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Agribusiness Management
in Asian Co-operatives
Dr GC Shrotriya
Dr Daman Prakash
ASIA is an agrarian based economy and it has made great strides in agriculture in terms of
production, productivity and area under many crops. More than sixty-five percent of Asia's
population comprises rural households and depend in one way or another on agriculture for
their livelihood. Agro-industry and rural industry are still untapped areas in the context of the
enormous potential they hold for transforming the rural economy. Poultry, fishery, animal
husbandry, crop production, handicrafts and a host of post-harvest occupations offer a
plethora of agribusiness opportunities.
Traditionally, Asian farmers have been practicing subsistence agriculture and as a result the
farming has become unremunerative. The business approach in agriculture is lacking.
Moreover, globalisation and removal of restriction on imports have increased the competition
in agriculture. It is now high time to make agriculture remunerative and globally competitive.
Agri-business/Agri-preneur approach can improve the competitive strengths of Asian
agriculture. Agribusiness sector has the potential to transform Asia into a leading agri-
economy of the world.
Agribusiness is a generic term that refers to the various businesses involved in food
production, including farming, seed supply, agrichemicals, farm machinery, wholesale,
distribution, processing, marketing, and retail sales. The agribusiness sector consists of
organisations which: Supply raw materials to agriculture; Supply capital goods to agriculture;
Procure agriculture produce for selling; Procure agricultural produce for processing; Provide
services to agriculture.
For a number of years, one of the strategies for tackling the problems of the agricultural
sector in general, and of micro- and small enterprises in particular, has been to organize
producers. Now, more than ever, organizing producers is considered to be one of the most
promising solutions in the current global context, where competitiveness is a natural
requirement. Co-operatives being people's movement can bring people together particularly
in rural areas and in agriculture sector.
Barring a few exceptions small and medium agricultural and agro-industrial producers in
Asia have a very poor organizational level, as they are organizations whose original reason
for joining forces was to resolve common problems. As a result, their management
development is very rudimentary, and they have few mutual production and business
interests to promote cohesion between them.
Agricultural Co-operatives Business Structures in Asia
Examples of typical organisational structures of agricultural co-operatives in two of the Asian
countries are given below:
While in some countries the organisational structure is two-tier, some countries adopt a three
or even four tier organisational structure. Some argue that fewer tiers help in taking quick
business decisions. The main objective of the apex organisation is to provide support to their
constituents in marketing of their produce, processing it, as well as to provide inputs.
Co-operatives as Business Enterprises
Co-operatives comprise a number of people who come together to satisfy mutual socio-
economic interests by carrying out a business activity. This might include: agricultural or
agro-industrial production co-operatives, trade co-operatives, housing co-operatives or
savings and loan co-operatives.
According to the International Co-operative Alliance [ICA], the world association of Co-
operative Movement, a co-operative institution is defined in its Statement of Co-operative
Identity as: “A co-operative is an autonomous association of persons united voluntarily to
meet their common economic, social and cultural needs and aspirations through a jointly-
owned and democratically-controlled enterprise.”
In co-operatives there are two main types of benefits for members – monetary benefits and
services. Monetary benefits are limited and are calculated not on the basis of the capital
invested but on the volume of transactions and on the use of each member’s services.
Services can include credit, sale of inputs and other products at low prices, housing or health
programmes, and so on. Sometimes, at the end of the financial year, if the co-operative
earns more than is required for distribution to members, the surpluses are earmarked for
education programmes, reserves or benevolent funds.
Despite the many different activities carried out under the legal form of co-operatives, all co-
operatives share certain values and principles: open and voluntary membership; financial
participation by the members; democratic control; autonomy and independence; education,
training and information; co-operation among co-operatives and concern for the community.
From out of world's total co-operative population of 800 million in the fold of International Co-
operative Alliance [ICA] 65% is from Asia-Pacific Region. Major Co-operative Movements in
the Region are India [24%], China [22%], Japan 7.5%] and Indonesia [4.6%] from the global
co-operative population point of view. Out of all primary co-operatives of all types within the
membership of the ICA, there were 37.2% of agricultural co-operatives in the Region.
