value chain assessment of climate resilient crops in...

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VALUE CHAINASSESSMENT OF

CLIMATE RESILIENTCROPS IN BIHAR

JUNE 2018

Contents

Value Chain Assessment of Climate Resilient Crops in Bihar

Abbreviations and Acronyms i

Executive Summary 1

Maize 3

Rice 7

Lentil 11

Transaction Costs and Risk Analysis 13

Opportunities and Way Forward 15

Section 1: Introduction 18

1.1. Brief about ACT

1.2. Background to the study

1.3. Value chain approach for Climate Resilience

Section 2: Objectives and Methodology 19

2.1. Objective of the study

2.2. Methodology

2.3. Secondary Reveiw

2.4. Data Collection Tools

2.5. Site selection criteria and sample size

Section 3: Climate Context of the State 21

3.1. Bihar State Prole

Section 4: Value Chain on Maize 25

4.1. Introduction 25

4.2. Actors 26

4.3. Factors of relationship 35

4.4. Transaction cost analysis 38

4.5. Risk analysis based on transaction cost value chain assessment 40

4.6. Constraints and opportunities in maize value chain 40

4.7. Recommendations 41

Section 5: Value Chain of Rice 42

5.1. Background 42

5.2. Actors 44

5.3. Transaction cost analysis 52

5.4. Risk analysis based on transaction cost value chain assessment 54

5.5. Constraints and opportunities in rice value chain 55

5.6. Factors (Situation and Constraint) and scope of improvement 56

5.7 Scope of Improvement (Recommendations) 58

Pg. no

Action on Climate Today(ACT) is an initiative funded with UK aid from the UK government and managed by Oxford Policy

Management. ACT brings together two UK Department for International Development programmes: the Climate Proong

Growth and Development (CPGD) programme and the Climate Change Innovation Programme (CCIP). The views expressed

in this leaet do not necessarily reect the UK government's ofcial policies

Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)


Section 6: Lentil Value Chain 59

6.1 Introduction 59

6.2 Actors 61

6.3 Factors of relationship 65

6.4 Transaction cost analysis 66

6.5 Risk analysis based on transaction cost value chain assessment 68

6.6 Constraint and opportunities in lentil value chain 68

6.7 Recommendations 69

References 71

Annexure 1: Value chain maps

Maize value chain map 72

Rice value chain map 73

Lentil value chain map 74

Annexure 2: Maize production: climate context 75

Annexure 3: Field visit details 76

Annexure 4: Transaction Cost Analysis of Maize Value Chain 78

Annexure 5: Transaction Cost Analysis of Paddy Value Chain 83

Annexure 6: Transaction Cost Analysis of Lentil Value Chain 88

Pg. no

List of Tables

Table 1: Agro Climatic Zones in Bihar 22

Table 2: Crops as per cropping season in Bihar 22

Table 3: Maize Production in Bihar 25

Table 4: Major maize producing districts of Bihar (2014-15) 26

Table 5: Market share of private companies in seed marketing 26

Table 6: Cost of Maize production in one hectare 29

Table 7: Cost and margin of maize primary trader 30

Table 8: Cost and margin of maize wholesaler 31

Table 9: Corn feed processor's cost and prot 33

Table 10: Feed dealers cost and margin 34

Table 11: Feed retailer's cost and margin 34

Table 12: Percentage spread of Transaction Costs at different actors' level in Maize Value Chain 38

Table 13: Risk Analysis of Maize 40

Table 14: Constraint and opportunities matrix of Maize Value Chain 41

Table 15: Paddy production analysis of Bihar state 43

Table 16: Consumption of Nutrients during last 5 years (In MTs.) 45

Table 17: Cost of paddy production in one hectre of land 47

Table 18: Cost and margin of Paddy trader 48

Table 19: Cost and prot of rice miller 49

Table 20: Cost and prot of attened rice processor 50

Table 21: Cost and margin of attened rice retailer 50

Table 22: Cost and margin of rice wholesaler 51

Table 23: Cost and margin of rice retailer 51

Table 24: Percentage spread of Transaction Costs at different actors' level in Rice Value Chain 53

Table 25: Risk Analysis of Rice 54

Table 26: Constraints and opportunities matrix of Rice Value Chain 55

Table 27: Share of Lentil in total pulses export form India 60

Table 28: Share of Lentil in total pulses import in India 60

Table 29: Area, production, and productivity of Lentil in Bihar 60

Table 30: Cost of production and benet ratio of producer 62

Table 31: Cost and margin of lentil Aggregator 63

Table 32: Cost and share of Lentil wholesaler 63

Table 33: Cost and margin of lentil dal wholesaler 64

Table 34: Cost and margin of lentil dal retailer 64

Table 35: Percentage spread of cost at different actors' level of lentil value chain 66

Table 36: Risk analysis of Lentil 68

Table 37: Constraints and Opportunities matrix of Lentil Value Chain 69

Pg. no

Value Chain Assessment of Climate Resilient Crops in Bihar Value Chain Assessment of Climate Resilient Crops in Bihar

Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)Action on Climate Today-Climate Change Innovation Programme (ACT-CCIP)


i


List of Figures Pg. no

Figure 1: Methodology 19

Figure 2: Flood affected area of Bihar 23

Figure 3: Drought affected area of Bihar 24

Figure 4: India's Maize Area, Production, and Productivity 25

Figure 5: Input supply chain in Bihar 27

Figure 6: Process ow for Distillers Dried Grains with Solubles (DDGS) processing 32

Figure 7: MSP comparison of Paddy and Maize 37

Figure 8: Factors affecting Transaction Cost in Maize Value Chain 38

Figure 9: Spread of transaction cost in Maize in Value Chain 39

Figure 10: Paddy coverage in Bihar 44

Figure 11: Functioning Primary Agricultural Credit Societies (PACS) 48

Figure 12: Paddy Procurement by Food Corporation of India (FCI) 49

Figure 13: Spread of Transaction cost in Rice Value Chain 52

Figure 14: Spread of Transactional cost in Rice Value Chain 52

Figure 15: Spread of Transaction of Cost in Lentil Value Chain 66

A3P Accelerated Pulses Production Program

ABCs Agri-Business Centres

ACT Action on Climate Today

AICRP All India Coordinated Research Project

APEDA Agricultural Produce Export Development Authority

APMCs Agricultural Produce Market Committee

AR Assessment Reports

ATMA Agricultural Technology Management Agency

BBF Broad Based furrows

BSAPCC Bihar State Action Plan on Climate Change

CACP Commission for Agriculture Costs and Prices

CAGR Compounded Annual Growth Rate

CCA Climate Change Adaptation

CCIP Climate Change Innovation Programme

CPGD Climate Proong Growth and Development

DAC Department of Agriculture and Cooperation

DAM Dryland Agriculture Mission

DFID Department for International Development

DoA Department of Agriculture

DRR Disaster Risk Reduction

ET Evapo-Transpiration

FCI Food Corporation of India

FGD Focused Group Discussion

FPOs Farmer Producer Organisations

GDP Gross Domestic Product

HYV High Yielding Varieties

ICAR Indian Council of Agriculture Research

ICRISAT International Crop Research Institute for Semi-Arid Tropics

ICSD Intercooperation Social Development

IFFCO Indian Farmers Fertiliser Cooperative

IIMR Indian Institute of Miller Research

INM Integrated Nutrient Management

IPCC Intergovernmental Panel on Climate Change

IPM Integrated Pest Management

IVR Interactive Voice Responses

KCC Kisan Credit Card

KVKs Krishi Vigyan Kendras

Abbreviations and Acronyms



ii 1


MCA Multi Criteria Analysis

MGNREGS Mahatma Gandhi National Rural Employment Guarantee Scheme

MMA Macro Management of Agriculture

MMT Million Metric Tonne

MPKV Mahatma Phule Krushi Vidyapeeth

MSAPCC Maharashtra State Action Plan for Climate Change

MSMEs Micro Small Medium Enterprises

MSP Minimum Support Prices

MT Million Tonnes

NAFED National Agricultural Cooperative Marketing Federation of India Ltd

NAIS National Agricultural Insurance Scheme

NAPCC National Action Plan on Climate Change

NAPCC National Adaptation Plan on Climate Change

NBFCs Non-Banking Financial Companies

NFSM National Food Security Mission

NICRA National Innovation on Climate Resilient Agriculture

NMSA National Mission on Sustainable Agriculture

NOP National Organic Program

NPOP National Programme for Organic Production

NSA Net Sown Area

NSDP National and State Domestic Product

PACS Primary Agricultural Credit Society

PC Producer Company

PMFBY Pradhan Mantri Fasal Bima Yojna

RH Relative Humidity

RKVY Rashtriya Krishi Vikas Yojna

RTE Ready To Eat

RTU Ready To Use

SAAPCC State Adaptation Action Plan on Climate Change

SAUs State Agriculture Universities

SEZs Special Export/Economic Zones

SRI System for Rice Intensication

TCA Transaction Cost Analysis

VCA Value Chains-based Approach

WET Water Efcient Technology

WS Water Stewardship

ZRS Zonal Research Station

Executive Summary

Climate-induced risks present signicant risks to Bihar's

planned trajectory of sustained, high agricultural growth and

steady farm productivity. Bihar's agriculture sector

witnessed a growth rate of 6.9%, while the economy

clocked 10.7% growth against a national average of 7% in 12016-17 . While the state government is bridging the rural-

urban divide by promoting higher agricultural growth,

vulnerability of the agriculture sector to climate change can

lead to signicant productivity losses. Factors that increase

the intrinsic vulnerability of Bihar's agricultural sector are:

(i)dominance (91%) of marginal holdings of less than a

hectare that have very limited access to institutional credit

and infrastructure (ii) a predominantly cereal-based farming

system. Each such holding is again fragmented in small

parcels, making investments non-viable and eroding the

adaptive capacity of these production units. Migration of

unskilled agricultural labourers to other sectors, as evident in

Bihar 's growing economy, can create st ructura l

unemployment challenges, further eroding the adaptive

capacities of rural households.

Action on Climate Today (ACT) supports the progressive

policies of the State government through technical

assistance and evaluating the constraints and opportunities

for mainstreaming climate resilient agriculture in Bihar, using

a Value Chains-based Analysis (VCA). VCA is an assessment

of different nodes and characteristics of the value chains from

producer to the nal consumer. It enables the identication of

potential interventions to make the livelihoods of (small and

marginal) primary producers, less vulnerable, to climate

induced uncertainties.

In an attempt to provide suitable policy alternatives for

safeguarding agricultural growth, governments have

promoted crop diversication strategies for resilience of

farming and natural resource systems. A clear majority of

farmers, who have diversied crop production into climate-

resilient crops, are small and marginal landowners and

resource-poor. Their production and post-production value

chains need to be understood and transformed, to realise an

egalitarian and sustained agricultural growth. Using a Multi

Criteria Analysis (MCA) tool designed by ACT, stakeholder

inputs, rice, maize and lentil were selected for an evaluation of

performance across four major parameters: production

base, income generation, socio economic and environmental

impact.

Our assessment is based on a robust combination of primary

eld surveys, extensive stakeholder consultation, market

analysis, a systematic secondary data review, and key

informant interviews in ve districts in Bihar (in 6-8 villages per 2district) . Insights and recommendations on constraints and

opportunities for the three crops are presented below:

Data CollectionReview & Analysis

1 2 3 4

Multi criteria DecisionAnalysis

for Crop Selection

StakeholderConsultation

Prioritized List ofClimate Resilient Cropsfor Value Chain Study

1

2

3

1 12th Economic Survey of Bihar2

Stakeholders- district ofcers, research institutions, input suppliers, farmers, traders, whole-sellers, processors, credit institutions, FPOs and insurance agencies.


3

Maize

Signicance

Bihar is India's third largest producer of Maize, with recorded

production of 1.7MMT (2016-17). Rabi-sown maize, with higher

yields has been replacing winter wheat and paddy in Bihar.

Coupled with high import demand from South-East Asian

nations, access to export terminals in India's eastern coast, and

reduced yields from major maize growing states (Karnataka,

Andhra Pradesh and Maharashtra), maize from Bihar provides

an attractive, economic alternative for small holders. Bihar

today has an estimated INR 250 crore maize seed market (US$

38 million), which is all set to grow rapidly, given a strong

Compounded Annual Growth Rate (CAGR) for maize in the

state.

While maize is cultivated in all the 38 districts of the state in

varying proportions, the state's 'maize road' covers 11 districts,

including Muzaffarpur, East Champaran, Vaishali, Katihar,

Purnia, Samastipur, Begusarai, Khagaria, Bhagalpur, Araria and

Madhepura. This localisation of production offers the

opportunity to promote infrastructure investments at

economies of scale.

Climate Risks

Maize has emerged as the main alternative for winter paddy and

wheat in Bihar. However, maize production during the Rabi

season may become comparatively more vulnerable due to

increase in temperature, variable day and night temperatures

and higher uncertainties in rainfall. Sensitivity to frost, high

temperatures and water logging are harmful to maize.

Unseasonal rains and water logging for more than 3-4 days can

result in a yield loss of up to 50%. Uneven drying and

unseasonal rains are found to increase fungal contamination in

maize which exhibits a serious threat to human and animal

health. This can especially occur because of inadequate

infrastructure for storage. Therefore, an increase in rainfall

amount and intensity under the future climate would become a

major climate risk for Bihar as it will exacerbate the state's

current vulnerability to oods caused by high rainfall and

topographic conditions.



54

Building from our analysis, we identify the immediate

opportunities that can achieve the triple-bottom line

benets (economic, social and climate/environmental) for

Bihar's maize farmers.

The biggest opportunity in the maize value chain, however,

lies in promoting local processing industries. Only 8-10% of

maize produced in the state is processed despite a robust

80-85% marketable surplus. Only a third of the demand for

maize in Bihar is driven by the livestock/poultry feed

industry, and a tenth by local consumption needs. The

remaining share hits the export markets in South-East Asia,

Nepal and Bangladesh. Unlike the top maize producers,

Andhra Pradesh and Karnataka area and production

expansion of Rabi maize in Bihar is not driven by industrial

demand.

Maize farmers (Rabi) in Bihar can garner only less than a

third of the consumers' rupee, while processors earn the

highest share in consumer's rupee among the marketing

actors. Direct selling and minimising middlemen in maize

value chains might not only result in fetching the farmer a

higher share in consumers' rupee but will also improve their

economic resilience to cope with climate change impacts.

Investments in maize processing units to fully absorb the

production can generate a ten-fold increase in direct

employment from current levels and US$ 350 million value

addition in Bihar's maize value chains annually. Currently,

33 operational units in Bihar have the capacity to process

only one-tenth of its annual production. The analysis

further indicates lucrative margins for processors and

therefore identies an incentive to expand the local

capacity in processing. This will also provide 3,000 direct

employment opportunities and will address economic

vulnerabilities of farmers to climate change (2014).

The price across mandis uctuates based on moisture

content in grains, which is a function of quality of storage.

The storage facilities for Maize are vastly inadequate, given

the exponential rate of growth of the crop. Storage is done

only at the household or at the processor level. A higher

proportion of marginal farmers also mean very low storage

potential (< 2 qtls/ farm) at farm level in Bihar. The localized

nature of Bihar's rabi maize production, along the Maize

Road, provides an opportunity to co-locate processing and

storage infrastructure and tap into the economies of scale.

Better storage facilities will also reduce the vulnerability of

the crop towards fungal contamination, induced by climate

change.

In the absence of adequate infrastructure, processors from

outside the state pocket receive more than double the

margin of other stakeholders (18%) in Bihar's maize value

chain. There are also huge losses reported during the

handling of the commodity from farm to processing (up to

9.33% of total losses), thereby impacting the margins

incurred by the producers, traders and wholesalers.

Value Chain Analysis

Our analysis suggests that a three-pronged approach for

pre-production and production stages in maize is needed

for Bihar which includes; (a) input cost-reduction strategies

(b) use-efciency gains, and (c) c l imate-proof

technologies.

Our study indicates that maize-cultivating farmers in Bihar

pay, on an average, nine times more for irrigating their

crops, compared to their counterparts in other major

producing states. Bihar uses double the recommended

quantity of fertilizers to produce the same output of Andhra

Pradesh, the top-performing state, which reduces the

protability for marginal farmers, who constitute over 90%

of adopters. In the table below, we summarise the key

challenges in the production and marketing segments of

the maize value chain in Bihar.


Pre-production and production

Support System • Limited involvement of Farmer producer Organisations (FPOs) and Primary Agricultural

Credit Society (PACS) in the aggregation of produce and overall value chain,

consequently leading to high market fragmentation.

• Though Bihar has a network of 39 Krishi Vigyan Kendras (KVKs), there is limited promotion

of climate resilient agriculture.

• Absence of APMCs have left an institutional vacuum that have led to reduced marketing

efciencies and lower producers' shares in consumers' rupee.

Infrastructure • Only 7.53% of the total agricultural area is under micro irrigation in Bihar, resulting in

reduced water use efciency and low yields.

• Frosts cause 30% losses, and additional cold waves cause 70 to 100% losses, as

irrigation facilities are not adequate to deal with this.

• Limited physical and transport infrastructure for storage and processing.

Inputs • Private players dominate the input supply markets. The seeds supply market is

dominated by Dupont and Monsanto, and 80% of the total seeds disbursed are hybrid.

• KVKs in the Maize Road districts could play a pro-active role in frontline technology

demonstration of input cost reduction and climate resilient maize varieties.

Post-harvest and value addition

Processing • Over 80% of produce is sold outside the state for processing, and processed products

like feed and fodder are brought to local markets again.

• Absence of adequate market infrastructure for storage and drying in market yards has

increased the losses (10-15%) for the state's rabi maize farmers due to variable moisture

levels (and fungal infections).

Market Access • Processing and consumption takes place out of state, thereby impeding producers'

access to fair and transparent markets. The processors appropriate about 40% share in

consumers' rupee.

• High post-harvest and storage losses, about 10-15% (highest) have been reported.

Marketing channels, in the absence of market infrastructure, information and institutions,

are often difcult and inherently disadvantageous for producers.

Pricing • Farmers are unable to realize Minimum Support Price (MSP) declared by governments;

marginal farmers spend considerable amounts in searching and bargaining processes.

Processed Maize (INR)/MT

Maize Gluten Alt. protein source (60%) 42,000

Maize Germs Alt. energy source with 40% oil 33,000

Maize Grits Alt. energy for boilers 15,000

Maize Fibre For cattle feed 11,000

Maize Oil cake Alt. energy source in cattle feed 22,000

Maize Oil Substitute for soya oil 48,500

Maize Doc Alt. protein for livestock/poultry 20,000

Maize Gluten Feed Alt. protein for livestock/poultry 13,000

Per Quintal (100 kg) Margins- Maize

Producer 182.10

Primary Trader 141.15

Wholesaler 81.54

Processor 442.89

Dealer 260.14

Retailer 337.98

Actor Margin (Rs)


7

Rice

Signicance

Autumn rice (Bhadai), winter rice (Agahani), and summer rice

(Garma) are three different varieties of rice grown in Bihar. Rice

is one of the main crop of Bihar, but its productivity is very poor.

More than 60% rice area is concentrated in Bihar in low

productivity zone and this zone contributes to more than 50% of

rice production of the state.

Area coverage under rice with high yielding varieties is about

65% and irrigation facility is available for about 40% rice area in

the state. The low productivity of rice has consequential effects

on low income and high poverty of its population, thereby

contributing to increased economic vulnerability towards

climate change impacts.

