• Agribusiness Development Support


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Technical Assistance Consultant’s Final Report
Project Number: 37091
September 2005
India: Agribusiness Development Support
(Financed by the Government of the United Kingdom)
Prepared by
ANZDEC Ltd.
New Zealand
For Department of Agriculture and Cooperation
Ministry of Agriculture, India
and the
Asian Development Bank
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. (For project preparatory technical
assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
INDIA
AGRIBUSINESS DEVELOPMENT SUPPORT PROJECT
ADB TA NO. 4407-IND
Final Report
Volume I – Main Report
September 2005
Prepared for the
Department of Agriculture and Cooperation
Ministry of Agriculture, India
and the
Asian Development Bank
by
ANZDEC Ltd, New Zealand
in association with
Agrifood Consulting International Inc, USA
and
Global AgriSystem Pvt. Ltd, India
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
Final Report– Volume I: Main Report i
TABLE OF CONTENTS
LIST OF TABLES .......................................................................................................................................................... iii
LIST OF FIGURES ........................................................................................................................................................iv
LIST OF BOXES ...........................................................................................................................................................iv
LIST OF APPENDIXES ................................................................................................................................................iv
ABBREVIATIONS AND ACRONYMNS..........................................................................................................................v
GLOSSARY ............................................................................................................................................................ vii
EXECUTIVE SUMMARY ...............................................................................................................................................ix
I. INTRODUCTION............................................................................................................................................. 1
A. Background .......................................................................................................................................... 1
B. Design Process .................................................................................................................................... 2
II. SECTOR OVERVIEW ..................................................................................................................................... 3
A. Agriculture Performance ....................................................................................................................... 3
B. Current Status of Agribusiness ............................................................................................................. 4
C. Agribusiness Policy Setting .................................................................................................................. 5
D. Potential for Agribusiness in India ........................................................................................................ 7
E. Major Constraints and Challenges........................................................................................................ 8
F. Institutional Setting and Issues ............................................................................................................. 8
G. Agribusiness Policy Missions and Programs ........................................................................................ 9
H. ADB Country Strategy ........................................................................................................................ 17
III. SECTOR PROBLEM ANALYSIS .................................................................................................................. 17
A. Major Sector Issues and Problem Tree .............................................................................................. 18
B. Lessons Identified............................................................................................................................... 24
IV. PROPOSED PROJECT ................................................................................................................................ 27
A. Project Rationale ................................................................................................................................ 27
B. Project Strategy .................................................................................................................................. 28
C. Project Goals ...................................................................................................................................... 28
D. Project Modality .................................................................................................................................. 29
E. Links with National and State Policy and Programs ........................................................................... 32
F. Future Directions ................................................................................................................................ 36
G. Assumptions and Risks ...................................................................................................................... 37
V. OVERVIEW OF PROJECT DESIGN............................................................................................................. 38
A. Project Framework ............................................................................................................................. 38
B. Project Components ........................................................................................................................... 40
C. Project at a Glance ............................................................................................................................. 42
D. Features of Project Design ................................................................................................................. 43
E. The Project as a Vehicle to Foster New Business Practices .............................................................. 45
F. Focus on a Limited Number of Horticultural Value Chains ................................................................. 45
VI. PROJECT COMPONENTS DESCRIPTION ................................................................................................. 49
A. Market Intelligence Component .......................................................................................................... 49
B. Technology Component ..................................................................................................................... 57
C. Value Chain Linkages Component ..................................................................................................... 73
D. Market Infrastructure Component ....................................................................................................... 94
