidelines.pdf • http://ficci.in/spdocument/20501/Evaluation-of-the-PPPIAD-Project-on-Maize.pdf • http://ficci.in/spdocument/20393/Pulses-report.pdf • http://coconutboard.nic.in/docs/FPO-concept-note.pdf • http://www.amuldairy.com/index.php/anand-pattern1 • http://www.iosrjournals.org/iosr-jbm/papers/ICSE%20Conference/14.75-85.pdf • http://www.preservearticles.com/201101193579/advantages-and-disadvantages-of- cooperative-society.html • http://www.nabard.org/auth/writereaddata/File/FARMER%20PRODUCER%20ORGA NISATIONS.pdf • http://agritech.tnau.ac.in/banking/PDF/Tomato.pdf • https://avrdc.org/download/publications/technical-reports/reports/GIZ_India- Processed-Tomato-Study_16Sept2016.pdf • http://www.karnataka.gov.in/pppihd/Pages/Farmer-Producer-Organization.aspx • https://www.slideshare.net/facegopi/farmers-organizationsfarmers-associations-in- india • http://www.efreshglobal.com/efresh/headers/images/pdf/Drip%20Irrigation/Maize.pdf

Annexure I

Public Private Partnership for Integrated Agricultural Development (PPPIAD) – Guidelines:

A Scheme for facilitating large scale integrated projects, led by private sector Player the agriculture and allied sectors, with a view to aggregating farmers, and integrating the agricultural supply chain, with financial assistance through RKVY, under the direct supervision of

State Governments, supported by National Level Agencies.

Background and Rationale

The agricultural produce landscape in India is undergoing significant and rapid change. This is primarily led by changing consumer demand preferences, as rising incomes rearrange the contents of the household food basket in both urban and rural India. Concern for food safety, traceability and assured year-round availability of quality agri produce at reasonable prices are demands which have emerged at the top of the supply chain. Organized retail (though as yet only 3% of the total retail market) is doubling its share every three years or so and is likely to play an increasingly important role in influencing the nature of agricultural markets in the coming decade. A game changer on the horizon is the proposed national food security legislation, which will require the sourcing of huge volumes of food from domestic producers. Traditional production and supply arrangements are unlikely to prove adequate in meeting the challenges posed by these two major developments.

Agriculture GDP is heavily weighted in favour of high value produce (horticulture, animal husbandry, dairy, poultry and fish products); as much as 75% of agri GDP value today is contributed by these products. Recent evidence suggests that this segment is increasingly favoured by small and arginal producers as it is labour intensive, offers quicker returns and can engage a higher proportion of women (especially dairy activities). Thus there appears to be immense potential to leverage high returns from non-cereal sub sectors, especially for small producers. This fits well with the XII Plan’s vision for “faster and more inclusive growth” and creative and collaborative effort can result in this vision being translated into reality.

However, several hurdles need to be overcome to reach these highly desirable goals. For one, 83% of land holdings in the country are now marginal or small and unless there is urgent intervention in aggregating producers through farmer’s institutions, we are unlikely to achieve scale in production and leverage it to the advantage of all stakeholders, especially primary producers. The fragmented agricultural marketing value chain and the large number of intermediaries is another major constraint, leading to wastage, low returns to producers and volatility in availability and prices at the consumer end. Estimates of the wastage of perishable such as fruits and vegetables range from 18-40% but they are undeniably too high and penalize both producers and consumers. The example of AMUL in milk demonstrates the benefits of value chain integration in agricultural produce. Yet, an efficient supply chain for cereals, perishables and other high value agricultural produce is unlikely to materialize unless there is parallel investment in aggregating farmers and farm produce at the bottom end, and strong and direct linkages are created between producers and market players, both for retailing raw produce and processed food.

Finally, the growing demand for quality agricultural products creates an opportunity to reduce risk in agriculture through the integration of producers on the one hand and retailers and processors on the other. While production and price risks are the most obvious areas of attention, the potential to create partnerships between farmer’s groups and market players also opens up better links with input suppliers, financial institutions and research bodies. This convergence can lead to better targeting of government expenditures on agricultural subsidies and achieve better outcomes for public policy. Overall, a collaborative effort between the government, farmers and corporates in agriculture is likely to raise the rate of agricultural GDP growth, thereby directly impacting rural poverty.

