Starting (and Scaling) a Food & Agro enterprises in India

Food & agro enterprises are built around post‑harvest value addition—everything that happens after produce leaves the farm: sorting/grading, storage, transport, processing, packaging, marketing, and quality compliance.

The “scheme-ready” first step: Udyam Registration (free, paperless) - Most MSME benefits begin with formal recognition via Udyam Registration, which is free, online, and is the Government’s official MSME registration portal.

Stage‑by‑Stage Scheme Picker (Integrated: MoA&FW + MoMSME + MoFPI)

Stage 1 — Farm‑Gate Sorting/Grading & First Handling: This stage reduces rejection and prepares produce for storage or processing.

Best‑fit programs

• ISAM (Integrated Scheme for Agricultural Marketing): Official guidelines describe ISAM as a framework to strengthen agri marketing systems and include components like marketing infrastructure and related support mechanisms. 
• MIDH (Mission for Integrated Development of Horticulture): Operational guidelines include end‑to‑end horticulture development with post‑harvest and market interventions. 

Stage 2 — Primary Processing / Pre‑Processing: Examples: cleaning, drying, milling prep, pulping, primary value addition, aggregation.

Best‑fit programs

• PMFME (MoFPI): The PMFME portal positions the scheme as support for micro food processing units and groups with credit‑linked assistance and ODOP alignment. 
• AIF (Agriculture Infrastructure Fund): AIF is an online financing facility for post‑harvest management infrastructure and related projects; the portal and guidelines emphasize the post‑harvest focus. 
• ACABC (Agri‑Clinics & Agri‑Business Centres): NABARD describes ACABC as supporting agri ventures, including post‑harvest services and market linkages, with training/handholding plus credit‑linked subsidy structures. 

Stage 3 — Storage (Scientific Warehousing, Cold Rooms, Ripening, Pack Houses): Storage is where wastage reduction becomes measurable and financing options expand.

Best‑fit programs

• AMI (Agricultural Marketing Infrastructure under ISAM): AMI supports creation of storage and marketing infrastructure and is implemented through institutional channels including NABARD guidance pages. 
• AIF: AIF provides a single-window portal for post‑harvest infrastructure financing, with scheme guidelines emphasizing infrastructure at the post-harvest stage. 
• MIDH: The 2025 operational guideline includes Integrated Post Harvest Management and Cold Chain Infrastructure interventions. 
• PMKSY (MoFPI): PMKSY covers cold chain and other supply chain infrastructure, and MoFPI maintains cold chain guideline downloads. 

Quick choice rule

• Market-linked warehouses & marketing infrastructure → AMI 
• Debt financing + incentives for post-harvest infra → AIF 
• Horticulture-focused post-harvest & cold chain → MIDH 
• Large integrated cold chain ecosystems → PMKSY 

Stage 4 — Transport & Logistics (Cold Chain Connectivity, Mandi‑to‑Plant Movement)

Best‑fit programs

• PMKSY cold chain: MoFPI maintains official cold chain guidelines and positions cold chain as part of integrated supply chain creation. 
• MIDH: Includes cold chain infrastructure and post‑harvest management interventions for perishables.

Stage 5 — Processing (Unit Setup, Expansion, Machinery, Collateral‑Free Credit)

Best‑fit programs

• PMEGP (MoMSME/KVIC): Official guidelines describe PMEGP as a credit‑linked subsidy programme for setting up new micro enterprises through banks and implementing agencies. 
• CGTMSE: DCMSME materials describe credit guarantee support that helps banks lend without collateral/third-party guarantees to eligible MSEs. 
• CLCS‑TUS (Technology Upgradation): DCMSME scheme page explains upfront capital subsidy support for eligible technology upgradation via institutional finance. 
• PMFME: Strong fit for micro food processors seeking structured upgrade support in a food-specific program framework. 

