| A summary of the Address
delivered by Dr Montek Singh Ahluwalia at
the MMA Seminar on “Corporate’s
Role in Rural Development” held on
27th March 2007 at Chennai.
The subject of this seminar “Corporate’s
Role in Rural Development” is a very
important one. But, I am going to put it
in a slightly different context. When corporate
leaders think of rural development, I think
they think of it as development of rural
areas. If that is so, it is undoubtedly
the case that it is one of the most important
things that we should be thinking about,
mainly because, 70% of population live in
rural areas. So the development of 70% of
the population should be pretty central
preoccupation of the government, generally
because the balance 30% of the population
is much better able to look after itself.
I feel that what we should be really emphasizing
in looking at the issue of Rural Development
is how do we ensure dynamic performance
in agriculture and you know within government
agriculture is different from Rural Development.
Historically Rural Development programmes
emerged out of the desire to produce a direct
employment generating programe in rural
areas. We have different kinds of employment
programmes and the principal focus of a
lot of Rural Development activities historically
used to be the need to provide employment
to those who do not actually get employment
or don’t get adequate employment in
the agriculture sector. Now, from the short
term point of view, that is certainly important.
But from the medium term perspective, the
really important thing is how do we get
agriculture to be doing better. I think
the real problem in the country is that
between 1980 and 1996 roughly the growth
rate of agriculture was about 3.6%. After
1996, the growth of agriculture fell to
something like below 2% per year. In the
last 2 years there has been an improvement,
that is only a little over 2% on an average.
The most important source of income in rural
areas is the agriculture economy; it is
not the only source of income. There is
a lot of non-agriculture income in rural
areas but the primary motive force for income
generation in rural areas is really agriculture.
While what we normally call Rural Development
are extremely important in providing a short
term employment support for the most distressed
part of the population, and this should
especially serve in a drought year when
normal employment may go down, we need to
keep in mind that a broader rural strategy
has to be a strategy that actually also
addresses how to expand the growth rate
of agriculture. Now the two are obviously
linked because if Rural Development is designed
to general rural infrastructure and if the
rural infrastructure in turn is designed
to maximize the agriculture production that
there is a complete synergy between the
two and that is what we should be aiming
at. There is no doubt in my mind that if
you want to achieve the target growth rate
which now is set at 4% for agriculture,
in rural developmenter to achieve this target,
you need lot of development of infrastructure
in rural areas. But this development of
infrastructure goes much beyond the infrastructure
that is actually built by what in the budget
is called the Rural Development Programme.
Some water conservation work, small roof
building, some construction of facilities,
drinking water facilities, those are important
but many of the other elements of infrastructure
are not done under the Rural Development
and are done under some other programmes.
Similarly, I think the challenge of increasing
the agriculture growth from an average of
around 2 to say 4% is really going to require
action on a very large number of other fields
and the real issue is ,”what is the
role of the Corporate Sector in triggering
all those developments?”
I think that if you take a look at it from
that point of view, one needs to identify
why is it that we are not getting the take
off in agriculture comparable to what happened
when the green revolution was launched with
C Subramaniam. This is his home town and
specially appropriate to pay tribute to
the memory of the great man; when the green
revolution was launched then in late 60’s
and the early 70’s and so on, there
was a real technological breakthrough, a
sort of a new plateau was reached. It is
interesting that what was needed then and
was successfully implemented then was largely
led by the public sector, with not very
much role for the Corporate Sector. I think
the word Rural Development was different
at that time. I mean, the technological
breakthrough was the result of essentially
a kind of public funding, some Rock Feller
money, but you might say that is really
public cum international charitable philanthropic
work, transmitted largely through the public
sector; the credit that was to be provided
was essentially provided by the PSU banks.
The minimum price support that was needed
was provided by the government through the
Food Corporation of India; and the technology
transfer was essentially also done through
the PSU with not much focus on question
on IPR and it was relatively easy to transfer
the technology and it worked like a dream.
I think the words Rural Development is changed
dramatically since then for number of reasons.
One is of course that if we want a transformation
in rural areas, it is not going from a single
magic bullet or one particular crop. In
fact, the scope for getting the high growth
rated agriculture if we rely only on cereals,
is very very low. It is extremely unlikely
that a cereal based growth rate can justify
more than 2% growth in agriculture. If you
really want a 4% growth in agriculture,
that is going to come from agriculture diversification,
and that does not mean crop diversification.