In the above scenario, RKVY is likely to be a major window of funding during the XII Plan to support integrated agriculture and allied sector projects. However, there are challenges of limitation of technical, administrative and financial capacity at the state level to absorb the growing level of funding support under RKVY. Project monitoring and assessing project outcomes are also areas requiring strengthening. Lastly, the short term nature of most RKVY interventions in the XI Plan raises questions about the long term impact and sustainability of these investments. PPPIAD has been conceived of as an alternative mode of implementation under RKVY, using the technical and managerial capabilities of the private sector in combination with public funding, to achieve integrated and sustainable outcomes, as also to achieve value chain integration and additional private investment in agriculture.

Main features of PPPIAD

• Corporates to propose integrated agricultural development projects across the spectrum of agriculture and allied sectors, taking responsibility for delivering all the interventions through a single window. Each project to target at least 5000 farmers, spread over the project life. • Complete flexibility in design, but ensuring an integrated value chain approach, covering all aspects from production to marketing. Projects can span 3-5 years. • Average investment per farmer during project must be quantified, though an average of Rs. 1.00 lakh per farmer will be a desirable benchmark. Government support will be restricted to 50% of the overall per farmer investment proposed, with a ceiling of Rs. 50,000 per farmer through the project cycle. The remaining investment will be arranged by the corporate through institutional financing and its own and farmer contributions. All subsidies will be directly routed to farmers or reimbursed to project leaders after verification of asset distribution to farmers. • Key interventions which must feature in each project are: a) mobilizing farmers into producer groups and registering them in an appropriate legal form or creating informal groups as may be appropriate to the area and Project (joint stock or producer companies, cooperatives, self-help group federations etc.); b) technology infusion; c) value addition; d) marketing solutions; e) project management. • Financial assistance will be provided by State Governments directly to corporates through the RKVY window after the project has been approved by SLSC, subject to a ceiling of Rs. 50,000 per farmer or 50% of the proposed investment per farmer, whichever is lower. Subsidy to farmer for availing drip/ sprinkler irrigation/mechanization / grading/shade nets etc. could be considered separately as it is a large investment. Therefore, subsidy availed by farmers for drip / sprinkler / mechanization / grading / shade nets, etc. under NMMI would not be considered as a part of this Rs. 50,000 ceiling. • Projects can also be proposed by corporates to State Governments through Small Farmers’ Agri-business Consortium (SFAC). This institution has been designated as a National Level Agency for this purpose by Dept. of Agriculture and Cooperation, Govt. of India. SFAC will act as a facilitator to link the project promoter to the concerned State Government. The role of SFAC will be to examine the proposal from a technical viewpoint and thereafter propose it for funding to the concerned State. SFAC will be restricted to being a support agency to facilitate the process of technical appraisal, coordination and facilitation; it will not be involved in implementation directly or handling funds. • An independent monitoring agency (like NABARD or other a suitably qualified consultancy firm with no conflict of interest with the particular project it is to monitor) will be appointed by the State Government to closely track the performance of the project and report to all relevant stakeholders in the State and Central government.

Coverage and Scope

PPPIAD is proposed as a pilot scheme to be launched during 2012-13 itself, with about 6-8 projects in the first tranche which interested States are willing to sponsor immediately. Its expansion during the XII Plan will be decided based on the experience of the first lot of pilot projects. Objectives

Main objectives of scheme are:

Augmenting the current government efforts in agricultural development by leveraging the capabilities of the private sector by:

• Addressing all concerns related to production and post-harvest management in agriculture/horticulture and agriculture allied sectors. • Enhancing production and productivity, improve nutritional security and income support to farmers. • Promote, developing and disseminating technologies for enhancing production and productivity. • Assisting states in addressing the entire value chain, right from the stage of pre-production to the consumers table through appropriate interventions. • Creating employment generation opportunities for skilled and unskilled persons, especially unemployed youth. • Improving value addition and ensuring farmer’s profitability increases. • Making farming a viable business proposition. • Improving the delivery and monitoring mechanism under RKVY funded projects.