Co-operative institutions contribute substantially to the common good in market economies,
principally by improving the efficiency and quality of the economy, but also by assuring
democratization and environmental rationality. They constitute a model for a people-centred
and sustainable form of societal organisation, based on equity, justice and subsidiarity. It has
also been recognised that agricultural production has increased through innovations in
farmers' organisation and institutions rather than relying on administrative measures.
Major Concerns of Agricultural Co-operatives
The major concerns for an agricultural co-operative cover two aspects i.e., economic
activities and managerial efficiency. The management of the functions of the society vests in
the management bodies and officers at different levels of the organisational structures.
These include, among others, the following: the General Body of members which includes
the annual members' meeting and other general meetings; the managing committee or the
board of directors; specialised committees; the Chairman and the vice chairman, the general
manager and other business managers. While the general meeting frames the general
policies, the managing committee implements them through the general manager and other
employees of the co-operatives and being answerable to the general meeting.
Forms of Co-operative enterprises
Types of agricultural co-operatives in the Asian region can be classified as follows:
Service Co- Producers Co-operatives Processing Co-operatives
Credit Fruits & Vegetable Growers Dairy
Input Suppliers Milk Food
Marketing Egg Fruits
Custom Hire Cotton Honey
Extension Bee-keeping Cattle-feed/Poultry-feed
Warehousing Plantation Oil/Ginning/Flour mills
Transport Farmers Sugar
Besides the above, single-purpose co-operatives, there are multi-purpose co-operatives
carrying two or more purposes or functions. In countries like Japan and Republic of Korea,
agricultural co-operatives operating at the local level perform multipurpose functions
including social services to members.
Characteristics of a Co-operative
Some of the characteristics of a co-operative enterprise are:
-Democratically-controlled and managed;
-Members join together to use the co-operative's goods, services and facilities;
-Members can increase their power by pooling their resources together;
-Members buy, sell, market their products as individuals or as a group;
-Share profit within the group.
Co-operative Benefits
Some of the benefits of a co-operative enterprise are:
- to help develop community-based private enterprises, help build open markets and
bring all kinds of people into the mainstream economy;
- to promote grassroots democracy and strengthen human dignity through self-help,
community activities;
- effective and proven development tools in alleviating poverty and achieving social
- to enable people to achieve lasting economic independence and economic
- to provide jobs, income, basic education and democratic experience;
- to present in nearly all cultures either as formal businesses or informal associations;
- Co-operatives come in all sizes including some of the largest businesses in their
country's economy.
Weaknesses in Agricultural Co-operatives
There are certain weaknesses in agribusiness co-operatives, which determined that
producer organizations’ poor business management is rooted in their inadequate
organizational structure and cohesion, stemming from a lack of leadership, rivalry among
organizations, producers’ lack of awareness, low educational levels and resistance to
In an integrated agricultural co-operative, member-farmers' income is expected to increase
by: Production enhancement activities [better seeds, chemicals, practices]; cost saving
activities [bundle volume purchase of inputs etc.], loss prevention activities [better
packaging, storage, transport and marketing], and Value-adding conversion into other
products through industrial interventions, and gains due to various welfare activities.
Despite the problems involved in organizing producers, it is common for government-run
agricultural and agro-industrial development programmes to promote the creation of
agribusinesses that have little chance of becoming self-sustaining, primarily to facilitate
implementation of governments' own programme, though the co-operatives may not have
adequate business management capabilities. In many instances, agricultural producers
become entrepreneurs suddenly without having been suitably trained to carry out this new
role. As a result, they have to resort to hiring external personnel, which is not always the
best solution besides being expensive for the organisation.
In addition to production and financing problems, further structural deficiencies have been
identified that impede the organization and development of rural agribusinesses and prevent
them from taking full advantage of globalization. They include: small markets, poor
technological development, a poorly trained workforce and constraints on breaking into the
export market.
Some of the strategies put forward by government and co-operative institutions for improving
business management in rural agribusinesses include: specialized training and continuing
professional development, long-term financing programmes and the development of
production and marketing support services.
Advantages & Challenges of Producer Co-operatives
It is observed that producer co-operatives present a series of advantages and challenges for
producers who decide to join them. These advantages and challenges are summarized
-Increased capacity and bargaining power;
-Access to new markets and marketing channels;
-Access to credit and support programmes;
-Access to better technical and market information;
-More opportunities for exchanging experiences;
-Greater access to training programmes.