Quick choice rule

• New unit + subsidy → PMEGP 
• Bank wants collateral → CGTMSE
• Upgrade machinery / improve efficiency → CLCS‑TUS 
• Micro food processor upgrade with ODOP ecosystem → PMFME 

Stage 6 — Packaging (Modern Packaging, Barcodes, Brand Readiness)

Best‑fit programs

• PMS (Procurement & Marketing Support): DCMSME PMS guidelines cover market access initiatives and packaging-related awareness/capacity building, with eligibility tied to Udyam. 
• PMFME: PMFME positions itself as an ecosystem approach for micro food processors with ODOP alignment, useful when packaging and market linkage become priorities. 

Stage 7 — Marketing & Sales (Mandis, B2B Buyers, Exhibitions, Government Buyers)

Best‑fit programs & policies

• e‑NAM: The e‑NAM portal describes a pan‑India electronic trading portal networking mandis into a unified national market, implemented with SFAC as lead agency. 
• PMS: Supports market access initiatives like participation in trade fairs/expos and related market readiness activities. 
• Public Procurement Policy for MSEs: The MSME ministry page describes procurement targets and facilitative features like tender fee/EMD exemptions and purchase preference mechanisms. 

Stage 8 — Quality & Compliance (Testing, Standards, Safety Systems)

Best‑fit programs and levers

• PMKSY (MoFPI): MoFPI’s PMKSY framework includes a component on Food Safety and Quality Assurance Infrastructure, reflecting support for quality systems within the umbrella scheme. 
• MIDH: The MIDH 2025 operational guideline includes Good Agriculture Practices (GAP)/BharatGAP and post-harvest management interventions relevant to quality and market acceptance. 
• PMFME: As a program designed around micro food processor competitiveness and formalisation, PMFME is often the better fit when quality documentation and process upgrades are needed alongside unit upgradation. 

Cross‑Cutting MSME Stack (Works with ANY stage)

• PMEGP (start a new micro enterprise with credit‑linked subsidy) 
• CGTMSE (collateral‑free lending via credit guarantee) 
• CLCS‑TUS (technology upgradation with upfront subsidy support) 
• MSE‑CDP (cluster infrastructure + common facilities; ministry page notes online applications)
• SFURTI (traditional industry cluster development with soft/hard/thematic interventions) 
• Interest Subvention (2%) (DCMSME scheme page explains 2% relief framework for eligible MSMEs) 
• PMS (marketing support/expos and market access capacity building; Udyam required) 
• Public Procurement Policy (procurement opportunities for MSEs) 

 Three practical “combo pathways” (actionable routes)

Pathway A — First‑time founder → service venture + market linkage

• ACABC (training + venture pathway) + e‑NAM (market access/price discovery) + AIF/AMI (if you finance/build post-harvest infra). 

Pathway B — Micro food processor → start small, upgrade, market better

• PMFME (micro food processing support) + CLCS‑TUS (machinery upgrades) + PMS (market access). 

Pathway C — Market‑ready MSME → institutional sales

• Udyam + PMS + Public Procurement Policy + CGTMSE (if you need collateral‑free credit). 

 Annexure

1) MSME / MoMSME

• MSME / MoMSME (Ministry homepage): msme.gov.in
• Udyam Registration (official portal): udyamregistration.gov.in
• PMEGP Guidelines (PDF – KVIC): PMEGP Guidelines PDF
• CGTMSE Guidelines Reference (Scheme document PDF – CGTMSE): CGTMSE Scheme Document (CGS‑I) PDF
• CLCS‑TUS / CLCS (Scheme & Guidelines page – DC(MSME)): CLCS Scheme & Guidelines
• MSE‑CDP (Scheme page – MoMSME): Micro & Small Enterprises Cluster Development (MSE‑CDP)
• SFURTI Guidelines (PDF – MoMSME): SFURTI Revised Guidelines PDF
• PMS Guidelines (PDF – DC(MSME)): Procurement & Marketing Support (PMS) Guidelines PDF
• Public Procurement Policy for MSEs (Order page – MoMSME): Public Procurement Policy (MSEs) Order, 2012 (page)
• Public Procurement Policy for MSEs (Gazette PDF): Gazette Notification PDF (SO‑581(E), March 2012)

