Cover Story

Calling in the corporates

Print edition : July 26, 2013

At a farm in Uttar Pradesh, the field being prepared for carrot cultivation. Photo: JAVED ASLAM

The huge cold storage where the sacks of carrot are kept before being sent to buyers across India. Photo: JAVED ASLAM

Carrots being washed before they are sorted and packed into sacks. Photo: JAVED ASLAM

The government’s aggressive moves to open up the farm sector to corporate control under the PPP model are fraught with danger. They can lead to the worsening of the agrarian crisis and landgrab by other means.

WHEN INDIA’S ONLY NATIONAL COMMISSION for Farmers (NCF), headed by the renowned geneticist M.S. Swaminathan, published its fifth and final report in October 2006 after functioning for two years, its key findings and recommendations were the following: “The major causes of the Indian agrarian crisis are: unfinished agenda in land reform, quantity and quality of water, technology fatigue, access, adequacy and timeliness of institutional credit, and opportunities for assured and remunerative marketing. Adverse meteorological factors add to these problems. Farmers need to have assured access and control over basic resources, which include land, water, bio-resources, credit and insurance, technology and knowledge management, and markets.”

In the seven years since the publication of the report, there has been no indication of a careful follow-up by the political leadership or the administrative machinery for the effective implementation of these recommendations. However, over the past few months, sections of the political class, bureaucrats and technocrats in the agriculture sector at the Centre and in several States have embarked on a policy blitz of sorts on public-private partnership (PPP) in agriculture that seeks a paramount role for the corporate sector in production and all the way up to retail marketing.

The advocates of this policy thrust, including Prime Minister Manmohan Singh, Union Agriculture Minister Sharad Pawar and the political leadership of over a dozen State governments as also trade and industry bodies such as the Confederation of Indian Industry (CII), have no qualms about presenting this as the answer to the country's agrarian crisis. The NFC, too, had seen some value in PPP initiatives, but only in a role subsidiary to key initiatives such as land reforms and institutional credit. But the current joint offensive of governments and the corporate sector on the PPP concept shows no such calibration. This so-called panacea is being promoted through a flurry of activity on the ground in several States aimed at setting up PPP ventures. They include conducting specific programmes mooted by different arms of the government and its agencies to facilitate and strengthen these exercises and the organisation of high-profile conferences with the objective of creating awareness. An overview of these exercises points to a systematic and time-bound unfolding of the agenda.

‘Framework’ for integrated projects

A formal beginning to all this was through the CII-sponsored national conference on agriculture in December 2012. The conference, inaugurated by President Pranab Mukherjee, had the proclaimed aim of ushering in a second Green Revolution in India through PPP. The groundwork for this proclamation had been laid a few months earlier, in August, through the “framework” devised by the Union Ministry of Agriculture to facilitate large-scale integrated projects led by private sector players in agriculture and allied sectors. In this framework, schemes were to be developed “with a view to aggregating farmers, and integrating the agricultural supply chain, with financial assistance through the Rashtriya Krishi Vikas Yojana (RKVY), under the direct supervision of State governments and supported by national-level agencies”. The framework also stated that “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”.

The deliberations at the CII-sponsored meet were immediately followed up, in January 2013, with administrative measures to formalise the role of the Small Farmers Agribusiness Consortium (SFAC) as the national nodal agency for advancing PPP initiatives. The Agriculture Ministry’s PPP framework had also stated that the SFAC would “provide technical support and facilitation to States and corporates”. Since January the SFAC has been active across large parts of the country in trying to set up Farmer Producer Companies (FPC) as visualised in the framework.

The framework stated as follows: “Eighty-three per cent of landholdings in the country are now marginal or small and unless there is urgent intervention in aggregating producers through farmers’ institutions, we are unlikely to achieve scale in production and leverage it to the advantage of all stakeholders, especially primary producers. The PPP in agricultural development (PPPIAD) has been conceived of as an alternative mode of implementation under the 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.”

It went on to add that the main features of the PPPIAD allowed corporates to propose integrated agricultural development projects across the spectrum of agriculture and allied sectors and also gave them complete flexibility in design. It also stated that State governments would provide financial assistance directly to corporates through the RKVY window after a project had been approved, subject to a ceiling.

The Farmer Producer Company

The primary interface between corporates and farmers in this exercise would be the FPC. The objectives of the FPC include enabling the incorporation of cooperatives of primary producers as companies and the conversion of existing cooperatives into companies. The FPCs would function as tools for corporates to be part of or to be associated with PPP schemes and programmes. As stressed in the PPPIAD framework, corporates would have complete flexibility in designing a scheme or a programme. The structure and its parameters also mean that many of the FPCs, despite the presence of big corporate players in them, would be eligible, technically, for a number of the privileges and concessions that only cooperative societies were entitled to earlier.

Field reports from different States and reports in SFAC publications themselves point to concerted efforts in the past six months to set up FPCs all across the country. SFAC documents for the early part of 2013 show that the institution has initiated a drive to facilitate the registration of more and more FPCs and that the drive had a significant response in about 20 States.

‘Contract’ farming

While the FPC model is being advanced as the primary instrument to promote the PPP programmes, government agencies and institutions involved with agriculture are also making use of long-standing practices in the farming sector, such as contract farming. A large quantum of contract farming is based on oral “contracts” and not on registered documents. Even international corporates involved in contract farming in India reportedly take recourse to this informal contract system, often through intermediaries. So, while a structure is sought to be put in place through a number of initiatives, all available traditional and informal channels are also being used to promote the so-called panacea.