-To achieving clear and efficient internal organization;
-To building trust in the managers’ decisions;
-To getting members to pledge to deliver products;
-To Abide by previously agreed volumes, conditions and deadlines;
-To running businesses properly and efficiently;
-To designing/implementing efficient & transparent administration mechanisms;
-To setting up proper communication and participation mechanisms;
-To complying with the legislation in force.
What Determines the Impact of Co-operatives?
Some of the studies carried out in various countries indicate that similar types of co-
operatives within the same country are known to have varying degree of impact. There are
two types of factors - internal and external - which go to determine the impact. These are:
Internal factors
-Lack of involvement of members in decision-making;
-Use of co-operatives for purposes determined not by members but by others;
-Lack of structural support from the above;
-Lack of managerial skills;
-Corrupt management/misappropriation of funds;
-Breakdown in democratic controls;
-Taking over of the co-operative by a narrow interest group;
-Failure to become self-reliant;
-Extensive dependence on an outside agency;
-Domination by big and the rich;
-Loss of goodwill and credibility among members;
-Inept handling of members by co-operative staff;
-Smaller size, limited range of services and non-viable operations;
-Lack of access to credit/capital;
-Difficulties in retaining skilled staff;
-Defective design of the co-operative system itself;
-Unhelpful macro-environment.
External Factors
-Economic inequalities and skewed pattern of land ownership;
-Rapid population growth;
-Absence of infrastructure;
-Market fluctuations affecting prices of crops/produce;
-Political instability;
-Lack of consistent government policies.
Factors to Enhance Impact
Internal Factors
-Viable and integrated co-operative;
-Strong vertical structural support;
-Trained professional and motivated staff;
-Enlightened dedicated and selfless leadership;
-Well-honed means to encourage members' involvement and participation;
-Comprehensive programmes for members' education and information;
-Value-added activities through the use of advance technologies;
-Provision for reasonable coverage of risk for loss of crops and deposits.
External Factors
-Positive support and helpful role of the government;
-Market reforms;
-Reasonable rate of growth in agriculture/economy;
-Availability of basic infrastructure;
-Healthy linkages with regulatory and development agencies and institutions.
Agro-Processing Co-operatives
- The Advantages of 'Value-Addition'
Agro-Processing means processing activities to handle the local produce of the member-
farmers with a view to generate additional or higher economic returns to them. It means to
reduce post-harvest losses, check outflow of rural population to urban centres, offer
remunerative prices to basic producers, help transfer improved/advanced technology to rural
areas, industrialise the rural areas, generate employment opportunities, help improve
productivity, help develop specific commodities through better land use and appropriate
application of fertiliser, bring recognition to the progressive and innovative initiatives of the
farmers etc. Agricultural co-operatives happen to be the most appropriate agencies to
establish and operate agro-processing industries as they have the distinct and unique
advantage of their closeness and support of their farmer-members.
Asian Co-operatives in Agribusiness System
-a Regional Review
Business performance, structural functions and infrastructure facilities in some of the Asian
countries are reviewed hereunder:
[i] The National Agricultural Co-operative Marketing Federation of India [NAFED],
established in 1958, is the apex co-operative marketing body. It is a farmer-friendly
organisation dealing in foodgrains, pulses, oilseeds, horticultural produce, cotton, tea, jute,
poultry products, chemicals and bio-fertilisers. It has its main office in New Delhi and
operates four regional offices, 24 branch offices, 8 sub-offices and 18 industrial units and
shops throughout the country. The 751 membership comprises of state marketing
federations, apex level marketing federations, tribal and commodity federations, primary
marketing/processing societies and the Government of India. During 2003-04 its turnover
was US$ 307.6 million. Export was of US$ 122.1 million. It is also a major nodal agency for
procurement of commodities like pulses, copra, and potato on behalf of the government.
[ii] National Horticultural Research
and Development Foundation [NHRDF-India]
The National Horticultural Research and Development Foundation [NHRDF] was established
in November 1977 to carry out research and development activities on various export-
oriented horticultural produce thereby to increase their yield and quality as also export.
NHRDF was promoted as an independent autonomous enterprise by NAFED to assist its
associate enterprises mainly village level agricultural co-operative of farmers and their
growers in production of export-quality horticulture produce. Onion and garlic are the two
major crops being researched and developed by the Foundation. It has also started work on
other export-oriented crops like okra, French bean, bitter gourd, chilli and baby corn.