2) MoFPI (Food Processing)

• MoFPI (Ministry homepage): mofpi.gov.in
• PMFME Portal: pmfme.mofpi.gov.in
• PMKSY (overview + components – MoFPI page): About PMKSY Scheme (components listed)
• Cold Chain guideline downloads (MoFPI “Download Guidelines” page): Cold Chain – Download Guidelines

3) MoA&FW / DA&FW (Agriculture & Markets)

• DA&FW / MoA&FW (Department homepage): agriwelfare.gov.in
• Agri Marketing overview (DA&FW page): Agricultural Marketing – Overview
• ISAM Guidelines (PDF – DA&FW): ISAM Operational Guidelines PDF
• AMI scheme summary page (myScheme): Agricultural Marketing Infrastructure (AMI) – Scheme page
• NABARD AMI page: NABARD – New AMI sub‑scheme of ISAM
• e‑NAM Portal (official): enam.gov.in/web

4) Horticulture (MIDH)

• MIDH Operational Guidelines (April 2025) – PDF: MIDH Operational Guidelines 2025 PDF

5) ACABC (Agri‑Clinics & Agri‑Business Centres)

• ACABC (NABARD overview page): NABARD – ACABC Scheme page
• ACABC Compendium / Guidelines (Programme‑2025 PDF): ACABC Compendium (Programme‑2025) PDF

6) AIF (Agriculture Infrastructure Fund)

• AIF Portal (DA&FW): agriinfra.dac.gov.in (AIF portal)
• AIF Guidelines (Revised Scheme Guidelines PDF – DA&FW): AIF Scheme Guidelines PDF
• RBI (reference repository for circulars / index): RBI Circulars Index

This post is an original, simplified, actionable rewrite based on the DC (MSME) e‑book “Information on the Major Government Schemes/Programmes for Development of Food & Agro Enterprises” and schemes of  MoA&FW, GoI.  

Best Podcasts for Public Policy, Governance, and Social Impact Professionals

Sharing a thoughtfully curated podcast that offers sharp insights into the development sector and public policy. It brings grounded perspectives from the field, policy debates, and real-world implementation—definitely worth a listen.

Indian Podcasts

1. Puliyabāzī (पुलियाबाज़ी) is promoted by The Takshashila Institution. It is a Hindi podcast hosted by Pranay Kotasthane and Saurabh Chandra, in association with Takshashila. The podcast discusses politics, public policy, technology, philosophy, and current affairs in a conversational and accessible Hindi style to reach a broad audience.

Where to listen: YouTube, Apple Podcast, Amazon Music and Spotify

2. All Things Policy is The Takshashila Institution’s flagship English podcast, designed as a primer and deep dive into the mechanics of public policy in India and beyond. Hosted by Takshashila faculty and visiting experts, each episode tackles a specific policy arena—such as fiscal federalism, climate regulation, or digital governance—by breaking down foundational concepts, showcasing case studies, and interviewing practitioners from government, academia, and industry.

Where to listen: YouTube, Apple Podcast, Amazon Music and Spotify

3. Decoding Impact with Rathish is a thought-provoking YouTube podcast series hosted by Rathish Balakrishnan, Co-founder and Managing Partner of Sattva Consulting, a leading social impact consulting firm. This channel explores complex developmental challenges and real-world solutions across domains like governance, education, climate finance, agriculture, digital public infrastructure, and social innovation. 

Where to listen: YouTube, Apple Podcast, Amazon Music and Spotify

4. Policy Podcast, IIT Kharagpur focus on how innovation is reshaping policy & governance in India; interviews with experts on electoral politics, public administration, etc.

