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Corporate Blueprint for Harnessing Technology for Rural India
Theme Presentation by Mr. Y.C. Deveshwar, Chairman, ITC Ltd. at the
ASSOCHAM National Summit on Public-Private Partnership for Rural Prosperity
New Delhi, 16th October, 2001
Honourable Prime Minister Shri Atal Behari Vajpayeeji, Honourable Minister for Rural Development Shri Venkaiah Naiduji, The President of Assocham Shri Raghu Mody, distinguished gentlemen on the dias, Ladies and Gentlemen :
It is axiomatic that high rates of economic growth cannot be sustained without putting in place an effective growth strategy for rural India. Growth in rural incomes is both a means and an end of India's economic development. The slowdown of industrial growth has brought out even more starkly the vital need to sustain rural demand.
The inspirational vision of doubling per capita incomes within the next ten years set out by the Honourable Prime Minister has already unleashed several initiatives for development of rural infrastructure - physical, social and institutional - through an outlay of public finances. The entrepreneurial energies of the Private sector also need to be harnessed in bringing about competitiveness of India's rural sector. As the economy globalises, liberalisation in trade of agri products will pose both formidable threats and exciting opportunities. In the absence of competitiveness, it can threaten rural employment. On the other hand, competitiveness can lay open the opportunities of remunerative world markets.
A Blueprint for Corporate participation in rural India
No Indian enterprise using agri raw materials can attain decisive international competitiveness in isolation. This competitiveness is inextricably intertwined with that of the farm sector and indeed, the entire value chain from the farm to the consumer, both domestic and international. The corporate sector has an enlightened vested interest in contributing to, and securing the competitiveness of the entire value chain of which it is a part.
One of the key objectives of second generation reforms should be to fashion a climate in which the corporate sector can pursue its objective of creating shareholder value more readily by contributing to the prosperity of the Indian farmer. Traditionally, the Indian corporate sector has by and large viewed its contribution to the rural sector as part and parcel of its social responsibility, outside of its commercial objectives. Such contribution, therefore, tended to be either limited in scope or unsustainable.
The imperative of competitiveness of the farm sector, and indeed, the entire value chain as a pre-condition for business success in a fast globalising environment has prompted the corporate sector to seek solutions with urgency. The two most commonly advocated solutions for improving farm economies are consolidation of land and contract farming. Both have evoked strong reactions from the farming community, particularly among small and marginal farmers, arising from apprehensions of large scale displacement of labour and fears of exploitation at the hands of more powerful corporate entities. This is one reason why there is political hesitation in gathering support for contract farming, even though contract farming is the quickest way to bring about efficiencies.
Harnessing Technology for rural partnerships
An alternative model that captures the advantages associated with contract farming, yet engages the resources of the corporate sector more equitably among farmers would be more preferred and therefore, more appropriate to the unique structure of Indian agriculture at this point of time. As the rural infrastructure in India matures, and over time, the farming community develops a more pervasive sense of security borne out of prosperity, there will be a wider acceptability of ideas like land consolidation and contract farming.
Rapid developments in Technology, particularly Information Technology, make such a model conceivable. The primary ingredients of the alternative model are :
- Use of Information Technology to deliver real-time information and customise knowledge to improve farmers' decision making ability to align farm output to market demands and secure quality, productivity and improved price discovery.
- Use of Information Technology to aggregate demand in the nature of a virtual producers' cooperative to access high quality farm inputs and knowledge at the lowest cost, and
- Use of Information Technology to set up a direct marketing channel virtually linked to the mandi system for the purposes of price discovery, yet eliminating wasteful intermediation, multiple handling and thus reducing transaction costs and making logistics efficient and cost effective.
The corporate entity that invests in such an e-infrastructure and creates abiding value for the farmer in this manner would be rewarded in more ways than one - as a trustworthy supplier of goods, services and inputs and as a buyer of cost effective, quality farm outputs to support its competitiveness in the marketplace. This infrastructure can also be used for channelising services related to credit, insurance, health and education.
This model, in facilitating a direct marketing channel in competition with the existing mandi system, is in conformity with the reforms recommended by the Shankarlal Guru Committee appointed by the Ministry of Agriculture. This will thus encourage the mandi channel to become more efficient and shed some of the malpractices that have crept in due to its monopoly status. This will also conserve public resources that would otherwise be required for the expansion and upgradation of mandi infrastructure. Such a digital infrastructure would also serve as a strong foundation for creating a vibrant futures market to facilitate farmer risk management.
Such an approach is illustrative and can be, with appropriate modifications, applied to all facets of agriculture like floriculture, sericulture, horticulture, aqua farming, poultry farming, animal husbandry etc. International competitiveness can thus be engendered wherever it is feasible to create a structure where the corporate sector's need for creating shareholder value can be enmeshed with that of the farming community in a mutually supportive, interlocking and interdependent partnership.
Utopian as it might appear at first sight, this model is not merely a fancy academic exercise. Indeed, Respected Prime Minister, my company ITC has demonstrated the feasibility of this model through its click and mortar initiative titled e-Choupal. It is a matter of pride for me to share with you that this initiative has already become one of rural India's largest internet-based interventions, reaching out to some quarter million farmers in two thousand villages through 460 choupals in the states of Madhya Pradesh, Karnataka and Andhra Pradesh. The customisation of the content to local requirements and in the local language has made it user friendly for the farmer. This model has met with enthusiastic response from farmers, and has thus encouraged us to plan for the extension of this initiative to another eleven States. This pioneering initiative is a manifestation of my company's commitment well beyond the market and is based on the understanding that Indian agri-based exports would sustainably create value only if the entire value chain from farm to consumer is internationally competitive.
Growing competitiveness of Indian agriculture induced through such a market led business model, can trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for farmer risk management, higher order of investments, feeding even higher quality and productivity. On the other hand, growth in rural incomes would also unleash the latent demand potential for industrial goods so necessary for the economy into a higher growth trajectory.
I may have overstated my case if I have carried any impression that such an endeavour as described by me is a cakewalk. There is many a challenge primarily in the form of infrastructural inadequacies, including power supply, telecom connectivity and bandwidth, apart from the challenge of imparting skills to the first time internet users in remote areas of rural India.
The benefits of rural initiatives tend to be back ended, thereby stretching corporate resources. One cannot expect everyone to be fired by passion alone. In order to mobilise wider participation by the private sector in similar endeavour, governments, Centre and State, can play a catalytic role by crafting a nurturing policy framework. Incentives to encourage investment in this sector could be confined to an initial period of say 3 to 5 years, until the rewards of the virtuous cycle kick in.
Another example of private sector involvement can be in the area of wood based industry. Biotechnology-based farm forestry programmes would bring into productive use vast tracts of degraded private land, create the biomass to restore ecosystems, provide a sustainable source of productive employment among the weakest sections of rural population, and secure a competitive source of wood-based raw material. Here again, my company, together with select NGOs, has embarked upon a social farm forestry programme that dovetails into the raw material requirements of its paperboard undertaking, thereby creating a mutually beneficial virtuous economic cycle with the marginal farmers in rural Andhra Pradesh. Due to paucity of time I will refrain from expounding the merits of this approach any further.
Respected Prime Minister, I believe that the models I have suggested can mobilise corporate sector involvement in bringing about prosperity in rural India, given appropriate policy support and encouragement. I am sure my colleagues in the corporate sector join me in assuring you that we are all willing to go the extra mile, toil harder and engage even more passionately in realising the inspirational vision set out by you.
Thank you for your attention.