For providing better services and planting material to its associates, the Foundation has
established its regional offices, seed production and processing plants, farms and
laboratories in various parts of the country. NHRDF has an yearly turnover of around US$
one million. It grows and procures seeds and bulbs for planting which is distributed further
for raising onion and garlic as per the quality requirement of market. The Foundation is
managed by a Managing Committee comprising representatives of NAFED-India, Associate
Shippers, scientists and growers. The Foundation has also established a Mushroom Spawn
Production Unit and a compost unit.
[iii] Beijing Fangshan District Farm Produce Production
and Marketing Association [China]
The Association, established in September 1998, is an NGO intermediary sponsored and
organized by the Fangshan District Supply and Marketing Co-operative to serve agriculture,
rural areas and farmers. It has a fixed worth of US$ 645,161 and a membership of 4000 farm
households, 41 units members and 14 co-operatives for cultivating, raising, processing and
marketing of Mopan Persimmon fruit, milch cows, mushroom, vegetables, small red beans,
wild vegetables and coarse cereals. With an annual producing, processing and marketing
647 million tonnes of various farm produce and earning nearly US$ 54.2 million, the
Association has become an industry. It was selected by the All-China Federation of Supply
and Marketing Co-operatives [ACFSMC] as a 'Key Leading Enterprise' and cited by the local
government as an 'Advanced NGO' in 2004. The Association also has a business
relationship with firms in Canada.
[iv] Sawada Primary Agricultural Co-operative
[JA-Sawada], Gunma Prefecture, Japan
The operational area of the Co-operative falls in North-Western part of Nakanojo-machi in
the mountainous area. In the area, the complex farming of product mix with paddy,
vegetables, livestock, sericulture and mushroom is popular. There are two hot spring resorts
in the area. The major industries are agriculture, forestry and tourism. The total membership
is about 900, and the average land holding of household is 0.75 ha. The Co-operative is
managed by a democratically elected Board.
In a bid to maintain the market price of local products of mushroom and vegetables through
shipping control as well as to secure advantageous prices by giving additional values to the
products, agricultural processing business was initiated. At present the Co-operative is
selling its products with the brand name of SAWADA which are highly appreciated by the
customers and are popular in the market. Sawada is the name of the locality.
Raw material is procured through three channels - contracts with and by members; shipping
controls, and indent buying. Marketing channels are: sale at own outlets, and through
wholesale and private retail shops/supermarkets. The Co-operative follows a five-year
development plan. The plan for comprehensive development of local industries includes:
development of local industries, commodities, agriculture, processing business,
strengthening herbs business, promotion of green tourism and seasonal festivals.
Agricultural co-operatives in Japan are the most sophisticated high-tech managed co-
operative institutions which, not only produce and market the needed agricultural products
but also look after the members and their interests in its totality.
The phenomenal rise of Japanese post-War economy can safely be attributed to the hard
and systematic work done by these agricultural co-operatives in consolidating people, land
resources and producing the needed food and providing the needed services to the
community. These services range from the 'cradle to the grave' [this slogan has presently
and gradually been pushed into the background mainly due to the economic capabilities and
capacities of agricultural co-operatives. The fact, however, remains alive because the
organisational structure and system firmly exists and has been integrated in the services
provided.] The Japanese agricultural co-operatives stand committed to '3-H agriculture -
Healthy, High Quality and High Technology'.
[v] Agricultural co-operatives in Malaysia are under the registration and supervision of
the Farmers' Organisation Authority [FOA]. The objectives of FOA are to enhance and
develop farmers' organisations and agro-based co-operatives. According to the FOA Act of
1973 the functions of FOA are: to promote, stimulate, facilitate and undertake economic and
social development of farmers organisations; to register, control and supervise them and to
provide for matters related thereto; to control and coordinate the performance of their
activities. There are 268 Area Farmers' Organisations [AFOs], 13 State Farmers'
Organisations [SFO], and one national organisation [NAFAS] which operates under the FOA
authority. The total membership is over 681 thousand members with a total share capital of
US$ 20 million. The total assets of farmers' organisations is approximately US$ 234 million
and the total networth of US$ 81 million. The NAFAS deals in distribution of consumer items
including fruits and vegetables.
