• +91 8446942500
  • scmproknowledge@iscmindia.net

Re-Vitalizing Agri Supply Chains in India

Siraj A Chaudhry
12th May 2020

Siraj A Chaudhry National Collateral Management Services Ltd speaks to Dr. Rakesh Singh, ISCM on the steps to strengthen agri supply chains

India needs a strong and resilient nationwide agri supply chain. The current situation, where we will be looking to re-build a post COVID-19 narrative is the right time to think of the supply chains we deserve – technology driven, efficient and one nation. This article looks at the immediate challenges and the short and long term agenda for building the new agri supply chains.

How has this pandemic disrupted food supply chains in India?

The current lockdown led by the pandemic has hit the country at a time when India is about to harvest a record Rabi crop. Because of lockdown, there were restrictions in Mandi Operations, creating hiccups in the origination of several commodities, which kept the Government agencies, stockists, and processors on the side-lines. Distortions in the free movement of goods from origin to destination further aggravated the situation, hurting food supply chains. On one side, farmers were selling their produce, especially perishables, at a distress price, and on the other hand, consumers are paying hefty amounts for the same. The difference in the farmer’s price and the consumer’s cost explains the gravity of the situation and how this pandemic disrupted the food supply chains.  For example, Banana prices at the farm gate level during the pre-lockdown period was hovering in the range of Rs 12 to 15 per kg while the same prices have fallen sharply to Rs 5 to 7 per kg during the 1st phase of lockdown in key markets of Andhra Pradesh.On the other hand, consumer prices of Banana were hovering near Rs 24 to 28 per kg during the pre-lockdown period, and during the 1st phase of lockdown, they climbed to Rs 32 to 36 per kg. The situation is similar in other perishables, such as Tomato, Mango, etc.

Distortions in the free movement of goods from origin to destination further aggravated the situation, hurting food supply chains.

How have been the players in the ecosystem managing the uncertainties in the supply chains?

The lockdown severely hit the entire food supply chain ecosystem. The availability of raw materials on one side and acute shortage of labor and working capital requirements, on the other hand, forced several players to shut their operations temporarily during the lockdown period. In our country, we have approximately 35 to 40 lakh enterprises, both organized and unorganized, engaged in manufacturing food and beverages. Few firms have managed to restart their operations after taking requisite permissions. Still, the shortage of labor and increased hurdles in every step of the process has affected the efficiency levels of the firms.

Labor availability will challenge the efficiency levels of the sector in the short run but, at the same time, allow mechanizing few operations.

With the agricultural sector coming out of restrictions, what is your view on short-run challenges and opportunities?

The Government has lifted few restrictions for the agricultural sector during the 3rd phase of lockdown, allowing Mandi’s to operate with proper safety measures, and lifted restrictions on the movement of agricultural goods. The move has come as a relief to the agricultural sector, but the biggest challenge the industry faces in the short run is the acute shortage of labor for various operations. Labor has been hard hit during this lockdown, have moved to their native places after witnessing days of nightmares, and may not come back till conditions go back to normal. Labor availability will challenge the efficiency levels of the sector in the short run but, at the same time, allow mechanizing few operations. Further, there is an opportunity to look at shortening the Agri value chains by removing unwanted intermediaries and thereby increasing producers share in consumer’s pie. The digitization of farm trade would be another opportunity that can transform the sector in the longer run. More Mandis and more transactions to be brought under e-NAM. Decentralization of origination/procurement activities is another opportunity wherein the stress on APMC Mandis can be eased by allowing origination/procurement at the warehouse point. Further, this move can eliminate one or two middlemen in the value chain. It’s the right time for the Government to undertake long-standing reforms in the sector and provide much-needed impetus for the growth of the agricultural industry.

Create Surplus-Deficit grid for various crops (at least for crops that account for in retail price inflation) and deficit states can reach out to surplus states to contemplate their requirement.


What should the government do to revive the food sector? What are the uncertainties that need to be addressed?

