CREW Project – India

Findings from Diagnostic Country Report

(DCR)Wheat Sector

Presentation by

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Outline

• Seed sector reforms, private engagement and farmers’ welfare• APMC reforms leading to very limited impacts on the ground• PACS – hold tremendous potential but needs urgent institutional reforms

1. Seed sector Reforms and Implication on Producers:

Favorable policy framework for competition leading to benefits

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1.1 National policy framework (Seeds Sector)

Policy FocusIndustrial Licensing Policy, 1987 De-reservation of the seed sectorSeed Development Policy, 1988 More foreign collaboration and easing of import norms

New Industrial Policy 1991 Recognised as high priority sector; more liberalized FDI norm

Protection of Plant Varieties and Farmers Right Act 2001

Better protection of intellectual properties; attracting more private investment

National Seed Policy 2002 Enhanced role for private players in seed distribution and marketing

EXIM Policy 2002-07 Further liberalisation of export-import of seedsNational Seed Plan 2005 • Emphasis on better private & public sector synergy

• 20% of foundation & certified seed from private sector

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1.2 Bihar Agricultural Road Map 2006

• Seed sector reforms a key element (In 2006-07, only 6200 qtls of certified/quality seed on subsidy was distributed. Seed Replacement Rate - Paddy 12%, Wheat 11%, Pulses 5%)• Salient features vis-à-vis Seeds sector reforms (Agri Road Map 2006): • Thrust on self sufficiency in seed production• Increase seed replacement rate• Enhanced role of private players to boost seed production and marketing• Strengthening seed infrastructure: Bihar Rajya Beej Nigam (BRBN); Bihar State

Seed Certification Agency (BSSCA); Seed Multiplication Farms; etc.• Schemes: Mukhyamantri Tibra Beej Bistar Yojana; Beej Gram Yojana; Seed

Production by Govt. farms; Certified seed distribution on subsidy• Issues of policy conflict Private producers can sell to National Seed Corporations

rather than developing their own distribution network

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1.3 Impact of Seeds Sector Reforms

2005-06 2006-07 2007-08 2008-09 2009-10 -

50,000

100,000

150,000

200,000

250,000

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

29,712

61,904

142,584

173,554

205,000

2,473

4,941

10,402 10,462

14,255

Production in quintals Area in hectare

pro

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n i

n q

uin

tal

Are

a i

n h

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are

• Seed production increased by 7 times over 2005-06 to 2009-10

• No of private seed players increased from 1 to over 10

• Farmers’ feedback• 87% report increase in access• 83% report increased reliability of supply and

higher purchase • 79% report quality improvement• 77% report better affordability

• Increased crop yield Saran: 17 Q/ha to 25 Q/ha (‘06-’09) Vaishali: 15 Q/ha to 30 Q/ha (‘06-’09) Bihar: Wheat yield augmented from ~18-20

Q/ha in 2008 to 38-40 Q/ha in 2013.

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1.4 Lessons for Policy

• State took advantage of an enabling national policy framework• State developed a focused ‘Operational Plan’ with key targets• Thoughtful yet pragmatic role allocation between public and private entities • Public entity (Bihar State Seeds Corp) introduces innovative programmes

retaining its identity and visibility• Reaps benefits in terms of increased yield and overall production• Entry and greater participation of private players

- More investment, including R&D- Higher production- Scope for development of better varieties

2. Agriculture Produce Market Committee (APMC) Reform:

Limited ground level impacts in both states

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2.1 Issues in APMC provisions

• Continued government control despite limited market access• Licensing rules inhibits competition by acting as entry barrier• Severe infrastructural bottlenecks in the APMC markets• High intermediation cost• No national level integrated market in the face of regulatory barriers• Lesser price realisation for farmers• High wastage due to long supply chain

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2.2 Reform and Implications in Bihar (APMC scrapped)

• All market barriers removed, to achieve• Greater private participation in market development• Better access for buyers to directly procure from farmers• Engaging farmers in contract farming

• Ground experience, however, belied the potential• Little or no private investments in infrastructure

• Complementarity with public investment• Farming community largely of marginal or small farmers• Benefits are reaped majorly by medium/large farmers (selling in organised markets)• Decline in transaction cost (savings by farmers selling in organised markets)• Thriving ‘middle layer’ – largely perceived as a win-win

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2.4 Reform and implications in Rajasthan (APMC embraced)

• Compliant with all three provisions of Model APMC Act: Direct marketing, contract farming and private markets

• Even with ‘full’ reform, ground condition has not changed much• No operational farmer-consumer market• Only 2 licenses issued for private markets; still non-operational• Only 1 license for trading in multiple markets• No registration of contract farming• 76 direct marketing licenses issued, but limited operationalisation

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2.5 Lessons for Policy• Contrasting reform experience – Bihar vs. Rajasthan

• Both enables greater private participation on paper; but little impact on beneficiaries due to implementation issues

• Policy Implications: - Withdrawal of government will not automatically attract private players- Need an integrated policy framework encompassing infrastructure policy, credit policy, etc.- Flexibility to adapt to heterogeneity among stakeholders- Planning and implementation of reforms, keeping in mind the ‘needs’ of specific target groups

3. Procurement in Bihar through Primary Agriculture

Cooperative Societies (PACS): Tapping potential needs urgent

institutional reforms

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3.1 Overview of PACS engagement in procurement

• Since Ravi Marketing Season (13-14), 2 public procurement entities are in oparation:• Primary Agriculture Cooperative Societies (PACS) & Bihar State Food Corporation

(BSFC)• PACS purchases from the farmers and sells it to BSFC, who in turn delivers it to FCI

along with its own procurement from its purchase centres

• Establishes state monopoly in procurement

• Holds considerable potential for greater access for marginal/small farmers to government procurement• 8463 PACS in Bihar in 2012-13• Implies larger local presence and formidable network

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3.2 Implications on Farmers’General• Farmers need to submit land ownership records (tedious and time-consuming)• Refusals to purchase citing quality issues is quite common• A ‘broker’ segment has emerged – who purchases from farmers at a discounted price

and sells it to PACS (farmers seem to be happy with this arrangement)• Politically influenced institution with vested interests• No system of performance audit• Bias towards paddy

Monopoly Status• Increased market access for 31% farmers• Better price realisation for 29% farmers

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3.3 Lessons for Policy

• PACS enable greater access to marginal/small farmers by its strong local network• Since procurement at MSP, distress-selling incidences should be lowered• A strong network of middle-men, considered helpful by farmers• Needs administrative and institutional reforms• Potential of private players as procurement agents worth exploring

• Selection of agencies may be done on the basis of open bidding• Can further expand the procurement network, improving accessibility