Where to listen: Policy Podcast, Apple Podcast, Amazon Music and Spotify

5. Policy Beyond Politics is a public policy podcast produced by the Centre for Public Policy Research (CPPR) — an independent think-tank in Kochi, Kerala focused on evidence-based research and actionable ideas for social transformation. The series brings together policy researchers, practitioners, and subject matter experts to discuss contemporary issues in governance, economics, democracy, and institutional reform that shape public life in India and beyond.

Where to listen: Amazon Music, Apple Podcasts and Spotify

6. Policy Talks by Bharti Institute of Public Policy, Indian School of Business: Conversations with policy thinkers and leaders about recent challenges & policymaking in India. 

Where to listen: Podcast Republic

7. Urban Planning in India (CEPT / CAU / CUPP): Deep, reflective conversations about urban planning, city development, governance at local levels in Indian context. 

Where to listen: Apple Podcasts, Amazon Music and Spotify

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International Podcasts

1. Governance Uncovered is a globally oriented podcast produced by the Governance and Local Development Institute (GLD) at the University of Gothenburg, with support from the Swedish Research Council. Hosted by Professor Ellen Lust, the series dives deep into the complex dynamics of governance, politics, state and non-state actors, and local development processes across diverse regions of the world.

Where to listen: Governance Uncovered - A Podcast by GLD | My new site

2. Building State Capability (Harvard): This podcast features interviews on research & practice in public sector capability, leadership in crises, policy implementation, etc. 

Where to listen: Building State Capability, Apple Podcasts, Amazon Music and Spotify

3. ADB Knowledge & Innovation Talks: This short series features ADB specialists and guest experts sharing practical insights on policy solutions, evidence-based governance, and development strategy. 

 Where to listen: Apple Podcasts, YouTube, Amazon Music and Spotify

4. Brookings Cafeteria (Brookings Institution): Great for hearing experts discuss public policy problems, governance and development economics around the world, including how governments are (or are not) coping with current challenges.

Where to listen: Brookings, Apple Podcasts, Amazon Music and Spotify

5. Policy Pathways by International Water Management Institute: Focuses on how evidence, complexity and coherence interplay in domains like food, land, water systems. Especially relevant if you’re interested in environment, resource policy, systems thinking.

Where to listen: Policy Pathways, Apple Podcasts, Amazon Music and Spotify

6. The Development Podcast (World Bank) - Focus: development challenges, data, research, policy solutions across sectors. 

Where to listen: World Bank, Apple Podcasts, YouTube, Amazon Music and Spotify

7. Future of Agriculture: 

Where to listen:  Apple Podcasts, 

Why Government Schemes Fail? - 3

Over ten years and countless reflections, the third part of "Why Government Schemes Fail?" explores why government schemes often fail at the grassroots level. The first and second of "Why Government Schemes Fail" can be accessed. 

Government schemes are essential tools aimed at uplifting vulnerable populations and promoting inclusive growth. Yet many schemes fall short of their intended outcomes due to a complex mixture of design flaws, governance shortcomings, and operational inefficiencies. Good policy, like good literature, takes personal lived experience as its starting point. 

Let me start with Scheme Design: The Blueprint for Success or Failure. Policy design is inseparable from governance outcomes. Schemes structured with complex rules, poor monitoring, unclear eligibility criteria, or ambiguous grievance mechanisms open doors to inefficiencies and corruption. Government schemes often lack transparency while in the design. Greater openness and participation before launching schemes can ensure better planning and public trust.  

Bringing together insights from practical experience, internet research, and foundational economic policy thought leaders like Vijay L. Kelkar and Ajay Shah, please find some insights: 

1. Leakage (Inclusion Errors): When benefits reach ineligible individuals, wasting scarce resources and weakening political support for programs.  Governments often focus on reducing leakages because they represent immediate financial losses and corruption. 

2. Exclusion Errors: When eligible individuals remain unserved due to bureaucratic failures and lack of social awareness which hurts the very citizens these schemes intend to help. 