[vi] The National Union of Indonesian Dairy Co-operatives-[GKSI] represents the
dairy co-operatives in the country. Its main activities are: to help dairy co-operatives on pre-
production, processing, and production and post-production [including marketing] of various
dairy products. Other activities are: to supply healthy calf, supply of cattlefeed, and member
education. It has four major milk treatment plants: Bandung [West Java], Boyolali [Central
Java], Pasuruan and Malang in East Java. Its major constituent is North Bandung Dairy Co-
operative, which has a membership base of 4,297. It has four business units: marketing of
milk, groceries store, loan and savings, and feed. The Union provides 24-hour veterinarian
and extension services, health insurance for members and scholarships for members'
[vii] The key to smallholder dairy production and India's 'White Revolution' has been the
growth of a nationwide network of dairy co-operatives. The co-operative approach started as
a successful local initiative in Anand [Gujarat] half a century ago. Since 1970, it has been
replicated all across India through a three-phase programme known as 'Operation Flood'
implemented by National Dairy Development Board [NDDB] and backed by the Indian
Government, the Anand Milk Union Limited [AMUL], FAO and the World Bank. About 11.2
million households are participating in over 101,000 village dairy co-operatives. The Gujarat
Co-operative Milk Marketing Federation, propelling the AMUL brand, is now India's first one
billion dollar co-operative.
[viii] Coffee Growers' Co-operatives in Indonesia: Farmers who are the members of
village level co-operatives, especially in the eastern part of Indonesia, grow coffee. The
product is collected by co-operatives and sold to coffee processors and exporters. Though
the co-operatives endeavour to pay to the growers a reasonable price yet the nexus
between the processors and exports manipulate prices due to which the growers remain at
disadvantage. An analysis of the problems affecting the operation of Indonesia’s coffee-
growers’ organizations shows that one of the causes is poor links between the organizations’
governing bodies, such as between the participative structure [general meeting] and the
executive [board of directors]. In part this is due to the differing communication styles of the
rural community and the enterprise.
Another problem is members’ lack of awareness regarding their role as members of an
organization. Some coffee farmers view their organization only as an instrument for selling
their coffee beans at a better price, without considering the solidarity and teamwork aspects.
Coffee grown in eastern Indonesia is considered to be of high quality. Members of
agricultural co-operatives [KUD] in Sulawesi sell their products through their co-operatives
and also to the private coffee procurement agencies. Coffee grown in this part of the country
is sold in domestic and international market as ROBUSTA coffee [brand name]. These co-
operatives are often short of funds to procure raw coffee beans and have poor organisational
Private procurement agents supply the product to multinational organisations for processing
and marketing and exports. The economic benefits of supplying coffee beans to main
processors are retained only by the middlemen. Co-operatives and farmers do not share
such a benefit.
Lastly, a frequent problem latent in all self-managed organizations, is an imbalance between
the members’ interest in obtaining immediate benefits from their organization to meet
sometimes pressing necessities, and the need to maintain or increase the enterprise’s
financial capacity, for which the enterprise must be capitalized as a joint long-term objective.
Despite these disadvantages, all the members of coffee-growers’ organizations feel that their
current financial status was better than if they had been working independently. After the
problems were identified through members' survey, the Association has increased linkages
with its members through frequent meetings and formal contracts.
Mechanisms to Solve Problems Confronting Producers
In the current globalization context, the competitiveness of the co-operative agro-production
system relies greatly on the linkages and associative entrepreneurship capacity between the
actors in an agroproduction chain or business concentration. These can be turned into a
strategy to enable the actors involved to cope with fast-changing economic and market
In recent years, a wide variety of mechanisms and instruments have been developed and
refined which support and facilitate associative entrepreneurship. Perhaps the earliest
example was contract farming, which sprang up and grew strongest in some of the Asian
countries. After several years of implementing contract farming agreements, the results
achieved have been given positive as well as negative interpretations. The advantages cited
include higher productivity, the security of having sale and purchase prices set in advance,
and better product quality. The disadvantages cited include an negotiation imbalances,
information disparities and unequal distribution of business profits. With effective
management, contract farming can be a means to develop markets and to bring about the
transfer of technical skills in a way that is profitable for both the sponsor and the member-
farmer. The approach is widely used, not only for tree and other cash crops but, increasingly,
for fruit and vegetables, poultry, pigs, dairy produce and even prawns and fish.
