1. Boosting Agricultural Productivity- Cluster
Cooperative Approach
Thoughts by:
Team Young Turks
05 September 2013

2. Crop Diversification- The right way forward
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Kar Guj Mah MP Raj AP TN UP Har Ker Bih Pun WB Ori
Crop Diversification Agricultural Growth
Crop
Diversification
Pecularities of
Indian Agriculture
Geographies Acquisitions
Recruitment &
Training
Branding
Crop Diversification is linked with improved yields and agricultural growth*
Growth
%
YoY
Index
For
Crop
Diversif-
ication
*Source: National Agricultural Statistics and State of Indian Agriculture
** Source: Indian Agricultural Statistics
Contribution of different sectors of growth by region and period**
• In an era of climate
change, crop diversification
acts as a useful risk hedging
strategy and hence boosts
productivity
• Much of the agricultural
gains in the western region
in the 1980’s and the
southern and eastern
regions in the 1990’s was
led by crop diversification
policies
• Bangladesh also showed a
successful correlation
between increased
agricultural production and
crop diversification
We observe that states with
higher diversification are
able to achieve growth
rates of above 4%.
Incidentally they are also
growing from a higher base.
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation

3. Fragmented holdings & rain-fed agriculture- Turning Adversity to Opportunity
Fragmented land holdings makes adoption
of technology difficult
Farmers become subsistence farmers and
go for crops that bear least risk i.e
foodgrains crops
Govt MSP fixing and generational
knowledge makes it unviable for
cultivation of cash crops
The problem of smaller land holdings is
going to be entrenched in our system
We need to evolve a system which takes
into account incidence of small land
holdings by agglomerating holdings
Overall irrigation potential is 45% of net
sown area
Low utilization of this irrigation potential
means a majority of the agricultural land
is rain fed
Large irrigation projects entail massive
displacement and loss of prime
agricultural land
Minor irrigation projects are plagued by
issues of maintenance
System of Rice Intensification and other
dryland farming technologies have
advanced to considerable extent
Solution lies in identifying the best form
of cultivation practice customised to suit
local agro-climatic and soil conditions
Emphasising on implementation of the
technologies
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1970 1976 1980 1985 1990 1995 2000 2005 2010
Average Size of Land Holdings (hectares)
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation

4. Credit & Insurance- Challenging established norms
Credit- A farmer’s nightmare
Formal credit sources like banks require large
amount of paperwork and are intimidating
for the poor farmer
Informal credit sources like moneylenders
charge exorbitant interest rates and stress on
placing land on mortgage
Kisan credit cards, a much hyped government
scheme is yet to permeate the agricultural
credit market. Linkage with banks and
paperwork makes it difficult to implement
Strategy should be two fold-
Reducing agricultural production variances to
bring down interest rates
developing local means of credit availability
Local means of credit makes it possible to
access credit worthiness with hardly any
costs while keeping interest rates low
Insurance- Non existent
Lack of adequate insurance schemes
Government’s NSAI insurance scheme
linked to yields has hardly any takers
Private player’s lack an incentive to
enter the low margin agricultural
insurance space
Link insurance and credit channels to
make it appealing
Encourage adherence to a code by
using insurance as a carrot
Insurance also reduces agricultural
income variability for a farmer
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation

5. Supply Chain- A chain of woes
Archaic domestic laws
Old APMC Act necessitated the
presence of series of intermediaries
Model APMC Act which corrects this is
yet to be adopted by many states
and several inter state tariffs remain
Farmer gets merely 66% of the price
paid by customer for produce
Marketing hassles need to be handled
by farmer organizations
Reducing the number of
intermediaries is need of the hour
Establishing direct customer touch
points for farmers
Using technology in this regard
Trade regulations
Inadequate infrastructure for
handling export of perishables
Freight charges in India about 50-
100% higher than other
agriculturally rich countries
Multiplicity of organisations makes
quality checks difficult
Differing needs viz a viz quality
and support requirements for
different agricultural products
Developing a system which handles
individual product export needs
and is solely responsible for the
same
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation

6. Cluster cooperatives – The way forward
Clusters
•Crop clusters to develop back to front linkage
•Supply of crop specific inputs, credit, technological knowhow, processing and marketing
•Research on agro-climatic conditions determining crop and technology to be used
•Overcomes problem of small land holdings, lack of irrigation, marketing hassles
•Use of SRI and other technologies
Cooperatives
• Cooperatives for each major crop
• Cooperatives to be run by the farmers and for the farmers
• Direct touchpoints for farmers and customers
• Interest of farmers to be the cornerstone of cooperative establishment
• Savings cum credit scheme and insurance guarantee scheme to address these shortcomings
Agglomorative
diversification
, Local
Specialisation
• Crop diversification at the aggregate level as presence of multitude of crop
clusters
• Crop diversification also to include letting out of processing plants, houses
etc during off-season
• Farmers free to use services of cooperatives or directly approach market
• State Cooperative Units to coordinate within state transport of produce
• National Cooperative Units to decide on import/export possibilities
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation

7. Implementation- Build Systems that Sustain and Grow
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation
•Aim is to design
a system that
factors in need
for crop
diversification
and fragmented
land holding
•The credit and
insurance
norms would
have to be
factored in
•The vision to
create a self
sustaining
model is of
utmost priority
Creation
• The aim is to achieve
improve agricultural
productivity would be
through a Four Tier
Cooperative model
•While most controls of
the Cooperatives
would rest with the
farmers while
professionals would
manage and run the
business.
Design Processes
and Procedures • A savings cum
lending scheme
shall be
established
wherein the
farmers would pool
in resources at the
cooperative level
•The cooperatives
in consultation
with lending
institutions shall
decide on the loan
amounts and
interest rates post
approval from
State Federation
Fund and Help
Processes Mature
•This is the final
stage and a self
Sustaining Co-
operative
model would
have been in
place having
followed the
three steps.
•The
cooperatives
would thus be
independent
bodies with
positive
earnings
Self-Sustain

8. Designing the Co-Operative Systems- A Four Tier Structure
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation
Tier 4 - The Zone level Federation
•The Zone level federation shall decide on policies and procurers for packaging, transporting among various states, exports and imports
etc.
•Further, this federation shall instruct the state level federations on the ‘type’ of diversification basing on the macro environmental
factors
Tier 3 - The State Level Federation
•The main functions at this stage would market the products and agricultural produce and take the produce from different district
federations
•Training & Development, Long term planning, conflict resolution, creating a brand and establishing purchase law for raw materials shall
also come under the state federation
Tier 2 - The District Federation
•The main functions at this stage would include procurement of agricultural produce, providing input services such as seeds, technology,
know-how to the farmers’ Union and decide on the prices to be paid to the farmers and other members
Tier 1 – The Famers’ Union
•A society at a smaller level could be formed under the supervision of the district federation
•The main functions of the society would include farming activity, selling the produce in the locally according to the local needs and
supplying the output to the district union

9. Road to Sustainability for the Cooperatives
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation
The first stage is a
creation stage. The
cooperatives would
be formed at this
level
A situation where
every cooperative
seeks for funds shall
be seen in this stage
The procedures
would have taken
shape and the
processes begin to
mature
The Cooperatives
would could still be
operating in the red
at this phase
A set of processes
would have been in
place which would
not be ‘person’
dependent
Crop Diversification
processes would be
taking place
The Cooperatives
would have enough
income at this step
to sustain
themselves
How the tide would change
The initial phase would see cooperatives operating in red.
With shared resources, shared technology, know how farmers would have better access to tools that
would increase productivity
With crop diversification, along with diversifying in crops, cooperatives could diversify in packaging,
processing and retailing to better margins that could be pumped in back to the system to get HYV
and better raw materials and thus leading to sustainable growth

10. The Impact
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation
Benefits at farmer level
• Focused employment among the farmers as they work under a cooperative model
• Would help in reducing variation on incomes YoY
• Farmers would have access to new technology and HYV seeds and other raw materials
which was otherwise inaccessible
• Ease of procuring funding and assurance of the money being spent the right way as
every loan would require approve from Zonal Federation
Regional level
• Better transporting and monitoring facilities would result in efficient results
• Computerization of land records would have resulted in better use of land and thus
increases scope for diversification at regional level
National Level
• Increased agricultural productivity brought out by use of technology
• Synchronized efforts in the agricultural sector as the zonal federation is the only
authority to direct on crop diversification and the other crops that need to grown and
such decisions shall be taken considering the macro-environmental factors.
• Would help boost agricultural exports and reduce imports

11. The Challenges- Rome wasn’t built in a day
Crop
Diversification
Peculiarities of
Indian Agriculture
Credit & Insurance
Marketing and
Trade
Solution Implementation
Political
•Setting up of cooperatives in a non partisan manner
•Ensuring large farmers do not establish their hegemony in cooperative functions
•Resistances from politically strong intermediary class
Economic
•Ensuring a self sustaining cooperative model
•Problem of defaults especially in case of savings cum lending
•Disbursement of cooperative profits in a fair manner
•Time of implementation as it goes through red tapism
•The fear of monopolisation by cooperatives and food price spiral for customers
Environmental
•Natural disasters or an infestation by pests spoiling a particular crop
•As there is local specialisation, entire area and therefore cooperatives to go into
defaults and losses
•Lack of adequate coordination between cooperatives and competition to bring in more
members, thereby disrupting the planning process