Friday, August 2, 2019

How Mass Plantation Drive is a scam?

Ethiopian officials announced that the country had surpassed its goal and planted over 353 million trees in 12 hours. This massive project is done to tackle the effects of climate change. This is well-intentioned action but will not be converting into tangible impact. Why? Two reasons: Design Flaw and Corruption. This project is prone to corruption by design.

Is this right intervention for the problem in the first place? The mass plantation approach for afforestation efforts seem to overlook previous afforestation issues by encouraging mass plantings to meet a national quota. Afforestation must be done by planning long term duration and phase wise distribution. The mass plantation drive is an event management and PR scenario form of intervention. The approach tackle neither development nor conservation goals without ensuring the long-term sustainability of the development or conservation impacts.

Each state like Maharashtra, Madhya Pradesh and Uttar Pradesh etc has done these mass plantation drive few years back. The previous Guinness World record for tree planting was held by India, where in 2017, volunteers in the country’s Uttar Pradesh planted nearly 50 million trees in one day. However, it had only proven to be a joke for various reasons. Narmada Plantation Scam is a prime example of that. I will be sharing the major flaws in this approach below:

1. GIS Mapping: Implementing Geo Tagging at the site-by-site basis can reduce the corruption and help in monitoring the state of saplings. Such technological interventions aren't generally initiated for 12 hours marathon and rarely shared in public domain for scrutiny.

2. Saplings Logistics and Procurement: The tree plantation drive is a lottery for these departments to earn money. The modus-operandi is allocation of ambitious/infeasible targets for plantation drive to all government departments . The state nurseries doesn't have capability to supply huge numbers of saplings for the drive. Private nurseries are hired to provide saplings on overpriced value. The kickbacks are inbuilt in hiring and transportation process.  The overpriced saplings doesn't fetches the big margins for the private vendors. Big margin lies in the transportation drive to the chosen locations. The ghost tress constitute major part of corruption money in the whole program and can be found only in files of the government.

3. Accountability: The tree saplings can not survive without any government officials being responsible for conservation in initial years. Such drives becomes a straight case of corruption. There isn't any impact assessment studies done to check the efficiency and effectiveness of the whole program. Reminding government and citizens to follow-through with the desired actions of any intervention is an essential step to helping people achieve the desired goals.

4. Sustainability: Trees are sustainability power tools but such massive drive without followup plan for conservation of saplings lead to massive irregularities and wastage of public money. There is no plan to ensure their growth and protect them for at least three years. How many survived is important indicator of success & not how many were planted.

5. Bio Diversity: Such afforestation drives can introduce damaging non-native plant species having destructive impact on land and caused adverse affect on flora & fauna. The massive nature of approach neglects consideration of local ecosystem and biodiversity. Growing Eucalyptus in low rainfall areas has caused adverse environmental impacts due to competition for water with other species and an increased incidence of allelopathy.

There is quick deforestation happening in India and with its rapidly growing population, more farmland being used, and unsustainable forest usage is rampage. Chopping and selling trees adds to GDP but planting them doesn’t. 1.09 crore trees have been cut down for developmental work in the last 5 years across India. As a consequence, global economy has a distorted perception of wealth.

Tree plantations drives have to be implemented in a decentralized manner through gram panchayats and local communities. Trees must be classified public health infrastructures. The afforestation drive can' be left to such PR relations and need more brain with political will for a good intervention.

Tuesday, July 23, 2019

Industry Connect Talk

On 30th June 2019, I had an esteemed opportunity to participate in Industry Connect Talk of Xavier School of Rural Management. The talk was conducted for the Rural Management batch of 2019-21. Truth be shared, this is the first time, I’ve given a talk in public place and that too a batch of aspiring rural managers. The speech revolved around exploring diverse opportunities in two years of college stay. I also gave a brief overview of the skills, students are expected to acquire before they venture into their careers in the respective domains of their choice

Career or academic goals may vary from time to time yet few qualities always help in gaining new heights. These three qualities were insights of a colleague (Subash Kumar). These are: Relationship Management, Deep commitment to Work and Always remembering 'Bad times will last longer than good times'. Interaction with students was really good but student debt was on the mind of each & every rural manager.

PS: I am sharing a paper by Dr. Michael Halse depicting an academic history of rural management domain. This will also bring historical context into perspective for millennial. “A new institute of rural management – and a new developmental discipline?

