OPPORTUNITIES IN AGRIBUSINESS

Agribusiness is defined as all business enterprises or sales to farmers / traders / consumers. The transaction may involve either an input or a produce or service and comprises of items such as: 1. Productive resources (feed, seed, fertilizer, equipment, energy, pesticides, machinery, etc.) 2. Agricultural commodities (raw and processed commodities of food and fiber) 3. Facilitative services (credit, insurance, marketing, storage, processing, transportation, packing, distribution, consultancy, soil testing etc.).

PRESENT SENARIO IN INDIA

The largest grower of fruits 15% of world output
Low share of global Exports at 0.5%

The second largest grower of vegetables 11 % of world output

Low share of global exports at 1.7% Cold storage facility available for only 10% of produce

Lowest cost producer of fruits & vegetables

Low farmer income

 Low processing
2.20 % in fruits

Value addition 20% Indias current share in world trade of processed foods 1.60 % Poor lab to land transfer of technology and adoption of new varieties.

 Market surplus of fruits & vegetables 88%

Farmer sells immediately due to perishability & absence of proper infrastructure to keep it for longer period

Post Harvest wastage of fruits & vegetables 25 to 35% valued at over Rs 45,000 crore
Losses as above in India is more than consumption of same in UK

Farm gate price 25% of domestic consumer retail price against 50% in developed countries

POTENTIALS
1. 2. 3. 4. 5. 6. Optimal Agro climatic conditions Political environment Strong credible coordinating & Promotion agency Strong Corporate leadership Strong Consumer base Strong Demand

AGRO CLIMATIC CONDITIONS

Favorable Growing conditions Sizeable irrigated acreages. High land productivity, land being a very scarce resource

POLITICAL ENVIRONMENT
Attracts Investment Provides Stability Encourages Infrastructural development

STRONG CREDIBLE COORDINATING & PROMOTION AGENCY

R & D initiatives including development of high yielding varieties Financial & Technical Assistance Extension activities Grower awareness

STRONG CORPORATE LEADERSHIP

Risk taking abilities Managerial skill development Risk mitigation

CONSUMING AND PROCESSING INDUSTRY

Internal consumption to avoid surplus stock accumulation Encourages Economies of scale Globally Competitive to serve wider base of consumers.

CHALLENGES
Low level of value addition
Bottle necks in cold storage including during transit Non Efficient storage/warehousing, processing & marketing techniques Non adoption of efficient technology

Infrastructure and others

Shortage of power High electricity tariff Low area under Irrigation High capital cost -Inadequate institutional finance at low rates High insurance premium in risk coverage Farm connectivity by road yet to take off

 Quality and consistency at grass root levels

Inputs delivery not in time Innumerable varieties Poor procurement and logistics Lack of cheap and timely credit Non professional management Low revenue rentals Non Efficient and competitive retailing High wastage

Weak and ineffective supply chain

Absence of a Successful Business Model

 Control of markets by few traders and agents who command large storage capacity Discouragement of farmer lower returns act as disincentive Larger intermediaries exerts negative pressure on farmer margin, and deteriorates quality due to multiple handling

 Higher Tax duties including on packaging material Non adoptive of cost effective technology High working capital requirement High cost of finance Infrastructural constraints Dependence on intermediaries inadequate farmer processor linkages

OPPORTUNITIES
Indian domestic market Diversifying into new markets and product segments 52% cultivable land as against 11% world wide

Unsurpassed Natural Advantages All the 15 major climates of the world 46 out of the 60 soil types 17% animal, 12% plant and 10% fish genetic resource of the world

 Food processing sector ranks fifth in terms of contribution to GDP Indian urban food market estimated at 350,000 crore Estimated investment in Food processing sector during 11th plan 1 lakh crore Horticulture crops Fruits vegetables and flowers cover 7% of cropped area of the country

 India ranks First in production of mango (65% of world) Bananas (11% of world) and papayas India ranks Second in production of Lime and lemon Move to invest in 10 mega food parks in the country Indian food processing industry averaging a growth of 10%

 Good governance
Strong , Stable and reform oriented government WTO signatory Strong economy comparatively resilient to the current economic crisis Vision to solve the power situation Nuclear energy Improving relationship with neighboring countries and a more important role in the global trade

 Included in the list of Priority sector lending by banks since 1999 Most of processed food Exempted from purview of licensing under the industries (Development & regulation) Act, 1951, except items reserved for small scale sector & alcoholic beverages Excise duty for processed fruits & vegetables, food mixes etc. NIL Excise duty on reefer vans reduced from 16 to 8% Reduction in customs duty on food processing machinery Tax breaks

STRONG CORPORATE LEADERSHIP

IT Hub of the world Telecom hub Acquiring global companies India managers at the Helm of many Fortune 500 companies

 Large young earning population

50% of population under 25 years of age Ready to experiment and try out new products
Increase in number of upper middle class & middle class by 159 % & 63 % respectively

Urban population projected at 40% by 2020 Middle class of 200 250 million spread across the country to increase to 580 million by 2025
Dual income households

Higher disposable incomes Ready to try out value added products

STRATEGY
Reduction of wastage /spoilage to be tackled
Accelerated establishment of cold chain networks Irradiation facilities and pest free warehouses Encourage SSI units and corporate to set up food processing units

Improvement of productivity both land and manpower

Example the case of Rubber where India has the highest land productivity in the world Change in cultivation practices such as irrigation for paddy rather than method of flooding the fields

Price stability
Make farming remunerative to attract talent and retain farmer interest

 Incentives to Corporate to enter core farming land ceiling restrictions Increase Mechanization to tackle low availability of labour and to remain a low cost producer Liberalized credit norms for agricultural production , marketing and infrastructure development Changes in market regulatory framework to allow corporate to establish market yards Review of legal instruments to facilitate entry in marketing activities Tax holidays and incentives Excise exemptions.

CONCLUSION
Food sector the highest multiplier effect of any industry 2.4 Tripling the size of the industry would generate
Direct employment 28 lakh and Indirect employment 74 lakh

Thrust in agriculture to be provide the next push to GDP and prosperity Enhanced export earnings to compensate for any slow down in IT related exports