Unlocking the Value Chain Fruits and Vegetables Sub Sector Potential for Primary Producers

Unlocking the Value Chain Fruits and Vegetables Sub Sector Potential for Primary Producers Biswajit Sen copyright Published by: ACCESS Development Services 28, Hauz Khas Village New Delhi-110016 www.accessdev.org Unlocking the Value Chain Fruits and Vegetables Sub Sector Potential for Primary Producers Copyright ©: ACCESS Development Services, 2015 All rights reserved. This book, or parts of thereof, may not be reproduced in any form or by any means, electronic or mechanical, including Photo Copying, recording or any information storage and retrieval system now known or to be invented, without the permission by the Publisher. Printed by: FACET Design D-9, Defence Colony, New Delhi Unlocking the Value Chain Fruits and Vegetables Sub Sector Potential for Primary Producers Biswajit Sen CONTENTS PREFACE 5 Author’s Note 7 1 INTRODUCTION 9 1.1 Study Perspective: The Storyline 9 1.2 Fruits & Vegetables: A Sectoral Overview 13 1.3 The Small and Marginal Farmer in Indian Agriculture 20 1.4 Identifying the Problems 23 2 CONCEPTUAL FRAMEWORK AND METHODOLOGY 26 2.1 Structuring the Subsector: Geography, Commodity, Value Chain 26 2.2 Value Chain & Stakeholder Analysis 27 2.3 Role of Institutions 29 2.4 Research Methodology: Cases of Successful Practice Models 31 3 POLICY: REGULATION & REFORM 32 3.1 Historical Perspective 33 3.2 Policy Reforms: The Model APMC Act of 2003 35 3.3 Case Study: Reforming the APMC Act in Maharashtra 38 3.4 Lessons from Reform 39 4 COMMODITY VALUE CHAINS: THE HIMACHAL APPLE 43 4.1 HIMACHAL: The Present Scenario 43 4.2 Case Study: Adani Agrifresh: A Corporate Intervention 51 4.3 Lessons from Practice 59 5 CLUSTER DEVELOPMENT IN FRUITS AND VEGETABLES: THE CASE OF NASHIK DISTRICT 62 5.1 NASHIK District: The Emergence of a Fruits and Vegetable Cluster 62 5.2 Updating the Grape Story 67 5.3 Case Study: Sahyadri Farms Producer Company Ltd (SFPCL) 69 5.4 Case Study: Sulla Wines 73 5.5 Case Study: Devnadi Valley Agricultural Producer Company Ltd. 77 5.6 Lessons from Practice 81 6 BIHAR: TRANSFORMING TRADITIONS 84 6.1 Trends and Context 84 6.2 Case Study: Samriddhi 87 6.3 Case Study: FarmsnFarmers 95 6.4 Lessons from Practice 98 7 CONCLUSIONS: REVISITING THE FnV SECTOR 100 7.1 Revisiting the Subsector 100 7.2 Scaling up Success: Vertical Scaling Up vs. Creating Ecosystems 108 7.3 Policy Reform: Role of the State vs. Free Market 109 7.4 Transferring Value: Unlocking the Value Chain for the Small Farmer 110 REFERENCES 111 3 4 PREFACE The recent spike in fruits and vegetable prices in urban areas has been not only a burden to the large and expanding urban population in India but also a major political issue. The reasons for this price rise is multifold and include low volume of production as consumer tastes change and demand expands (often referred to as the supply constraint); the excessive margins retained by middlemen and retailers (often referred to as the value chain problem); the lack of storage and transport facilities for perishable commodities like fruits and vegetables (the infrastructure problem); the absence of modern market systems at each level of the value chain that can address the above problems in a comprehensive manner ( the institutional problem) and finally the archaic policy framework put in place several decades ago when the economy was growing at a slow pace and rapid urbanisation and migration was restricted to a few pockets of the country. Several research studies, mostly of a statistical nature, has been undertaken over the years that have continued to highlight these constraints, but in a fragmented manner. Further they offer little in the way of concrete recommendations that a player in the field of fruits and vegetables can adopt. There are very few examples of systematic documentation of solving the distortions of value chains in different commodities and different sub-regions. Despite the growing demand and high prices of fruits and vegetables, why does the primary producer continue to receive so little in these value chains. This study seeks to address this lacuna in a more comprehensive way so that the study becomes relevant and useful to institutional practitioners working in the sectors of fruits and vegetables in different regions of India. A particular weakness in the development experience of India has been the transfer of knowledge and practice between institutions, states and regions having successful experiences and those where potential exists but lies untapped. The study also endeavours to give concrete recommendations. I hope this report will be valuable across board for all actors in the sector such as policy makers, bankers, private sector, farmers, and other institutions on how they can act to benefit the sector as a whole and the poor working within it in particular. The idea for publishing this