Climate Risks

Bihar receives high annual rainfall (>1000 mm) under the

present climate. More than 80% of the annual total rainfall is

received during the monsoon season (June-September)

benetting the Kharif rice. Climate variability analysis of Bihar

using a 30-model ensemble by CGIAR indicates an increasing

trend in both minimum and maximum temperatures across

Bihar, with the rate of increase in minimum temperature being

signicant and higher than the maximum temperature at almost

all stations. Uncertainty and variance in rainfall (more dry spell

days in the growing season) are expected to impact the pest-

pathogen build up and reduce rice yields in addition to

deleteriously impacting the critical tillering/panicle emergence,


Per Quintal Margins- Rice

Producer 361.46

Primary Trader 4.15

Wholesaler 74.27

Processor 378.16

Retailer 119.63

Actor Margin (Rs)


98

grain-lling and ripening stages. Focus group discussions

with farmers indicate a need to make climate information

available, to accommodate an increase in rainfall amount

and intensity under the future climate.


There is a clear stagnation in productivity of rice in Bihar.

Approximately two-third of Bihar's rice-growing area

(North-Eastern Bihar) responsible for half of its annual

production, falls in the low-yielding category. Analysis of

the marginal rate of change in yield per unit area using

government data, indicate only a modest rate of change in

productivity between 1992-93 and 2015-16. Pre-

production/production constraints include lower seed

replacement rates (<40%) for rice and lower input

consumption patterns. Irrigation continues to be a critical

constraint that increases the cost of cultivation in crops,

across the sector. It disproportionately impacts the

protability of small and marginal farmers with high factor

costs. The analysis indicates an extreme reluctance to

invest in plant protection chemicals (herbicides and

pesticides) before the onset of pests/disease and in

irrigation during critical growth stages of the crop due to

ex t reme ly low marg ins a t wh ich the f a rmers

operate in Bihar.

Garma (Boro) rice cultivation in lowland pockets during the

months of Nov-May, using residual moisture after Kharif

harvest, is yielding higher returns to the farmer. The Garma

paddy belt is spread in low lying belts of north-eastern

districts and north-western districts viz. East and West

Champaran, where water logging beyond October renders

it unsuitable for maize cultivation. Appropriate changes in

the cropping pattern can be planned for incorporating

Garma rice in low-lying districts where maize cultivation is

impossible. The yields accrued by tapping into the residual

moisture content of the soil in these low-lying belts can

increase the economic resilience of farmers towards

climate change and can also help improve the soil quality

through the change in cropping pattern.

Highest margins in Kharif rice are earned by processors,

suggesting opportunities for upward mobility and

untapped gains along the rice value chain in Bihar.

Aggregation, bulk storage and processing, as the

stakeholder analysis suggests, have suffered from the lack

of infrastructure. More than one-fourth of produce is

retained for personal consumption, because of which

margins are negative. Small traders/aggregators run

volume-based business models, with very low positive

margins. The higher margins associated with the marketing

and value addition stages are also because of the higher

risks borne by these actors. Despite government efforts to

ensure a fair deal for its farmers by announcing higher

MSPs, most farmers are unable to sell rice at the MSP as

their inferior-quality produce is often rejected by

government agencies such as Food Corporation of India 3(FCI) and so, they are forced to sell in local mandis . On

average, 3-4 local small traders operate at the village level,

trading roughly 7.5-15 MT rice each. There are also 1-2

large traders as well as PACS that trade up to 40-70 and 50-

60 MT of rice annually. A selection of important constraints

along the pre-production, production and marketing

dimensions of the value chain is given below:


Pre-production and production stages

Support System • Institutional constraints in enhancing production, processing and marketing

• Negligible penetration of formal, cooperative credit (1%) in the input market

• Slow adoption of mechanisation in the face of high capital requirements with limited

access to credit/delay on subsidies

Infrastructure • Market infrastructure for drying, processing and storage is absent

• Per-capita consumption of power is the lowest, suggesting its poor quality

• Adequate information on weather and markets

Inputs • Restrictions in seed subsidies have limited availability of High Yielding Varieties (HYV)

seeds

• Shortage of labour for rice transplanting and input credit

• Low adoption rates of plant protection chemicals (<300g/hectare of NSA).

Processing and Value addition

Processing/Marketing • Farmers and VC actors lack awareness on quality standards

Market Access • Market intermediaries have restricted the sharing and access to information

4Infrastructure • Lack of modern warehousing in market yards

Pricing • Information on MSP is not available to farmers

• Procurement through FCI is less than 15% of the total production

3Local markets

4ICSD Field Report


11

Lentil

Signicance

Bihar is the third largest producer of lentil in India, with a

reported production of 140 thousand MT in 2014-15. The

average productivity of pulses in Bihar, ranges from 820 to 897

kg/ha though the area has shown a slow and steady decline.

Lentil is the only crop which has performed well in Bihar

whereas area and production of most of the major pulses have

declined. Lentil is cultivated in all 38 districts of Bihar, though

bulk of the production is from six districts - Patna, Nalanda,

Bhojpur, Aurangabad, East Champaran and West Champaran -

that accounts for 51% of the production. The national status

paper on pulses by Government of India identies lentil, among

all leguminous crops cultivated, as the crop providing the

highest natural nitrogen xation (in the range of 60-147 kg/ha

besides 30-35 quintals of crop residues) in Indian conditions.

Climate Risk

Bihar's major climate risks for crop production will be heat stress

due to increasing minimum temperatures in the rabi (winter)

season and high minimum and maximum temperatures in the

spring season, and intense rainfall and longer dry spells in the

kharif (monsoon) season. Climate-induced agro-climatic

conditions favour the build-up of insects and pests and

pathogens. Extremely high temperature at the time of fruit

setting to pod development stages may reduce the productivity

due to less fruit setting, non-healthy development of grain and

forced maturity of grain. The crops are also susceptible to water

logging and inundation.


Lentils occupy marginal lands and protect and enhance

ecosystem services. However, the area under legumes in Bihar

has declined to an extent that the cropping systems are unable

to deliver the benets leguminous crops such as lentils can

deliver. These benets include protection of soil and water

resources, enhanced agro-biodiversity, adaptation to climate

change, reduced GHG emissions through sequestration and

fodder substitution. Lower levels of input application and

irrigation have constrained the production.



12

Producers reported farm gate prices of roughly INR 3,025

per quintal (MSP: Rs. 3,325/Quintal). It was observed that

both primary traders and retailers are involved in lentil

aggregation. Since lentil farming is mostly subsistence

oriented, marketable surplus is recorded at only 10% of

total production. Producers often use this surplus as credit

with grocery retailers. This trade with grocery retailers

results in low transparency in price discovery, where quality

is not given nancial merit.

Primary traders either source produce directly from the

producer or from grocery retailers. The market is highly

fragmented, and quantity sourced by traders from farmers

is little/negligible since few large-scale farmers supply to

primary traders. Both wholesalers and primary traders

don't therefore enjoy high margins. Processers are based

out of state and serve the crucial role of milling, which is

necessary to protect the grains from weevils. Higher retail

margins also indicate a correspondingly higher processing

margin. Retailers sell aggregated produce, either self-

collected or from out of state. A list of constraints and

challenges as identied in the stakeholder consultation and

eld surveys is shared below:

13

Transactions Costsand Risk Analysis

Maize

For traders and wholesalers, screening and monitoring

costs are high, while search costs are high for producers.

Market access is the key underlying issue, with limited

access to aggregated storage and sale and a general lack

of transparency. Consumption of the bulk of maize

produced is not in-state, and this further complicates

marketing.

Rice

Producers bear the most screening and bargaining costs.

Traders, on the other hand, have a good understanding of

the market setup and have a well-established network with

processors. Their enforcement costs, as result of regular

bribe payments, is the biggest expense. Rice processing,

unlike maize, is available in-state. This allows big

traders/processors to limit a signicant amount of

transaction costs. Retailers face high bargaining costs due

to a lack of rice-certication mechanisms in place that allow

them to sell based on quality.

Lentils

Producers face search and screening costs, with limited

avenues to market information. The lack of aggregation

We further undertook a detailed Transaction Cost Analysis

(TCA) approach for detailed diagnostic investigation of

individual relationships within a value chain and to explore

solutions and strategies for improving efciencies. We

present the results crop-wise but also include a generic

solution set that targets capacity and knowledge

constraints among the actors. For the analysis, we divided

the major categories of marketing costs among actors

using stakeholder data and eld surveys. The major risks

for each actor were also isolated, which will yield important

insights into how climate variability will impact costs and

risks associated with the value chains.

Our ndings suggest that the biggest 'return on

investments' for producers in the maize, rice and lentil value

chains can be realised from improving market information

and awareness on quality-grade/standards for crops.

Extension trainings targeting these specic capacity

constraints can help farmers improve the margins and

increase the producers' share in consumers' rupee.

Interventions targeting improved access to market

information and efcient price discovery processes

through institutional or technology reforms have the

potential to yield rich dividends. Improving the quality of

outputs, and aggregation or storage facilities are found to

improve the margins across all categories of actors and

hence lead to a better marketing efciency. This also

contributes to increased economic resilience of farmers

towards climate change.

90

80

70

60

50

40

30

20

10

0Producer %

Trader %

Wholesaler/Processor %

Retailer %

Maiz

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Se

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Sc

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g

Barg

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ing

En

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en

t

Tran

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Se

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Maize Rice Lentils

Transaction Cost Spread in Value Chains - Bihar


Pre-production and production

Support System • Breeding strategy (1998-2012) focuses only on pest and disease tolerance

• No crop specic credit schemes, farmers rely on non-institutional credit

Infrastructure • Inadequate market infrastructure and lack of processing infrastructure

• Unaffordable irrigation services

Inputs • Availability of improved seeds is very low; farmers depend on stored seeds

• Farmers still use old seed varieties (such as Aruni, Panthmasoor 4 and Pusa)

Processing, Value addition and Marketing

Processing/Marketing • Large scale mills are not present; inefcient milling practices

Market Access • High transaction costs lead to producers accessing village level traders only

• No real-time price discovery and dissemination of market information

• Dependency on international market due to high import

Infrastructure • Inadequate market infrastructure in storage and processing

• Farmers unaware of quality standards and depend on village-level traders

Pricing • Farm sales are mostly below the MSP price of INR 3400 (2016-17)

• Procurement by government agencies is very limited

• Lack of awareness on quality grade-linked pricing and access to market info


1514

opportunities at the producer level is to blame. Traders are

fairly well-connected to processors, thereby reducing their

search costs. However, given the informal nature of

contracts, their enforcmement costs are comparitively

high. For processors, costs include those arising due to the

lack of legal transactions, as welll as auditing and bribery.

Retailers face high bargaining costs, both at the seller and

buyer end.

Key risks for each of the actors were assesed based on a

set of observed risk points. For producers across the three

crops, the main high risk point is climate vulnerability. For

traders, damage and quality of the commodity is a medium

risk area. Processers, across the spectrum, face quality

and payments related risks; legal issues and infrastructure

bottlenecks are also concerns.

Opportunities andWay Forward

De-risking the value chains for maize, rice and lentil, as the

stakeholder analysis suggests, would yield maximum

benets when the investments target aggregation and

quality improvement of outputs. In the wake of climate

variability, this is also an area that is expected to be most

impacted.

Market infrastructure targeting drying, storage, grading

and aggregation coupled with awareness/extension

interventions can build resilience and reduce the

transaction costs for most of the actors in the value chains.

In this section, we share crop-wise insights on the

opportunities and way forward from the value chain

analyses. In addition, we also share our understanding

from stakeholder analyses on systemic bottlenecks that

reduce the value chain and marketing efciency in general.

Maize

Expanding rabi maize can lead to increased growth and

higher dividends for Bihar's farmers.

Bihar's rabi maize outputs are double the kharif outputs and

has the potential for cornering larger dividends. An

institutional vacuum and decient infrastructure has

enabled the middlemen and traders to game the market

and deny the producers their rightful margins. Proximity to

South-East Asian markets, comparative advantages over

competing states (Andhra Pradesh and Karnataka) in terms

of water availability, offer opportunities for targeting export

markets. Improving infrastructure requirements in storage,

drying and grading can fetch higher margins for farmers

along the value chain when coupled with policies that

enforce sale and purchase of produce at MSP levels at the

minimum. Improved storage infrastructure will prevent the

fungal contamination and can result in reduced health and

economic vulnerabilities. Government policies targeting

improved access to HYV seeds through interventions such

as input subsidies, facilitation of agri-business centres

operating on public-private partnerships, expansion of

seed villages by sharing HYV foundation seeds from SAUs

can improve production levels. Similarly, improved access

to climate resilient varieties of seeds will enable farmers to

deal with risks of increased temperature and limited water

availability. Micro irrigation, currently covers an area less

than 10-15% of the state's net irrigated area. Adopting Micro

irrigation in maize has the potential to further increase

yields by an additional 25-30%. Training plans for maize

targeting critical irrigation, plant protection, drying, grading

and quality improvements are expected to yield maximum

returns. These returns can help reducing the economic

vulnerability of the farmers towards climate change and

contribute towards replenishing the ground water table and

improving soil nutrient content.

Rice

Garma/Boro Rice offers the potential for farmers to

improve stagnant production levels in Bihar.

Garma or Boro rice has demonstrated its ability to deliver

higher productivity for farmers in areas where Maize is

unviable, because of higher water tables. While the area

and production of Kharif rice has remained stagnant,

Garma rice has grown both in area and production levels.

Improvement in seed replacement rates (30 to 40%) along

with a focus on short duration Garma rice varieties can

signicantly improve the margins to farmers, after

compensating for higher household consumption and

withholding in the crop. This can also enhance the

economic resilience of farmers towards climate change by

enabling them to save for the bad times and by increasing

their capacities to invest in climate resilient inputs. This also

serves as a channel for maintaining the soil health through

changing cropping patterns. Coupling management

innovations along with technology, including System for

Rice Intensication (SRI) has the potential to further

improve productivity of Garma rice. Government policies

can potentially target improved yields from Garma rice to

offset the reduced margins from Kharif rice by way of

improved yields (access to HYV seeds), reduced costs

(tillage, irrigation) and low HP-mechanization strategies.

Lentils

Upgrading the marginal production prole of lentil is

key to improving the pulses output in Bihar.

Lentil has shown a consistent growth pattern in Bihar's

agricultural scenario. The production of the crop is now

plagued by constraints in availability of inputs (improved

seeds, right amount of fertilizers and irrigation). Production

levels are further constrained by absence of critical

irrigation, lack of preventive application of pesticides and

Rhizobium treatment that could potentially improve yields,

as the farmer attempts to control costs in marginal

environments. Absence of infrastructure and institutions to

drive aggregation, storage and processing of lentil has led

to higher transaction costs to farmers in price discovery. In

nearly two decades, breeding strategies of state

agricultural research institutions have focused on selection

of pest and disease tolerance lines of lentil in Bihar.

Improving cultivars based on climate risk prole of Bihar

should be prioritized. Lentil offers the possibility of

designing a unique, subsidy policy for farmers based on

ecosystem services (N-xation and inorganic N-fertilizer

avoidance) for the rst time in India, thereby improving the

soil health.


Input Availability ** * **

Climate *** *** ***

Credit ** * *

Labour ** *** *

Transport ** * *

Market Information * * *

Market volatility *** ** *

Climate * * *

Theft * * *

Damage/Wastage ** *** **

Transportation * * *

Payments ** *** **

Market volatility ** ** *

Climate * * *

Quality *** *** ***

Infrastructure ** *** ***

Transportation ** ** *

Policies and Legalities ** *** **

Payments *** *** **

Market Volatility ** * *

Maize Paddy

Risk Rating

LentilsRisk PointActors


1716

A comprehensive eld survey combined with a robust desk

review and stakeholder analysis has provided us deeper

insights into systemic bottlenecks for value chains that

operate in the State. In this section we attempt to share the

most important ndings and insights from the eld, which

we believe, can make the biggest impacts in safeguarding

Bihar's agricultural growth.

Resilient institutions improve market efciencies and

reduce transaction costs across value chains

The abolishment of APMCs in Bihar (2006) was intended to

favour small and marginal farmers and help them realize

higher marketing margins. The institutional vacuum in the

markets as a result, has led to: the rise of private markets

(mandis) involving local traders resulting in asymmetry in

price-discovery and higher transaction costs; absence of

adequate market infrastructure (roads, market yards,

drying-storage-grading and processing facilities);

inequitable marketing margins and revenue loss to the

exchequer by way of leakage in processing to

neighbouring states. Climate risks multiply for farmers by

affecting the quantity (marketable surplus) and the quality

of marketed surplus.

Suggestions that can help plug institutional gaps in

marketing model can include:

Ÿ Reforming rural marketing institutions to improve both

backward linkage (agri-business centres built on

public-private and micro-nance models) and forward

linkage (Farmer Producer Companies) to de-risk

farmers

Ÿ Establish block level, single-window Agri-Business

Centres (ABCs). ABCs could be established to increase

access to low-cost credit (promoted by revolving funds

and joint-liability mechanisms), HYV seeds (partially

subsidised by govt and private actors), crop protection

chemicals (weedicides and pesticides); low-cost,

efcient technologies (Slow Release Fertilizers,

machinery), real-time information (weather-market);

knowledge (paid extension services/certication

systems for QC - grading) and risk nancing (crop

insurance, government subsidies).

Ÿ Enhancing the role of KVKs in capacity building and

technology transfer along crop value chains, focusing

on quality standards, processing and value addition

and uptake of crop produces at MSPs through public

channels and PACS with aggregation, storage and

drying facilities.

Ÿ Processing can be promoted through nancing and

Micro-small- medium enterprises (MSMEs). These

MSMEs can be linked to FPOs or farmer collectives

through formal contracts to facilitate backward linkages

at the same time MSMEs can be supported in market

functions for product development, branding, and

marketing by the project in the initial years. Such initiatives

will eliminate overlapping functionaries from value chain

and improve the value proposition.

Ÿ Promotion of credit lines through NBFCs (Non-Banking

Financial Companies) to support inclusive rural

economic growth. NBFCs support innovative nancial

services to MSMEs that can promote enterprises in the

upper end of value chains (processing, packaging and

value addition).

Infrastructure investment is critical for the

sustenance of agricultural growth trajectory

Ÿ Rural markets in Bihar lack basic facilities including

pucca roads, market yards, drying-storage spaces, etc.

Value addition in agriculture is the key to sustained

economic growth in Bihar. Though Bihar is on the path

of achieving full coverage in rural electrication,

government s ta t is t ics show that per-capi ta

consumption of electricity in Bihar is 76% below the

national average, suggesting opportunities for

Renewable Energy-based marketing infrastructure in

rural Bihar. The lack of power has pushed farmers

toward adoption of diesel-powered pumps that have

contributed to inated irrigation costs, as most marginal

farmers end up as “water buyers” in the groundwater

market. Mechanisation targeting low-HP machinery can

help women and labourers move up the value chain and

support processing or value addition. Suggestions for

infrastructure improvement include:

Ÿ Integration of Renewable Energy (off-grid and grid

connected) systems can improve the per-capita power

consumption and capacity utilization of agricultural

processing infrastructure in Bihar. Every revenue

subdivision in Bihar has been planned with 132/33 KV

transmission lines under the state plan, which will take

care of power evacuation from renewable energy

projects. Grid connected solar power projects powering

rural marketing infrastructure (community dryers, cold

storage etc.) are hence, viable.

