It can provide flexibility in functioning and offer effective incentive to agents
Managing agri-business value chain is essential from production to procurement and distribution to consumption to complement a diverse group of agents such as resource provider/supplier, transporter, producer, processor, distributor and marketer. Public-private partnership may induce flexibility in the functioning of the value chain and offer an effective incentive structure to the agents along the chain (see, Chandrasekaran and Raghuram 2014 and Dey 2014 for book review)
Value chain drivers
Value chain drivers are said to complement and augment system efficiency and responsiveness. Efficiency along the supply chain calls for a robust planning known as Material Resource Planning (MRP). On the other hand, synergy in supplier relationship, facility with respect to choice of location and contract manufacturing decisions of (material) inputs and delivery of service inputs, and inventory management are also important. Besides input management, managing output is also critical to agri-business value chain. Value-addition through processing of agro-based produce is critical to output management in agri-business. Sourcing is a key driver for an efficient value chain that may be possible either from regulated markets or from focal firm’s designate-collected centre or directly from the farm gate. Hence, quality, quantity, price, source and time influence the decision making of a focal firm.
Infrastructure – Hard and Soft
Infrastructure and information technology together contribute to sustain value chain efficiency in agri-business. For example, cold chain – a temperature-controlled supply chain – comprises surface and refrigerated storage for enhancing the shelf-life of fruits and vegetables. However, inadequate infrastructure, rising energy cost, and poor utilisation of storage unit could act as bottleneck for an efficient post-harvest management of agri-produce.
The role of technology in agri-business supply chain is noteworthy. Management information system across the strategic, tactical, and operational levels seeks to map the supply chain layers, viz. planning, collaboration, and execution. This synchronises the value chain activities with the layer-wise processes. For instance, dairy and other processing industries manage to manoeuvre their value chain layer effectiveness deploying adequate resources supported by a robust information system. As a consequence, they are able to optimise cost-benefit metrics embracing a value chain reference model that includes plan, source, make, distribute, and return.
ITC-e-Choupal, utilising information technology, has brought a remarkable advancement in procurement, trading, warehousing, and distribution for commodities such as wheat, soyabean, and tobacco, mobile technology, on the other, adopted by fishermen in Kerala, enhanced price realisation at source reducing price volatility and dispersion in fish prices. Nonetheless, disbursement (by formal institutions) and credit growth has remained an area of concern for agribusiness industries and policy makers as any strain on financial flow can arrest the working of operating cycle and thus, functioning of the value chain.
PPP to Chain Integration
Public-private partnership could bolster to integrate the information flow, physical flow and cash flow. In agribusiness, producer, trader, distributor and customer constitute the value chain. Integrating these three flows is of crucial relevance to value chain stability. While a resilient value chain is warranted from intermediaries, stability of the system is subject to government policies. A stable government with responsive bureaucracy can help create an innocuous and effective macro environment to instil efficiency in agri-business value chain.
Consider a typical PPP model in value chain. In Rajasthan, StarAgri has constructed an integrated structure for farm produce procurement, storage and distribution. Licensing is critical to start the procurement and distribution activities. For a successful intervention, StarAgri may contract out end-to-end solutions to Farmer Producer Companies (FPCs). For instance, Ajaymeru Kishan Samruddhi Producer Company in Ajmer incorporated in 2013 that has 2,500 farmers’ base with a share capital of Rs.13 lakh. Indian Grameen Services of BASIX has played a key role in capacity building of the FPC. Nabard – being a promoter of Farmers’ Club – could be a financial intermediary between FPCs and StarAgri. FPCs could source the inputs from various suppliers at competitive rate and provide to farmers for production and then, bring the produce to private mandi for auction and sell. StarAgri needs to organise the auction and mediate the exchange between FPCs and buyers. Council of State Agricultural Marketing Board and National Institute of Agricultural Marketing may craft the right policy for functioning of this PPP model.
The writer is a Post-Doctoral Fellow of the Centre for Management in Agriculture, IIM-Ahmedabad. Views are personal.
Source : http://www.thehindubusinessline.com/todays-paper/tp-agri-biz-and-commodity/how-publicprivate-partnership-can-embrace-agrivalue-chain/article6956530.ece