The supply chain for agricultural produce in India is not very competitive in the world market. Our agriculture products lose their competitive edge in the process of reaching the markets from a farm gate.
At the pan India level, 34% of fruits and 44.6% of vegetables do not reach the market and get spoiled due to lack of a seamless Agri supply chain and related infrastructure. In monetary terms, this loss amounts to INR 63,000 crores for farmers on the pan India level. It’s evident that if rural supply chain gaps are plugged successfully, farmers’ income will increase manifold and agriculture will become a profit-making business.
Rural road infrastructure is considered as the wealth of a nation because it brings economic development in rural areas by providing market routes to the agricultural produce and plays a role of growth enabler. India has one of the largest road networks in the world running approximately 5.9 million km in length with 73% roads running through the rural areas.
Despite having a mammoth share of rural roads in the total road network, Indian farmers incur INR 92,651 crore post-harvest losses per year due to inadequate roads, storage and other transportation facilities.
The Ashok Dalwai Committee, set up for doubling farmers’ income, brings an eye-opening fact in its report on the investment required for ramping-up the state of storage and transportation facilities in the rural areas. The report suggests that an investment of total INR 89,375 crore is needed to improve overall rural transportation infrastructure which is marginally lower than the annual post-harvest losses.
Inadequate transportation and storage facilities largely impact farmers’ ability to monetize their products and this problem becomes even more critical in the case of perishable products like fruits and vegetables.
Uneven cold chain infrastructure intrinsically and directly put an impact on the value of cargo, whether in cold storages or en-route in transport. For such sensitive fresh produce, cold-chain counters perishability only temporarily, and this transient extension in saleable life needs to be directed for the sake of expanding range and access to markets. Therefore, integration with refrigerated transport is important but our country has mainly built capacity in storage only.
However, in recent years, transportation and storage facilities have recorded reasonable growth in rural areas. A strong push to the overall rural infrastructure including the sectors like food processing, warehousing and logistics will be very beneficial as it will help boost farmers’ incomes, reduce wastage of perishable agriculture commodities and provide employment to rural workers.
Inefficiencies in Rural Supply Chain
The slow pace of development in the rural infrastructure has resulted in productivity losses, longer transit times and higher logistics costs. According to K. Satyanarayana, Co-founder and Director, Ecom Express, “Good infrastructure, especially in the rural markets, is expected to improve operational efficiency, reduce transit times, control costs and result in better utilisation of assets.”
The bad roads, lack of cold chain infrastructure, manual handling and slow transportation pose challenges for supply chains to penetrate deep into the hinterlands.
Rural Last-mile delivery: A nightmare
The last-mile delivery of goods focuses on product delivery to the end consumer with the least cost. And, thus infrastructure plays an important role in the facilitation of the last mile-delivery. The poor, underdeveloped road infrastructure of rural India becomes a great hindrance in the logistics supply chain making it almost impossible to reach certain customers.
L R Sridhar, Founder and MD, Connect India holds the view that the biggest constraint in rural supply chain is the reach, coupled with a higher incidental cost, making the product more expensive. Also, if for some reason the customer is not home, the package is returned and an attempt has to be made yet again, and this translates into additional cost. Connect India, with its rural distribution model, works with partners to solve the issue of the high percentage of returns.
The rural roads yet have poor geometrics, inadequate compaction of the embankment and inadequate drainage, resulting in bad transportation facilities as well. However, meeting customers’ needs and demands remains the priority for every logistics company.
Infra projects to boost rural supply chain
The Government has given a solid foundation to pilot a better India by putting in efforts to bring India’s infrastructure at par with international standards. Union Government’s big infra projects like Bharatmala and establishment of 35 Multi-Modal Logistics Parks (MMLPs) aims to improve connectivity on economic corridors for quicker movement of cargo and boosting domestic trade besides exports.
According to Mr Satyanarayana, “Special emphasis should be given on providing connectivity to the far-flung border and rural areas including the tribal and backward areas for inclusivity. The thrust on improving connectivity in remote and border areas will hike trade and enable faster movement of cargo and passing of benefits to the last level.”
All the initiatives will help in reducing the cost of operations and will result in efficiency around turn-around times.
On being asked about the benefits of establishing MMLPs, Mr Shridhar said that it will not largely benefit rural supply chain. He said, “Unfortunately, the MMLPs are mainly situated in Tier 1, Tier 2 and Tier 3 towns, and by the time they move to the rural areas, it would take time since it has fixed costs and if there is no scale, the cost of last-mile-delivery will shoot up and ultimately, it would prove unviable.”
LR Sridhar, Founder and MD, Connect India believes setting up smaller warehouses and Rapid Fulfillment Centers (RFC) will be beneficial for a rural supply chain. He said, “This will not only create an effective distribution eco-system via small warehouses and RFCs but also help the farmers and small producers to take their produce to the market.“
Connect India’s efforts at creating this ecosystem has yielded very good results. We have plans to set up 150 such RFCs over the next two years to create an effective rural distribution system.
In a nutshell
The Government of India has understood the importance of rural infrastructure and pushing hard to build roads in rural India to connect villages to the city markets. According to reports, 1.69 lakh km of rural roads have been built since 2014 in India. And, 74% of villages are connected to all-weather roads.
The substantial expansion of rural connectivity in a systematic manner and smart execution of ongoing infra projects can bring freshness to the rural supply chain network and also be helpful in improving farmers’ income.