Ÿ Investing in solar pumps for irrigation can improve the

prot margins for producers. A maize farmer in Bihar,

according to Government of India statistics, currently

shoulders approximately nine-times the cost of

irrigating a plot than his peers in Andhra Pradesh or

Karnataka, which has a sizeable dryland. Farmers can

potentially boost their prot margins by 30% if solar

pumping is adopted. Solar pumps have shown to be

more effective with 40% more water yields when

compared to electric pumps. The Government of Bihar

could help farmers achieve additional co-benets by

purchase of surplus solar power from farmers (1.5-3%

Renewable Purchase Obligation, 2015). Power Purchase

Agreements could be executed with Solar Farmer

Cooperatives (Jyotigram model in Gujarat, Solar farmer

model in Karnataka and Punjab) are examples.

Ÿ Investments in drying and storage facilities at a cluster

level can help farmers and value chain players improve

their margins, due to improved quality of produce. The

TCA indicates that bulk of the actors lose a considerable

margin by way of storage losses and inferior prices

attributed to quality of produce. Marginal farmers in the

value chains do not have the capacity to store bulk of

the produce in their homesteads and transfer the risks

to agricultural traders and other value chain actors, who

appropriate a higher share of the consumers' rupee as a

reward to the higher amount of risks borne.

Ÿ Bihar loses out to neighbouring states in value addition

and employment generation as bulk of the farm

produce gets processed outside the state and gets sold

in the state at higher rates. Processors as a segment

earn the highest share of prot margins and consumers'

rupee in Bihar for the crops studied. With stable

agricultural policies and a roadmap for development in

place, Bihar should pitch for private sector investments

in agricultural processing. Agricultural SEZs (Special

Export/Economic Zones) and could be fostered (maize

road comprising 11 high producing districts for rabi

maize is an example) where investments in processing

and value addition can be concentrated.

Ÿ Promotion of warehouse receipt nancing schemes for

development of market infrastructure: Warehouse

receipt nance schemes can solve the issue of access to

credit by facilitating pledged lending as an opportunity for

taking advantages of market variations. However, it needs

to be linked with national and international markets through

spot exchanges and future markets to maximize benets

from warehouse receipt nance. This can minimize farmers'

risk by providing alternate marketing options and hedging

opportunities.

Information is key to increasing producers' share in

consumers' rupee

There is no competitive price discovery mechanism in

private local mandis, where the trader assumes the larger

role of credit supplier, information agent and buyer for small

and marginal farmers with very low bargaining power.

Access to Market information, Technology, Government

schemes and Agromet advisories through mobile

platforms such as SMS or Automated Voice Messages and

Interactive Voice Responses (IVR), in partnership with

telecom operators can improve price discovery and risk-

taking ability of marginal farmers. Private sector models

integrating IT-enabled services, such as e-Chowpal that

incorporate aggregate transportation services can prove to

be game changers. Producers spend the highest share of

marketing costs in price discovery, whereas other actors

spend higher share on quality and value addition. In the

absence of appropriate storage (and market) infrastructure

at ground level, climate variability (characterised by

unseasonal rains and extreme events) could hit the sector

hard.



1918

1.1. Brief about ACT

Climate change is a global phenomenon affecting all

sectors of economic activity. Poor people are highly

vulnerable to the impacts of climate change. The impacts of

climate change are severe in South Asia and in coming

years, are likely to become more pronounced. As per

Intergovernmental Panel on Climate Change (IPCC), by

2050 the average surface temperatures are likely to

increase by 2-4 degree celcius while the warmest daily

maximum temperatures are projected to increase by 4-7 5degree celcius . Rainfall, on which agriculture is dependent

in the region, is going to suffer as monsoon is going to be

more erratic, with some areas receiving more than they do

now and others suffering more frequent and serious

droughts. Population projections for this region indicate

that by 2050, the population is likely to increase by 0.36

percent reaching to approximately 2.3 billion. 1.6 to 2.2

billion. Agriculture which is the mainstay of the region is

likely to be further affected with rapid economic growth and

urbanization, thereby bringing sustainable change is a

great challenge for this region.

ACT (Action on Climate Today) is working to reduce the

effects of climate change in South Asia. The initiative is

funded by the UK Department for International

Development (DFID) and managed by Oxford Policy

Management. The programme provides technical

assistance to mainstream climate change in policies, plans

and budgets. It has been working in Bihar since late 2014.

1.2. Background to the study

6In 2016, ACT instituted a study to identify potential climate

resilient crops in Bihar. The study, carried out by

Intercooperation Social Development India (ICSD),

analyzed the impact of climate change on crops grown in

different agro climatic zones of the state and identied

Maize, Paddy and Lentil as the potential climate resilient

crops for the state of Bihar. The current study seeks to build

on the earlier study and explore the full spectrum of

opportunities in the identied climate resilient crops in

Bihar using a Value Chain Approach.

1.3. Value chain approach for

Climate Resilience

While production of climate resilient crops can help farmers

adapt to the changing climate, for addressing climate

change actions beyond production, it is important to study

the entire value through a climate change lens. The Value

Chain Approach, analyses the value addditon at each level

as the commodity moves from the producer to the

consumer. The current study proposes to identify

constraints and opportunities in the entire commoditiy

value chain through a climate change lens.

2.1. Objective of the study

The objective of the study is to conduct a comprehensive

Value Chain Analysis (VCA) of maize, paddy and lentil and

based on the VCA ndings, suggest strategies for

improvement and for designing a pilot project on climate

resilient agricultural value chains.

2.2. Methodology

The methodology for the study comprised three stages-

preparation stage, eld study stage and data analysis and

report collation stage. The detailed steps under each stage

are mentioned in Figure -1.

The study was conducted in two parts i.e.

Ÿ to identify the issues in crop production, and

Ÿ to study constraints and opportunities in the entire value

chain.

Details of the commodity mapping based on Multi Criteria

Analysis (MCA) are presented in Annexure I.

2.3. Secondary Reveiw

A desk review of existing material on climate resilient value

chains was undertaken as the rst step in the study.

Section 1:Introduction

Section 2:Objectives and Methodology

2.4. Data Collection Tools

Structured questionnaires and Focus Group Discussion

(FGD) Checklists were designed for interviews with the

following set of value chain actors and stakeholders:

Ÿ Farmers

Ÿ Input suppliers

Ÿ Local traders

Ÿ Wholesaler

Ÿ Processors

Ÿ Research institutes

Ÿ Government ofcials

Ÿ Farmer Producer Organisations (FPOs)

The data collection tools were eld tested and nalized

prior to eld data collection.

2.5. Site selection criteria and

sample size

The sample selection was done in three stages:

Ÿ District selection

Ÿ Village and habitation selection

Ÿ Farmer selection

Figure 1: Methodology


5 IPCC Fifth Assessment Report

6Selection of climate resilient crop for value chain study in state of Bihar, November 2016, Action on Climate Today


2.5.1 District Selection

The district selection was based on the following steps:

Ÿ Steps-1: Districts where all three climate resilient

crops– maize, paddy have major area coverage

under cultivation were selected

Ÿ Step-2: From the districts selectedin Step-1,

districts having higher productivity of the three

crops were short listed

Ÿ Step -3: From the list of districts shortlisted in step -

2, districts having different agro-climatic zones for

the three crops were selected

The list of the shortlisted districts was presented to the

agriculture department ofcials in a workshop at Patna

and based on their inputs as also interaction with

Director, BAMETI, four districts, namely Purnia,

Bhagalpur, Madhubani and Samastipur were selected

for the study.

2.5.2. Villages selection

In each district, six to eight villages were selected for

the primary survey. Two types of villages were selected

in each district:

Ÿ villages where farmers had adopted improved

varieties provided by the research institute and

Ÿ villages where farmers used their own seed (mostly

traditional seeds).

Information shared by research institutions and

agriculture department formed the basis for village

selection.

2.5.3. Farmer Selection

In each village, a mimunim of ve farmers were

ramdomly selected.

2.5.4. Other Stakeholders

In addition to farmers, data was also collected from

other value chain actors like policy makers, research

instutions, service providers, input suppliers,

aggregators, traders, wholesalers, credit institutions

and insurance agencies.

2.5.5. Final Sample

During the survey, information was collected from the

following stakeholders:

Ÿ No. of individual farmers: 45

Ÿ No. of farmers in FGD: Men 115 and Women: 10

Ÿ No. of input suppliers: 12

Ÿ No. of agriculture ofcers: 30

Ÿ No. of primary traders: 7

Ÿ No of secondary traders: 8

Ÿ No. of researchers: 18

Ÿ No. of processors: 8

Ÿ No off farm machinery suppliers:2

2.5.6. Data Analysis and Report

Preparation

The quantitative data collected from the eld was

analysed in excel formats while qualitative data was

analysed using the VCA framework and associated

framework like TCA.

2120

Section 3:Climate Context of the State

3.1. Bihar State Prole

Geography

Bihar is a land-locked state in tropical to sub-tropical region

with a geographical area of 94,163 sq. km. It is located

between 24°20'10" and 27°31'15"N latitude and 82°19'50”

and 88°17'40"E longitude in the eastern part of the country 7and situated at about 52.73 m height above sea level .

Demography

8As per Census 2011 , Bihar has a population of 10.41

crores with 89 percent of the population being rural. The

state has a rural population density of more than 600/km2,

with higher man-land ratio, indicating the low per capita

availability of land.

Agriculture sector in Bihar

Nearly 77 percent of the State's population is generating 924.84 percent of State Domestic Product in agriculture .

Farm holdings are small and scattered. There are about 101.61 crore farm holdings of which 91 percent is marginal .

The area under cultivation as a proportion of the total area is

as high as 57 percent, as compared to only 47 percent for 11the whole country .

While the state has abundant water resources, the spatially

and temporal distribution of this valuable resource is

uneven across the state. There is also a high degree of

dependence on groundwater in the State, and this can

have serious consequences in the future. The ultimate

irrigation potential in the state is estimated to be 117.54 lakh

hectares, including major, medium and minor irrigation

schemes. This is 22.38 percent of the net sown area. The

created potential of 68.90 lakh hectares is 58.6 percent of

the ultimate potential. The utilised potential of 56.66 lakh

hectares, which is 82.2 percent of created potential and 1248.2 percent of ultimate potential .

13Climate

The state has a tropical monsoon climate receiving an 14average annual rainfall of 995 mm . The commencement of

monsoon begins as early as the last week of May or as the

rst or second week of June. The rainy season begins in

June. The months with the heaviest rainfall are July and

August. The rains are the gifts of the southwest monsoon.

There are two distinct areas in Bihar where rainfall exceeds

1800 mm. These lie on northern and north-western wings of

the State. The southwest monsoon normally withdraws

from Bihar in the rst week of October. The maximum

frequency of the tropical cyclones in Bihar is during

September-November especially during the asterism

called hathiya. These cyclones are essential for the

maturing of paddy, and are required for the moistening of

the soil for the cultivation of Rabi crops.

15Agro Climatic Zones in Bihar

In Bihar, based on soil characteristics, rainfall, temperature

and terrain, there are three main agro-climatic zones. Agro

climatic zone I and II are located north of the river Ganges

whereas the Zone III (A and B) is located south of the river

Ganges. Zone I is situated in the north-western part of the

state whereas zone II is located in the north-eastern part.

Zones I and II are ood prone whereas zone III is drought

prone.

7BIHAR STATE PROFIE 2015-16, MICRO, SMALL & MEDIUM ENTERPRISES DEVELOPMENT INSTITUTE, Ministry of Micro, Small and Medium Enterprises, Government of India

http://dcmsme.gov.in/dips/state_wise_profile_16-17/Bihar%20-%20State%20Profile.pdf8https://www.census2011.co.in/census/state/bihar.html

9Department of Agriculture, Governemnt of Bihar; www.krishi.bih.nic.in

10Report of the Task Force on Agriculture, Governemt of Bihar; http://niti.gov.in/writereaddata/files/Bihar.pdf

11Economic Survey of Bihar, http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf; Executive Summary, pg xx

12Economic Survey of Bihar; http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf pg- 89-91;

13Bihar State Action Plan on Climate Change, Building Resilience through Development, 2015, Governemnt of Bihar:

http://www.moef.gov.in/sites/default/files/Bihar- State%20Action%20Plan%20on%20Climate%20Change%20%282%29.pdf; Climate Profile of the state14

Economic Survey of Bihar; http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf pg- 89-91; 15

Bihar State Action Plan on Climate Change, Building Resilience through Development, 2015, Governemnt of Bihar:

http://www.moef.gov.in/sites/default/files/Bihar- State%20Action%20Plan%20on%20Climate%20Change%20%282%29.pdf; pg 4-5



2322

Table 1 : Agro Climatic Zones in Bihar

Agro climatic Zone

Districts Area 000ha Average rainfall Soil

Soil and Topography

Crops

Zone -I North West Alluvial Plains

Bettiah, Motihari, Gopalganj, Siwan, Vaishali, Seohar, Muzaffarpur, Samastipur, Sitamarhi, Madhubani, Darbhanga, West & East Champaran

Net Cultivated – 2281; Gross Cultivated -- 3260

1234.7 Medium acidic, heavy textured, sandy loam to clayed, ood prone. (Large area remains under water called Chaur, Maun & Tal lands)z

Rice, Wheat, Maize, Arhar; Horticultural crops including Litchi, Mango, Makhana, Water Chestnut

Zone - II North East Alluvial Plains

Purnea, Katihar, Saharsa, Madhepura, Araria, Kishanganj, Supaul, Khagaria, Begusarai

Net Cultivated – 1147; Gross cultivated -- 1677

1382.2 Light to medium textured, slightly acidic, sandy to silty loam (large area comprise of Tal and Diara lands)

Maize, Mustard, Jute, Sugarcane; Horticultural crops include Mango, Bel, Banana, Papaya

Zone - III South Bihar Alluvial Plains

3(a) Bhagalpur, Sheikhpura, Lakhisarai, Jamui, Munger, Banka 3(b) Bhabua, Rohtas, Aurangabad

Net Cultivated – 241; Gross cultivated -- 3408

1102.1 Old alluvium to sandy loam.

Rice, Gram, Wheat; Horticultural crops include Mango, Guava, Banana, Bel, Jackfruit, Onion, Potato, Chillies, Marigold

Cropping Seasons in the State:

The principal crops are rice, wheat, pulses, maize, potato,

sugarcane, oil seeds, tobacco, and jute. Rice, wheat, and

maize are the major crops.

Table 2 : Crops as per cropping season in Bihar

S. No Kharif Crops Rabi Crops Zaid Crops

Sown in May-June

Harvested in Sep– Oct

Sown in Oct-Nov

Harvested in Feb– March

Short duration crops from March to June

1 Rice Wheat Muskmelon

2 Cotton Pulses Watermelon

3 Sugarcane Barley Gourds

4 Maize Rapeseed

5 Jowaar Mustard

6 Bajra

Climate Vulnerability of Bihar

Vulnerability refers to the degree to which the geophysical,

biological and socio-economic systems are susceptible to

and unable to cope with the adverse impacts of climate 16change . Around 90 percent of Bihar's population lived in

rural areas in 2015, where agriculture and animal

husbandry are a source of primary livelihoods. Though

Bihar state is endowed with good soil, adequate rainfall and

good ground water availability, its agricultural productivity

is one of the lowest in the country, leading to rural poverty, 17low nutrition and migration of labour . Bihar is highly

vulnerable to cl imate change encompassing (i)

approximately 81 percent of labour force employed in the

agricultural system (ii) lack of proper irrigation facilities and

high dependence on rainfall (iii) low cultivated area with

fragmented land holdings and (iv) poor marketing 18distribution, processing and storage facilities .

According to Bihar State Action Pplan on Climate Change

(BSAPCC), a drastic decline in green fodder production

and dry fodder production (crop residue of cereals, pulses

and oil seeds) has been observed during 2005-2011. The

area under pastures and grazing lands is extremely scarce

(0.18 percent of the total geographic area). Of all rural

households owning cattle and/or buffalo in Bihar, more

than three-quarters are either landless or have less than

16Definition adopted from Glossary of terms, IPCC, 5th Assessment report

17http://krishimis.in/WebPortal/AboutUs.aspx

18Source: Agrarian Communities' Action Plan on Cliamte change in Bihar

one hectare of land. Sheep and goats tend to be even more

concentrated among landless and marginal rural

households. A decline in the fodder production and in the

area under pastures has increased the vulnerability of

livestock towards climate change. It has also increased the

vulnerability of the marginal and landless farmers in terms

of livelihood opportunities (e.g. animal husbandry/dairy)

available to them in case of a crop failure.

The future projected change in maximum surface

temperatures during 2011-2040 reect a 0.6-1 degree

celcius increase in Western Bihar and 0.2-0.4 degree

celcius increase in Eastern Bihar. The projected change in

the minimum surface temperatures reect a 1.2- 2 degree

celcius increase in the Southern Bihar and 1-1.6 degree

celcius increase in Northern Bihar. The future rainfall

projections show a 5-10 percent surplus rainfall in Eastern

and Central Bihar as against 5 percent decit in Southern 19and Western Bihar during 2011-2040 .

Currently, Bihar state is highly vulnerable to climate-

induced hydro-meteorological extremes, with North Bihar,

in general, being highly ood-prone and South Bihar being

highly drought prone. An increase in surface temperatures

along with changing rainfall patterns can intensify the

impacts of droughts and oods received by the state and

have a potential to severely impact the productivity levels of

the farmers.

The total geographical area affected by the ood and water

logging amounts to 56 percent of the total geographical

area of Bihar. Floods in large parts of the plains of Bihar,

especially North Bihar, are recurring features and cause

havoc destroying crops and the quality of land and

threatening the conditions of life and livestock due to large

scale displacement. Out of these, the area of Sitamarhi,

Supaul and Kishanganj are 90 percent affected by the ood

and ve districts- Bhagalpur, Darbhanga, Khagaria,

Madhepura and Saharsa is 70 percent affected. Whereas,

33 percent of the State receives less than 750 mm rainfall,

making the southern part of Bihar vulnerable to drought.

Additionally, due to inadequate climate models and

vulnerability studies at the state level, as well as low

community awareness, Bihar is potentially more sensitive

and vulnerable to the climate change and its impacts.

Figure 2 : Flood affected area of Bihar


16D Bihar SAPCC report: Climate Model Intercomparison Project Phase 5 data is used


2524

Figure 3 : Drought affected area of Bihar

Given that Bihar is highly vulnerable to climate change

i m p a c t s , a d a p t a t i o n a n d r e s i l i e n c e b u i l d i n g

practices/initiatives are crucial to enable the sustainable

growth trajectory of Bihar's agricultural sector. Agricultural

vulnerability in Bihar has been mapped by Central 20Research Institute for Dryland Agriculture (CRIDA) . In line

with the state's policy of an 'entitlement based planning

approach', the BSAPCC adopts the motto “Building

Resilience through Development” as the core theme that

will guide implementation. Direct seeded rice has been

identied as a preferable option over the conventionally

transplanted rice which is both labour and energy

intensive. With direct seeding, rice seed is sown and

sprouted directly into the eld, eliminating the process of

planting seedlings by hand, thus reducing intensive labour

and water use.

Adaptation strategies for crops like rice and wheat include

the advancement of sowing date of rice for shorter duration.

This may increase the production of rice up to 2050 for all

ago-ecological zones of Bihar, except at zone III B

according to the simulation models. Similarly, in the

medium duration variety an increment in yield could be

predicted with the advancement of sowing date by almost

25 percent during the 2080s for Pusan. Advancing the

sowing of Radha variety by seven days may prove

benecial for 2020 and 2050 scenarios. Rabi maize showed

an increase in yield with the advancement of sowing for all

stations and for all scenarios except for Patna in 2020,

similarly, Kharif maize showed an enhancement in yield

with seven days advanced sowing.

