Policy Framework for Agriculture Extension Interface with Private Sector Organizations
October 30, 2001, New Delhi

Presentation on Indian Agriculture From Promise to Performance by Mr M S Banga,Chairman, Hindustan Lever Ltd.

Agriculture in the Indian Economy

Gross cropped area : 190m ha - largest in the world

Agriculture growth critical for GDP growth

• Supply & Demand linkages with industry
  • Rural consumption of cement, durables, FMCG at 50% of total
• Force multiplier for growth :
  • 3% increase in agriculture
  • 2.6% increase in manufacturing
  • 1.7% increase in overall GDP growth

Shift in focus : From Managing Shortages to Stimulating Demand

• Paradox of Indian agriculture : overflowing granaries yet hungry population.
• Agricultural growth through increase in support prices no longer sustainable.
• Need to increase consumption through price reduction by improving productivity and efficiency.
  

Catalysing Change :

Some Solution Themes
Key Areas for Action

1 Create enabling environment
Reforms in food laws
Legislative and fiscal reforms

2 Improve productivity and efficiency of agriculture
Create partnership webs

3 Re-direct govt. effort
Focus on infrastructure - roads and water
Broadbase agriculture - stimulate growth of new crops

Enabling environment
Food law reforms

• Unified Food and Consumer laws to avoid:
  • multiple legislation and regulatory authorities
    
  • Duplication of Foods standards
    
• Re-focus Food Laws and align with global standards
  
• Pragmatic enforcement approach :
  
  • Graded punishment
    
  • Distinction between adulterated and sub-standard food
    

Legislation

• Create common Indian market
  
  • remove restrictions/barriers to movement
    
• Enable farmgate procurement
  
  • reform Market Committee Act
    
• Create Futures market/ Permit Forward contracts
  
  • enable improved crop planning by farmers
    

Fiscal reforms

• Multiple levies
  
  • creating complexity & cascading impact on consumer price
    
  • need to simplify and reduce levies/taxes
    

  For eg. Wheat in Rajasthan :
  
  

Mandi Fees                                           1.6%
Kaccha Aadthiya commn                       2.0%
Association Fees                                   0.3%
Sales Tax                                              4.0%
Pakka Adthiya commn                          2.0%
Octroi (eg Punab)                                0.5%

Improve Agricultural Economies

Partnership Web

Partnership Web - HLL experiment

• Pilot in Hoshangabad in MP, along with Rallis & ICICI
• 250 acres in 99-00, scaled up to 1000 in 00-01
• Learning's :
  
  • Productivity up <70% : Technical inputs
    
  • Quality of grain better
    
  • Direct procurement : saving in handling & transport costs
    
  • Good response from farmers : Yield, Finance & Direct sales
    
• Scalability :
  
  • Enablers need to be in place
    
  • Critical mass
    

Re-direct government effort

• Focus on infrastructure improvement
• Redefine role of FCI : re-model on lines of Australian Wheat Board (AWB)
• Broadbase agriculture through appropriate intervention
  

Solution Themes - Implementation

• Need to increase demand by price reduction
  
  • create a win-win for farmer and consumer through productivity and efficiency improvement
    
• Create enabling environment for rapid growth
  
  • Reforms in food laws, legislations and policies
    
• Implement partnership webs between processors, farmers and Government
  
  • Enlightened self interest for common good