Strategy

To achieve the above objectives, the scheme will adopt the following strategies:

• Companies to submit a Detailed Project Report (DPR), to States directly or SFAC for consideration of SLSC. • Organize growers into Farmers Association/Groups in every project. • Identify/select aggregators and enable tie-up with farmers/associations/groups. • Coordinate with ICAR/SAUs/Private Sector to provide improved varieties of seeds/seedlings and to introduce innovative technologies as required. • Addressing issues in the credit supply chain with support from NABARD. • Measures for production and productivity enhancement by adopting improved cultivars, production technologies using precision farming techniques, protected cultivation, micro irrigation etc. • Primary processing, sorting, grading, washing, packaging and value addition clusters. • Logistics from farm to market including: o Post Harvest Management, Storage and Transport infrastructure. o Aggregators for suitable tie ups in the supply-chain. • Support to these groups to develop warehouses, cold chains, Controlled Atmosphere (CA). Procedure for Approval and Implementation Strategy and Roadmap

Companies will identify the regions they wish to take up in 2012-13 and develop the project for integrated agriculture development. The strategy & road map formulated by companies should invariably contain information on geography & climate, potential of agriculture development, availability of land, SWOT analysis, and strategy for development and plan of action proposed to be taken to achieve goals in the identified region. The document should focus on adoption of cluster approach for production and linking with available infrastructure, or to be created, for post harvest management, processing, marketing and export. Growers/farmers would also be entitled for assistance under all schemes of DAC/other departments of Government of India so that these schemes can ensure appropriate synergy and convergence for maximum benefit in the field. Each DPR will also provide a Results Framework Document (RFD), giving clearly verifiable indicators for tracking the progress of the project during its life cycle. Implementing Agencies

1. Small Farmers Agri-Business Consortium (SFAC).

2. State Government (Agriculture Department)/State level agencies.

3. Private sector partner.

Proposals can be either submitted directly to States or to SFAC at the national level. In either case, the NLA or State Government will examine the project proposal from the viewpoint of suitability to priorities and objectives of the State and the general framework of RKVY. If found suitable, the proposal will be forwarded to the SLSC chaired by Chief Secretary for consideration. Based on the approval of the SLSC, the project will be rolled out after an agreement has been signed between the State Government and Project Promoter. A standard format of agreement for PPPIAD under RKVY will be circulated for the guidance of States. They will be free to adapt this format to their specific needs.

All fund releases will be made directly by the State Government to the concerned private sector Project Promoter, based on satisfactory progress reports. Funding will be in the form of reimbursement of expenditures incurred by the Project Promoter on various approved budget heads, after these have been duly verified by the independent monitoring agency.

A baseline survey to determine the entry level situation and end-of-project survey will also be conducted by the independent monitoring agency to assess the impact of the project intervention. It will further furnish monthly, quarterly and annual progress reports to DAC and the State and operationalize Information Communication Technology (ICT) enabled Management Information System (MIS) up to grass root level and if need be develop and host its own website.

Scheme Components and Pattern of Assistance

The Scheme will cover all project components in all agriculture and allied sector areas. All farmer related services (i.e. not inputs or hardware) and other interventions leading to productivity enhancement will be supported fully. There will be a 50% limit on items (like farm machinery and irrigation infrastructure) which are to be provided on subsidy to farmers. However, there will be flexibility as far as the community based projects are concerned. For instance, 100 per cent subsidy can obtained by FPOs for developing warehousing infrastructure under Rural Godown Scheme.

The scheme will be demand and need based in each segment. Technology will play an important role in different interventions. The interventions envisaged for achieving desired goals would be varied and regionally differentiated with focus on potential vegetable crops to be developed in clusters by deploying modern and hi-tech interventions and duly ensuring backward and forward linkages.

Performance based overhead costs will be given to the companies for meeting administrative expenses for executing the projects. The companies would have to submit Results Framework Document (RFD) for getting the project approved. If the company’s performance if excellent, it can be entitled to maximum overheads of 8 per cent, similarly, if it is average, it would be entitled to overheads of 5 per cent. If the company’s performance is poor, it would be only entitled to overheads of 2 per cent.