(Source: Singh C.C. et al. 2014. “Environmental Challenge due to Climate Change in Bihar, Developing State of India”. Journal of Natural Sciences Research, Vol.4, No.13. 21-28.)

Section 4:Value Chain on Maize

4.1. Introduction

Maize, also known as the Queen of cereals, is the most

produced cereal crop in the world with production of more

than 960 MMT during 2013-14. This is a widely cultivated

crop and carries tremendous genetic variability. India has

witnessed growth in maize area, production as well as

productivity from 14 MMT production from 7.5 M ha and

productivity of 1.9 MT/ha during 2004-05 to 23 MMT from 229.5 M ha and productivity of 2.5 MT/ha during 2013-14 .

India is the seventh largest producer of maize in the world

having two percent world production and fourth largest

exporter in global trade.

Though the overall progress in maize production in India

seems to be satisfactory, several concerns cannot be

ignored like stagnant productivity at 2.5 MT/ha and

stagnant area at 22 M ha. The gap in productivity with 23global average at 5.5 MT/ha, and USA at 10 MT/ha is also

high.

Andhra Pradesh and Karnataka dominate maize

production, contributing 38 percent to national production.

Out of the nine major maize producing states, Bihar is the

sixth largest producer with 1.4MMT production on 0.6M ha 24land during 2010-11.

Figure 4 : India's Maize Area, Production, and Productivity

Table 3 : Maize production in Bihar

2011 2012 2013 2014 2015 CAGR

Total Maize 2108.19 2557.06 2755.95 2904.24 2478.75 4.61

Kharif Maize 468.52 622.42 926.32 778.21 825.15 14.51

Rabi Maize 922.28 1098.17 791 1199.39 913.78 0.7

Summer Maize 717.39 836.47 1038.63 926.64 739.82 1.65

Source: Economic survey of India, 2015-16


20Atlas on Vulnerability of Indian Agriculture to Climate Change, Central Research Institute for Dryland Agriculture (CRIDA), 2013

21Indian Council of Agricultural Research: http://icarrcer.in/wp-content/uploads/2014/01/ICAR-RCER-News-for-Jan-June-2010.pdf

22Department of Agriculture, Cooperation and Farmer Welfare, Government of India. http://eands.dacnet.nic.in/PDF/Glance-2016.pdf

23USDA Portal corn database https://data.ers.usda.gov/FEED-GRAINS-custom-query.aspx

24APY database, Department of Agriculture and Cooperation, GoI, 2015-16.


As per productivity ranking, the top three performing

district since 2014-15 are — Katihar, Madhepura and

Saharsa. The highest productivity in 2014 – 15 is recorded

for Katihar (6510 kg/hectare) which is 160 percent more

than the national average productivity of 2500 kg/ha. The

top ve district having the highest coverage under maize

are:

2726

S. No DistrictArea (000ha)

Production (000MT)

Productivity (MT/ha)

1 Khagaria 60.160 214.830 3.57

2 Samastipur 56.890 156.000 2.72

3 E chmaparan 52.230 102.580 19.64

4 Muzaffarpur 48.770 191.890 3.96

5 Bhagalpur 46.060 155.810 3.84

Table 4 : Major maize producing districtsof Bihar (2014-15)

Source: APY database,Department of Agriculture, State Govt. of Bihar, 2015-16

India's maize utilisation pattern during 2012-13 indicates

that poultry and cattle feed forms 61 percent of local

utilisation, direct consumption was 20 percent and

industrial usage for starch extraction, food processing, 25brewery and others form 19 percent . This utilisation was

79 percent of total production and the rest 21 percent (4.7

MMT) was exported during 2012-13.

4.2. Actors

Actors in maize value chain are input suppliers, producers,

commission agents, primary traders, wholesaler,

processors, dealers and distributors and retailers. The role

of each actor is very specic as described in paragraphs

below.

4.2.1. Input Suppliers

Input supply is an important function in the maize value

chain. Major inputs in maize cultivation are seed,

fertilisers and pesticides. The role of government

agencies and department is minimal in input supply

and private players dominate in maize input supply

in Bihar.

Seed Supply:

Seed is one of the most important inputs dominated by

private players. The following are the market share of

the different seed suppliers:

Role of state seed corporation in maize seed marketing

is very limited.

PUSA Agriculture University has released 13 varieties

including few varieties dedicated for improved protein

contents like Quality Protein Maize (QPM). Till date, ve

varieties are released as QPM under the brand name

Shaktiman – 1,2,3,4 and 5. These varieties are suitable

for animal feed and have shown excellent research

results. However, as revealed by university scientist

during discussions, these varieties have limited

popularity as they are not specially recognised by the

market and private feed manufacturers.

Fertiliser Usage and Supply:

Important fertiliser manufacturers and marketers in

Bihar are PPL, IFFCO, RCF and Zuari. The important

fertilisers for maize are Urea, DAP, and MoP. There are

no shortages reported in recent years for fertilisers.

According to PUSA Agriculture University, in Bihar,

usage of chemical fertilisers is increasing continuously.

Nitrogen requirement has increased from 150 N-1ha to 26200N-1ha . This is an alarming situation in the climate

context, as an increased requirement and higher

dosages are resulting in more water and soil pollution

and nitrogen emissions.

Crop protection chemicals supply:

The important molecules used in maize crop for

protection from pests and diseases are chlorpyrifos,

copperoxichloride and sulphur and herbicides used

Table 5 : Market share of private companies in seed marketing

Sl No Seed Marketing Company Market share

1 Dupont – pioneer 36 – 37%

2 Monsanto 29 – 30%

3 Limagrain 10%

4 Syngenta 5%

5 Domestic players 18 -20%

Source: ICSD Field Visit, Bihar

and retailers. There are 10 wholesalers and more than

100 retailers in Purnea district forming a well-

established network. Department of agriculture is also

availing services of these supply chain actors to

provide inputs under various schemes at subsidised

rates, but this collaboration is limitedin its scope.

However, department of agriculture is directly involved

in the maize value chain as it has a major role in

monitoring the supply and in quality control.

Producers

In Bihar, the area under maize cultivation is larger under

Rabi than under Kharif season. The shifting to Rabi

maize shows obvious comparative advantages of low

insect, pest, and diseases infestation as well as the

slow growth of weed. The total area under Rabi maize 28is around 60 percent more than that of kharif maize .

(Kharif maize area is 230,000 ha while Rabi maize area

is more than 400,000 ha for 2012). Bihar has the largest

area under maize during Rabi among all states in India.

are Pendimethalin and metachlore. Practices of

Integrated pest management and manual or

mechanical weed control are limited. During eld

discussions farmers in Purnia and Bhagalpur districts 27reported that cost of these practices is very high .

Supply chain:

The complete supply chain in seeds, fertilisers and

crop protection chemicals is dominated by private

manufacturers, dealers-distributors or wholesalers

During 2014-15, the total area under Rabi Maize was

706,000 ha while in 2005-06 it was 661,000 ha. Over ten

years, between 2004-05 to 2015-15, there is an

increase of 40,000 ha in the area. In the same period,

the production has increased from 1,519 thousand MT

to 2,478 thousand MT. Bihar's rabi maize output

doubled from 10.64 to 21.26 lakh tonnes (LT) between

2005-06 and 2013-14.

Figure 5: Input supply chain in Bihar


25Maize in India, India Maize Summit, IMA and KPMG Analysis. http://www.docslides.com/briana-ranney/maize-in-india

26Four decades of Soil Test Crop Response (STCR) research, findings of PUSA agriculture university. AICRP on STCR correlation, IISS, Maize pg – 103 to 119

27Focused group discussion by ICSD, field team.

28Kumar, R., K. Srinivas and N. Sivaramane (2013), Assessment of the maize situation, outlook and investment opportunities in India. Country Report – Regional Assessment Asia (MAIZE-

CRP), National Academy of Agricultural Research Management, Hyderabad, India.


2928

Climate:

Maize is a C4 crop and hence, it can be cultivated in a

wide range of climatic conditions with the temperature 0 0range being 22 C to 35 C. However, maize is

susceptible to frost and high temperature. The

minimum rainfall requirement of maize makes it more

climate resilient, as it can be grown in 500 mm to 900

mm rainfall.

Seed and sowing:

In Bihar, 80 percent of the area under maize is under 29hybrid seeds . Private players dominate in the seed

supply. Rabi sowing is done during September.

However, during discussions with PUSA University, it

was found that due to changes in the climate, sowing

has shifted to mid October. Thiram, carbendazim,

Trichoderma, and Azospirillum are commonly used for

seed treatment. Azospirillum helps in nitrogen xation,

while other help in countering soil borne diseases.

During eld visits, it has been observed that standard

practices are not followed for spacing and plant

polulation. The recommended spacing for maize is

75cm X 18cm or 60cm X 22cm in Kharif while for Rabi it

is 50 cm x 20 cm to 60 cm x 18 cm, but lower spacing

was observed in the eld. The recommended

population is 85000 plants/ ha but, this has not been

followed and plant population maintained is more than 30100,000 plants/ ha .

Fertiliser application:

The recommended dose of fertilisers for maize is 150:

50: 50 of N:P:K per kg/ha. According to PUSA

university, the nitrogen requirement in Bihar has

increased and Rabi maize requires more nitrogen than

Kharif maize. During discussions with farmers at

Purnia, it has been found that nitrogen supply to maize

is now 200 – 300 kg/ha. However, according to KVK,

Purnia, the increased N requirement is only 200kg

N/ha. A dose of potassium is recommended for crops

grown in low temperature zones. However, during eld

visits it has been found that farmers are not applying

potassium to the crop.

Water requirement:

The ve critical growth phases for irrigation are

seedling stage (6-leaf stage), knee high stage,

tasselling, 50 percent silking and dough stages.

Moisture stress at early growth stages results in

delayed tasselling and silking. Stress at a later stage of

growth causes a drastic reduction in yield.

Irrigation is important to cope with frost, cold waves as

well as high temperatures and heat waves as it protects

the crop.

Excess water or water logging is harmful to the crop.

The crop is highly sensitive to excess water

(waterlogging) and hence efcient drainage is as

important as irrigation. It is observed that water logging

for more than 3-4 days may result in a yield reduction to

the extent of 50 percent or even complete crop failure,

depending upon the severity of water logging. To avoid

water logging, sowing on ridges is desirable especially

in kharif.

Intercropping:

In Bihar mixed cropping of groundnut with maize is

quite protable. In certain areas, maize is intercropped

with pigeon pea. In rabi maize, intercropping of pea,

rajmash, lentil and potato is also practiced.

Intercropping minimises the risk of failure of the crop

due to various climatic conditions.

Harvesting and post-harvest management:

Maize is harvested when the husk turns yellow and

grains are hard and having about 30 percent moisture.

There is no need to wait for stalks and leaves to dry

because they remain green in most of the hybrids and

composites. The husk is removed from the cobs, and

cobs are dried in the sun for 7-8 days. Thereafter,

grains are removed either by beating the cobs with a

stick or with the help of maize sheller.

The average yield of kharif maize is abou 1.5 - 2MT/ha

while rabi maize is 2.5 to 3.5 MT/ha. Yield also depends

upon irrigation provided at critical stages and other

crop management practices.

Disease and pest management:

Maize is a hardy crop and is less susceptible to pest

and diseases. However, kharif maize tends to be more

susceptible than rabi due to favourable temperatures

and moisture content for insects and pests growth.

Downy mildew and leaf spot are common diseases.

Incidences of shoot y are also noted recently. Farmers

directly use chemical sprays and practices like IPM are

followed in crop protection. Important climatic

constraints in crop production are in Annex 2.

Table 6 : Cost of Maize production in one hectare.


29Directorate of Economics and Statistics, Department of Agriculture and Cooperation http://eands.dacnet.nic.in/PDF/Glance-2016.pdf

30ICSD research team, consultation with PUSA universirsity.


Based on the eld survey, the cost of cultvaiton for

Maize in Bihar is ₹ 44,059 per quintal and the sale is

₹ 52,800 per hectare. The total income per hectare is

₹ 8,741 per hectare and net income per quintal is

₹ 182.10.

4.2.2. Primary traders:

Traders can be divided into different categories

depending on functions and volumes they trade in.

However, to simplify the analysis and establish costs,

commission agents, primary traders and wholesalers

are the three trader categories being considered in this

value chain.

Pr imary t raders are those who col lect the

produce/commodity from producers. There are

different types of primary traders -village collectors

(buying at local weekly haat), farm gate purchasers,

primary traders at the block level and district level.

However, their function remains the same which is

aggregation of the commodity from farmers.

Commission agents form a link between farmers and

traders. Their main function is to nd right primary

traders for farmers based on the quality of produce.

Commission agents do not buy the commodity but

only facilitate the process of sale between the farmer

and the trader. Throughout Bihar, the commission

agent takes approximately 1.5 percent of the sale

value.

Traders and collectors make their livelihood based on

volumes traded, rather than on margins. Margins for

traders are ₹1-2 per kilo or sometimes even less

depending on sale value and quality. Quality is an

important parameter based on which rates are

decided; important quality parameters being moisture

content, foreign material content, size and colour of

maize .

The best quality maize, with optimal moisture

percentage and low broken/damaged grain content, is

called “Shalimar Calcutta Pass” after a Kolkata-based

poultry feed company. Next in the hierarchy is “Super

Bangladesh” or SBD, followed by plain Bangladesh

(“BD”) and nally RBD (“Reject Bangladesh”) that

fetches the lowest price.

Exports in maize are around 20 percent of the total

production and hence quality parameters and rate

decisions also vary as per international markets. The

eld level analysis shows that income of a primary

trader from the trade of 1 quintal is ₹ 1.41 per kg.

3130

Farmers in Bihar do not have primary processing facilities to follow quality parameters. Grains are neither graded nor

cleaned and moisture content of maize is observed at above 10 percent.

Table 7 : Cost and margin of maize primary trader

4.2.3. Wholesaler

The basic function of wholesalers is to trade in large

quantities and supply the commodity to processors

and exporters. Warehousing facilities play a key role in

the wholesale business. It allows the wholesaler to

store excess commodity and control supply of

commodities as per market demands. The wholesaler

support different processors through timely supply of

maize for ensuring the quality of the commodity in the

market.

The wholesaler makes storage losses up to two

percent and also pays for the loading charges. Interest

on working capital for the wholesaler is at 13.5 percent

for 75 percent of commodity value. Wholesalers invest

25-30 percent of the total investment needed for the

business from their own funds while the rest is a loan

from nationalised or private sector banks.

During eld visit in Purnia, 3 – 4 wholesalers also

claimed that they are using warehouse receipt nance

to facilitate the maize business.

4.2.4. Market trade: Climate Context

The traditional marketing system is increasing trade

costs in the value chain.

Handling of commodity: During the market visits in

Bihar, eld team observed that there are huge losses 31during handling of the commodity from farm to

processing. It is estimated that 9.33 percent losses

happen in cereals during handling. The reasons

behind these losses are due to the hook system used

by labour, open storage (without packing), re-trade of

the commodity, traditional methods of heaping and

weighing, etc.

Transportation: Transportation has a hidden but key

role in commodity trade, starting from the producer's

farm to the consumer's doorstep. Traditionally, the

farmers use to transport produce by bullock cart, but

now maize is transported through tractor trollies or 1 or

2 tonne capacity. Individual farmers transport the

produce to the market and collective marketing or

transporting is not undertaken.

Table 8 : Cost and margin of maize wholesaler


31FDr V D Panse Committee to estimate post-harvest losses.

Interest


4.2.5. Processing:

Maize is processed for different purposes. Cattle feed,

bird feed, starch extraction, maize oil extraction,

popcorn making, maize oor, canned sweet corn and

sweet corn soup, canned baby corn, corn akes and

ethanol are important products produced processing

of from maize. However, feed processing is the most

popular in India with 61 percent of maize produced

being used for feed processing. In Bihar, only 8-10

percent of maize is processed within the state despite

the fact that the state has huge and rising marketable

surplus. While the area under cultivation, maize

production & yield have increased, there are only 8-10

maize processing units in Bihar. They are mainly into

milling of our and production of poultry feed. In

absence of adequate processing facility, the huge

marketable surplus of Bihar, especially in rabi season

depends completely on other states for i ts 32consumption .

In all, there are 34 units of maize processing in Bihar, of

which 21 units are of a commercial size. The total

investment in maize processing sector is ₹40079 lakhs, 33generating employment for 2200 employees . Bihar

does have poultry feed mills, mainly in the Muzaffarpur-

Hajipur region, but these are typical of 150-200 tonnes

per day (tpd) capacity. This compares poorly to the

1,000-1,200 tpd capacity feed mills in the South or the

1,000-tpd modied corn starch facilities that

multinationals like Cargill and Roquette have put up in 34Karnataka .

Distillers dried grains (DDGS) and distillers' wet grains

(WDGS) are major products used as feed products.

DDGS is more popular in poultry. “DDGS is the product

after the removal of ethyl alcohol by distillation from the

yeast fermentation of a grain or grain mixture by

condensing and drying at least three-quarters of the

solids of the resultant whole stillage by methods 35employed in the grain distilling industry ”.

The important products of dry distillations are dry

distillers' gains, wet distillers grains, condensed 36distillers soluble .

3332

Figure 6 : Process ow for DDGS processing

Table 9 : Corn feed processor's cost and prot

The cost for processing corn feed is `1707/-. The total

raw material required for producing the feed is 66 kg of

corn and 44 kg of other raw material. The total weight

losses during processing is 4 kg and by products

produced weigh 6 kgs. Processor selling price of feed

is ̀ 2150/- and that of by product is ̀ 30/-. Total margin

for the processor is ̀ 442/-.

Though there are processing units in Bihar for feed

processing, there is a huge potential for corn

processing considering the production and

productivity of corn in Bihar. Following are the

important opportunities as reported by IL&FS in short 37and medium term .

Ÿ Poultry and Animal Feed: Cluster based

interventions need to be undertaken to federate the

existing small unorganised household enterprises

into 8–10 clusters and develop processing mills.

Common facility centres may be created through a

Special Purpose Vehicle (SPV) on a PPP basis to

leverage technology and investments in the

districts of Begusarai, Samastipur, Khagaria and

Saharsa.

Ÿ Corn oil: Establishment of 2–3 large units of 200 to

250 TPD processing capacity may be facilitated in

the four districts mentioned above on a PPP basis.

Ÿ Creation of 100–150 rural warehousing facilities of

1,000–2,000 MT each in the identied clusters on a

PPP basis.

Ÿ Facilitating the establishment of 1–2 units for value

added product table product like corn akes,

popcorn, corn sweeteners etc.

Ÿ Establishment of 2–3 corn based starch producing

units of 150 TPD–200 TPD each.

Ÿ Upgrading the corn oils mills into value added

products like ethanol, alcohol, etc.

Ÿ Induce the formation of additional 5–6 clusters in

other maize growing areas of Bihar like Purnia,

Katihar, Madhepura and Bhagalpur on a PPP basis

with further provision for inducing additional 3–4

cluster, should the demand arise.

Ÿ Establishment of 4–5 grain silos with a storage

capacity of 100,000 tonnes each across the state on

a PPP basis but mainly in the maize producing

districts.


32Bihar: A land of uncommon opportunities for food processing, Udyogmitra portal, http://www.udyogmitrabihar.in/docs/policies/food-processing-schemes.pdf

33Economic survey of Bihar 2015- 16.