Wednesday, April 17, 2019

Call of Aravalli Biodiversity Park

I have been working in development sector for six years, longer if you include student life in my alma mater’s rural management program. So would you believe that I have never, not once, have a meeting with an ecologist? I had only attended a small talk by Mr. Pankaj Sekhsaria in early monsoon of 2011.

I accompanied office colleagues to a meeting at the Aravalli Biodiversity Park. We met Mr. M. Shah Hussain, Scientist In-charge and Ms. Aisha Sultana, Field Biologist. It was worthwhile experience to understand the technical process that went into setting up the whole park. The ecological conservation and restoration started in 2004 and 450 acres (total area 700 acres) have been completed by now. The whole area was Acacia dominated forest with mesquite (Vilayti Babool trees) as a dominant species. The team of ecologists replaced mesquite with forest communities present on Aravali range in Haryana, Rajasthan and Gujarat. Their efforts has converted open mining pits into micro habitats through landscape management.

Good park management has lead to increase from 50 to 200 bird species, 25 to 50 butterfly species with even flourishing of jackal and blue bull. Conservation efforts are being carried in all forms through action research, education model, and awareness building.

They also suggested that any new area for bio-diversity conservation efforts need brief profiling, area identification and legal acquisition. The acquisition of land for conservation is the toughest part and needs patience to navigate in legal and government machinery. Once acquired, land must be fenced and compartmentalized in small habitats. Stage wise restoration is better strategy even if land mass for conservation is huge.

Additional Suggestion from our team:

1. There must be a feasibility analysis on connecting underpass between Aravalli Biodiversity Park, JNU and Sanjay Van. This underpass can provide corrugated landscape for migration of the animal within large areas.

2. The promotion campaign required for community awareness is bit missing. There is heavy emphasis on protecting biodiversity and securing ecosystem services. But, there is less emotional connect of the surrounding colonies (posh) except considering whole area as a jogger park. There must be introduction of concept like: Shinrin Yoku in the park.

3. The economic value of park in terms of reducing CO2 emission isn't used in spreading awareness.  This park is an open facility without any fees to the visitors leading to financially unsustainable model. There must be concept of polluter's fee for conservation efforts.

Thanks Note:  Nature requires interpretor to understand the whole ecological balance. It was my honor to be educated on conservation, flora and fauna by Mr Shah & Ms Aisha. Hats off to team behind Aravalli Biodiversity Park for their passion and commitment.

Enjoy a video that took 7 years in making !

Wednesday, June 6, 2018

Analyzing Model Contract Farming Act

The agriculture ministry on 22nd May released the Model Contract Farming Act, 2018. Mr. Ashok Dalwai, CEO, National Rainfed Area Authority has chaired the committee that drafted the model law.

Contract Farming: Contract farming is a container concept that covers a wide range of contractual arrangements, which makes it difficult to draw overly general conclusions. Under contract farming, agricultural production (including livestock and poultry) can be carried out based on a forward agreement between buyers (such as food processing units and exporters), and producers (farmers or farmer organisations) frequently at predetermined prices.

The Model APMC Act, 2003 provided for contract farming however, only 14 states notified rules related to contract farming, as of October 2016. Only Punjab has a separate law on contract farming. The NITI Aayog observed that market fees and other levies are paid to the APMC for contract framing when no services such as market facilities and infrastructure are rendered by them. In this context, the Committee of State Ministers on Agricultural Reforms recommended that contract farming should be out of the ambit of APMCs. Instead, an independent regulatory authority must be brought in to disengage contract farming stakeholders from the existing APMCs. (Reference)

Salient features of Model Contract Farming Act, 2018

1. In addition to contract farming, services contracts all along the value chain including pre-production, production and post-production have been included.
2. “Registering and Agreement Recording Committee” or an “Officer” for the purpose at district/block/ taluka level for online registration of sponsor and recording of agreement provided.
3. Contracted produce is to be covered under crop / livestock insurance in operation.
4. Contract framing to be outside the ambit of APMC Act 2003.
5. No permanent structure can be developed on farmers’ land/premises
6. No rights, title ownership or possession to be transferred or alienated or vested in the contract farming sponsor etc.
7. FPO/FPC can be a contracting party if so authorized by the farmers.

Policy Analysis by Experts:

1. As per Professor Sukhpal Singh of IIMAhmedabad: The new model Act 2018 opens up agricultural markets to contracting agencies without adequate safeguards for farmers.