The release of funds would be done in a phased manner as per the approved project proposal. The entire project would be divided into five phases with a specific financial allocation for each phase. Amount pertaining each phase would be released during the beginning of each phase. For availing funds of the subsequent phase, the company would have to submit a detailed utilization certificate from the company auditor and interim project report of that phase.

Dispute Redress Mechanism

A standing mechanism to review projects sanctioned under PPPIAD and resolve disputes will be activated at the State level with the following composition:

(a) Agriculture Production Commissioner or Principal Secretary, Agriculture - Chair

(b) Commissioner/Director, Agriculture - Member Secretary

(c) Representative of Private Sector Implementing Partner - Member

(d) Representative of independent monitoring agency - Member

This DRM will be the forum to resolve any disputes which arise during the implementation of PPPIAD projects. If this committee is unable to resolve an issue, it will be referred to the SLSC chaired by Chief Secretary, in which all members of the DRM will be invited to participate. The decision of the SLSC in any matter will be final.

Annexure 2

Presentation on PPPIAD for important Agricultural Commodities in Karnataka

Public Private Partnership for Integrated Agricultural Development (PPPIAD) for Important Agricultural Commodities in Karnataka

➢ A contractual agreement between a public agency (federal, state or local) and a private sector entity.

➢ PPP refers to long term, contractual partnerships between public and private sector agencies, targeted mainly towards financing, implementing, and operating infrastructure facilities services that were traditionally provided by the public sector.

➢ It may include non-government organizations (NGOs) and/or community-based organizations (CBOs) who represent stakeholders directly related to the project.

The Government contribution and Private Sector

➢ The government‘s contribution to a PPP may take the form of capital for investment (available through tax revenue), a transfer of assets, or other commitments or in-kind contributions that support the partnership.

➢ The private sector‘s role in the partnership is to make use of its expertise in commerce, management, operations, and innovation to run the business efficiently. The private partner may also contribute investment capital depending on the form of contract.

Need of Public Private Partnership for Integrated Agriculture Development

➢ Institutional Credit opportunity for farmers ➢ Growing yield and area under irrigation ➢ Increasing mechanization of farming and preventing it from losses with post harvest management. ➢ Enhancing the productivity, assisting full value chain right from the stage of pre production to the consumers table through appropriate intervention. ➢ Agriculture services ( seeds and fertilizers)

“What takes the government 50 years to achieve can be done by the private sector in a tenth of the time”

- Milton Friedman.

Objectives under PPP-IAD

➢ Concerns related to production and post harvest management to enhance the productivity and nutritional security with income support to farmers ➢ To demonstrate technologies in Public Private domain, technologies to be promoted with the value addition technique ensuring the profitability of farmers should increase ➢ The implementing agencies for the scheme i.e to mobilize farmers into groups and federate groups into “Producers Company” ➢ To aggregate the farm produce and link it to the markets. ➢ Aggregate farmers, creating rural infrastructure. ➢ Adding value and integrating the supply chain.

Coverage and Scope

➢ According to the New Scheme in the recent budget passed by Karnataka Government 2015-16 it is proposed to continue the organizing and strengthening farmers by affiliating them to FPO’s in the current year. ➢ And to support them 90% subsidy will be given for procurement centres, cold storages, farm mechanization implements and processing units. ➢ Backward and forward linkages will be provided through PPP-IAD framework of Government of India. ➢ These organisations will act as Monitoring Organizations for activities within their jurisdiction. These organizations will be involved in selecting beneficiaries and training farmers.