34Bihar: An unlikely corn revolution, UdyogMitra Publication. https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/

35Purwadaria, Tresnawati & P. Ketaren, Pius & Sinurat, Arnold & Sutikno, Irawan. (2016). IDENTIFICATION AND EVALUATION OF FIBER HYDROLYTIC ENZYMES IN THE EXTRACT OF TERMITES (Glyptotermes montanus) FOR POULTRY FEED APPLICATION. Indonesian Journal of Agricultural Science. 4. 40. 10.21082/ijas.v4n2.2003.40-47.

36Kelly S Davis Chippewa Valley Ethanol Company, https://www.biofuelscoproducts.umn.edu/sites/biodieselfeeds.cfans.umn.edu/files/ddgs-techinfo-pro-20.pdf. 37

Food Processing in Bihar Road Ahead, interventions proposed for maize processing by IL&FS for Govt. of Bihar http://www.ilfsclusters.com/pdf/Food_Processing_in_Bihar.pdf


4.2.6. Dealers

Dealers are bulk handlers of product, their main function is to store the product, transport it to the retailer and facilitate

business for the processor. In Bhagalpur district, there are more than 35 dealers who are directly involved in corn based

feeds, most of them are accessing feed products from outside the state. The dealer's cost and margins are as detailed in

the below table.

3534

Table 10 : Feed dealers cost and margin

The dealer's margin is �2,60 per quintal on a purchase price of �2,150 per quintal and a selling price of �2600. The costs at the dealer level are transportation, unloading, storage, losses and interest on working capital.

4.2.7. Retailers

Every dealer is associated with minimum 60 to 70 retailers with the estimated retailers in Bhagalpur district being 2200. The retailers carry the stock, display product, provide advisory to consumers as well as educate the customers about the new products. Retailers have reached to the remote and rural areas and they hold responsibility for brand development and establishment.

Table 11 : Feed retailer's cost and margin

The margin at the retailer level are �338 per quintal.

4.3. Factors of relationship

4.3.1. Support System

Extension agencies

Bihar has a network of 39 Krishi Vigyan Kendras (KVK). The

purpose of the KVKs is to disseminate new technologies

developed by research institutes and state agriculture

universities. The state government has a well established

department of agriculture with a huge network of extension

staff throughout the state. Beyond that fertiliser and

pesticide marketing companies run their extension

services through dedicated staffs and provide farm

advisories.

The overall focus of extension agencies is toward

improving production. Most of the subsidies from

government department are directed towards improved

inputs and capacity building in production related

activities. There are several ongoing projects dedicated to

improving maize production directly or indirectly. These are

1. National Food Security Mission

2. RashtriyaKrishi Vikas Yojana

3. Integrated Scheme of Oilseeds, Pulses, Oil Palm and

Maize (ISOPOM)

4. All India Coordinated Research Project Maize.

5. Agricultural Technology Management Agency

schemes.

6. State Rural Livelihood Mission, Bihar

However, there is lack of coordinated effort towards climate

resilient agriculture technological promotion. The

awareness among the ground staff on climatic issues and

efforts being taken by the agency is also observed to be

limited.

Seed production

Under the Agriculture Road Map II, the production of

certied seeds of the recently evolved crop varieties has

been emphasised. As many as 23 crops were identied and

promotion programmes for their seeds have been initiated

by the state government. Other programmes include Chief

Minister's Crash Seed Programme, Seed Village

Programme (Beej Gram Yojana) and provision of subsidy

for the production and purchase of certied seeds.

Recently Bihar government has revived Bihar Rajya Beej

Nigam (BRBN), for strengthening of Bihar Seeds

Certication Agency and multiplication of foundation and

breeder seeds by state farms. The Government has set up

three new seed processing plants at Hajipur, Bhagalpur

and Begusarai. These steps have led to increase in crop

productivity in the state. Government has also launched

'Mukhyamantri Tibra Beej Vistar Yojana. Due to these

initiatives, the seed replacement rate for major crops

like maize have increased substantially in recent 38years .

Research and development

Several agencies are involved in maize research, the main

focus of research is the development of new varieties and

another focus is developing crop protection technologies.

All India Coordinated Research Project on Maize also

focuses on developing a package of practices and

managing resources for maize.

The varietal development at research institutes was more

focused on quality and high protein varieties like High

Quality Protein Maize (HQPM) also known as Shaktiman

several version (1 to 5) are released but not yet popular with

farmers. The reason discovered by the eld team being that

Shaktiman is not offered at a special rates in the market.

This is demotivating for both farmers as well as researchers

for adopting and researching further on the varieties.

Different institutes involved in research anddevelopment are

1. Bihar Agricultural University

2. Dr. Rajendra Prasad Central Agriculture University, Pusa

3. Indian Institute of Maize Research

4. Borlaug Institute of South Asia

5. Indian Institute of Agricultural Research

Meteorological support (IMD)

The meteorological support is necessary during sowing

when the crop is in a critical stage. Maize is susceptible to

water logging, frost and temperatures above 350C. Since it

is cultivated in all three season in Bihar, meteorological

support becomes very essential for maize cultivation.

Farmers depend on newspapers and TV news channels for

specic climate related information, but these sources

provide state specic or country specic information and

not always location specic information.

Indian Meteorological Department (IMD) is slowly bringing

in new technologies and expanding reach to provide region

or zone specic information. However, block level or cluster

level information is not yet available as network has not

developed to that level of granularity.

Overall poor information and dependence on traditional

methods for weather predictions are affecting production

and productivity of maize.


38Economic survey of Bihar, 2015-16.


4.3.2. Business facilitators

Mandi

Gulab Bagh Mandi is the largest trading platform available

for maize trading. Most of the maize trading of Bihar is

facilitated in this Mandi. It is even India's largest maize

trading Mandi with annual arrivals of 5-6 lakh tonnes (7,500-

10,000 tonnes daily during the peak season from mid-April 39to mid-July) . Due to repealing of the APMC Act, there is no

a marketing board responsible for developing and 40maintaining infrastructure . The whole system is non-

transparent. Although it is said to be an open bazaar, the big

traders decide the price and even grain quality by ocular

judgements without using moisture meters or displayed

grades.

Being free from regulations of APMC Act, there are no

administrative impediments to the marketing of produce at

this mandi or the farmer/village aggregator delivering

maize directly at the railway rake points of Purnia, Ranipatra

and Jalalgarh, which are within 25 km of Gulab Bagh

Mandi. About 100 rakes, each of 2,600 tonnes, are moved

annually from these three rake points. Lack of trading

regulations are invariably working against farmers. There is

no or low transparency in price discovery and weighing, as

only ten traders are involved in the majority of trade, trading

25,000 to 50,000 MT each. The market is monotonous and

lacks vibrancy and competition.

The mandi is lacking proper infrastructure for maize

trading. The absence of a metalled road, properly sized and

well maintained shops, raised drying and trading yards,

street lights, drainage, running water and rain shelters are

clearly visible in this Mandi.

Warehousing

The warehousing development and regulations Act was

introduced in 2007. The act provided nancial

opportunities against stored commodities and made

warehouse receipt a legal tender. It was a revolutionary step

to facilitate more credit to those who needed credit and at

the same time reduces NPAs with banks by bringing in

commodity under banks custody.

Bihar has warehouses of central warehousing corporation

as well as state warehousing corporation and there are also

warehouses of private entities and individuals in Bihar. The

pledge nancing and warehouse receipt nancing is

gaining popularity in entire Bihar.

In Purnia, though there is an increase in pledge nancing,

nance against warehouse receipts (Negotiable

warehouse receipts: NWRs) is not observed and only

traders and large farmers are currently availing the facility of 41pledge nancing .

The state government has declared special warehousing

scheme for maize, Establishment of the silo for storage of

maize. Under this scheme, the benet of subsidy will be

given for the establishment of silos for maize storage. The

construction of silo with a storage target of ve thousand

tonnes of maize will be considered as one unit and a

subsidy of 35 percent will be provided on the same.

However, the chances of development of such warehouses

in rural areas are low considered the scale of investment

and size of the structure.

Finance

Nationalised banks and small scale credit cooperatives are

providing credits to farmers. However, the overall credit

offtake is very low and nancing system including a

network of nationalised banks, credit cooperatives and

rural banks is very poor in Bihar. Schemes like Kisan Credit

Card are also not very popular.

Access to credit is easier for trader, processors, and big

farmers rather than for small and marginal farmers, whose

contribution is high in production of maize and other crops.

Most of the farmers reported that their source of nance is

from informal sources like land lords, trader or relatives.

Input suppliers also provide credit to the farmers.

Government policy and schemes

Although, minimum support price (MSP) declaration by

Commission for Agricultural Costs and Prices is expected

to support producers by providing a guaranteed price for

the produce, in practise that is not the case. MSP declared

for maize during 2013-14 to 2016-17 is almost stagnant with

little increase in three years from ₹ 1,310 in 2013-14 to ₹

1,365 in 2016-17. In contrast, MSP for paddy increased

from ₹ 1,080 in 2011-12 to ₹ 1,470 for 2016-17, an increase

of more than 43 percent.

Procurement by Food Corporation of India (FCI) is very low.

During 2014-15 only 721.9 MT was procured by FCI against 42the production of 926 thousand tonnes .

3736

Figure 7 : MSP comparision of Paddy and Maize

The State Government is trying to promote a business environment in Bihar and putting dedicated efforts for attracting investment from private sector. Industrial Area Development Authority of Bihar is majorly involved in all these initiatives. The state government is very keen to develop food processing sector and even stressing on maize processing. There are different schemes to promote maize processing in Bihar as below:

1. The National mission for food processing: The ratio of 75:25 (Govt. of India and States) is applicable for

43Bihar .

2. Food park scheme: This scheme is implemented with individual and special purpose vehicle. The minimum investment by individual or SPV is 51 percent and then rest of the investment is a combination of banks,

44central and state government .

3. Scheme for Integrated Development of Food Processing sector: This scheme is for individuals with 35 percent subsidy or maximum of ₹ 5 crores. For special purpose vehicles (SPVs formed by minimum ve investors), 40 percent subsidy or maximum ₹ 10 Crore is applicable. One time settlement scheme for

45NPAs is also provisioned under the scheme .

Horizontal linkages

State Rural Livelihood Mission, Bihar (Jeevika) has

promoted producers company which is trading in maize on

a large scale. Aaranyak Agri Producer Co Ltd. is having

2,601 shareholders. It was established in 2009 and the

company has traded 1,014 MT in 2015 and 3,064 MT in

2016. The total revenue generated in consecutive years is ₹

1.28 crores and ₹ 4.66 crores, thereby posting tremendous

growth in business and scale of operation. The company is

availing warehousing facility from ITC and Star Agri

company. During 2015, producer company has distributed

patronage bonus of ₹ 6.53 lakhs to all farmers and earned

prots of ₹ 3.84 lakhs. For 2016 patronage bonus has not

been distributed yet.

Such collective initiative is setting up examples for the

promotion of new collectives. Maize is cultivated by small

and marginal farmers throughout the state. The state

government can promote producer organisations for maize

cultivators.

Vertical linkages

Vertical linkages from farmer to trader and farmer to input

supplier are more personal and less institutional in

nature.Farmers receive advisory for farm activities and

climatic information from input suppliers, while traders

provide market information and price hints. However,

information exchange from both the actors is on an ad-hoc

basis and reliability is very low, making vertical linkages

weaker.


39UdyogMitra portal https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/

40Bihar: An unlikely corn revolution, UdyogMitra Publication https://www.udyogmitrabihar.in/bihar-an-unlikely-corn-revolution/

41Report on warehousing in India Study commissioned by the Warehousing Development and Regulatory Authority by National Institute for Public finance and policy, 2015

42Food Corporation of India, database, 2015-16

43Bihar State Government resolution on NMFP http://industries.bih.nic.in/Schemes/SchemeInfo-NMFP-XII.pdf

44Bihar State Government Resolution on FPS http://www.mofpi.nic.in/Schemes/mega-food-parks

45Bihar State Government Resolution on IDFPS http://www.mofpi.nic.in/Schemes/mega-food-parks


4.4 Transaction Cost Analysis

The transaction cost of the product varies at various level of the actors involved in the chain. Here are the factors affecting

maize transaction at various level.

4.4.2. Producers

The search cost for producers involves visits to nearest

markets, interaction with traders, fellow farmers accessing

market information through newspapers, phone calls and

internet. The average distance to market is about 10-12

kilometres where the producer has to spend a full day with

his travel to get the information, contacting the business

link either for input or nished product from the market. The

observation indicates producers spend approximately

`2,166/- per MT for his produce of 4.8 MT from one ha. For

producer, the screening, searching and bargaining costs

are very high in comparison to monitoring and enforcement

cost. To make the maize value chain more efcient, this cost

has to be reduced by strengthening the local institution

(promoting the aggregation/FPO) and making the market

more transparent and accessible for the producer. In this

context, use of modern technology should be encouraged

for online sale, pledging the stock etc.

4.4.3. Traders

In the state, traders are having fairly good contact with

processors or with big traders who are responsible for

trading the stock out of the state. In such a case, the search

cost is minimized but they pay high cost towards

monitoring and transfer cost. At this point, storage plays a

crucial role as most of the time the stock is transferred

immediately after the transcation is nalised. During eld

interactions, all traders interviewed shared bribing

regulatory authorities/institutions at various level for

carrying out their businesses. Their enforcement cost is

also higher than that of the producer. One trader handles on

an average 2000 MT of maize in a year which brings down

his transaction cost to `52/- per MT. The trader bears the

risk of quality assurance and transportation of produce to

the market. More transparency in the Government system

and improvement of production quality will help in reducing

3938

The transaction cost of maize at various level is calculated and shared in Annexure _. The analysis shows the spread of

transaction cost in the following graph.

Table 12 : Percentage spread of Transaction Costs at different actors' level in Maize Value Chain

4.4.1. The transaction cost of various VC actors:

The transaction cost of the maize value chain analyzed across the chain reveals that the variation is very high as the total

quantity handled by various actors differ signicantly. The actor who handles the minimal quantity of the commodities (like

retailers) bears low risk and actors having good forward and backward linkage are able to minimize the risk and the

transaction costs (Processors and traders). In maize, the variability is very high as access to the market is limited, where most

of the produce is going out of the state. The weak institutional structures also increases the transaction cost at each level.

Table -13 shows the analysis that aggregation/FPO-centric models will be more effective to reduce the TC because of

economies of scale. If the stock handled increases for farmers, there's clearly a case for reduced bargaining costs. So the

recommendation for increasing storage and FPO-centric marketing initiatives are pertinent. Similarly, FPO-centric quality and

grading standards can also unlock a huge margin that can be transferred to the producer enhancing his farm-gate price.

Uncertainty about the market, quality of commodity and legality involved in the activities also adds to the transaction cost in

Bihar.

the transaction cost for the trader and also help in making

the Value Chain more efcient.

4.4.4. Processors/ big traders

As there are few feed industries in the state, commodities

go outside the state for processing and return as a value-

added product. The lack of feed processing units in the

state is attributed to lack of infrastructural support to the

industry and to the fact that the power supply is also not

consistent to support the production at processors

level.This process of products returning to state after value

addition increases the transfer cost for the big traders. The

transparency level is low. Legal issues arise frequently with

transporter and suppliers. Searching cost is minimal as

these traders have established very good links with buyers

from other states. The enforcement expense is usually very

high. The processors and the big trader approximately

handle 40,000 MT in a year which means their transaction

cost per MT is ̀ 7.80 which is low. As processors handle the

maximum quantity in the value chain, they are also

absorbing more risk in legal transactions, auditing and

bribery. Though at this level the cost of the transaction is

low but bringing more transparency through legal contract

between buyer and seller and minimizing the enforcement

expenses can make the value chain more vibrant and

efcient.

4.4.5. Retailers

Feed industry is not very efcient in Bihar and the retail sale

of feed is not gaining momentum like it is in other states of

India. However, it is observed that average retailer is having

a business of 50-60 MT in a year with a transaction cost of

`95 /- per MT. Bargaining cost is the major cost at both

seller and buyer end. Quality of the stock is also not

guaranteed as there is no certication on percent

use of maize.

Figure 9 : Spread of transaction cost in Maize in Value Chain


Figure 8 : Factors affecting Transaction Cost in Maize Value Chain


4140

4.5. Risk Analysis based on Transaction Cost VC Assessment

The major risks the producer faces are climate and market volatility related. At the trader level, the risks are low while the

damage, payment and market volatility risks are medium. The major risks faced by the processor are quality and payment

related.

Table 13 : Risk Analysis of Maize

4.6. Constraints and opportunities in maize value chain

While constraints and opportunities are identied at every actor-level, producer and processor level contraints are major

hurdles in the maize value chain. Despite of policy efforts for maize processing, there is much to be realised. The research

team observed that most of the produce goes outside state for processing and is procured back as nished product. This is

evident in feed products. The largest costs observed are in transaportation of feed and fodder which is around thirty six 46percent .

Opportunities exist for both producer and processor in the maize value chain forward. Maize offers ease in cultivation with end

to end mechanisation lowering production cost. Maize is also the most easiest produce in post-harvest handling. The

evergrowing demand of corn in food as well as feed industry is reaping better returns at farm level, with more than thirty

percent of maize and sorghum stovers used as green fodder. Processors from other states are able to capitalise on

opportunities from corn feed and food products demand in the state.

Table 14 : Constraint and opportunities matrix of Maize Value Chain

4.7. Recommendations

There were many insights the team gained in the eld after

interaction with value chain actors in person and in group.

All information were analysed and synthesised to reach the

point where the seed requirement, contingency planning at

the time of exigency, loaclised PoP for production system

and mechanisation are few priorotised recommendation

for the overa l l va lue chain improvement . The

recommendation at each actors level are as follows

4.7.1. Producers

Water resource development and management are key

factors in crop production. Protective irrigation is important

for maize to survive in adverse climatic situations.

Structures like farm ponds, earthen bunds and other micro-

watershed development activities which will provide

protective irrigation coverage to small land holdings and

improve ground water can be constructed either on

farmers' elds or at the watershed level. Use of harvested

rainwater for one or two life-saving irrigations can increase 47the average yield of rainfed crops by 40–90% .

Micro irrigation increases the efciency of water use,

controls weed growth, improves yield and reduces the cost

of production. Sprinkler irrigation is popular and

economical in maize as it has high crop density and use of

drip is relatively expensive.

Mechanisation reduces the cost of cultivation by saving on

the cost of manual labour and increases the efciency of

operation. But access to mechanisation for small and

marginal labours is limited due high cost of implements and

machinery and high running costs. Custom hiring centre in

villages or within a cluster of 4 to 5 villages will increase

access to machinery and reduce running costs and

facilitate productivity by timely and efcient operations.

Credit is required throughout crop cycle to facilitate

different activities. Credit is required for input purchase,


46DFodder market in Bihar: An exploratory study, K.M. Singh and R.K.P. Singh and A.K. Jha and Abhay Kumar, 12 March 2013, pg -27.

46DFodder market in Bihar: An exploratory study, K.M. Singh and R.K.P. Singh and A.K. Jha and Abhay Kumar, 12 March 2013, pg -27.

47http://www.currentscience.ac.in/Volumes/112/03/0471.pdf

Infrastructural gaps


4342

labour wages payment, payment of electricity bills, towards

hired machinery payments and for transporting of produce

to mandi. This can be either facilitated easily through Kisan

credit card scheme or by developing farmer groups and

increasing their capacities for internal lending and

repayments.