book came from the feedback we received from the field on understanding the policy environment and the real examples of inclusive fruits and vegetables value chains and 5 its potential. I’m sure the publication will enthuse private sector agri business companies, financial institutions, primary producer organisations and other stakeholders to structure such pro-poor value chains in the fruits and vegetable sub-sector. I am extremely thankful to Biswajit Sen for authoring this study and putting together diverse case studies on interventions in the value chain that have enabled the small and marginal farmers to transform their livelihoods streams covering different dimensions. I am grateful to NABARD and Rabobank for their support to the Report. This is a part of an ongoing effort of NABARD to add to add to the knowledge repertoire for the sector, an effort for stakeholders to learn from other experiences for policy makers to analyse and frame forward looking policies and for private sector to design innovative value chain strategies. I am also thankful to my Livelihoods Asia Team of Puja and Ila for providing efficient support and co-ordinating will all the stakeholders for getting the report ready. Vipin Sharma CEO 6 AUTHOR’S NOTE When Vipin approached me to write a book for Access Development Services on the fruits and vegetables subsector in India, I was rather reluctant for more than one reason. Firstly, I could not claim to be any kind of expert on the subject and had to actually start from a clean slate in understanding the subsector. Secondly, a quick glance through the internet revealed that a lot seemed to have already been written on the subject and what new could be added. Thirdly, the whole subject matter of fruits and vegetables didn’t seem very exciting as a topic. Anyway, I took up the assignment as an opportunity to learn something I was ignorant about. All this has changed today. A detailed search of the internet and review of documents and literature revealed that most of the material available was either based on dry statistics published by the Department of Horticulture. Useful, but not very insightful. Also most of the studies stopped at the first level of analysis, concluding with a very long list of problems facing the subsector. Most of the studies also did not have a clear analytical framework through which the sector was looked at to draw conclusions. This led to the need for searching out what is happening in the subsector from the field and trying to identifying various models from practice. The whole excitement factor transformed once I visited the field. The subsector while turning out to be vast, diverse and complex, also showed that it is on a dynamic growth path that is transforming Indian agriculture all over the country, albeit in small pockets. There is money to be made in the subsector and in states like Maharshtra is drawing back young people into agriculture from lower level industrial jobs. Also this whole transformation process is being led both by farmers but also by a variety of players such as home grown rural entrepreneurs, social entrepreneurs branching out from the NGO space; corporate houses; and farmer led producer companies. While government’s direct role has become limited, it has through reforming the APMC act freed up the sector for greater participation by new players. The scope for documenting, analysing, and presenting what is happening in the subsector seemed endless. One is still struggling at where to limit the scope of the study. That is why this version of the study can be termed as work in progress and only provides the frameworks and key findings of the work done till now. It has looked 7 at the subsector more from the farmer production side and has yet to look at the retail revolution that the sector is poised for as demand for fruits and vegetables transforms in urban India. The study has drawn certain broad lessons from practice, but needs far greater elaboration through a much wider consultative process. It also needs to complete the cycle of the value chain by looking at a variety of more experiences from the field in different locations in the country. Hence we look at this version of the book as both an iterative learning process and a participative process of building up block by block rather than a conclusive final version. As every writer knows, a book is only worth it if people read it. I would like to specially thank Jaipal Kaushik, who has been my fellow traveller in discovering what the subsector can offer and has done part of the field work as well as drafting of some of the critical case studies. Having got excited about the study and what the subsector can offer, I can now also thank Vipin and Access Development Services for giving me this opportunity to learn about what rural entrepreneurship really means.

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