PPP-IAD: 2012-2013

Market Linkage of Small Holders

➢ Projects Under PPP – 11 ➢ Participating Companies – 20 ➢ Farmers – 1,11,525 ➢ Area – 79,468 Ha ➢ Project Cost – Rs. 97.90 Crore ➢ Share of farmers – Rs.43.20 Crore (44%) ➢ Share of Pvt.Sector – Rs. 14.45 Crore (15%) ➢ Government Share – Rs. 40.20 Crore (41%) PPP-IAD: 2013-2014 Market Linkage of Small Holders

Name of Cost Share % Participating Area No: of S.no Project (Rs.Cr.) Govt. Farmer Company Companies (Ha) Farmers 1. Pulses 44.37 41 42 18 Rallis India 35000 59000 2. Soybean 11.55 32 61 7 ADM 53580 29740 UPL, Pioneer, 3. Maize 38.47 41 51 9 60000 50000 Monsanto Nuziveedu 4. Cotton- 64.4 17 44 39 8000 11000 Seeds 5. Cotton- 1.69 42 7 51 Jain Irrigation 2000 2000 Desai Fruits & 6. Banana 40.69 23 16 61 500 500 Vegetables Ghatge Milk 7. Banana 4.06 34 17 49 100 200 Process Deepak Fert & 8. Pomegranate 10.65 18 3 79 Petro. 200 200

Deepak Fert & 9. Grapes 9.58 14 9 77 Petro. 300 300

10. Grapes 1.52 41 35 26 Rallis India 200 500 Hindustan 11. Tomato 2.91 45 48 7 1500 1500 Unilever 12. Onion 27.92 45 44 11 Jain Irrigation 2000 4000 2 Sugar 13. Sugarcane 37.76 35 43 21 1200 1000 Factories 20 Total 265.58 32 41 28 134580 159940 Companies Acknowledgement

We would like to thank Dr.T.N Prakash Kammardi , Chairman (KAPC) for his extended support to make the initial workshop happen.

Special thanks to Dr. Parmeshrappa and Dr. Chandrashekhar for their constant support in helping throughout the preparation of workshop.

We acknowledge all the concerned stake holders, from public as well as from private organization who gave us their valuable time to attend the workshop to share their valuable inputs.

Annexure 3

Workshop on PPPIAD – Karnataka State – 2016

Contents

1. Introduction to Public Private Partnership for Integrated Agriculture Development 2. About PPPIAD model framework

3. Introduction about the Workshop of PPPIAD

✓ Aims of the workshop

✓ Involvement of Private sector

✓ Role of FPO in PPPIAD

✓ Procurement and the Pricing Strategy

✓ Outcomes of the workshop

❖ Introduction to Public Private Partnership for Integrated Agriculture Development:

Public Private Partnership for Integrated Agriculture Development denotes the long term agreement or contractual based partnership between the Public and Private sectors to focus especially on the Agriculture. The need is to amalgamate the production related concerns to engage with government for the purpose of enhancing the production and productivity. Dissemination of technologies relevant to the promotion of productivity and improving the production is the major objective of this scheme. Improvisation of quantity of production, allotment of major areas for the production and pricing policies would get benefits over this aspect and so the target of PPPIAD is to merge the public and private sectors to motivate and improve the contribution of agriculture with farmers. Value chain would be procured before the production to integration and additional private investment in agriculture.

❖ About PPPIAD Framework:

Government of India has release a Framework for Public Private Partnership for Integrated Agriculture Development under Rashtriya Krishi Vikas Yojana. Indian agricultural produce landscape happens to attain a significant stage year over year. The alternation over the demand preferences of the consumers and the inflexible over the income of the consumers make the price of the household or agricultural goods and it also create a variation over their household basket. So the framework denotes that there would be a partnership between Public and Private sectors to improve the agricultural production and to provide procurement to the farmers. And the framework proposes the agriculture and allied sectors for the integration of agricultural projects. The expected outcome is the average investment of farmers before the project implementation and the improvement over the average investment on behalf of the existed partnership between the public and private sector. The major features of this framework are Mobilizing farmers into producer groups, value addition, Infusion of technology, Marketing Solution and Project Management.

The objective of the framework pronounces the improvisation of agricultural infrastructure by merging the public and private sectors. The core objectives includes Enhancing the production and productivity and to provide income security to the farmers, Promotion and dissemination of technologies for improve the productivity, Creating employment opportunities for the young generation over the field of agriculture, Profit maximization to the farmers and improving the value addition and to make the farming business viable. And the implementing agencies are Small Farmers Agri-Business Consortium, State level Agriculture development agencies.