VII. PROJECT COSTS AND FINANCING ......................................................................................................... 110
A. Project Costs .................................................................................................................................... 110
VIII. PROJECT IMPLEMENTATION ARRANGEMENTS.................................................................................... 115
A. Complexity of Implementation .......................................................................................................... 115
B. Requirement of a Strong Coordinating Organizational Arrangement................................................ 115
C. Linkages with the National Horticultural Mission and Technology Mission ....................................... 115
D. Project Organization ......................................................................................................................... 116
E. Steering Committee.......................................................................................................................... 117
F. Alternative Executing Agency Arrangements ................................................................................... 117
G. Proposed Executing Agency............................................................................................................. 119
H. National Coordination Unit................................................................................................................ 120
I. Implementation Agency .................................................................................................................... 121
J. Project Implementation Unit.............................................................................................................. 124
K. Rationale of the Choice of a Society as Implementation Agency...................................................... 125
L. Project Monitoring and Evaluation Unit............................................................................................. 126
M. Organizational Relationships of the Project ...................................................................................... 127
N. Implementation Schedule ................................................................................................................. 128
O. Reporting .......................................................................................................................................... 132
P. Project Funds Disbursement ............................................................................................................ 132
Q. Project Procurement......................................................................................................................... 134
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
ii Final Report – Volume I: Main Report
IX. PROJECT PERFORMANCE AND MONITORING SYSTEM ...................................................................... 137
A. Introduction....................................................................................................................................... 137
B. Project Performance Monitoring and Evaluation............................................................................... 137
C. Project Monitoring and Evaluation Unit............................................................................................. 138
D. Inception Activities (First Six Months)............................................................................................... 138
E. Regular Monitoring ........................................................................................................................... 139
F. Project Reporting.............................................................................................................................. 140
G. Reviews ............................................................................................................................................ 140
X. POLICY AND LEGAL ISSUES.................................................................................................................... 143
A. Introduction....................................................................................................................................... 143
B. The Implementation Agencies as Societies ...................................................................................... 143
C. The Amendment of APMC Act and Private Markets......................................................................... 148
D. Alternatives for Establishing a Conducive Environment to Private Investment in Market Places...... 152
E. Eligibility of State Mandi Board/Committee to hold Equity of a Company......................................... 155
F. Institutional Structure at Farm Level ................................................................................................. 159
XI. PROJECT GOVERNANCE AND SUSTAINABILITY................................................................................... 162
A. Governance in the Project ................................................................................................................ 162
B. Sustainability .................................................................................................................................... 165
C. Annual Costs to Sustain Project Benefits after Project Completion .................................................. 169
D. Funds, Absorption Capacity and Willingness to Pay ........................................................................ 173
XII. FINANCIAL AND ECONOMIC JUSTIFICATION......................................................................................... 178
A. Project Rationale .............................................................................................................................. 178
B. Project Assessment.......................................................................................................................... 178
C. Distribution of Benefits...................................................................................................................... 181
D. Cost of Funds ................................................................................................................................... 182
XIII. SOCIAL, GENDER AND POVERTY ASSESSMENT.................................................................................. 184
A. Social Impact Assessment ............................................................................................................... 184
B. Socio-economic Indicators, Poverty and Gender.............................................................................. 184
C. Poverty Related Parameters............................................................................................................. 185
D. Gender Related Parameters............................................................................................................. 185
E. Poverty and Social Analysis of the Proposed Project Interventions.................................................. 186
F. Poverty Reduction and Social Strategy ............................................................................................ 189
XIV. ENVIRONMENTAL EVALUATION.............................................................................................................. 192
A. Introduction....................................................................................................................................... 192
B. Expected Environmental Effects of Project Components ................................................................. 192
C. Private Market Places....................................................................................................................... 195
D. Environmental Situation of Existing Markets .................................................................................... 196
E. Expected Environmental Issues of Upgrading and Expanding Existing Markets .............................. 196
F. ADB Requirements........................................................................................................................... 197
G. Supply Chain Infrastructure .............................................................................................................. 198
H. Potential Cumulative Effects of the Project....................................................................................... 198
I. Environmental Opportunities within the Project ................................................................................ 198
J. Main Conclusions of Environmental Evaluation................................................................................ 199
K. Environmental Management Plan..................................................................................................... 199
XV. REFERENCES............................................................................................................................................ 201
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
Final Report– Volume I: Main Report iii
LIST OF TABLES
ES1: Selected Horticultural Value Chains for Project Intervetnions ................................................................xiv
ES2: States by Components - total including contingencies ...........................................................................xvi
Table 1: Funds released under Technology Mission (Rs. Crore) ......................................................................... 10
Table 2: Patterns of Assistance for Mini Missions................................................................................................ 11
Table 3: Pattern of Assistance under TM and NHM............................................................................................. 12
Table 4: Area target of NHM (lakh ha) ................................................................................................................. 14
Table 5: Lessons Identified .................................................................................................................................. 24
Table 6: Role of Private and NGO Sectors in the Project .................................................................................... 31
Table 7: Role of Various Government Organizations in the Project ..................................................................... 31
Table 8: Complementarities between the Project and National Programs including the NHM and TM................ 32
Table 9: Summary Project Framework................................................................................................................. 39
Table 10: Components and Subcomponents of the Project ................................................................................... 40
Table 11: Horticultural Value Chains for Project Interventions ............................................................................... 48
Table 12: Selected Value Chains for State Interventions....................................................................................... 81
Table 13: Calendar of Processing Application ....................................................................................................... 86
Table 14: Performance Indicators .......................................................................................................................... 88
Table 15: Shares of Investors in a Market Company (hypothetical example) ...................................................... 104
Table 16: Expenditure Accounts by Components – totals including contingencies.............................................. 112
Table 17: Project Components by Years – totals including contingencies ........................................................... 113
Table 18: Components by Financiers .................................................................................................................. 113
Table 19: States by Components – totals including contingencies ...................................................................... 113
Table 20: States by Financier – totals including contingencies (US$ ‘000).......................................................... 114
Table 21: Members of the Steering Committee of the Project.............................................................................. 117
Table 22: Alternative Options for the Executing Agency ...................................................................................... 117
Table 23: Managing Committee of National Horticulture Board ........................................................................... 120
Table 24: Governing Council of Society in Himachal Pradesh ............................................................................. 122
Table 25: Governing Council of Society in Punjab ............................................................................................... 123
Table 26: Governing Council of Society in Sikkim................................................................................................ 123
Table 27: Implementation Chart of the Project..................................................................................................... 129
Table 28: Percentage Distribution of Project Costs, by year ................................................................................ 133
Table 29: Procurement Accounts by Year (totals including contingencies).......................................................... 135
Table 30: Procurement Arrangements (totals including contingencies) ............................................................... 136
Table 31: Summary of Monitoring and Evaluation Activities and Responsibilities................................................ 141
Table 32: Baseline Surveys, Studies and Monitoring Reports ............................................................................. 142
Table 33: Alternative Options for Establishment of Private Markets .................................................................... 152
Table 34: Annual Costs Needed to Sustain Benefits of the Project after Project Completion .............................. 171
Table 35: Stakeholder Shares in Subprojects ...................................................................................................... 173
Table 36: Subproject Contributions for a 25-Member Farmers’ Group ................................................................ 174
Table 37: Private Sector Investment for Market Places ....................................................................................... 175
Table 38: Subsidies under TM and NHM compared to Grants under the Project ($ Million) ................................ 176
Table 39: DRC Ratios of Value Chain Crops ....................................................................................................... 178
Table 40: Results of Example Analysis ................................................................................................................ 179
Table 41: Market Costs ........................................................................................................................................ 180
Table 42: Total Investment for Market Places – base costs ($ ‘000).................................................................... 180
Table 43: Financial and Economic Analysis of the Market Places ....................................................................... 180
Table 44: Economic Analysis for the Project........................................................................................................ 181
Table 45: Suggestions made by Farmers and Agro-producers............................................................................ 193
Table 46: Environmental Opportunities for the Project......................................................................................... 199
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
iv Final Report – Volume I: Main Report
LIST OF FIGURES
Figure 1: Agriculture Sector Growth Rate – Target vs. Actual................................................................................. 3
Figure 2: Agricultural Employemnet as a percent of total ........................................................................................ 3
Figure 3: Rural Poverty as a percent of total ........................................................................................................... 4
Figure 4: Producers Share of Retail Price for Unprocessed Vegetables................................................................. 5
Figure 5: Allocation of Funds (% of total) by Program for Technology Mission ..................................................... 10
Figure 6: Problem Tree for the Project .................................................................................................................. 20
Figure 7: Overview of Project Modality.................................................................................................................. 30
Figure 8: Project at a Glance................................................................................................................................. 42
Figure 9: Comparative Prices of Oilseed Rape - I ................................................................................................. 47
Figure 10: Representation of Organizational Arrangements for Market Intelligence Component............................ 54
Figure 11: Overview of Technology Component ..................................................................................................... 60
Figure 12: Representation of Organizational Arrangements for Subcomponent 3.1 - Producer Enterprises ......... 80
Figure 13: Representation of Organizational Arrangements for Subcomponent 3.2 - Contract Farming ................ 89
Figure 14: Representation of Organizational Arrangements for Market Infrastructure Component...................... 102
Figure 15: Representation of Organizational Arrangements for Subcomponent 4.2 - Supply Chain
Infrastructure ........................................................................................................................................ 105
Figure 16: Representation of Organizational Arrangements for Subcomponent 4.3 - Governance and
Efficiency.............................................................................................................................................. 105
Figure 17: Investment by Component ................................................................................................................... 110
Figure 18: Proposed Financing ............................................................................................................................. 110
Figure 19: Investment by State ............................................................................................................................. 111
Figure 20: Project Organization Chart ................................................................................................................... 116
Figure 21: Accountability Relationships in the Project........................................................................................... 127
Figure 22: Reporting, Implementing and Monitoring Relationships in the Project ................................................. 127
Figure 23: Flow of Funds for the Project ............................................................................................................... 132
LIST OF BOXES
Box 1: The Fiscal Cost of the ‘Food Subsidy’...................................................................................................... 5
Box 2: Market Companies: an example of public-private partnership ............................................................... 44
Box 3: Differences between eSuvidha and eChoupal ....................................................................................... 51
Box 4: Project proposal for forming a ginger farmer enterprise group............................................................... 84
Box 5: Project proposal for forming a strawberry farmer enterprise group ........................................................ 85
Box 6: Project proposal for a farmer group enterprise to obtain organic certification ........................................ 86
Box 7: Matching Grant Fund Project Review Parameters ................................... Error! Bookmark not defined.
LIST OF APPENDIXES
1. Design and Monitoring Framework
2. Background to Market Intelligence Component
3. Background to Technology Component
4. Background to Value Chain Linkages Component
5. Background to Market Infrastructure Component
6. COSTAB Tables
7. Terms of Reference for Project Management Staff
8. Terms of Reference for Consulting Services
9. Economic and Financial Analysis
10. Social and Gender Analysis
11. Summary Poverty Reduction and Social Strategy
12. Initial Environmental Evaluation Report
13. Summary Initial Environmental Evaluation
14. Financial Assessment of Executing Agency
15. Summary of Meetings
16. Summary of Focus Group Discussions
17. Summary of Workshops
18. Case Studies
19. Policies Relevant to Agribusiness Sector in India
20. Institutions Relevant to Agribusiness in India
21. Assessment of Agribusiness in Five States
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
Final Report– Volume I: Main Report v
ABBREVIATIONS AND ACRONYMS
ACI Agrifood Consulting International Inc.
