Learning Objectives

Understand the reasons behind increased interest of

corporate sector in the entire agri-business chain

Compare and contrast traditional farmer led

agriculture model with corporate sector led integrated

agri-business model
Comprehend advantages from integrated involvement

of corporate sector in Indias agri-business chain

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Learning Objectives
Understand potential challenges and limitations for

the corporate sector

Be aware how the involvement of corporate sector is

transforming rural markets in certain parts of rural

India
Understand rural marketing strategies of leading

corporate giants of India in the field of agri-business

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Reasons for Increased Interest of

Corporate Sector in Agri-business
India's untapped potential in agriculture sector is

making corporate world enthusiastic.

Progressive states such as Punjab and Maharashtra

realised that large companies can bring in technology,

investment, modern best practices and crop
diversification techniques.
State governments were finding it increasingly difficult

to maintain procurement at Minimum Support Price

(MSP) levels.

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Traditional System of Marketing

Agricultural Produce: An Overview
For long, farmers of India were forced by law to sell

their produce at mandis, a system of local markets,

which was established to protect poor farmers from
exploitation.
Farmers were paid official minimum price or less for

their produce, but no one was there to guide them

about which varieties they should produce for better
yield and the best farming practices to increase
productivity and improve quality.

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Traditional System of Marketing

Agricultural Produce: An Overview
The produce was sent via other middlemen on a slow

and often hot journey to retail customers, where,

according to estimates by agriculture experts between
30% and 40% of it would rot before it got to market.
With few refrigerated packing centers, no regional

distribution network, and inefficient fleet of trucks, India

can't sustain large-scale vegetable production, let alone
an export business.

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Opportunities in Agri-Business
Good amount of agriculture produce in India is organic by default

its just not certified. This organic production can have a good
demand in overseas market. Corporate sector can help farmers
with this.
India produces 14% of worlds fruit and vegetables but only 1% is

exported due to lack of processing facilities.

Less than 1% of farm produce is processed (it is about 50% in the

U.S.) while 25% of fruits and vegetables grown in India (worth

Rs.2500 crores) rot in the farms only.
With low wages of $1 to $3 a day in a labor-intensive business,

India has a clear cost advantage over many producing countries.

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Opportunities in Agri-Business
Every 60th person in the world is an Indian farmer, but he

produces 1.8 tonnes a hectare, while an American farmer

produces 8 tonnes.
The potential for exports and rapidly growing domestic demand

for reliable produce from supermarket chains is opening up

opportunities for investment by multinationals such as PepsiCo,
Britain's Tesco, etc.
Bharti Enterprises is planning to set up a nationwide retail chain

with Tesco, as well as India's first large-scale fruit and vegetable

export business.
"Organized supermarkets have to have an organized back end,"

says Lynn Forester de Rothschild, founder and CEO of E.L.

Rothschild.

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Proposed Agri-business System

Companies have begun to transform integration and

links of food chain, which is going to benefits the

farmers, consumers and corporates.
Corporates are getting involved in all facets of agri-

business right from research and development,

production, processing, marketing and even retailing.
Government at national and state level are also backing

the big companies' entry into vegetables and fruits

because of the obvious growth potential and the impact
they can have on farmers' performance.
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Benefits of Corporate-driven
Agri-business System
Corporate sectors intervention can improve quality

of produce and delivery, creating significant

development for India.
There would be better alignment of consumption and

farming patterns by bringing in marketing linkages

which are conspicuously missing, especially for
fruits and vegetables and many of the crops not
covered under the Minimum Support Price (MSP).

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Benefits of Corporate-driven
Agri-business System
This will make farmers prosperous as they will be

better informed about the latest technology, seeds and

farming practices. This will create a large number of
consumers for all products.
With 77% of India's population relying on agriculture

for a living, improvements in efficiency and new

markets have the potential to benefit large numbers of
people.

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Benefits of Corporate-driven
Agri-business System
Farming family can remain employed for longer period

for horticulture.
The improved cropping practices and low water

consuming varieties can result in solution to problems

like falling water table that has affected the
productivity of the farmers.
This model has the potential to halt the growing

suicide by farmers in Punjab and some other states.

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Challenges for Proposed

Agri-business System
Consolidation of land with corporate world or farmers' being

displaced from their land is a politically sensitive issue especially

at a time when crop failures and bankruptcy have led to an
average of 15,000 farmer suicides annually over the past five
years, according to official records.
State governments need to change laws to loosen up the mandis'

monopoly and improve infrastructure. Progressive states are

slowly beginning to do so.
Lack of infrastructure of cold storage facility for transportation

and storage, transportation bottlenecks, lack of efficient

availability of airport facilities can slow down the movement of
goods from farm to the export markets.
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Conclusion
These initiatives may seem to be small in the context of a

giant market called rural India but, this a very good

beginning in the post liberalized era.
We should see the second Green Revolution in the near

future if these experiments prove to be successful.

There is a decent support of government in the spread of

the corporate involvement in the cultivation and contract

farming through various required legislative measures.

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Conclusion
The corporate involvement in agri-business at all levels in

the food chain will not only provide much needed assured
markets to the farmers but will also bring the latest knowhow to the farmers.
The competition of corporate giants in the food processing

sector like Reliance, ITC and Bharti will bring in gains for the
industry and all the stakeholders, as it was seen in the
telecom sector.
Once the farmers have better earnings with them it will

increase their purchasing power and they will become a

market with a potential much higher than now.
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Summary: Points to Ponder

Second green revolution that is driven by direct

involvement of corporate sector in different domains of

agriculture production and marketing, is getting
established across India.

Leading companies, which earlier had no relation with

agriculture business, are stepping in this sector with big

investment plans.

This system, which integrates the entire chain of

activities from crop production to the supermarkets, is

beneficial for all the stakeholders: farmers, corporate
sector and the center and state governments.
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Summary: Points to Ponder

Central and state governments are encouraging this

trend, which offers solution to many of the problems

that were associated with traditional marketing of
agriculture produce.

There are immense opportunities for enhancing

farm production efficiency as well as in the field of

processing of farm output, as very little has been
done so far.
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