❖ Introduction about the workshop of PPPIAD:

PPPIAD workshop held on 20th July 2016 in Hotel Solitaire Bangalore. The workshop was headed by Dr. Prakash Kammardi, Chairman of Karnataka Agriculture Price Commission and the workshop was also supported by Dr.Parameshwarrappa and Dr. Chandrashekara. Around 30 agricultural products processing associations includes KAPC and Karnataka State Agricultural Produce Processing and Export Corporation [KAPPEC] have been invited to participate in the workshop. Some Farmer Producers Organizations [FPO] are also joined in the workshop to support PPPIAD.

• Aims of the workshop

The workshop was targeted to gather the suggestions of the participants about the PPPIAD and the core aims includes,

✓ To make an easy way of trading relationship between the farmers and the consumers. ✓ Improvisation over the value addition ✓ Yield improvement ✓ Improvement over the production ✓ Post harvest management ✓ Dissemination of technologies ✓ Increasing the Farmer Producer Organization

• Involvement of Private sector

Major agricultural products processing association have been participated in the work shop includes TATA Rallis India Ltd and Monsanto who have been agreed with the involvement over the Farmer Producer Organization. The representatives of the FPO’s have pointed that the amalgamation with the private sector resulted a tremendous benefits to the farmers. As like, TATA Rallis has committed with the procurement measures with the Farmers Producers Organizations. And Monsanto provides chemical pesticides to the FPOs. And the participants explained that the NCDEX has a contribution over the marketing for the agricultural produce. So it is noted that the Public Private Partnership would make a better price over the products and provide benefits to the farmers.

• Role of FPO in PPPIAD:

Farmer Producer Organization is a company which consists of Farmers and Producers and established under the Indian Companies Act and the Cooperatives Act. FPO is also acts as a mediator for farmers to sell their producer for better prices directly or indirectly to the consumers. Generally, FPO has agreements or contract with the companies to sell their agricultural produce and even they prefer to sell the produce for some other companies whether they quote better prices. FPO fixes the price of the produce under the pricing policies of the government and as per the quantity of yields. As like private concern, FPO also issues a sample of produce to the companies to engage with a contract or agreement with the company whether the quality fulfills them.

• Procurement and Pricing Strategy:

FPO fixes the prices after the procurement has done. Before the procurement process the concern concentrates on the removal of moisture contains and impurities and the price would be a moderate one which will make profit for the farmers. And if the price happened to decline, the farmers would sell the agricultural produce when it reaches the expected price level and the storage procedures availability handled by the FPO. The damaged or Perishable goods will be scheduled to the value addition for some other productions. For example, the price of pulses would differ from state to state. If the pulse harvesting takes place in Gulbarga district Karnataka and its cost Rs.9000 per quintal and the same price will not be in the state of Maharashtra. It would be Rs.9200 which includes the transportation charges. FPO takes one percent commission over the price per quintal. Nisarga is one of the emerging FPOs which holds 1000 farmers as its members and out of 1000, 600 farmers have the share capital of 8 crores since 2001 to 2016. And their major yields are Red gram, Bengal gram, Sun flower and Soybean.

• Outcomes of the workshop:

Weather Conditions, Economic and Political Conditions and Government Policies are the factors which affect the range of the commodity prices in our country. Processes like cleaning, betterment in packaging, branding would lead the commodity to attain a better prices which could make a profit for the farmers. Thus the farmers should be as a single group rather than an individual. More schemes have been implemented to form a union among the farmers and the PPPIAD is the emerging practice which majorly focuses on the betterment for farmers. And some aspects have to be considered whether this initiative would result beneficiary for farmers and whether the private sector has overloaded more than the public sector. PPPIHD for the Banana crop results successful previously under the guideline of SFAC. Thereby PPPIAD has also the opportunities to encourage and motivate the agricultural crops. Several PPP models have to be studied as the initiative is along with the major agricultural commodities of Karnataka. Annexure 4

List of FPOs in the State of Karnataka:

Annexure 5

Food parks locations in the State of Karnataka: