In the past four decades, the Indian economy has not only grown, but has also undergone a structural transformation. While, the share of industries and services in the gross domestic product (GDP) increased, the share of agriculture declined, from 52 per cent in 1951-52 to 17.6 per cent in 2014-15. Nonetheless, enhancing agricultural growth remains a key policy concern as it still supports livelihood to more than half of the country’s total population. However, Indian agriculture is dominated by small landholdings— about two-thirds of the landholdings are of size less than or equal to one hectare, with an average land size of about 0.4 hectares. At this scale, the agriculture-based livelihoods are untenable for majority of these households. Therefore the pertinent question for policy makers is: how to improve productivity of small-farm agriculture and livelihood of smallholders? Amongst a constellation of constraints, lack of access to markets and capital is an important barrier to enhancing productivity of smallholder agriculture. Many studies have shown that smallholders have limited access to credit, which restricts them from adopting income-enhancing cropping pattern, improved technologies and quality inputs, and to undertake long-term investments in land improvements, irrigation, mechanization and storage. Though financial requirements of smallholders are not big; financial institutions often shy away from financing them because of high cost of lending relative to their size of loan, and higher risks in agriculture. Further, they have limited collateral, often less documented, which makes it difficult for institutional agencies to liquidate these in case of default. Smallholders have, thus, resorted to borrowings from informal lenders who often charge exorbitant rates of interest and discount output prices in case of product-linked transactions.
Furthermore, smallholders are often at a disadvantage in the market place. Local rural markets for agricultural produce are thin, and the trading in distant urban markets is not remunerative due to higher fixed costs in relation to their marketable surplus. There is also apprehension about intensification of competition in agri-food markets with globalization. The unorganized small-scale producers, entrepreneurs and processors are likely to be more affected by increasing competition because of their lack of resources, especially capital to improve upon their technological capabilities to face global competition and stringent food safety standards. These tendencies suggest that smallholders need to adjust their agriculture to the emerging market forces, which is difficult unless they are supported with finance, markets, technologies, information and services. Given these constraints that small farmers face, there is an increasing recognition that some of these constraints related to access to product and financial markets can be overcome using a value chain approach. The value chain approach brings different chain actors including farmers, aggregators, traders, processors and financial institutions together in order to realize economies of scale, reduce transaction costs, and minimize uncertainties in supplies and quality of inputs and outputs. In the past the Government of India has made several policy changes to facilitate development of integrated value chains. Important among these include: de-regulation of the food processing industry, reduction in taxes and duties on processed foods, establishment of agri-export zones and food parks and institutional lending to food processors on easy terms, liberalization of agricultural markets from the state control, and removal of restrictions on inter-state movement of agricultural commodities. Despite these policy changes problems like limited access to agricultural produce markets and financial resources, monopoly of licensed traders in agricultural markets, lack of agriculture market infrastructure, high incidence of market charges , high wastages in supply chain , long gestation period of infrastructure projects and seasonality of agriculture produce, lack of national integrated market, low price realization by farmers, large number of marketing channels with long supply chain , lack of accurate and timely market information/ intelligence system, high marketing cost affecting mostly the small and marginal farmers, remain unresolved. To address some of these issues the Hon’ble Union Finance Minister in his 2014-15 Budget speech, stressed the need to create a National Common Agricultural Market so as to standardise and improve transparency in trade practices across States under a single licensing system. The suggested unified market aims to break the entry barriers, monopoly and cartelisation that have crept into the functioning of the current agricultural marketing system. The national common market is expected to bring more transparency due to wider participation, uniform market fees structure and uninterrupted inter-State movement of commodities. In this context, this seminar aims to disseminate successful private, public and civil society models in India and address relevant challenges and opportunities to improve efficiency and inclusiveness of agriculture value chains. Furthermore, it aims to open the discussion to use value-chain approach as a tool to improve access to finance to small holder farmers and discuss the possible structure and regulatory framework for the ‘National Common Market’.
Objectives of the Seminar The aim of the seminar is to discuss the multi-faceted challenges and opportunities in increasing integration of the value chain in India. It also aims to discuss ways to co-integrate issues of finance into the value chain framework to improve efficiency. Further, it intends to deliberate on the possibilities of developing innovative financial instruments into the value chain framework by supporting tripartite agreements between producers, lead firms and financial institutions. The seminar will also address the possible structure and regulatory framework for the ‘National Common Market’ as proposed by Hon’ble Union Finance Minister in his 2014-15 Budget. The forthcoming Seminar has been structured into six technical sessions to focus on the following themes: Session-I : Structure and Regulatory Framework for the ‘National Common Agricultural Market’ Session-II : Infrastructure Support for Agriculture Value Chain Session-III : Financing Indian Agriculture Value Chains Session-IV : Innovative Financing of Commodity Value Chains Session-V : Participation of Small Farmers in Agri-commodity Value Chains Session-VI : Panel Discussion: Way Forward Who can participate? (i) Corporates/ private sectors/ exporters/traders dealing in agricultural inputs and outputs