Tracing India’s agricultural supply chain’s transition into a value chain

India is the world’s second-largest agricultural land user and gross agricultural producer, with two[1]thirds of its population engaged in farming. It ranks 7th in agricultural exports and is the top producer of bananas, mangoes, guava, lemon, chili pepper, ginger, papaya, okra, jute fabrics, and the second[1]largest producer of rice and wheat. However, the agricultural sector’s contribution to the nation’s GDP is limited due to the lack of profitable and sustainable business models. Despite this, India is embracing a business-oriented approach, like the Farm-to-Fork model, to unlock its agricultural potential. This feature story explores India’s transformative agricultural supply chain, highlighting opportunities and challenges in building a sustainable, consumer-driven value chain.

India – an agrarian economy with half of its labor market representing agriculture-related sectors, and more than 54% of the nation’s land categorized as arable, has seen the sector grow phenomenally over the years. The agricultural production capacity of India increased from 51 Million Tons in 1951 to an estimated production of 284 Million tons in 2018. Now, while the increase in production keeps on growing year after year, the sector’s contribution towards the nation’s GDP remains limited at 11%, which in 1947 was 43%.

Where on one hand, India has been able to crack the formula to increase the produce, it is yet to unveil the right way to make Indian agriculture a business making sector. Despite having rags full of the hard sown produce by the farmers of our nation, India is unable to establish a profitable and sustainable business for its crop.

Mihir Mohanta, General Manager – SCM, Mother Dairy Fruits & Vegetables, highlights that the Indian agriculture industry is unorganized to an extent of 90%. Within agriculture, the fruits & vegetables are most vulnerable. He mentions about the lack of demand and supply aggregation visibility and says, “This mismatch of the demand & supply leads to price volatility and food wastage.”

It is to be noted that India’s post-harvest losses account for up to 40% as estimated by the Food and Agriculture Organisation of the UN (FAO), while the Food Corporation of India pegs it at 15%. As per FCI, each year food grains worth USD 14 billion dollars are wasted, out of which 84% is rice and 14% is wheat. This loss can be attributed to the many challenges faced by the traditional agricultural sector of the nation.

Acing the list of the many challenges plaguing the Indian agri sector is the lack of rural infrastructure and an inadequate agro-supply chain. India has often turned a blind eye towards building an adequate storage capacity and processing infrastructure. The country has only 91 Million tons of food storage capacity, of which 41% is owned by government agencies such as FCI, CWC (Central Warehousing Corporation) and SWC (State warehousing Corporation). Also, the warehousing capacity in India has regional imbalance, with most of them built for the production side, causing missed opportunities to fulfill the demand on the consumption side due to longer lead time.

It was only after the implementation of GST that warehouses are now being built irrespective of laws and regulations and will improve in upcoming years. The broken supply chain of agri business in India accounts for 20% of its agricultural production. The lack of reefer trucks and manual loading and unloading of agricultural produce often accounts for a large chunk of produce going to waste.

The lack of farmers’ education and training also results in heavy post production losses, Mr Mohanta explains, “Most of the agriculture crop planning is based on the farmers’ intuitions and wisdom and not on any scientific basis.” He further adds that the Government too lacks any kind of formal control mechanism that can have controlled planting.

Further halting India’s journey of meeting its agricultural potential is an inefficient food distribution system, unpredictable weather, small average farm sizes (2.7 acres/1.08 hectares and shrinking), inadequate plant and animal genetics, and domestic agriculture support programs and subsidies that distort market signals and hamper investment.

But now the Indian agricultural sector is slowly shifting away from its traditional practices and eyeing a business making approach.

The agricultural production and food supply chains are now, with the transformation of technology, on the journey to becoming a value chain. This transformation has birthed the concept of Farm-to-Fork – the journey of food, from its production on the farm to its consumption on our plates, while keeping in check the safety and quality of the produce.

By implementing robust measures, such as adherence to good agricultural practices, rigorous testing, and regulatory compliance, the farm-to-fork model, which is a transition from the supply chain to a value chain, helps safeguard public health, promote consumer confidence, and uphold the integrity of the agricultural industry. This comprehensive and collaborative effort among farmers, processors, retailers, and consumers is rapidly growing in prominence.

 But, what is driving the growth?

The answer is the growing consciousness among consumers. Ever since the pandemic, consumers have become more particular about their health and what they consume. This is primarily giving a push to the model, as it emphasizes the importance of food safety and quality assurance at every step of the food production and distribution process.

“Enhanced awareness and concern regarding the quality and safety of food have brought the spotlight onto the emerging field of effective supply chain management, encompassing the entire journey from sourcing to the final food plate,” said Dr MJ Khan, Chairman, Indian Chamber of Food and Agriculture (ICFA). Different from the traditional supply chain, the farm-to-fork model also cuts short the supply chain and establishes customers contact with the farmer as direct as possible, giving them fresh produce.

This is an abridged version of the story published in the July edition of the Logistics Insider Magazine-India. To read the full story, click here.

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