3.  Poor state capacity means that government institutions struggle to properly plan, carry out, and track policies.  Indian states face challenges like excessive power in hand of the few skilled bureaucrats, lack of technical staff, and very poor institutional memory. 

4. Many poorly paid ad hoc staff and officials juggling multiple tasks reduce the overall effectiveness of government. Additionally, frontline workers are often overworked with high workloads, which strains their ability to perform efficiently and weaken government service delivery.

6. Weak incentives for better work hinder efficient government service delivery. Issues like poor monitoring of vendors and delays in payments reduce motivation for timely and quality performance.

7. Poor public procurement procedures in the government add to inefficiencies and reduce accountability. Complex, inconsistent, and bureaucratic procurement rules limit competition, cause delays, and enable corruption through practices like favoritism, bid-rigging, and limited vendor participation. 

8. Elite capture of public policy and bureaucratic dominance in decision-making lead to the control of resources and benefits to serve their own interests. Powerful local elites often sideline the poor, which fosters corruption. The corrupt money is then transferred back to the elites and bureaucrats, perpetuating the cycle.

9. Insufficient integration across government departments leads to siloed implementation. Schemes are often designed for the convenience of departments rather than focusing on the needs of the users. 

10. Schemes do not operate in an apolitical vacuum. Political incentives often favor launching high-visibility programs over investing in challenging, long-term institutional strengthening.

11. Especially, there is an 'ABCD' culture from top to bottom in rights-based services—A stands for Avoid, B for Bypass, C for Confuse, and D for Delay. 

No amount of sensitization can hope to overcome resistance from vested interests. be it of a financial, power, or political nature. The government scheme is doomed to fail but those who have designed the scheme will not be made to own the responsibility for its failures.  In conclusion, it is important to approach case studies based on "success stories" with caution, as they often emphasize positive outcomes while overlooking challenges. There is a lot of talk about an ‘action-oriented government,’ but it often involves dramatic announcements praised by a media that rarely asks follow-up questions. 

Caste Census and Public Policy

Public policy should be an outcome of democratic practice, a data-driven approach, and professional expertise. While data poverty has been attributed as one of the major challenges in framing policies for development, the democratic representation of the population can be attained through quota reservations in the decision-making process. Dealing with the thorny issues around quotas, meritocracy, social justice, inclusion, and opportunity leads to huge public debate with implications extending beyond the electoral politics realm. Since the social change is intrinsically political, data on caste is crucial because, in the absence of it, the only evidence we have is anecdotal.

Evidence-based policymaking based on caste census data is a better approach leading rather than arbitrary decisions lobbied by a dominant group and populist narrative. Caste-based data can reveal disparities in education, employment, healthcare, and other socio-economic indicators among different caste groups. This information is crucial for identifying marginalized communities and designing targeted interventions to address their needs.

What are the ‘natural’ building blocks of Indian society – gender, class, caste, region, and religion? The answer may vary but the development of Indian society be discussed without mentioning caste as the pivotal factor. Caste continues to be a determinant of educational opportunities, a robust indicator of economic status, and a gateway to decent employment opportunities. The commission, headed by B.P. Mandal, submitted its report in 1980, recommending a reservation of 27% of government jobs for Other Backward Classes (OBCs). The reservation was implemented based on the 1931 caste census, which found that 52% of Indians were OBC and did not fall into the category of scheduled castes or tribes. Our reservation policy is based on caste data that is outdated by a century.  Having reliable data from such caste census can serve as a foundational element for developing targeted and effective public welfare schemes to address the diverse needs of different communities.

Even though politics is controlled by the prism of caste, public policy is often focused on the problems of market failure or state failure. By prioritizing human development and implementing meaningful social reforms, we can invest meaningfully toward unlocking democratic dividends. The primary purpose of reservation is to make public institutions more representative and diverse by including the voices of caste groups who don’t find inclusion due to entrenched discrimination. The most well-intentioned social interventions fail because of the ground realities that consultants /bureaucracy/ policymakers often fail to grasp due to a lack of data. Analyzing the state capacity with the data-driven approach can help us anticipate unintended consequences and help pick a context-appropriate policy instrument.