The joint venture is another means for enterprises or groups of enterprises to join forces,
with each contributing their greatest strengths, whether it be capital, technology, information,
infrastructure or market contacts, and in accordance with which they run proportional risks in
activities such as testing and adapting new technologies, developing products and exploring
Fertiliser producing co-operative of India, Indian Farmers Fertiliser Co-operative Limited
[IFFCO] has set up joint ventures outside the country for the production of Ammonia and
Urea in Oman and Phosphoric acid in Senegal. Such joint ventures have helped IFFCO to
gain on the raw material resources of other joint ventures.
More recently, there have been institutional developments within agroproduction chains
involving rapprochement, dialogue and consultation among the different agroproduction
chain actors. This has included industry round tables, advisory boards, product systems and
national or regional agroproduction chain councils, whose agreements on medium- to long-
term action have led to what some countries have dubbed competitiveness agreements.
Linkage mechanisms are adopted and facilitated as a result of close proximity in rural
agribusiness concentrations, fostering collective actions. Another positive result of collective
action is that they help to improve social capital in the areas where such business ventures
are concentrated.
Summing Up
Agribusiness is a generic term that refers to the various businesses involved in food
production, including farming, seed supply, agrichemicals, farm machinery, wholesale and
distribution, processing, marketing, and retail sales. The agribusiness sector consists of
organisations which: Supply raw materials to agriculture; Supply capital goods to agriculture;
Procure agriculture produce for selling; Procure agricultural produce for processing; Provide
services to agriculture.
For a number of years, one of the strategies for tackling the problems of the agricultural
sector in general, and of micro- and small enterprises in particular, has been to organize
producers. Co-operatives comprise a number of people who come together to satisfy mutual
socio-economic interests by carrying out a business activity. There are various form of co-
operatives e.g., single and multi purpose.
Agricultural co-operatives happen to be the most appropriate agencies to establish and
operate agro-processing industries as they have the distinct and unique advantage of their
closeness and support of their farmer-members. In the current globalization context, the
competitiveness of the agro-production system relies greatly on the linkages and associative
entrepreneurship capacity between the actors in an agroproduction chain or business
concentration. These can be turned into a strategy to enable the actors involved to cope with
fast-changing economic and market conditions.
Agriculture like any other production industry demand professionalisation at each and every
level. Farmers, who are the basic producers, need to know more about the technical aspects
of inputs and of post-harvest technology. Co-operatives need to be professional with an
efficient infrastructure and a line of efficient manpower. Co-operatives also need to upgrade
their extension services and communication with the members. Agribusiness is not confined
only to the national boundaries but it is needed to be pursued in the global village. To enter
any foreign market norms governing production and processing need to be observed.
In providing avenues to enhance income of farm households, providing high-quality safe and
healthy agricultural products, reducing production costs, upgrading means of production by
making use of machines and quality seeds, resorting to organic farming, agribusiness needs
to be managed well. For this purpose farmers' institutions, like co-operatives, need to play a
key role by providing information on technology, quality inputs, and best farm management
practices besides creating the needed infrastructure. Asia has a number of instances of
success in agribusiness. Member-farmers need to interact with each other to learn from
each other and trade their own commodities. Research and development in agriculture is a
continuing activity, it needs to be expanded and shared by the co-operatives.
DP Agribusiness-dp
July 02,2007
About the Authors:
Dr GC Shrotriya, Director, Rural Development and Management Centre, New Delhi; Former
Chief Manager [Agricultural Services], Indian Farmers Fertiliser Co-operative Limited, New Delhi;
Principal Agronomist, Chad Basic Development Authority, Nigeria; Project Manager, Potash
Promotion Project of Indian Potash Limited, New Delhi; and currently Consultant with IFFCO
Foundation, New Delhi.
Dr Daman Prakash, Director, Rural Development and Management Centre, New Delhi; Former
Director, International Co-operative Alliance Regional Office for Asia-Pacific; Chief Technical
Advisor, ILO Rural Co-operative Management Project in Indonesia; Senior FAO Consultant; and
currently Consultant with IFFCO Foundation, New Delhi.

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