Agriculture needs private sector linkages: Indo-American Chamber of Commerce

20 August 2007

New Delhi: The most serious issue, which Indian farm industry faces, is the wastage of almost 40 per cent of farm produce due to lack of cold storage facilities and adequate transportation, said a study, Farm to Retail, by the Indo-American Chambers of Commerce.

This lack of infrastructure coupled with several layers of intermediaries, who do not add any value to the product significantly raises the cost of the final product available at the retail shelf.

"The price paid to farmers for fresh farm produce is currently about 30-35 per cent of retail prices as compared to the international norm of more than 50 per cent of retail price," said Deepak Pahwa, national president, IACC. "This differentiation is primarily due to the farm sector being predominantly unorganised in India. Organised retailing in F&G segment can drastically improve supply chain and boost farmers'' incomes and will bring a more structured growth to the whole sector."

Indo-American Chamber of Commerce notes that the Indian government has been targeting a growth rate of 4 per cent in the agricultural sector, against the growth rate of 1.8 per cent over the last few years. The IACC study looks at the issues affecting the farm-to-retail process in India to understand why this problem exists in a nation, which is predominantly agricultural.

Typically a farmer gets a return of up to 14 per cent on his produce, the trader adds his 12 per cent to it, and the retailer charges the consumer an additional commission of 12-15 per cent. By the end of this three-step series, the consumer ends up paying over 40 per cent extra for the produce, without any value addition.

Pahwa added, "The agriculture sector needs diversification, modern marketing, and cold chain management and private sector linkages. While India is the world''s second largest producer of fruits and vegetables, only 2 per cent of the produce is processed. As per a recent study on the food-processing sector, the turnover of the total food market is approximately $70 billion, out of which value added food products comprise $ 22 billion. The government has been encouraging FDI and joint ventures for food and agro processing industry and 100 per cent export-oriented units are being encouraged."