In urban India, the debate on caste, especially among educated classes, revolves around the quota. While very conveniently, its other aspects - mental isolation, stigma, discrimination, bullying, etc. are ignored. Representation, inclusion, and diversity are all liberal progressive ideas. Only through intelligent use of caste census data can contribute to public reasoning. There are two opposing perspectives, one by Yogendra Yadav and the other by Pratap Bhanu Mehta worth reading.  

जातीय जनगणना होनी चाहिए या नहीं? Pros and Cons of a Caste Census | Puliyabaazi Hindi

A note on Public Procurement

In a feat of digital procurement, Central Public Sector Enterprises (CPSEs) witnessed a staggering Rs 1 lakh crore procurement in FY 23-24 through Government e-Marketplace (GeM). A commendable achievement. Now, that the good news is settled, we will be discussing insights on public procurement below:

Given the enormous size and the stakeholders' vested interests, public procurement is entangled in unfair practices. This leads to an entry barrier and a cause for significant transactional costs arising from, for example, delays in payments and bribery required to get them released. One can read Insights into cartels, bid rigging, fr, ads and other corrupt practices: Collusions in Public Procurement (cag.gov.in).

Among the serious issues highlighted by private companies that work on government projects is receivables because the Indian government is an all-powerful entity with the ability to delay/deny payment. Pavithra Manivannan and Bhargavi Zaver who are the researchers at the CMI-Finance Research Group have authored a blog post: How large is the payment delays problem in Indian public procurement?

The government allocations for social welfare have increased over the years, although the utilization of funds has remained low due to procedural difficulties, straitjacketed rules, delays in payments, corruption, and political interference. This disrupts nonprofit operations and undermines nonprofits’ attitudes towards working with the government, which has a more detrimental effect on public service delivery.

This reflects the dichotomous principle of government which on the one hand advocates for greater transparency and efficiency of government organizations and on the other hand refuses to penalize these organizations for huge delays in the payment to the vendors.

Issues created due to poor public procurement:

1. Many firms do not take part in public procurement as the government procuring entities often delay releasing the payments. The firms that are part of the public procurement face working capital shortage since delayed payment affects companies' cash flows negatively. Unless this money is unlocked, the problem of the payment percolates and is reflected in banks' stressed assets.

2. This is like Gresham's law (Bad money drives out good money) but in the public procurement domain. The payment delays impose an unnecessarily heavy burden on small firms, potentially knocking them out of the competition and discouraging them from participating in other procurement processes. Now all that is left are the big firms that are either immune to corruption or the firms that adopt corrupt practices. The more valuable 'good money' gradually disappears from circulation.

3. The government is legally liable to pay on time but the firms don't enter into a dispute for the delayed payments. The dispute with the government creates bad faith for future bids and contracts. If the procuring officials are themselves responsible for causing grievance, there is little chance of the aggrieved bidder getting his due from such a redressal system. In addition to that India does not have an Independent Grievance Redressal Mechanism in the procurement system.

4. It is worth noting that India hasn’t even signed the Government Procurement Agreement (GPA) as a member of WTO. Only recently, India has included government procurement in the India-UAE Comprehensive Economic Partnership Agreement.

5. Public officials also determine which vendors will thrive and which will fail by setting the terms and conditions under which public procurement takes place. This situation creates a situation of cartelization from the supply side.

Remedies:

1. Every organization has an incentive to conceal perceived areas of poor performance in public procurement. The government has to create independent and effective oversight processes where data on delayed payments is openly & easily available for public scrutiny.

2. Strengthening the monitoring mechanisms must lead to the creation of a strong knowledge management system for establishing best practices and creating institutional memory.

3. A lot of issues can be resolved if dispute resolution and claim settlement are faster.

4. Opening up government procurement to global competition with best-in-class project management and governance practices will help improve the quality of government projects.