Obviously, the drive to create more and more FPCs and to facilitate PPP programmes through contract farming is loaded heavily in favour of corporate players. Farmer organisations in Andhra Pradesh and Maharashtra have listed complaints of farmers being forced to join FPCs and being made to sign documents in English, a language they do not understand. Even long-standing contract farmers in the relatively advanced and well-off farming community in Punjab have recorded how corporates ultimately dictate terms and cause them many types of losses (see separate articles).

Officials at the SFAC were not able to give exact figures for the number of PPP projects that have been advanced at present for “want of a proper feedback from the States”. However, the listings in 2012 record that as many as 17 State governments initiated PPP schemes in association with more than 25 corporate players. Prominent among them were Reliance, Essar, Bharti Enterprises-Del Monte Pacific Ltd, the Adani group, ITC, Godrej, Marico, Tata Chemicals and Nestle.

In the assessment of a number of senior officials in the Union Ministry of Agriculture, Maharashtra, Andhra Pradesh, Karnataka and Gujarat have shown greater intent to advance PPP programmes in agriculture. The listed programmes mainly cover vegetables such as potato and tomato, which go into the condiment-confectionary industry; tobacco; sunflower; cotton; and dairy products. The overall trend shows that PPP initiatives are very few in the cereal production sector.

The PPPIAD framework, too, indicates this tendency. It said: “Agriculture GDP is heavily weighted in favour of high value produce (horticulture, animal husbandry, dairy, poultry and fish products); as much as 75 per cent of agri GDP value today is contributed by these products. Recent evidence suggests that this segment is increasingly favoured by small and marginal 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 subsectors, especially for small producers.” The framework seems to suggest that corporates are only facilitating a felt-need of small and medium farmers.

The CII-McKinsey report

Apart from the August 2012 framework, the thematic structure for the efforts to advance PPP in agriculture is provided by the CII-McKinsey report, Food and Agriculture Integrated Development Action (FAIDA). In fact, the two institutions have brought out five-yearly FAIDA reports since 2003, and every report championed the cause of PPP in agriculture. While the 2003 and 2008 reports were rated within the CII itself as not having generated enough traction and momentum, the current context is perceived as promising.

The latest FAIDA report, released in April 2013, suggests a 12-point plan of action to take PPP forward. The suggestions include creating scalable farmer-industry partnerships to encourage various emerging models such as FPCs. The report stresses that private capital and world-class expertise will ensure the adoption of latest technologies and practices in all parts of the agriculture and food value chain.

It also calls for a favourable policy regime to improve agricultural marketing mechanisms so that farmers can decide to whom and where they will sell their produce and to ensure incentives for strategic industry initiatives. It also calls for the setting up of a “National Agricultural Technology Mission” and a “National Agricultural Sustainability Mission” to create high-yielding, disease-resistant seed varieties and to “map and test soil health, ensure integrated nutrient management and sustainable cropping practices”. “These suggestions,” avers Rakesh Mittal, chairman of FAIDA 3, “form the blueprint for the completion of the much-needed second Green Revolution in Indian agriculture.” By all indications, the Ministry of Agriculture and the SFAC are addressing these suggestions seriously and are bound to come up with “concrete and positive responses” by mid-August. As these efforts and plans continue apace, the repeated failure of earlier PPP models, such as the fruit and vegetables programme of Tata Chemicals and Sunil Mittal’s Bharti Enterprises’ horticulture programme, both in Punjab, are being overlooked.



The landgrab experience

The grabbing of land and property of farmers by corporate firms during and after the functioning of the joint stock companies has been a recurring story from the time of the first contract farming experiment in the late 1990s, in Kuppam in Chittoor district of Andhra Pradesh, up to the early 2000s. Experiences as recent as five years ago in Uttar Pradesh and Punjab, too, underscore this aspect. These experiences show that in the larger neoliberal, corporate-driven economy plan, PPP in agriculture could end up as yet another landgrab programme as the special economic zones ( Frontline, June 17, 2011).

A number of agricultural specialists who have long experience working with farmers in the field in advancing innovation in farming practices and creating sustainable and environment-friendly technology pointed out to Frontline that it would be costly to overlook the pitfalls of the past and the warnings from the larger socio-economic scenario.

“It is all very well to talk about the second Green Revolution, but those who say this must also think whether the first Green Revolution was driven by a PPP mechanism,” pointed out the agricultural scientist Raj Gupta of the Borlaug Institute for South Asia (BISA). In his view, even in PPP the farmer and the farming community’s interests and the sustainability of agriculture and nature should be the foundation on which it is built. “The government needs to be strong, committed and imaginative to build up clear and definite parameters for this. Leaving it to corporates in the private sector will only bring the profit angle above everything else,” he said.

Subhas Deswal, a colonel-turned-farmer in western Uttar Pradesh, has had several brushes with corporate players as he built up Sunshine Farms in Sikandrabad in Bulandshahar district, and these experiences, he says, have filled him with doubts whether the big corporates can imbibe the farm-oriented work culture and that too in the specific manner in which it exists in Indian conditions. “If the government wants to do something for farmers, it should concentrate on building up agricultural infrastructure, especially in terms of building up technology that is suited for local conditions,” Deswal said.

Even as this context and the varied opinions on it develop, it is not clear whether the suggestions of the country’s only NCF so far on evolving PPP-based structures for technology development and dissemination with a pro-nature, pro-poor and pro-woman orientation will be considered seriously by those in government. If the track record on the NCF’s central recommendation on land reforms is anything to go by, there is little doubt that these suggestions will also remain unaddressed.

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