Farmer producer organisations (FPOs)carry tremendous

potential for collective action by farmers. FPOs can

facilitate access credit for farmers, run custom hiring

centres, provide input at cheaper prices by collective

purchase and most importantly provide an alternate

marketing opportunity to small and marginal farmers,

thereby reducing dependency on traditional markets.

4.7.2. Traders

A network of warehouses and cold storage provides

alternate space for storing excess production and helps to

manage supply during varying demands. Pledge nancing

are other important opportunities in warehousing. NWRs

can also promote forward contracting and exchange

trading of commodities. In all, warehousing infrastructure at

the rural level or urban level with small or large capacities

can provide alternate marketing and nancing options.

Minimum infrastructure at Mandi is very important to

facilitate and promote trade. Shops, yards, roads, street

lights, water, and ofces can motivate traders as well as

producers to trade in conditions with necessary minimum

comfort.

Regulation and development of market help in facilitating

transparency, controlling oligopoly through licensing and

establishing standard operating procedures for market

participants. It also helps in maintaining existing and

developing new infrastructure by charging trades with

minimum transaction fees. In Bihar, establishment and

enacting of such authority is required for developing fair

and transparent markets.

External infrastructure like roads, communication and rails

can be improved to connect more rural areas with

prominent markets for providing opportunities. This will

also reduce use of petroleum resources and in turn carbon

emissions.

Primary agriculture credit societies in Bihar are

participating in paddy value chain by procuring for FCI and

State Food Corporation. Considering the scale of

production of maize, they can be encouraged to participate

in maize trading by providing them with minimum techno-

managerial support and nancial support.

4.7.3. Processing

There are many schemes from central and state

government directly or indirectly promoting processing in

maize. However, the scale of operation required to

participate in these schemes is very high and these

schemes are meant for private entities like micro, small and

medium entreprises (MSMEs). Micro and small units of

processing can be developed in rural areas for processing

starch, our, akes and canned products from maize.

Medium to large units can be promoted in feed processing

and ethanol processing.

Export is another important opportunity in maize. India is

exporting more than 20 percent of its produce to Asian

countries. Special zones and regions can be identied for

promoting maize export. Dedicated infrastructure like

markets, warehouses, transport single window for

documentation and export procedures can be created to

facilitate the process.

5. Value Chain of Rice

5.1. Background

In India, rice is grown in 43.86 million ha, the production

level is 104.80 million tones and the productivity is about

2390 kg/ha (Agricultural Statistics at a glance- 2015). It is

grown under diverse soil and climatic conditions and the

productivity level of rice is low compared to the productivity

levels of many countries in the world. The highest

productivity is in China at 6710 kg per ha followed by

Vietnam (5573 kg /ha), Indonesia (5152 kg/ha) and 48Bangladesh (4375 kg/ha) .

Rice is one of the most important food crops and feeds

more than 60 percent population in India. The area under

rice crop was 30.81 million/ha in 1950-51 which has

increased to 43.86 million hectares during 2014-15, an

increase of 142 percent. Rice production has registered an

appreciable increase of ve times from 20.58 million tonnes

in 1950-51 to 104.86 million tonnes during 2014-15. The

yield was 668 kg/ha in 1950-51 and has increased to 2390

kg/ha during 2014-15. Major share of rice production takes

place in Kharif season. Rice is grown in almost all the states

in the country. However, the major ve states in rice

production are West Bengal, Uttar Pradesh, Andhra

Pradesh, Punjab and Tamil Nadu. West Bengal produces 4915 percent of total quantity of rice produced in the country .

Rice is grown under varying conditions in India from 8° to

25° N latitude and from sea level to about 2,500 metre

altitude. It is a tropical plant and requires high heat and high

humidity for its successful growth. The temperature should

be fairly high at mean monthly of 24°C. It should be 20°-

22°C at the time of sowing, 23°-25°C during growth and 25°-

30°C at the harvesting time. The average annual rainfall

required by rice is 150 cm. It is the dominant crop in areas of

over 200 cm annual rainfall and is still an important crop in

areas of 100-200 cm rainfall. The rainfall should be fairly

distributed throughout the year and no month should have

less than 12 cm of rainfall. Lesser amount of rainfall is

required as the harvesting time approaches. The elds

must be ooded under 10-12 cm deep water at the time of

sowing and during early stages of growth. Rice can be

grown on a variety of soils including silts, loams and gravels

and can tolerate acidic as well as alkaline soils. However,

deep fertile clayey or loamy soils which can be easily

puddled into mud and develop cracks on drying are

considered ideal for raising this crop . 50

Rice in Bihar

Rice is cultivated in 37 districts of Bihar. Of the thirty seven,

25 districts are falling under the low productivity group

classication (productivity of 1,000-1,500 Kg/Ha) and these

account for 63 percent of the 36.57 lakh hectares of total

area under rice in the state. Only one district is falling under

high productivity group classication i.e. yield more than

2,500 kg/ha . Average area under high productivity group 51

comprising one district during triennium ending 2000-2001

was 2.26 lakh hectares, which was 6.2 percent of total area

(36.57 lakh hectares) under rice in the state. Triennium

Table 15 : Paddy production analysis of Bihar state

Source: http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm

average production was 5.87 lakh tonnes which was 10.5

percent of average total production (55.97 lakh tonnes) in

the State. Triennium average productivity of high

productivity group comprising one district was 2,597 kg/ha

as against the State's average productivity of 1,530 kg/ha.

Area, production, and productivity of rice under different

productivity groups in Bihar during triennium ending 2000-

2001 are given in the table below.

Considering the level of productivity, the leading districts in

2015-16 were — Lakhisarai, Sheikhpura and Rohtas. The

highest level of productivity (4270 kg/hectare) was

recorded in Lakhisarai. Considering the production level,

the leading districts are — Rohtas, Aurangabad and 52Banka .

Rice is one of the main crop of Bihar but its productivity is

very poor. More than 60 percent rice area is concentrated in

Bihar in low productivity zone and this zone contributes

more than 50 percent of rice production of the State. Area

coverage under rice with high yielding varieties is about 65

percent and irrigation facility is available for about 40

percent rice area in the state. If the productivity of low

productivity zone is increased, the rice production can be

increased considerably without increasing the area under 53rice . This can be achieved by adopting various climate

resilient technology like using the ood and drought

resilient varieties, promoting the seed bank for seed

availability after the recession of ood, adopting water

efcient technology like SRI, AWD, crop rotation, etc.


48https://www.nfsm.gov.in/StatusPaper/Rice.pdf page 1

49https://www.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4

50http://www.yourarticlelibrary.com/cultivation/cultivation-of-rice-in-india-conditions-methods-and-production/20919

51http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm

52http://finance.bih.nic.in/Reports/Economic-Survey-2017-EN.pdf

53http://drdpat.bih.nic.in/PA-Table-04-Bihar.htm


4544

Figure 10 : Paddy coverage in Bihar

5.2. Actors

In the rice value chain, a number of actors play important

roles. Being a major commodity, the volumes handled are

also very large and challenges are faced by all the actors in

the value chain. Although the supply chain is established

for hundreds of years, still there is lack of linkages amongst

the actors as far as the value chain is concerned. The main

actors involved in the rice value chain in Bihar are input

suppliers, farmers (producers), traders, processors,

retailers and service providers.

5.2.1. Input Suppliers

The input requirement for rice cultivation include seed,

fertiliser, manure, pesticide, weedicide and farm

equipment.

Seed – Farmers normally use their own seed but with the

increased awareness and need for higher production, the

farmers have understood the importance of hybrid seeds

and seed replacement. Farmers who use their own seed

have a high percentage of admixtures and seed purity

remain a big challenge for them.

A number of companies like Bayer, US Agriseeds and

DuPont Pioneer are working in Bihar for suppling paddy

Prominent varieties of rice suitable for lowland are Prabhat

and Rajendra Bhagwati and those suitable for dryland are

Vikas and Sahbhagi . Other varieties used in Bihar are

Arize-6444 (115 days), US Agri – 312 (110 days) and PHB-

71 (125 days). Drought Tolerant varieties of rice – Sahbhagi

and Sabor Ardhjan (both have 40 q/ha). Submergence

tolerant variety of rice is Swarna Sub – 1 (long duration 55-

60 q/ha). It can tolerate 14 days ash oods after 30 days

transplanting (in ood conditions it gives 30-35 q/ha).

Research is being undertaken at Bihar Agricultural

University for suitable rice variety for Submergence (North

Bihar) and Drought (South Bihar) conditions. A single crop

may have to face both the conditions during its growth

period, thus research is also being undertaken to

incorporate resistance for both these conditions in rice.

There is scope of producing long grain rice in Bhagalpur,

but due to non-availability of appropriate rice processing

(broken percentage will be more in absence of appropriate

technology), the production cannot be taken up on a large

scale.

There is government subsidy offered on selected 8-10

hybrid varieties of rice.

To achieve self-sufciency and self-

reliance in meeting the growing

demand of quality seeds of high

yielding varieties from the farmers

of the State at a reasonable price,

the Bihar Rajya Beej Nigam Limited

(BRBN) was incorporated on July

18, 1978 under the Companies Act,

1956 by the Government of India

with the nancial assistance of

World Bank under the Second

National Seed Project.

seeds. Other than private companies, the seed is also

supplied from Agriculture university and State Seed

Corporation i.e. Bihar Rajya Beej Nigam Limited (BRBN).

Department of Agriculture also supplies seeds of improved

and traditional varieties to farmers. PACS and some groups

formed by Jeevika are also involved in sales of the paddy

seed to farmers.

A specialty rice called “Katarni” (small grain

aromatic) has achieved eld trials of upto 40 q/ha

yield. The aroma of this rice is dwindling over time.

Manure – Most of the farmers use their own manure. In the

ood prone areas, farmers don't use a lot of manure.

Instead, they use chemical fertilisers injudiciously. Since,

most of the farmers are not undertaking soil testing, they

don't have an idea about the quantity of fertilisers to be used

in paddy cultivation. Moreover, the use of cow dung as fuel

cake is a matter of concern as this can be used as compost

in paddy production.

Table 16 : Consumption of Nutrients during last 5 years (In MTs.)

Source: http://krishi.bih.nic.in/Fertilizers.htm

Fertilisers – The fertiliser/nutrient consumption in the state

is increasing gradually since 2006-07. It has risen from 54163.61 kg/ha in 2011-12 to 201.07 kg/ha in 2015-16 . (see

table below).

The fertilizer requirement for the State is planned annually

according to the expected crop coverage area. The

requirement is placed to the Government of India in a zonal

conference organised at New Delhi. Based on the

discussions as per discussion with State representative,

the Department of Agriculture, Cooperation and Farmer

Welfare, Government of India and Department of Fertilizers,

Government of India x the annual target of fertilizers

requirement for the State. According to the target xed by

GOI, the State prepares district wise and districts prepare

Block wise and month wise supply plan of different

fertilizers.

When the State receives the monthly company wise

fertilizer supply plan from the Department of Fertilizer (GOI),

the State allocates this to all the districts according to

district requirement. The company receives the fertilizers at

rail rake point and distributes this to wholesalers or retailers

as per the district wise allocation. Wholesalers' sell

fertilizers to the retailers and nally, retailers sell fertilizers to

the farmers. Chemical fertilisers are distributed through

cooperatives (PACS) and government input stores.

Fertilisers are widely used in rice cultivation. These include

DAP, urea, NPK (usually 20-20-20), muriate of potash

(MOP) and to a lesser extent SSP, Gypsum and

micronutrients such as zinc and sulphur. The sale price of

various fertilisers are Urea – ₹ 450; DAP – ₹ 1140; NPK – ₹

850; SSP – ₹ 405; MoP – ₹ 560; Gypsum – ₹ 270 (all bags

are 50 kg capacity).

Pesticides, Fungicides, and Weedicides - Pesticides and

fungicides are used for control of stem borer and false

smut. The state is promoting zero tillage concept in which

there is a recommendation to use weedicide in paddy

cultivation.


54http://krishi.bih.nic.in/Fertilizers.htm


4746

Wholesalers: The input wholesalers based at district head

quarter get stocks from private companies as per the

Government schedule and sell these in their existing

channel of retailers at block and village level.

Retailers: Input retailers operate small shops in the block

and villages of the districts. They buy from private

wholesalers in the area or in neighbouring cities. They sell

different varieties of rice, including local varieties which

reects the shortage of improved seeds. A range of

chemical inputs including Chlorpyriphos, Phorate,

Pendimethalin, 2-4 D and Acephateetc is sold by the

retailers. In recent years, biofertilisers like Azotobacter,

PSB, Neem Oil and Trichoderma and Pseudomonas have

also found its place in the retailer's shop. High Water

Absorbent Polymer is now available in many retail shops

which is used in dry areas for soil moisture conservation.

5.2.2. Producers

Land holdings of farmers in the three AEZs studied, ranged

between 0.5 to 20 acres. Farmers grow wheat, rice, maize,

mustard seed and a variety of pulses and horticultural

crops. Rice is the major crop for most farmers, as it is a

traditional food crop and nd its place both in ooded and

dry areas. Most farmers practice crop rotation of rice and

wheat on the same eld for years rather than alternating

with other crops such as pulses, oil seeds or vegetables.

In the context of Bihar, oods and drought are the two main

factors which impact crop cultivation. In the last 10 years,

the producers are facing the risk of uncertain rainfall

especially at the time of nursery raising and transplanting.

Some of the farmers reported that they had to throw away

the nursey raised paddy transplants as due to delayed

rains, transplanting could not be taken up. In the ood

affected areas, farmers reported crop loss of upto 100

percent during the rainy season. At the time of owering,

rains wash away the owers resulting in chaffy ears. With

limited availability of varieties, only a few farmers are able to

cope with uncertain rainfall.

The Department of Agriculture is promoting SRI (System of

Rice Intensication) but there is poor eld level adoption

amongst farmers due to the high skill requirement for

transplanting and weeding in SRI.

Smallholder farmers use a protion of the produce for family

consumption and surplus is sold in the market. For a family

of ve members, approximately 25 percent (10-12 quintals)

of the total household level paddy production is kept for

own consumption (ICSD eld survey). There are also

cases, when smallholder farmers need cash to buy inputs

for the next planting season, they sell their produce and

later purchase the grain necessary to feed the family.

Most farmers are not able to sell their product at

Government declared minimum support price (MSP) due

to the inferior quality of the produce and the lack of

accessibility to the sale point of the FCI or designated

agency. Farmers are forced to sell the produce in mandis

(local markets) or to traders at a price lower than the MSP.

Producers/ small collectors are aware of the market price

offered by traders. They are ignorant regarding the MSP

though the same is announced through radio, newspapers

and also displayed at PACS. Farmers prefer to sell the

produce from the farm gate after keeping the required

stock for their own consumption. They are not aware of

post-harvest management aspects. Different types of bags

are used by the farmers for packing paddy (empty bags of

fertilisers, cement, old gunny bags, etc). These pose a

health risk for consumers. Most of these bags are normally

thrown away after reaching the mills and a proper recycling

mechanism for the bags does not exist, which poses a

threat to the environment.

The cost of production for rice in Bihar is approximately ₹

22,113/hectare.

Due to the lack of storage facilties near the eld,

transportation of paddy from eld to home is an energy

consuming activity, involving labour and tractor. On an

average, the producer travels between 0.1-0.5 km and in

some cases, upto 2.0-3.0 km for transporting the harvest

from the eld to the storage point in the house. Paddy sold

to the local collector/trader / PACS is transported a distance

of approximately 3.0-5.0 km and in certain cases, upto 6.0-

7.0 km in poor road conditions by the producer through

tractors.

5.2.3. Aggregators or traders

The farmers sell paddy to local traders in the villages, in the

nearest market, at the PACS and sometimes directly in the

Mandis (local markets). Local traders in the village buy

small quantities of paddy and sell this to larger traders or

rice millers. On an average 3-4 small collectors are

operating at the village level. These collectors trade an

approximate volume of 150-250 bags of 50-60 kg paddy

(i.e. 7.5-15.0 MT paddy) each. There are 1-2 large traders

making a transaction of 40-70 MT paddy in each village.

Apart from these, PACS is also trading in some areas to the

tune of 50-60 MT of paddy annually. During the peak

procurement season (October-December and then again

March for Agahani paddy) the trading transcations take

place on a daily basis, whereas during the lean season,

transactions take place on a weekly basis.

Local collectors and large traders are not very quality

conscious. Their storage system is temporary in nature and

not upto acceptable storage standards.

The small traders or aggregators operate their business

with low margin but handle high volume for the

sustainability of their business. Margins for traders is ₹ 4.15

per quintal or sometimes even less. This is sufcient since

quality differentiation is limited.

Table 17 : Cost of paddy production in one hectre of land



4948

Table 18 : Cost and margin of Paddy trader

Figure 11 : Functioning Primary Agricultural Credit Societies (PACS)

5.2.4. Food Corporation of India (FCI)

FCI plays an important role in monitoring the price of the produce. The FCI procures the produce from farmers whenever the

market price is operating lower than the MSP. However, in the eld it was found that this intervention did not have a signicant

impact as farmers were selling paddy at less than the MSP. Though there is a steady increase in MSP over the years, but the

procurement through FCI is less than 15 percent of the total production in the state.

5.2.5. Rice Millers

Processors play a vital role in the paddy value chain. Processing of paddy results in rice as the main product. Rice is the

source of many products available in the market for consumption. Paddy has to undergo de-husking, cleaning, polishing and

packaging to become rice. The husk of the rice is reused as fuel in the processing plant or sold at a throwaway price. Rice bran

is sold to solvent plants that extract oil. It is sometimes used by the feed manufacturer to use as an additive for cattle feed.

There are rice mills in all the district but they have low capacity and are not modernized to produce high quality rice. The

processors from Haryana and Punjab used to collect the paddy through their agent and sell it to FCI which then comes back to

the state for distribution under PSD. The small scale rice mills are not adhering to the norms of pollution control board which

demands the rms to ensure propoer handling, storage and transporation of rice husk ash. During the processing of paddy,

the disposition of boiler ash can result in emissions, thereby requires effective management of ash. The rice miller in the state

is procuring the paddy through their agents (traders in villages) and through the open market. The miller earn a prot of ₹

378/- per quintal. Broken rice is purchased by the rice traders.

It was observed during the visit that processors and large traders do not buy insurance for the commodity (whether in storage

or in transit) and hence are exposed to risks arising from re, theft, etc.

Figure 12 : Paddy Procurement by Food Corporation of India (FCI)

Table 19 : Cost and prot of rice miller



Small millers at the village level process very small quantities of rice for home consumption as a service for villagers. Medium-

and large-scale millers buy raw grain from the mandi through traders, and a few are registered as traders themselves. They

also purchase paddy from PACS and in turn sell processed rice (with 60 percent recovery).

For specialty rice the price offered is based on quality. The quality characteristics of rice are the length of the grain, whiteness

and amount of broken pieces. Millers set an acceptable level for each quality characteristic and discount the price given for

each percentage over the acceptable limit, rejecting when damage or moisture is above a certain percentage.

5.2.6. Flattened rice Processor

Flattened rice (also called beaten rice or Chuda) is a rice which is attened into at light dry akes. These akes of rice swell

when added to liquid, whether hot or cold, as they absorb water, milk or any other liquids. The thicknesses of these akes vary

between almost translucently thin (the more expensive varieties) to nearly four times thicker than a normal rice grain. This

easily digestible form of raw rice is very popular across Bihar. Normally attened rice is taken with curd in Bihar and jaggery is

added to taste. There are a number of “Chuda” makers in many towns in Bihar and they are one of the important actors in the

rice value chain in Bihar.