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 an over-regulating act distorting the market for both players.

Good Governance & Public Policy

What is Public Policy ? Public policy focuses on the processes by which various types of policies and regulations that affect members of the public are created and enforced. Public Policy deals with public goods delivery – political economy, taxation, law and order, good social and physical infrastructure, including better education and health facilities – and facilitate provision of private goods (cheaper power, flexible labour laws and other subsidies). The guiding principles for better public policy include building people’s ownership and participation in the governance and decisions affecting their lives. Regulation, Redistribution and Equity came to the forefront of policymaking.

Resources be it human, natural or financial are limited in a country and a government must utilize them in the most productive manner can achieve the best possible growth. That is the essence of good governance. The first and foremost requirement of good governance is broadly distributed political rights among citizens and the government accountability and and transparency in public administration. An ideal public service institutions will be decentralized, professional and autonomous management structures.

The theoretical framework however doesn't work smoothly in the real world. Governments in many developing & underdeveloped countries are corrupt and never work in favor of the people. They work for the interests of specific groups. It would be naive to think that governments work for the public all the time. Economics works alongside and interacts with social and political forces framing the policy. Politically motivated decisions, the undisclosed profiteering, the conflicts of interest, the vested interests, & the bad experiments with good intentions can lead to the flawed policy making process. So how the end objective is achieved ?

Policy makers must be open-minded and open-armed to combat such conflicting interests arising due to potentially corrupt motivation. They must have sound knowledge of the local context of a community – its history, politics, social structure, and culture, along with its economics. More the diverse the stakeholders in policy making, the probe in the issue will examine ground realities, re-validate assumptions on which our policies rest, and evaluating  new initiatives. The real impact of policy decisions are measured by three factors:

* Number of beneficiaries covered under the policy
* Number of beneficiaries who experience a positive change with the implementation
* Participation of the people and innovation springing from the outcomes.

Public opinion is varied and contested space, continually shaped and reshaped over time. Popular opinion in India generally overlook corrupt vested interests or don't want to go for long term reform. Hence, Indian state has always insulated public policy from open debate. The bureaucracy in India has never let the control of policy shifts to an autonomous institutions and public has suffered the ill results of lack of knowledge among civil servants. Bureaucracy seldom promotes creativity and, under the cover of neutrality, preserves the advantages of the powerful by dominating the weak. In the government systems, professionals are always crowded out by the imprisoning logic of bureaucracy. As described aptly by Prof Ajay Shah: In the West, leaders choose the direction of public policy. Government is like a car, which goes where the leader directs. But in India, the car is broken, and just turning the steering wheel is ineffective. To do public policy in India, the skill required is that of an engineer and not the driver. It is about opening the hood, understanding what is wrong with the institution, and fixing it.

Each policy must face several test: Are the policies realistic? How will they be implemented? What results will they produce in the long run? Were there more reasonable, less risky, cost effective, user friendly, & more inclusive policy measures that would have yielded as much benefit as the rolled out one ? There is no ultimate policy measure but always a solutions-oriented approach means more innovative outreach and trade-offs in a wiser way. I will be putting more on the non academic and self learned diagnosis of public policy in coming days. Watch this space and hear buzz words like committees, accountability, check and balances, transparency. Have I lost you yet? I will.

Mid Day Meal (MDM) Program

Theda Skocpol, Professor of Government and Sociology at Harvard, notes that spending on education and family health care is especially likely to generate social and economic returns. Midday Meal (MDM) program is a school meal programme of the government of India designed to improve the nutritional status of school-age children nationwide. India's MDM program feeds 120 million children and employs 2 million women. It's an initiative that changes lives and provides human-capital investment in millions of children. 

The poorest of the poor are defined as those who can eat only when they get work and who lack shelter, proper clothing, social respect, and means to send their children to school. They have no land, live on daily wages, and need to send school-age children to work in times of crisis. They send children to government schools as this is the only way to ensure one time meal to their wards and the best chance for children to break the cycle of poverty. MDM scheme has many potential benefits: attracting children from disadvantaged sections (especially girls, Dalits and Adivasis) to school, improving regularity, nutritional benefits, socialisation benefits and income support to women.