ADB Asian Development Bank
ADSP Agribusiness Development Support Project
APEDA Agricultural and Processed Foods Export Development Authority
APMC Agricultural Produce Market Committee
CAPART Council for Advancement of People’s Action and Rural Technology
CEO Chief Executive Officer
CSIR Council of Scientific and Industrial Research
CSP Country and Strategy Program
DAC Department of Agriculture and Cooperation
DASP Diversified Agriculture Support Project
DOA Department of Agriculture
DOH Department of Horticulture
EA Executing Agency
EIA Environmental Impact Assessment
EIRR Economic Internal Rate of Return
ELISA Enzyme Linked Immunosorbent Assay
EMP Environmental Management Plan
EMS Environmental Management Strategy
EU European Union
FCI Food Corporation of India
FDI Foreign Direct Investment
FIRR Financial Internal Rate of Return
GDP Gross Domestic Product
GOI Government of India
GPU Germplasm Production Unit
HACCP Hazard Analysis and Critical Control Points
HDI Human Development Index
HDO Horticultural Development Officer
HIMCON Himachal Pradesh Consulting
HOPSCOM Name of a horticultural cooperative in Bangalore
HP Himachal Pradesh
ICAR Indian Council of Agricultural Research
ICICI ICICI Venture Funds Management Company Ltd
IEE Initial Environmental Examination
IPM Integrated Pest Management
IRR Internal Rate of Return
ISO International Standards Organization
IT Information Technology
ITC India Tobacco Company
J-K Jammu-Kashmir
LIBOR London Interbank Offered Rate
M&E Monitoring and Evaluation
MANAGE National Institute of Agricultural Extension Management
MARKFED Punjab State Cooperative Supply and Marketing Federation Ltd
MCF Market Committee Fund
MDF Marketing Development Fund
MIF Market Infrastructure Fund
MIU Market Intelligence Unit
MOA Ministry of Agriculture
MSP Minimum Support Price
MTA Mid-Term Appraisal
NABARD National Bank of Agriculture and Rural Development
NATP National Agriculture Technology Project
NCCT National Council for Cooperative Training
NCDC National Cooperative Development Corporation
NCU National Coordination Unit
NDDB National Dairy Development Board
NGO Non-Government Organization
NHB National Horticultural Board
NHM National Horticultural Mission
NPD National Project Director
NPV Net Present Value
OCR Ordinary Capital Resources
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
vi Final Report – Volume I: Main Report
PAIC Punjab Agro-Industries Corporation
PIU Project Implementation Unit
PME Participatory Monitoring & Evaluation
PMEU Project Monitoring and Evaluation Unit
PPMS Project Performance Monitoring System
RUCHI Rural Center for Human Interests
SDPAH Society for the Development and Promotion of Agribusiness in Horticulture
SFAC Small Farmers Agribusiness Consortium
SHG Self-help Group
SIA Social Impact Assessment
SIEE Summary Initial Environmental Examination
SMB State Marketing Board
SMS Subject Matter Specialist
SRA The Societies Registration Act 1860
SREP Strategic Research Extension Program
TA Technical Assistance
TM Technology Mission
TOR Terms of Reference
WTO World Trade Organization
YSPUHF Yashwant Singh Parmar University of Horticulture and Forestry, Solan
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
Final Report– Volume I: Main Report vii
GLOSSARY
$ US Dollar
% Percent
Apni mandi A local market in which producers sell directly to consumers
Arthiyas Commission agents
Bidi Traditional cigarette made of tobacco and with a tendu leaf cover
Crore 10 million
eChoupal Computerized market information system introduced by ITC; choupal means meeting place
eSuvidha Computerized market information system for the project; Suvidha means facility
FY Fiscal year
ha hectare
haats Local markets
Jatropha Plant out of which oil for fuel can be extracted
Khancha Pure, clean
Kharif Rainy Season
Kissan Sangathan Farmer association
km kilometer
Lakh 100,000
Mandi Market
Panchayat local government authority (lower than district level)
Rabi Winter season
Rs. Rupees
Sanchalaks procurement agents
Subzi Vegetables
t tonne
Tendu A tree, the leaves of which are used for bidi cigarettes
ADB TA 4407-IND – Agribusiness Development Support Project
ANZDEC Ltd in association with ACI and Global Agrisystem Pvt. Ltd
Final Report– Volume I: Main Report ix
EXECUTIVE SUMMARY
A. Sector Overview
1. Current Status of Agribusiness. The contribution of agribusiness to Gross Domestic
Product (GDP) is estimated at about 10%. In value terms between 65 and 75% of agricultural
produce is transacted in markets, usuall


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