The state of India’s food security is worsening by the year. The cost of food items is increasing rapidly, making them unaffordable to a majority of the people. Added to these woes is the short supply of agro food commodities and edible oils, which forces the Central government to import them. Recently, there was hue and cry over Onion prices (sold for 60-80 per Kg) and also not forget the sugar and milk crisis in year 2008. To put all this in numbers, an analysis done by IMF and Agriculture Production Statistics Deptt is presented below:
Graph explains that there is a rise of 32% in food basket price from Jan,2010 to Jan,2011.
There must be something
amiss in a country that is the world's second largest producer of food, behind
Brazil, but has the largest number of people ravaged by hunger and starvation.
India's failure in agriculture is coming under increased scrutiny as soaring
food inflation of 18.32 per cent ravages the common man and cripples household
incomes. The spiraling food bills have been driven by a 58.58 per cent rise. This
is an alarming development, considering that the wholesale price index of food grains
had shown only single digit growth, largely below 5 per cent, throughout the
last 13 years. Even the devastating famine of 2002-03, when food grain
production plummeted to 174.2 million tonnes from 212
million the year before, had not hurt the consumer as much.
India is also the world's largest producer of cashew nuts, coconuts, tea, ginger, turmeric and black pepper, the second largest producer of wheat, rice, sugar, groundnut and inland fish, and the third largest producer of tobacco. It also has the largest cattle population, of 281 million, and accounts for a tenth of the world fruit production, while being the foremost producer of banana and sapota.
The situation is thus a paradox of plenty across a landscape of debasing malnutrition. What is worrisome is that increasing yields over the past many years, barring sporadic declines, are not rendering food progressively affordable. In 2008-09, food production scaled a record 234.47 million tonnes on the crest of a cycle of good monsoons between 2005-06 and 2008-09. While drought diminished production to 218.19 million tones in 2009-10, it was still enough to swell buffer stocks. Prices, however, flared by 19 per cent earlier last year.
Globally food prices have been rising
since 2005 and many of the factors contributing internationally seem to be
contributing equally to the domestic markets. No single factor seems to be
sole-contributor to the current crisis. Some of the factors believed to have
caused the present turmoil are highlighted further:
Going further, we would discuss the solutions for the first two factors. Not that other factors are not significant, but they largely depend on government action and policies.
Increase
in wastage due to in-efficient storage and distribution system
India loses close to Rs
60,000 crore worth of agricultural food items due to
lack of post harvesting infrastructure such as cold chains, transportation, and
storage facilities. The inadequate storage facilities are resulting in rotting
of tons of food grains and rendering it unfit for human consumption as well as
for animals. India lost about two lakh metric tons of
wheat and rice in April and May alone. The Food Corporation of India lacks
adequate storage capacities in many states. All this despite
of the fact that India ranks second worldwide in farm output and the
agriculture and allied sectors like forestry and logging.
Some of the key constraints
identified by the food processing industry include poor infrastructure in terms
of cold storage and warehousing; inadequate quality control and testing
infrastructure; inefficient supply chain and involvement of middlemen; high
transportation and inventory carrying cost; and high packaging cost.
The broad questions to
discuss include innovations that are needed to promote agriculture; the
methods for advanced storage and distribution of food grains; use of technology
for collection of data and prediction ahead of time, besides other things.
The
key solution to this problem is to deploy planned and efficient supply chain
management that will minimize wastage and meet demands effectively. IT
solutions in the area of supply chain management, demand planning, and business
intelligence implemented at the national level are the key technologies that
will help in resolving the problem.
We have already highlighted
the fact that one of the most painful reasons for wastage in storage and
distribution is lack of adequate storage facilities. Having
said that, setting up a storage facility needs large amount of investment and
manpower resources. Hence, decision of where to setup a facility should
be well studied and analyzed. As, a step wrong in this would further lead to
increase in distribution cost and wastage. Today,
we have IT enabled solutions which help the business in determining the
optimized location of a storage facility based on demand, cost of setup,
distance, etc. Not only these solutions help in determining the potential
location, but also they help in designing the optimized sourcing strategies for
fulfilling the demand from a particular location. These solutions have
useful reports which help a planner to take appropriate action on a business event.