2. Opinion Piece by Smriti Sharma, Policy Analyst with the National Institute of Public Finance and Policy on role of the government in Contract Farming Act

3. Opinion Piece by Jayshree Sengupta, Senior Fellow (Associate) with ORF's Economy and Development Programme on making contract farming suitable for Indian farmers.

Policy Analysis and Suggestions:

1. FPOs as aggregators: From the draft Model Act, it is not clear whether FPOs can also be contract farming sponsor. There may be a situation where FPOs would like to expand the cultivated area without increasing number of the farmers as members. The model law should clarify that how can FPO will be able to expand farming activities adhering to contract farming route.

2. Pro Farmer Policy: The Act lays special emphasis on protecting the interests of the farmers, considering them as weaker of the two parties entering into a contract and has been provided for reasonable protection to the weaker party to the contract, i.e., the producer, the pre-agreed price, category wise as under Section 18(2). Where no price premium exists, and a competitive price is paid on local markets, the intermediary role of FPOs may become more important for enabling higher income effects of the contract farming arrangement.

3. Capacity of State: The model contract farming Act proposes a state-level agency, the Contract Farming (Development and Facilitation) Authority, which would put contract farming outside the scope of the APMC. There is already acute shortage of extension services in Agriculture Department and current Act is proposing for an officer at the district/block/taluka level.

4. Corruption and Transaction Cost: More the responsibilities taken by the government staff, there is a higher chances of bribery for the online registration of sponsor and recording of agreement with a registering and agreement recording committee. Registration imposes extra procedure mechanism and costs on the parties, while small and marginal farmers cannot easily afford these transaction costs. Transaction costs embedded in contract farming need to be outweighed by the benefits, both for sponsoring corporates and farmer.

5. Monopoly, Fraud and& Settlement of disputes: Sponsoring agri business companies will exploit the monopoly position and similarly farmers will sell outside the contract (extra-contractual marketing) and divert inputs supplied on credit to other purposes, thereby reducing yields. There is no provision of budget for the establishment of body for dispute settlement mechanism at the lowest level possible required for quick disposal of disputes.

6. Insurance and Risk Management:  Agricultural investments always involve risk. The five most likely reasons for investment failure in agriculture are poor crop management, climatic disasters, pest epidemics, market failure and price volatility. The standard approach in agribusiness to compensate the farmer against quantity shortfalls is crop insurance. The contracted produce will also be covered under crop/livestock insurance in operation. But the government-run crop insurance schemes are proving to be unsatisfactory

7. Price Discovery and Market: Normally, contract farming does not work in an ecosystem when either party is looking to fetch a better price without any product differentiation. This is where derivative market integration with farm sector can help. This will eventually lead to both party trying to get the best price from the market instead of the each other. Where there are fixed price contracts there is no apparent risk to farmers with regard to payment for their crops. If a market collapses, the sponsor should automatically shoulder the loss. However, if the sponsor becomes bankrupt, farmers could be permanently affected. Where contracts are on a flexible or spot-price basis the stability of farmers' incomes is always at risk.

8. Farm income varies between commodities: The costs associated with contracting is high hence, it tends to be limited to high-value commodities (including meat, milk, fish, fruits, vegetables, and cash crops) being grown for processors and exporters who sell into quality-sensitive markets. An apple grower benefit from higher yields (presumably due to technical assistance), while contract green onion growers receive higher prices (presumably due to better quality).

9. Establishment of Forum: A major feature for market to work is a "market matching" exercise. This can be done by organizing forums where agribusiness entrepreneurs could meet FPO/ farmers' representatives to discuss their requirements. The forums can be followed by more detailed discussions between individual sponsors and individual cooperatives or farmer organizations.

10. Literature Review: All studies report at least one case of contract farming that has a positive and statistical significant income effect. The lack of studies on ‘failed treatments’ leads to an overestimation of the effectiveness of contract farming. The practitioner-oriented literature indicated the high risk of failure in the first years and stressed the need for adaptive management and mechanisms to settle disputes. Apart from food security effects, the role of contract farming in rural development, such as (sector-wide) innovation, and livelihood resilience, will need more research.