Paddy is either directly purchased from the farmers or local traders. chuda makers don't store paddy. Paddy is soaked in water

and immediately processed into chuda. The chuda is further sold directly to customers or retailers.

For the chuda processor, the total costs are ₹ 1625 per quintal and the margin is ₹ 191.

5.2.7. Flattened Rice retailer

The chuda is further sold either to retailers or directly to customers in small quantities especially during the festival season of

Makar Sankranti. After processing into Chuda the margin goes up. The cost for the retailer is ₹ 3,000 quintal and the retailer's

margin is ₹ 383 per quintal.

Table 20 : Cost and prot of attened rice processor

Table 21 : Cost and margin of attened rice retailer

5150

5.2.8. Wholesaler

Rice wholesaler's main responsibility is to bring rice from other states and distribute to local retailers.The retailers approach

wholesaler for rice stocks. The total cost of rice wholesaing is ₹ 2,875/- per quintal and whoelaser's sale price is ₹ 2,950/- per

quintal, earning him a margin of ₹ 74.27/- per quintal.

5.2.9. Retailers

Rice in Bihar is sold by retail shops, dealers and traders in Mandi. Apart from this, huge quantities are distributed through

Public Distribution System (PDS). Rakes of rice of Food Corporation of India (FCI) come from Haryana / Punjab (19000 MT per

month) (1 rake=42/58 wagons each of 60.1 MT). FCI does not have a direct role in distribution or procurement.

Table 22 : Cost and margin of rice wholesaler

Table 23 : Cost and margin of rice retailer



5.3. Transaction cost analysis:

Factors affecting the TC at various level of the value chain is illustrated below:

5352

5.3.1. The transaction cost of various VC actors:

The transaction cost analysis was completed for rice value chain in Bihar for all value chain actors. Producer and retailers

handle the minimum stocks and hence bear the lowest risks. Traders and processors are handling larger volumes, bearing

maximum risks. But, it is important to understand that transaction risk is low as compared to the actual risk of individual

producer because of climate uncertainties and other factors. Processors and traders lower the risk by developing good

forward and backward linkage. Policies play a major role for risk minimization. In rice, the variability is not high as there is local

and domestic market available. The weak institutional setup also increases the transaction cost at each level. The analysis in

above table shows that transaction costs could be signicantly reduced by aggregation/FPO-centric models at the

producer's level due to economies of scale, whereas at the trader and processors level it could be reduced by adoption of

improved transfer and monitoring systems and stock handling. Quality and grading standards can also unlock a huge margin

that can be transferred to the producer enhancing their price. It is important to note here that policy level intervention and its

appropriate implementation will help to reduce the transaction cost. Uncertainty about the market, quality of commodity and

legality involved in the activities also adds to the transaction cost in Bihar.

5.3.2. Producers:

Lack of market information and knowledge about tapping the opportunity are the main challenges at the producer level. The

search cost for producers involves interaction with traders and fellow farmers, accessing market information through

newspapers, phone calls and internet. Producers spend approximately ₹ 1405/- per MT for the produce of 3.0 MT from one

ha. For producers, the screening and bargaining costs are very high in comparison to search, monitoring and enforcement

cost. To make the VC more efcient, this cost has to be reduced by strengthening the local institution (promoting the

aggregation/FPO) and making the market more transparent and accessible for the producer. In this context, modern

technology should be used for online sale, pledging the stock, etc. Grading and quality improvement of produce are

important to reduce transaction cost, which could be improved by extension services and capacity building programmes.

5.3.3. Traders:

In the state, traders are having fairly good contact with processors (small, medium and large). In this case, the search cost is

minimized but they are paying high costs towards bargaining and enforcement. Storage plays a huge role as most of the time

the stock are transferred immediately. Traders shared that bribes are paid at various level for carrying out their businesses.

Their enforcement cost is higher than the producer. One trader handles on an average 500 MT of rice in a year with a

transaction cost to ₹ 156/- per MT. The trader is taking the risk of quality assurance and payment uncertainties because of the

non-contractual setup of the trading in the market. More transparency in the government system and improvement of

production quality will reduce the transaction cost of the trader which ultimately helps in streamlining the VC.

Figure 13 : Spread of Transaction cost in Rice Value Chain

Figure 14 : Spread of Transactional cost in Rice Value Chain

Table 24 : Percentage spread of Transaction Costs at different actors' level in Rice Value Chain



5554

5.3.4. Processors/ big traders:

Rice processing is spread across the state and is available in small, medium and large capacities. As power supply is a

constraint, processors use diesel as a fuel other than the electricity. They have the institutional setup with the state food

corporation and PACS apart from direct linkup with traders and producers. The transparency level is low for the transactions.

The legal issues arise frequently with the transporter and the suppliers as there is no appropriate contractual arrangement

within and outside the state. Searching and screening cost is minimal as these traders have established very good links with

institutions, buyers and suppliers. The enforcement expense, transfer and monitoring and bargaining cost are high. The

processors and the big trader approximately handle 25,000 MT in a year which means their transaction cost per MT is ₹ 12.74

which is low. As processors handle maximum quantity, they are also absorbing more risk pertaining to legal transaction,

auditing and bribery. Although at this level, the cost of the transaction is low but by bringing in more transparency, legal

contract between buyer and seller and by minimizing the enforcement expenses the VC can become more vibrant and further

minimize the producers cost by improving the market dynamics.

5.3.5. Retailers:

Retail sales of rice in the state are not much diversied because of a common variety of paddy. Trade in specialty rice is limited

and restricted to select big cities in the state. It is observed that an average retailer is having a business of 20 MT in a year and

that the transaction cost is ₹ 240 /- per MT. For the retailer, the major cost is bargaining cost at both seller and buyer end.

Quality of the stock is also not guaranteed as there is no certication mechanism.

5.4. Risk Analysis based on Transaction Cost VC Assessment

The major risks faced by the producer are related to climate an labour. The trader faces high risk of damage/ theft and

payments and the processor faces risks of quality, infrastructure, policies & legality and payments as major risks.

Table 25 : Risk Analysis of Rice

5.5. Constraints and opportunities in Rice Value Chain

Though the declared MSPs are higher than the market price in past few years, the limited presence of FCI in the market

safeguards' producers' interest. Lower market prices resulting in loss for producers is the biggest constraint in paddy value

chain. The presence of newly release wide range of paddy varieities which can survive both drought and ash oods are

available however, the varieties need wider adoption among farmers.

Punjab and Haryana state dominate production in country and also have state of the art processing infrastructure. The

processor from both these states dominate Bihar market as well as FCI supplies. The schemes and subsidies provided by

Bihar state government are recent, it will take time for development of inhouse processing facilities and competitive products

within Bihar.

Table 26 : Constraints and opportunities matrix of Rice Value Chain



5.6. Factors (Situation and

Constraint) and scope of

improvement

5.6.1. Extension and research:

The productivity of rice is dependent on the quality of

advisory service available to the farmers. It is observed that

there is a gap between the farmers and the service

providers like the department of agriculture and extension

agencies like ATMA and the NGOs working in the state. The

private companies (specially input suppliers) are offering

advisory services in high productivity areas with a mandate

to increase the sales of their inputs. Their visit also varies as

per the demand of the input sale which does have any

scope to guide the farmers in the critical stages like the post

harvest period. Borlaug Institute for South Asia (BISA) is

also catering only to the needs of farmers in the areas close

to the vicinity of the institute.

5.6.2. Package of Practice and Post-

Harvest know how

To cater to the needs of family and efforts for selling more

volume of rice (which is of coarse quality and lack of market

for premium rice), farmers try to grow more quantity of rice

and there is less focus on the quality. As a practice, farmers

prefer to broadcast seed and fertilisers, rather than

transplant paddy. The seed used is also of mixed type. As

the labour availability is becoming scarce, the practice of

rice transplanting is reducing, specially where family labour

is not available.

Farmer awareness about importance of crop rotation, soil

testing and proper land management is low. Only

progressive farmers are in direct touch with department

and follow their recommendations.

Paddy is not stored for long at the farmer's end. Within the

short span of storage, there is weight loss and loss due to

attack of rodents. There are incidences reported when

paddy lot was received with moisture and fungal attack and

entire rice was spoiled.

The government agencies and extension services are

trying to disseminate information about farming practices

to the farmers, but it is not reaching the farmers in the

remote areas.

5.6.3. Input Availability

With adequate supply of fertiliser in the state, many farmers

in remote villages are not able to acess the input due to bad

road condtion and distance to the sale point. This in turn

results in high transcation cost. In addition, it appeared that

in some instances, farmers are over-applying chemical

inputs including DAP and urea. Various Bio-fertlisers

without any quality certication are available on the input

retailers' shelves. It was informed that bio-fertilisers are

coming from faraway places like Bangalore, which means,

its efcacy must have reduced because of exposure to high

temperature during transportation.

5.6.4 Farm Implements

There are no 'formal' Custom Hiring Centres, but, there are

progressive farmers and entrepreneurs who have large

equipment and tractors. These farmers and entrepreneurs

rent their implements to other farmers during cultivation. It

has been observed that at the time of sowing the pressure

on hiring the implement is high, because large area needs

to be covered in a shorter period. The existing policy of

pushing higher horse power farm machinery (tractors

250%, combine harvestors 400%, power-tillers 150%

growth between 2009-2015) in Bihar is less effective in

value addition in pre-production stage. Rotary weeders and

transplanters that require lowe household level

investments can create a signicant impact on reducing the

labour costs.

There is high degree of parcelization of lands in Bihar.

Coupled with this is the fact the higher costs in production

are not incurred during land preparation, but during

transplanting and inter-cultural operations. The machinery

required for these are low-investment, farmer-friendly

(knowledge, skills to operate) and most importantly,

gender-friendly.

With the current set of practices already adding 30-60

percent of costs in terms of labour, it is suggested to

conduct a review of SRI in the context of rice cultivation in

Bihar. SRI has shown beyond doubt that it is quite labor-

intensive and hence not the protable way ahead for rice

cultivation in the state. Further, the effects of scale are yet to

be evident in SRI.

5.6.5 Irrigation Facilities

Bihar has fertile land and availability of water resources.

However, in spite of the fact that the irrigation network in

Bihar is spread across approximately 86.25 lakh acres,

irrigation is yet to reach many farmers. About 61.12 percent 55of net cropped area is irrigated . In Bihar, irrigation is

available through canals, tube wells, ponds and some

other modes. Flood prone areas are affected rst by ood

and later followed sometimes by drought like situations.

The synchronization between oods and duration of rice

crop sometimes does not match and ultimately results in

total crop failure. Farmers use pump sets and it is mostly

rented by the large farmers to the small and marginal

farmers. Lack of regular supply of electricity and higher cost

of diesel is one of the factor affecting margin of farmers.

Uneven land is also found in certain places and tal has ood

water retained for a longer period.

5.6.6 Plant Protection

Rice crop gets affected by stem borer, blight, blast, brown

hopper and cut worm. As rice is grown mostly in ooded

condition, pest and disease infestation is high. Farmers

reported that due to small landholdings, their plant

protection activities are less. Many do not realise that their

crop losses are high. Normally, the farmers follow the

recommendation of the retailers. The retailers are

frequently visited by the companies' representatives for

sales promotion. The places where retailers are having

access to institutions like KVK, university, are adopting their

recommendations.

Rats are also a big problem reported by farmers. The

measures to control rodents are less.

After harvesting the paddy is either sold or given to PACs

and nally reaches millers, where it is stored and pest

control measure is adopted.

5.6.7 Soil Testing Services

Department of Agriculture provides soil testing services.

There are mobile soil testing vans which goes to villages

and organise camps for soil testing. There are some private

companies also providing soil testing services. The soil

testing services are available on highly subsidised rates or

nominal charges. But, in most of the areas, farmers

interviewed reported that soil testing facility is not available.

5.6.8 Business Enabling Environment

The key aspects of business enabling environment for rice

in Bihar are:

Ÿ Transportation infrastructure;

Ÿ Financial Services

Ÿ The open mandi system; and

Ÿ The minimum support price mechanism.

5.6.8.1 Transportation and infrastructure

The condition of the main roads was found to be good but

the connecting roads to the village are in poor condition. At

the same time, the transporters are concentrated in the

main hubs. To feed the villages and procurement from the

hub is a challenging task and farmers are again dependent

on small vehicles and agents. This, in turn, increases the

cost and losses during transit. The situation becomes more

challenging after oods. Most of the feeder roads and small

bridges are broken. In some of the cases transporters

report about local police harassment. It was observed that

during the transport, transit insurance mechanism is not

adopted and stakeholders involved also bear a risk by not

taking transit insurance.

5.6.8.2 Financial Services

Farmers are equipped with Kisan Credit Cards and banks

are also very cooperative now, as compared to 5-10 years

ago. Jeevika is also working with groups and organising

the inter-loaning facility. Still the relations between the

producer and buyer is strong and credit is availed in case of

a requirement from the farmer .

5.6.8.3 Mandi

A Model APMC Act was formulated and circulated to the

States/UTs in the year 2003 for adoption. The Model Act

provides for contract farming, direct marketing, setting up

markets in private and co-operative sector, e-trading, single

point levy of market fee, single registration of market 56functionaries, farmer-consumer market etc . APMC Act

was repealed in Bihar in year 2006, post open mandi

systems is functional. In case of rice / paddy neither miller

nor farmers have to pay any charges to the Mandi.

5.6.8.4 Minimum Support Price

The government has set a minimum support price of ₹ 1470

/ qtl of paddy for year 2017. But no producer shared getting

paid this price by traders. Only where the paddy is sold to

the PACS, the producers are paid the minimum support

price.

5.6.8.5 Upgrading

In the rice value chain in Bihar, the PACs, aggregators and

millers play a vital role. There seems to be lack of capital

investment and incentive for upgrading their units. Rice

millers interviewed were keen to upgrade but they are not

sure of the demand of improved grades of rice in Bihar.

Farm equipment suppliers expressed their willingness to

upgrade themselves. Chuda makers are willing to upgrade

but their knowledge about improved technology and

returns after upgradation is limited.

5.6.8.6 End Markets

Rice is sold to consumers by the local shopkeepers and

retailers. Market preference is for coarse rice. But in the big

cities, long grain and ne grain rice is gaining popularity.

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55Agriculture Road Map - Biharwww.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4

56http://agricoop.nic.in/sites/default/files/overview.pdf


Most of the ne grain rice is imported from other states like

Haryana and Punjab. Local varieties are sold at ₹ 28-30 per

kg. About 10 different types of rice is being sold in the open

market.

5.6.8.7 Inter-Firm Cooperation

Horizontal Linkages: Farmers have been organised into

groups under the various schemes at village and block

level. Each group has 10-15 members and in some cases

upto 35-40 members. Jeevika is playing an important role in

organis ing farmers groups. NGOs l ike AKRSP,

Technoserve, BAIF and Access are also involved in forming

farmers group. Their activities are not only limited to crops,

but also linked to livestock, micronance etc. Farmers have

been benetted particularly in terms of shared labour,

equipment and collective procurement. Still a trust building

is required among the groups before taking up larger

initiatives. Farmers still prefer to deal individually with

traders rather than as a collective.

Vertical Linkages: At the village level, strong linkages exist

between farmers and local traders. Personal relationships

are very strong between them. In times of crisis, farmers are

supported by local traders through loans. The local traders

also inform farmers about the use of inputs, marketing etc.

Vertical integration is not seen in the rice value chain of rice.

The partnership approach is lacking. Farmers do not get

timely or accurate market information. Traders try to keep

the prices offered as low as possible to increase their

prots.

5.7 Scope of Improvement

(Recommendations)

5.7.1 Extension and research:

Participatory Technology Development could be adopted

for effective dissemination of technology. Farmers group

formation and linkage with extension services is another

important area for improvement. The challenging areas

where ood incidences are likely, intensive training and

capacity building measures need to be taken with the help

of line departments. Use of ICT through normal mobile SMS

services regarding ood warning and recommendation of

cultivation practices could be adopted on a larger scale.

5.7.2 Package of Practice and Post-

Harvest know how

Capacity building of farmers and training them about post-

harvest technologies can be undertaken for improving the

value chain. There is the scope for improving the storage

facilities with the farmers and collectors. This will help in

reducing the storage losses. As there is not much

uctuation in prices, storing for a longer period may not

yield much prot, but reducing the post-harvest storage

losses will add to the overall protability.

Storage of rice for farmers' own consumption is

challenging. Weevils damage is reported. The use of

fumigants or chemical could be researched to replaced

with low cost nitrogen / CO2 gas ushing systems.

Ÿ Storage facility at village level could be created

e x t e n s i v e l y t h o u g h PA C S a s w e l l a s b y

entrepreneurship mode

Ÿ Warehouse construction at mandi level/miller level to

create the nance linkage with institution

5.7.3 Input Availability

Village level input availability centres could be created. The

same can also be routed through PACs. As far as availability

of Biofertilisers are concerned, it would be better to have

them manufactured in the state itself through universities,

zonal research centres and KVKs.

Availability of ood and drought resistant seeds varieties

should be made available.

5.7.4 Farm Implements

There are various small scale equipment available with

manufacturers. They keep on experimenting with

implements based on the feedback received from the

farmers. Orienting manufacturers towards integrating

renewable energy for running the implements will be

useful. As a higher proportion of labour cost is on inter-

cultural operations and sowing/transplanting (adding upto

37 percent), there is scope of increasing the use of farm

implements.

5.7.5 Irrigation Facilities

Adoption of Water Stewardship and Water Efcient

Technologies will be helpful in controlling production costs.

There is need to store the water for the crops in the Rabi

season.

5.7.6 Plant Protection

To reduce losses, availability of inputs ar village level is

required. But, for a sustainable practice, non-chemical

control measures in the post-harvest produce should be

worked upon and the manufacture and distribution of

biological agent should be promoted.

5.7.7 Soil Testing Services

Distribution of soil testing kits and its service availability

through gram panchayats would be benecial for further

the cause of soil testing among farmers. At the same time,

farmers also need to be trained to adopt recommendations

based on soil test results.

5.7.8 Business Enabling Environment

The key aspects of the business enabling environment for

the rice in Bihar are:

· Transportation infrastructure

· The open mandi system and

· Ensuring the minimum support price mechanism.

5.7.8.1 Transportation and infrastructure

There is scope of improvement for road connectivity and

alternate transportation means which are cost effective.

5.7.8.2 Financial Services

Formation of FPOs and collective collateral for purchase of

inputs in time could be worked upon. At the same time,

equipping more farmers with Kisan Credit Cards will help

them access credit at lower rates. Increasing the

penetration of PACS (Input/Credit) will therefore also

increase the availability of credit and access to inputs

leading to signicant value addition in the pre-production

phase.

5.7.8.3 Mandi

From traditional way of negotiations by traders, a

transparent system could be worked upon, but this

requires a lot of efforts and policy level decisions.

5.7.8.4 Minimum Support Price

For benets of MSP to benet the farmer, it is important to

have farmer's policy level dialogues and better

coordination amongst different departments and farmers/

FPOs/ PACS.

5.7.8.5. Upgrading

Tradition rice mills are running on diesel or electricity and

use of renewable energy sources using Solar/wind energy

could be explored. There is also the possibility of using

pneumatic based operations instead of using conventional

conveyors. Many technological improvement could be

researched for chuda making, which presently is highly

labour and fuel intensive.