Following are the few steps that Government may consider implementing in the near immediate term as well as in the longer term to revive the sector



A. Short term

  1. Incentives for farm mechanization
  2. Incentives for use of quality seed (Research suggest that a quality seed ensures 25% better yields)
  3. Crop diversification (65% area for nation’s food security and 35% area for commercial use of the total agriculture cropped area. The ratio might vary from state to state based on self-sufficiency target of the individual state)
  4. Create Surplus-Deficit grid for various crops (at least for crops that account for in retail price inflation) and deficit states can reach out to surplus states to contemplate their requirement (by doing so, states can address consumer price inflation effectively) on y-o-y basis.

B. Long term

  1. Work on market driven production of crops/ varieties/ Grades
  2. Roll out mission for enhancing yields in Pulses and Oilseeds
  3. Earmarking areas based on processing/ value addition
  4. On-farm incentives for grading/sorting/cleaning (Post harvest management at Farm gate) for TOP (Tomato, Onion, Potato) as part of Horticulture mission
  5. Build Cold chain infrastructure for perishables viz., Cold storages, reefer vehicles, CO2 packing units as part of Horticulture Mission
  6. Extension activities aimed at enabling FPO’s to be export competitive as part of market linkages program

Further, as a national policy, all units/plants/industries that process perishables may be given “Seasonal” status and applicable benefits in terms of subsidy on electricity tariffs, etc., may be availed.

How should the food industry build its supply chain? What are the key areas that need to be addressed?

India is the second-largest populated nation, and there is a greater need to bring the food supply chains back on track so that both producers and consumers do not suffer because of the disruption that has erupted in the last two months. Following are some the points that are envisaged to bring the food supply chains back on track

  1. FPO’s should be made part of the food supply chain (as on date the FPO’s contribution in Food industry supply chain is <5%) and efforts should be made to increase their contribution gradually to over 20% in the next 2-3 years.
  2. Contract farming should be promoted in the catchment of processing units
  3. CSR initiatives aimed at capacity building of FPO’s need to be augmented
  4. Farmers to be motivated towards commercial farming from subsistence farming in Pulses and Oilseeds
  5. Mission for migrating farmers towards commercial Agriculture from subsistence farming
  6. Processing for export purpose (from current 1% we need to aim at 10% in the next 5 years)
  7. R&D investments aimed at minimizing the post-harvest losses
  8. Promotion of Direct Farm Benefit Transfer to be WTO compliant

Investments are to be made in a PPP mode to create cold chain infrastructure in the country so that post-harvest losses in the perishables can be minimized and increase the export competitiveness of the perishables.

Perishable supply chain in India has a disconnected ecosystem. How should it be addressed?

Most perishable commodities are seasonal, and the associated processing units operate seasonally with < 100 days, the GoI should envisage and incentivize for alternate use of the capacity (s) so that they can operate for at least 150 days to be economically viable. Further, as a national policy, all units/plants/industries that process perishables may be given “Seasonal” status and applicable benefits in terms of subsidy on electricity tariffs, etc., may be availed. The Ministry of Food Processing and Industry has rolled out an ambitious project “TOP” scheme for promotion of processing in Tomato, Onion, and Potato. As an extension to the project, the capacity building of FPO’s with investment in post-harvest management at Farmgate can be taken into consideration. Further, a national grid of supply – deficit of various perishables may be created, and linkages of FPO’s to the processor worked out to enhance annual factory operating rates. 

What are the legacy and long term challenges that need to be addressed to make agricultural supply chain competitive?

Agricultural supply chains to become competitive must get aligned to the ever-changing supply-demand scenarios. Following are the few points that we envisage can make agricultural supply chains more competitive

  1. The present MSP system in place keeps India aloof from aligning to the global trade. MSP system has been introduced at a time when the country was not self-sufficient in food grains and the situation has changed significantly in the last two decades. It’s the high time for policy makers to consider gradual withdrawal of MSP regime in a phased manner over the next few years so that Indian Agriculture can become more competitive.
  2. Further, there is a greater need to move away cropping patterns from subsistence farming to commercial farming and accordingly thrust to be given to enhance the productivity levels in various crops, especially Pulses and Oil seeds.
  3. Direct Benefit Transfer schemes are to be linked to yield and productivity.
  4. Investments are to be made in a PPP mode to create cold chain infrastructure in the country so that post-harvest losses in the perishables can be minimized and increase the export competitiveness of the perishables.

♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦♦

Copyright © All Rights Reserved www.scmproKnowledge.in