It involves a diversification into other
crops, certainly into horticulture, certainly
into things like live-stocks, dairy, poultry,
fishery, depending on the circumstances.
So we need yield break-through, production
breakthrough and technology break-through
in a very large number of different areas
unlike the situation at the point of the
green revolution. This is obviously more
complex, but anyway the issue is also that
these kinds of yield breakthroughs by themselves
will not be sufficient unless there is a
comparable marketing breakthrough also,
so that the increased production can effectively
be marketed, Marketing of the diversified
agriculture. Most of the diversification
in the perishable commodities is very different
from marketing of wheat and rice. These
products happen to be products that don’t
perish, so it is relatively easy to organize
marketing. If you are going into horticulture,
technology is required to market efficiently.
I understand that it is recommended that
you should be able to chill the vegetables
for half an hour or so when taken out from
the field, and keep them at a very low level
until they reach the consumer’s shelf
and that is the way of increasing the shelf
life. If you want to produce something for
agro processing, then you need to produce
something which is particularly suited for
the agro processing, i.e., the end destination,
in the sense, that varieties being used
for juices will be different from what is
being used for canned fruits and those differences
are reflected in the varieties and therefore
the person buying the product must have
a much greater role in determining exactly
what kind of seeds are used and so on. At
least this area seems to me that the role
of Corporate Sector in energizing agriculture
growth has to be very large. It is not actually
conceivable that we will achieve the sort
of huge yield increases that we are talking
about and achieve the marketing breakthrough
that we are talking about, simply based
on a public sector management of the agri-
chains, where the departments of agriculture,
co-operatives, etc., do the entire work.
I think this is really the core issue: How
can we get the corporate sector which is
best able to take the risks involved, which
is best connected with the markets, which
is best able to handle the entire logistics
chain, from when the product is taken off
the field to when it is delivered whether
it is to an agro processing unit or to a
shop in urban areas or to an export market,
to get things done. It is possible to also
do it, through modern marketing co-operatives
and there are many examples in the rest
of the world, including in the U.S. where
modern co-operatives actually in effect
compete with the Corporate Sector. But it
has to be some part of modern corporate
type organisation. I think in our particular
context, we recognize this in government
and I don’t think there is a failure
to accept that, I think there is a willingness
to welcome the role of the Corporate Sector
in supporting rapid agriculture growth.
There is also however, a fairly deep suspicion
and it is a suspicion which is not surprising.
It is clear that in any marketing, a contractual
arrangement between the Corporate Sector
on the one hand and the individual farmer
on the other, it is an unbalanced kind of
transaction, and the presumption is that
much of the economic power with the Corporate
part of the transaction must rest on the
part of the farmer, and this is bound to
generate suspicion and we see this suspicion
emerging in many contexts. But at the same
time, I think there are examples, of successfully
overcoming this problem. Many State Government
that I have talked to welcome very strongly
institutional mechanisms such as, for example,
contract farming that provide a way of protecting
the interests of the farmers and at the
same time provide an entry for the Corporate
Sector to essentially indicate what are
the products it wants, even how to do the
supply of inputs, possibly also provide
technical support. I visited the places
where the special agents really perform
the role of technical advisors and in effect
extension agents in the private sectors
rather than from the government and the
system seems to have worked quite well.
But at the same time, there is also a suspicion
and I think really seminars like this should
help to focus attention on what is working
and what is it that can be replicated, and
what are the constraints of government policies
which actually prevent a deeper integration.
As far as I can see the fundamental constraint
which I don’t think anyone wants to
change or would be able to change, is that
land should remain owned by the farmers.
And that we are not in a position to have
large corporate ownership of land. But shown
as that, I think any sort of arrangement
that allows the corporate sector to interact
with farmers to communicate the sort of
technology they want to use, they enter
into purchase agreements and off-take agreements
on the output, I think all these can be
fitted in to the existing framework. One
very important thing is to document what
succeeds. There is nothing new about corporate
farming. I mean, all sugar mills are a form
of corporate farming. So it is not a new
awful thing that has suddenly come out.