An impact study has shown that the food stamps alternative or the direct income support is not feasible, for it may lead to adverse consumption choices by the targeted households. This would happen, particularly in countries like India, where educational and awareness levels of the targeted households are low.

Learn more in this animation designed by Rhitu Chatterjee and Mathilde Dratwa.

SECC data is out.

As per Prof Cornel West, Democracy always raises the fundamental question: What is the role of the most disadvantaged in the public interest? The catch in the valid question lies in the definition of the 'Disadvantage Class/Caste'. The definition of "Who are they" varies among politicians, academics, and policymakers. Any major program in any sector can't be effective without a robust information system. The road to social justice for all should be based on solid data for understanding ground realities.

SECC data is out. This census takes caste into account for the first time in any such exercise since 1931. But the government is hiding OBC numbers. The previous government led by the Congress had also decided to conduct a caste-based census, but not to make the data public. The reasons for withholding this data can only be political.  Data on economic indicators, with special enumeration of SCs and STs, is done by the regular census as well. SECC was commissioned because many parties wanted similar numbers for the OBCs to pitch for political mileage. However, it is always tough to digest that SECC was done to mitigate the absence of large-scale, credible, and empirical data for public policy. But, it is a matter of time before the numbers are made public.

There was once a huge hue and cry over caste census as being labeled as divisive by upper caste-dominated groups. Prof. Kancha Ilaiah had explained this in his article: Who’s afraid of caste census? --- "Caste culture is all around us. In the dalit-bahujan discourse, the upper castes are being shown as constituting less than 15 per cent. This could be totally wrong. Even within the lower castes there are several false claims about numbers. Every caste claims that it is numerically the strongest and keeps asking for its “rightful” share. How to tell them that their claims are wrong? When caste has become such an important category of day-to-day reckoning it is important to have proper data at hand to tell communities that they constitute this much and cannot ask for more than their share. It is true that we cannot distribute everything based on caste. But caste census is the right basis for statistics such as literacy rate and issues like the proportion of representation. Once we cite the Census data there cannot be any authentic opposition to that evidence."

There is unquestionable value in a general policy of reservation as merit can't be the only criteria for granting subsidies and quotas. Social Justice and economic barriers also need to be fulfilled for deciding such national/state-level policies. Despite deep affiliation with caste groups, the public is ready and eager to advance toward a more transparent and accountable society. And, making SECC data publicly available would improve transparency in the political debates if not direct action leading to better governance.

The bigger question isn't the availability of the data but the lack of willpower to implement the policy. There is all the required data available for STs in the census yet there is a siphoning of funds allocated to SC/STs. (Systemic denial and diversion of budgetary allocations). Many departments have failed miserably in allocating funds and even spending that minor fund for the TSP as per the proportion of the tribal population of the state. The manipulation made by the bureaucracy and political leaders in making the decision to divert the TSP fund showed a huge contrast between public policy and data-based evidence. Also, there is a deafening silence on Gender Budgeting (GB) in the corridors of power. So we have a country where no one pays heed to independent minds seeking evidence-based policy in the social sector. In such a political system, one has to learn to manipulate rather than simply put the case.

A pure functioning meritocracy would produce a society with growing inequality, but that inequality would come along with a correlated increase in social mobility. Is this really happening across caste and religion? We can only guess policy as there is not yet sufficient data for planning on caste-based issues. SECC data would even regenerate healthy debate between two groups proposing - either 'caste-blind &class-based' or 'caste & class based' type of affirmative action. The best way to improve the quality of the debate is by providing individuals with the data to make informed choices in a democratic country. SECC data is crucial for making sound evidence-based plans, it helps us understand what justice is so that appropriate policy can be made for the Disadvantaged class/caste.