Conclusion: Modest expectations and careful planning are needed for contract farming to be effective and sustainable. However, it is important for policymakers to be realistic about the potential scope of contract farming. Thus, policymakers should not think of contract farming as a solution to the problems of credit, information, and market access for all small and marginal farmers . Model Contract Farming Act should be a promoting and facilitating Act as is intended, and should not end up as a over-regulating act distorting the market for both players.

Monday, May 28, 2018

New era of P2P Lending in India

Crowd-funding is a relatively old practice commonly known as “friends and family financing.” The transparency and scalability of Web 2.0 technology has emerged as a social media-based funding mechanism leading to development of Peer to Peer platform. Crowdfund investing (CFI) is the investment alternative to pledge-based crowdfunding. This term, which describes securities based equity and debt fundraising through crowdfunding platforms, has recently emerged as an alternative to more traditional funding tools such as bank loans, angel or venture capital (VC) investments for financing entrepreneurs and small and medium-sized enterprises (SMEs). Debt crowdfunding is more popular and commonly known as peer-to-peer lending (P2P lending). It is the practice of matching borrowers and lenders through online platforms.

This is an innovation in entrepreneurial finance that can fuel the Rise of the Rest globally. In the developed world, most platforms are donation and perks-based. The early success of platforms, such as Kickstarter, has brought annual growth in the number of platforms of 60% CAGR. PwC has presented an analysis on P2P lending Peer pressure: How P2P is transforming consumer lending industry. PwC paper discusses how peer-to-peer lending platforms are transforming the consumer lending industry and the key considerations that financial institutions should evaluate when deciding on their strategic response.

Is P2P disruptive? I would say it certainly has been, but in the Indian context, it can make serious and material difference to the credit scene in the country. Access to finance is the most common constraint to growth cited by entrepreneurs in a broad range. Growth rates are higher for smaller enterprises yet the size of them becomes stagnant after a certain turnover. More recently, micro-finance has succeeded in expanding access to credit for the poor but high level of interest rates hinder the formation of surplus. By allowing customers to borrow smaller sums and lower interest rates than MFIs, the advent of P2P finance can open more possibilities for reaching the under-served than ever before. Currently the recommended rate of interest ranges from 12% p.a. to 28% p.a. and the loan tenure ranges from 6 months to 36 months.

The Fintech revolution in India had also facilitated a sudden boom in Indian P2P lending industry. The Indian P2P lending space has players like LendBox, LenDenClub, IndiaMoneyMart, Monexo, Rupaiya Exchange, LoanBaba, CapZest, and i2iFunding. Until few years back, there was no regulation in place to regulate P2P Lending. Any entity could undertake the business of P2P Lending Platform without any restriction and accountability. RBI has shared master directions for NBFC–Peer to Peer Lending Platform in 2017 and updated as on February 23, 2018. The new regulatory era began when Faircent become the First and only RBI recognized P2P lending platform.

India must find an appropriate balance between protecting investors and ensuring the flow of capital to early-stage companies. Modest and balanced regulatory schemes will more likely to accelerate formation of high growth MSMEs and crowd-funding ecosystems. The existing companies which are currently carrying on the business of P2P lending has been given 3 months’ time to apply for registration as an NBFC-P2P within 3 months from the date of the direction i.e. January 03, 2018. Recently, reports surfaced that digital payments giant Paytm is in the process of seeking a license from the RBI to operate a P2P lending platform.

Most of the MSME owners don't have the assets to present a collateral and hence don't qualify for the traditional finance. The need for collateral, from lender perspective, arises because default rates in this segment are higher and are unfeasible for profitable lending. However, only a small portion of borrowers (entrepreneurs) default and majority of this group forms a genuine customer base. But unfortunately, today there is no mechanism to segregate good portfolio from the bad in MSMEs. Hence, the lenders mandate some form of collateral to manage the risk. To reach their complete potential, this systemic hindrance & risk management must be tackled by P2P platform. Investors will be needing standardized and efficiently delivered information about business plans, use of proceeds, valuation and other disclosures in order to make investment decisions. The future is bright but the customer protection measures in place: caps on investment size, repayment frequency, tenor, margins and lending rate can lead to a sustainable Business model.


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This Blog is meant purely as a personal diary of a rural manager in making. It exists to record information, experiences and opinions about various issues encountered in the line of duty. Any person, institution and organization mentioned here doesn't assume any liability for its contents. This is not a deliberate attempt to defame anyone. And if you have actually read all that is written in the blog and aren't mad at me, then thanks for your time and patience !


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