I have many friends who are very suspicious
of corporate farming. I keep telling that
this is one of the traditional forms of
interaction that have existed, but I think
it can now exist and expand in many different
areas. I think that is where Corporate Sector
has the greatest chances of coming in. One
of the important things here is the way
in the world the driving forces of research
have actually changed. I think compared
to the position 20 to 30 years ago, where
there was a great deal more of publicly
funded research, when you get into areas
where there is much better reliance on hybrids
and varieties that don’t replicate
themselves and it is true, obviously we
are going to have a lot of private sector
research and the whole shift in the seed
production also into the private sector,
that provides another role for the Corporate
Sector, again that is the role that will
it have some suspicion. Hopefully we can
over come this suspicion. It is not generally
realized that in many of these areas, India
has actually moved quite rapidly, I mean,
for example, if you look at the potentially
controversial areas, e.g. genetically modified
crops, India is the fourth largest user
of the genetically modified seeds in agriculture
in the world, so we have lot of changes
taking place. I don’t think we have
done enough to debate these issues and to
put on the agenda specific proposals which
will enable the government to move forward
to Rural Development. I want to share with
you that we are in the middle of trying
to prepare strategy for agriculture for
the 11th plan. A committee was set up under
the Ministry of Agricultural which is Committee
of Chief Ministers, they have set up many
sub- groups. So all aspects of agriculture
are going to be put together in a composite
strategy which we hope, will be taken to
the National Development Council, sometime
in the next month or so. I hope that will
lay out the ground work, a kind of a road
map, what needs to be done in agriculture.
In that framework, it would be very useful
to be able to say, “This is the role
that the Corporate Sector can take.”
In many areas such as building of roads
and irrigation, water management etc., these
are the areas that the government has to
handle. But on the provision of technology
and on the provision of extension advice,
on the provision of marketing and on the
provision of logistics, I think these are
the areas that the Corporate Sector can
take a big role in. I do believe based on
all the infrastructure information that
we have it is possible to raise the agriculture
growth rate from 2% to 4%. It should be
the effort of all the agriculture related
departments, that includes agriculture itself,
Rural Development, irrigation, rural roads,
and actually provision of the electric power
to the rural areas. Without reliable electric
power in rural areas, it is going to be
very difficult to bring about a focused
growth on the diversified agriculture. If
you think of the logistics requirements
of the cold chains, the lack of the reliable
supply of electricity at reasonable prices,
must be viewed as one of the critical constraints.
In that sense, I think the challenge before
us is actually more difficult than it was
when we were talking about the green revolution
some decades ago. Quite frankly, looking
20 years ahead, if what we read about global
warming is correct, and there is a problem,
then the challenge becomes much much deeper
and stronger. If the average temperature
is to rise by 2 degree centigrade, and if
we are going to have change in the availability
of water and the dispersion of availability
of water of the country, then quite frankly,
we need to adapt to be able to cope with
these changes. That adaptation requires
a huge amount of research, I mean, simple
things in the sense if the temperatures
in Northern India in January and February
go up by 1 degree centigrade, the productivity
of the wheat crop goes down by 10%. So really
the impact of climate change on production
is very large. At the same time, it is possible
through more research, very focused research,
to be able to find varieties that are more
resistant to temperature change, the change
in the storing pattern, so that the maturation
takes up before the heating up….all
of these are something that need to be worked
upon so that in the time period of let’s
say, 30-40 years, there is enough of rejuvenation
of research effort to take care of these
problems. This sort of basic research with
the long term vision has to be done by the
public sector and there is a huge responsibility
for the Central Government and the State
Governments and the agriculture research
system. But a lot of the other research
which is really looking at the commercial
attractiveness of different varieties and
building on the basic research done in the
public sector is really done in the world
in the corporate sector and it is done in
the corporate sector by corporations that
are involved in agriculture. Research about
shelf life, research that may determine
the likelihood of spoilage owing to temperature
rise during storage, all of these stuff
involves very active involvement of the
Corporate Sector. We need to document all
this and hopefully when we are in a position
to present an agriculture strategy, (we
don’t have that strategy), we would
be pulling together what has already been
done, the reports of the National Farmers’
Commission, our internal work in the Planning
Commission and lots of other works including
some of the conferences like this and make
up a National Agricultural Strategyn
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