5.7.8.6 End Markets

Branded Chuda and other speciality rice could be

promoted through retailers. Once there will be an increase

in demand for specialty rice in the local market, farmers will

tend to grow such varieties and millers will also try to

upgrade their technologies to process speciality rice. This

will help in reducing the dependency on import of premium

rice from other states.

5.7.8.7 Inter-Firm Cooperation

Horizontal Linkages: Organising the farmers into FPOs

and organising business meets with the traders and buyers

will help farmers to increase their bargaining power. There

is a need to motivate farmers towards enterpreuernship

skills. At the same time, the understanding about collective

marketing and aggregation will help farmers in not only

reducing the other overheads and losses but also

negotiating a better offer for themselves.

Vertical Linkages: Vertical linkage can be strengthened by

moving from individual approach to SPO approach.

Partnership approach should be work upon and value

chain establishment should be oriented to include many

different stakeholders who can help in the process of

improving in value chain efciencies like nancers,

Government Departments, input suppliers, etc. There is

dire need to create a system for transparent market

information system. Speciality rice is not promoted.

6. Lentil Value Chain

6.1 Introduction

Lentil is a highly nutritious pulse and its grains are mostly

used as dal (whole or dehulled). It contains 25 percent

protein, 0.7 percent fat, 2.1 percent mineral, 0.7 percent

bre and 59 percent carbohydrate. It is also rich in 57phosphorus and carotene . Lentil is a traditional crop in the

Gangetic plains of UP, Bihar and West Bengal. The dual

purpose of lentils as source of protein in human diet and

nitrogen xation ability in soil has gained importance in 58farming in these states . Lentil is an important Rabi crop in

this region due to low water and input requirement and 59higher protability .

Lentil can be grown on a variety of soils However, it cannot

tolerate waterlogging and even short exposure to

waterlogging can harm the crop. The production in deep

sandy loam soils having high phosphorus and potassium

content is also poor. Lentil is also sensitive to boron, saline

and sodic soils. Rainfall of 350 mm to 550 mm is enough for

lentil cultivation.

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57Lentil in India – An overview, K M Sindgh and A K Singh

58Joshi 1998

59Reddy and Reddy 2010

55Agriculture Road Map - Biharwww.nfsm.gov.in/StatusPaper/Rice.pdf page 3-4


Canada is the largest lentil producer with production of 1.98 million MT, followed by India with 1.10 million MT. Turkey,

Australia, Nepal, and Bangladesh are among the largest producers of lentil after India. Although India is the second highest

producer of lentil, domestic consumption in India is very high and Indian exports are very limited. The share of lentil in total

pulses export from India is also comparatively low.

Lentil is exported from India to Sri Lanka (43.39 percent), Bangladesh (18.11 percent), UAE (8.35 percent), Egypt (3.98

percent) and USA (3.67 percent). India is also importing lentils on a large scale to sufce high domestic demand. Most of the

import comes from Canada (89.58 percent), USA (7.47 percent), Australia (2.88 percent), Turkey (0.03 percent) and

Mozambique (0.03 percent). The share of lentil in overall pulses import is as provided below:

Table 27 : Share of Lentil in total pulses export form India

60However, if compared with international market, domestic prices are always high .

Bihar is the third largest producer of lentil in India after Uttar Pradesh and Madhya Pradesh. Bihar's production of lentil for

2014-15 was 140 thousand MT from the area of 152 thousand hectares and productivity of 821 kg/ha. The data on area,

production and productivity for the last three years in Bihar is shared in table below. It can be seen that there was a decline in

area coverage, production and productivity in the three years between 2012-13 to 2014-15.

Table 28 : Share of Lentil in total pulses import in India

Table 29 : Area, production, and productivity of Lentil in Bihar

6.2 Actors

6.2.1 Input Suppliers

Lentil being a leguminous crop can x nitrogen in the soil, reducing nitrogen requirement from chemical and other organic

sources. Seed is the major critical input in lentil production. Farmers are still using old varieties like Aruni, Panthmasoor 4 and

pussa Vaibhav etc which have not been replaced for a long time. Anguri is slowly being introduced to the farmers through the

BAU seed production system. The plant breeding department of BAU during interactions agreed that the seed supply chain is

very weak. In addition, inputs like sulphur, zinc and phosphorus are the only recommended fertilizers. However, application of

zinc and sulphur is limited and not common among farmers.

6.2.2 Producer

61In Bihar, lentil is grown as a subsistence crop and not for commercial purposes . Most of the lentil is cultivated under rainfed

conditions.

The seed rate for lentil is 38 – 40 kg-1ha. The seeds are treated with Trichoderma and thiram/carbendazim. While the local 62Agricultural University recommends rhizobium treatment , during FGDs at Jagdishpur, Parora, and Baraiya it was found that

only 60 percent farmers have adopted rhizobium treatment. The normal sowing time for the crop is second week of October,

but due to weather shifts, sowing has also shifted in recent years to mid-November when the temperature drops to 200C, the

ambient temperature for germination of seeds.

The spacing followed is 30cm X 10cm. L entil grows like a bush and hence maintaining the optimum spacing is necessary to

get good yields. Lentil is majorly grown as sole crop. However, the department of agriculture and agriculture universities are

trying to promote it as an intercrop with maize and green gram(moong). In elds where short duration paddy is cultivated,

there is high soil moisture content in soil and farmers take advantage of this soil moisture to cultivate short duration maize 63which is then followed by lentil . Intercropping of mustard with lentil is also recommended.

The popular varieties in Bihar are SBL 668, Plant lentil 406 / 639 / 8 and IPL 2/3. Plant lentil is a long duration (135 to 140 days)

variety with resistance to rust and it is used for sequential or intercropping. Plant lentil 406 is drought resistant variety with 115

to 120 days duration. Arun is a 30-year-old variety which is still popular in Bihar, HUL 57 and Anguri are slowly gaining in

popularity in Bihar.

The recommended dose for lenil is 20:20:20 kg of N:P:K per hectare with basal does of zinc of 15 kg-1ha. Sulphur is also 64recommended at the rate of 30kg-1ha . During eld visits in Bhagalpur, it is found out that farmers are not applying

recommended dosages resulting in good vegetative growth but low reproductive growth and poor yield.

Water stress situations during owering stage can reduce owering in lentil. If water stress condition persists for more than 15

days, one protective irrigation of up to 10 cm is necessary.

Short duration varieties can be harvested within 110 days while long duration varieties are ready for harvesting within 135 to

140 days. Accroding to the farmers, the average yield of lentil in Bihar is around 1 MT-1ha while the Bihar Agriculture University

claims that it is 1.2 to 1.5 MT-1ha.

Wilt is an important disease causing 30 percent reduction in yield and occurrence is very frequent.

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60Commodity profile of pulses 2016-17.

61Interaction with Departet of Agriculture, Bihar.

62Interaction with Dr Rajendra Prasad Central Agricultural University, Pusa.

63Field survey ICSD, India

64Package of practices for lentil, BAU.


Table 30 : Cost of production and benet ratio of producer

While producers bear input cost of ₹ 2,630/- per hectare, their total expenditure on labour is ₹6,770/- per hectare. The total

production cost of lentil for one hectare is ₹9,400/-, while revenue generated is ₹33,600/. Farmers net income in the

production of lentil from one quintal is ₹3,025/-.

6.2.3. Aggregators

Aggregation is a unique feature in the lentil value chain. Unlike most other agricultural value chains, in lentil, aggregation is

done by the retailer grocers as well as traders. Due to subsistence farming, marketable surplus with farmers is less than 10

percent of total production. Farmers use this small quantity to repay the credit availed from retailers or traders.

Trade with retailers in small quantities leads to low transparency in price discovery. Farmers are forced to sell the produce at

the given rates due to credits they have availed and there is no xed price or differential prices for good quality or excess

quantity. The lack of premium for quality is the biggest constraints for price discovery in lentil marketing. The system is not

regulated and lack of licensing of business is also leading to an oligopoly of retailers.

While the aggregator or primary traders get ₹ 95/- per quintal as margin toward lentil trading, the cost of the trader is ₹ 4,305/-

per quintal.

Primary traders are also active in lentil value chain. They either source commodity directly from farmers or from retailers.

Quantities sourced from farmers are very little or negligible since few large scale farmers supply to primary traders.

6.2.4. Wholesalers

Wholesaling in lentil is a very small business in Bihar as small quantities are involved. However, most of the quantities from

wholesaler are purchased by Dal millers from outside the state. The established costs and margins for wholesaler are as

below:

Table 31 : Cost and margin of lentil Aggregator

Table 32 : Cost and share of Lentil wholesaler

Wholesaler cost is Rs. 4750/- per quintal and margin per quintal is Rs. 150/- per quintal.

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6.2.5. Processors

Dal milling is necessary as whole grains attract weevils resulting in destruction of large quantities. As commercial scale dal

mills are not present in Bihar, most of the lentil goes outside the state for processing.

6.2.6. Wholesalers

The whole saler buy the processed Dal from outside the state, most of this being supplied from UP and MP, where there are

many processors with commercial processing plants. Most of the wholesalers in the local markets (Mandis) conrmed that

they are purchasing the processed dal from Indore and Kanpur APMC.

6.2.7. Retailers

The retailers are serving a dual purpose that is of aggregation and dal sale. The cost for the dal retailers is ₹ 8,469/- per quintal

and the margin is ₹ 2,30/- per quintal. Consumers' price of dal is ₹ 8, 700/- per quintal.

6.3 Factors of Relationship

6.3.1. Support System

Table 33 : Cost and margin of lentil dal wholesaler

Table 34 : Cost and margin of lentil dal retailer

Extension Agencies

Ÿ Focused towards increasing production.

Ÿ Targeted increase in area under lentil cultivation by DoA.

Ÿ Promotion of new varieties like K-75 by DoA.

Ÿ Private extension services from input supplying companies.

Ÿ Overall extension for climate awareness is poor.

Ÿ Important programs promoting lentil are NFSM, ISOPOM, MMA.

Research &

Development

Ÿ Least focused crop

Ÿ Farmers use old varieties, adoption of new varieties is limited.

Ÿ Development of wilt resistant varieties is required.

Ÿ Low seed multiplication creating shortfall in availability of seeds.

Ÿ Important programs in research are AICRP MULLaRP.

Ÿ IIPR, BAU, Dr RPCAU, Pusa are involved in R & D.

Meteorological

support

Ÿ Producers depend on news published in newspapers / TV channels.

Ÿ Most of the data published for national level or state level.

Ÿ Local information is based on experience and traditional methods /

calendars.

Ÿ IMD published information is the only source

Insurance

Ÿ PMFBY and NAIS two schemes operational in insurance.

Ÿ Central and state government subsidies are available for crop insurance.

Ÿ Insurance for Lentil is covered in few districts.

Ÿ Insurance not popular among farmers.

Ÿ Compulsory participation for loan availing farmers

Ÿ Settlement of claims is tedious process and takes time.

6.3.2 Business Facilitation

Finance

Ÿ Most of the support to traders is in the form Cash-credit facility

Ÿ KCC not popular among farmers.

Ÿ Producers depend on land lords, input suppliers, traders, relatives and friends.

Ÿ Farmer groups and women SHGs are alternate source of nance.

Ÿ Network of nationalized banks and credit cooperatives is limited.

Ÿ No crop specic dedicated schemes are available.

Markets

Ÿ Traders dominate, retailers performing as aggregators.

Ÿ APMC Act not enacted, no regulating authority established

Ÿ Indirect promotion to illegal trade without licensing

Ÿ Infrastructural issues like road, street light, running water, shops, yards,

warehouses and weighing mechanisms

Ÿ Quality parameters not standardized

Ÿ No real-time price discovery and dissemination

Ÿ Dependency on international market due to high import.

Government Policies

and schemes

Ÿ CACP declared MSP of ₹ 3,400/- for 2016-17

Ÿ Procurement by government agencies like FCI is very limited

Ÿ Rate offered by aggregators always below MSP

Ÿ Government promoting processing through food park scheme, NMFP, SIDFP

Ÿ Import of lentil in large quantities reduces the prices in local market, affecting

producers and traders

Ÿ Market distortion due import and MSP

Ÿ Dependency on international market due to high import.

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6.4 Transaction cost analysis

Factors affecting the TC at variuos level as follows:

Figure 15 : Spread of Transaction of Cost in Lentil Value Chain

Table 35 : Percentage spread of cost at different actors' level of lentil value chain

6.4.1 Transaction cost of various Value Chain actors

The transaction cost analysis in lentil value chain in Bihar

was done for different VC Actors. Involvement of various VC

Actors with varying volumes results in signicantly different

transaction costs at each level. Producer and Retailers

handle the minimum stocks henceforth bear lowest risks,

whereas actors like Traders and Processors are handling

the larger volume, henceforth bearing maximum risks. But,

it is important to understand that transaction risk for

producer is low as compared to the actual risk of individual

producer because of climate uncertainties and other

factors. Processors and Traders lower the risk by

developing good forward and backward linkage. Policies

play a major role for risk minimization. The weak

institutional setup also increases the transaction cost at

each level. The analysis in above table shows that

Transaction Costs could be signicantly reduced by

aggregation/FPO-centric models at the producer's level

because of economies of scale, whereas at the trader and

processors level, it could be reduced by adoption of

improved transfer and monitoring systems and stock

handling. Quality and grading standards can also unlock a

huge margin that can be transferred to the producer

enhancing the farm-gate price. Uncertainty about the

market, quality of commodity and legality (export) involved

in the activities also adds to the transaction cost in Bihar.

6.4.2 Producers

Lack of market information and knowledge about tapping

opportunity is the main challenge for the producers. The

search cost for producers involves interaction with traders,

fellow farmers accessing market information through

newspapers, phone calls and the internet. Contacting the

business link either for input or nish product from the

market, is the main cost involved for the producer. At the

same time, there are local traders, to whom the producer

sells the produce. The observation indicates that producers

spend approximately ₹ 1,458/- per MT for his produce of 1.5

MT from one hectare. For producers, the screening and

bargaining costs are very high in comparison to search,

monitoring and enforcement cost. To make the VC more

efcient, this cost has to be reduced by strengthening the

local institution (promoting aggregation/FPO) and making

the market more transparent and accessible for the

producer. In this context, modern technology should be

used for online sale, pledging the stock, etc. Grading and

quality improvement of produce are important to reduce

transaction cost, which could be improved by extension

services and capacity building programs.

6.4.3 Traders

In the state, traders are having fairly good contact with

processors (small, medium and large). In this case, the

search cost is minimized but they are paying high cost

towards the bargaining and enforcement cost. For traders,

storage plays a huge role, as most of the time, the stock are

transferred immediately. The enforcement cost for the

trader is also higher than that for the producer. One trader

handles on an average 50 MT of lentil in a year with a

transaction cost of ₹ 81/- per MT. The trader is taking the risk

of quality assurance and payment uncertainties because of

the non-contractual setup of the trading in the market. More

transparency in the Government system and improvement

of production quality will reduce the transcation cost of the

trader which will ultimately help in strengthening the VC.

6.4.4 Processors/ big traders

Lentil processing capacity is limited in the state and is

available in different capacities from small and medium

size. As power supply is a constraint, the processors use

diesel and this increases the processing costs. The

transparency levels are very low. The enforcement

expense, transfer and monitoring and bargaining cost are

high. The processors and the big trader approximately

handle 400-500 MT in a year which means their transaction

cost per MT is ₹ 52.50 which is low. As processors handle

the largest quantities, they are also absorbing more risk in

legal transaction, auditing and bribery. Though at this level,

the cost of the transaction is low but bringing in more

transparency, legal contract between buyer and seller and

minimizing the enforcement expenses can make the VC

more vibrant, improving the market dynamics and minimize

the cost for the producers.

6.4.5 Retailers

Retail sales of dal or whole lentil is not diversied because

of a common variety of lentil. However, it is observed that

average retail is having a business of 3-5 MT in a year so his

transaction cost is ₹ 1,170/- per MT. The major cost for the

retailer is the bargaining cost at both seller and buyer end.

Quality of the stock is also not guaranteed as there is no

certication mechanism for the stock.

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6.5 Risk Analysis based on Transaction Cost VC Assessment

6.6 Constraint and opportunities in lentil value chain

Old varieities and subsistence farming are limiting production potential. However, lentil offer excellent diversication option to

small and marginal producers from ood affected areas where high siltation is recorded. Being a leguminous crop, lentil has

high potential for improving soil carbon content.

Aggregators play key role in entire value chain after producer. They offer market to farm produce though it is in small quantities

and have quality issues. Aggregators also play retailer's role by marketing nished product (dal).However, they are

constrained with lentil being traded against other commdities (like barter system) and face quality issues. The opportiunity for

aggregators lies in extending input services and products, which may change production practice and commercialise

production.

Table 36 : Risk analysis of Lentil

Table 37 : Constraints and Opportunities matrix of Lentil Value Chain

6.7. Recommendations

6.7.1. Producers

Ÿ Intercropping is not very common in lentil. However, it can always be used in intercropping with paddy based or maize

based cropping system. This will ensure income diversication in case of adverse climatic situations and consequent crop

loss.

Ÿ Contingency planning in adverse climatic condition must include lentil as it is sturdy crop and has the capacity to perform

well in adverse conditions.

Ÿ Short duration, wilt and rust resistant varieties developed by various institutions can be promoted through participatory

technology development (PTD) methods in pilot projects

Ÿ Seed production programmes are being implemented in specic pockets to ensure availability of seeds to farmers.

Foundation and breeder seeds are distributed to farmers and FPOs on a priority basis for seed production. This

programme can be further scaled up to form seed villages and seed hubs. Seed banks at the local level also need to be

developed.

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Ÿ Region specic package of practices needs to be developed and demonstrated to farmers through extension programs to

ensure proper resource utilization andincrease in yields .

Ÿ Mechanization will reduce the cost of cultivation and increase efciency by reducing the time taken for completion of

operations. However, implements can be developed for harvesting and threshing of lentil.

Ÿ Farmer producer organizations can be developed to provide alternate market opportunities, reducing the dependency on

aggregators and improving negotiating ability of individuals through a collective approach.

6.7.2. Traders

Ÿ Activities like trading and retailing needs to be segregated through licensing and stricter regulations to avoid illegal

practices.

6.7.3. Processor

Ÿ Small scale dal mills can be promoted to serve the purpose of processing at the village level and for providing services to

consumers. This can be taken up by individuals as well as by farmer groups. It will incubate entrepreneurs and generate

employment at the village level.

Ÿ MSMEs can be promoted for commercial production to sufce national demand and export nished product. This can be

done by attracting private investments in processing or by public private partnership (PPP) mode, through the support of

existing government schemes and by accessing nance and grants from various development agencies.

Ÿ Supporting infrastructure like warehousing and transportation can also be developed to promote and motivate

commercial processing.

Ÿ Different schemes for promotion of processing can be tapped to attract private investors in the state by providing

subsidies and tax relaxation.

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Annexure 1: Value chain Maps

Maize VC map. Rice VC map

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Lentil VC map Annexure 2: Maize production: climate context

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65

66

65Rabi Maize Opportunities and challenges, Directorate of Maize research.

66Dr B Gangaiah et-al, IARI.


Annexure 3: Field visit details

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Annexure 4: Transaction Cost Analysis Of Maize Value Chain (in INR)

7978



8180



Annexure 5: Transaction Cost Analysis of Paddy Value Chain (in INR)

8382



8584



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Annexure 6: Transaction Cost Analysis of Lentil Value Chain (in INR)

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9190



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93


Notes


Notes

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value chain assessment of climate resilient crops in...

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