We have been involved in
designing such solutions for various clients. Canadian Wheat Board, a public sector company of Canada is into
business of procuring wheat from farmers and distributing wheat through
different distribution channels. They implemented an IT solution which helped
in designing the sourcing strategy as per the regional demand. Solution
helped them in determining the optimized route for sourcing the goods. It
helped them in reducing their distribution cost and also wastage of wheat. This
solution also helped the company in determining the potential location for
opening up new storage facility (based on the demand), and also analyzing if
any storage facility is under utilized.
Another, such IT solution
was implemented for a global coffee retail chain. It helped the company in reducing their wastage using the demand and
shelf life of goods. Business users claim a reduction in wastage by as much as
10%.
Food Corporation of India
or other retail players should implement such IT solutions to make their supply
chain more efficient and responsive to market demand. Not only it would help
them in reducing their operational costs, but also it would result in increased
availability of goods. Benefits should be passed onto final consumer as low cost
of food items.
Small-scale farmers in many
countries have inadequate access to markets. Their lack of access to
information and market data leads to inefficiencies, both on the farm and in
the marketplace. The result is large differences in what is produced and what
is demanded by consumers. This, in turn, results in shortages or surpluses of
produce on the market, creating instability in the prices of agricultural goods
and consequently farmers’ incomes.
Farmers need to know what
the market demands in order to determine what, when and how much to produce.
They need access to information about prices, trends in the market, and quality
standards in order to capitalize on market opportunities, increase incomes and
enhance food security. It is imperative that we integrate the production of
agricultural commodities with marketing if the farming community is to get the
best from its efforts, achieve the maximum use of scarce resources, and realize
sustainable livelihoods.
The author and his
colleagues have provided technology based solutions to some of the largest
grain handling and distribution companies in the world. They have seen the
concept of demand driven food production working and want to share the same
solution for their country.
IT
enabled solutions can help organizations in accurately forecasting the market
demand for various food items and cereals. This information should be shared
with farmers so that they can accordingly plan for their produce. We understand that it would be
practically not feasible for organizations to interact with each and every
farmer. In order to tackle this, farmers should be grouped together in clusters
(based on factors like geography) and organization should interact with these
clusters of farmers. This would help the farmer in diversifying their crop base
and hence utilizing their field potential to an optimum level. It would also
help in help in controlling wastage and hence would lower the price of
commodities. A web portal should be made on which forecast demand and producer
information should be shared. Forecast demand would help the farmers and
produce information would help the companies in designing their sourcing
strategies well in advance.
Canadian
wheat board handles 25MT of wheat annually. It procures the wheat from clusters and then
transports its all over the world.
The organization that is
akin to our own FCI, uses sophisticated forecasting
software to forecast the output of wheat. Based on this forecast, it enters
into forward contracts with the farmers and the farmers know before hand what is the demand they have to sow for. This
prevents over cropping of farmland. The farmer can then use the unsown land as
fallow, or can grow other cash or seasonal crop.
The author would like to
add another variable of forecasting the consumer demand using forecasting
tools. For example, if the government is able to forecast at the local level
the demand for a certain grain, it can do two things: try to procure, store and
distribute that grain locally as much as possible, thereby reducing
transportation cost, loss during transportation as well as shelf life, and
secondly it can communicate that local demand to the local farmers through a
cluster.
The objective of
forecasting the demand, forecasting the possible harvest and then working with
the farmer to avoid over cropping or under cropping will all lead to reducing
shortfall of grain output as well as over production leading to a glut.
While output shortfall will
lead to inflation, over production will lead to surplus being stored for years
and ultimately rotting. And the land could have been used for another crop,
that purpose is also defeated.
In India, the ITC uses the
concept of e-chaupal very effectively to communicate
with clusters of farmers.
FCI and other retail
players in India should implement such IT solutions to make their supply chain
more responsive to market demand. Farmers in Caribbean region have reaped the
benefits of such solutions. Companies like Canadian Wheat Board issue
procurement contracts of wheat for farmers based on the forecasted demand. This
helps the farmers of Canada region in planning their crop base effectively and
hence utilizing their field capacity in a better way.
To sum up, if both the
above discussed solutions are used in integration by different stakeholders in
agriculture it would definitely be beneficial for not only organizations, but
also the entire nation.
**The author and his colleagues have implemented the above solution of forecasting the harvest and then CWB would use that information for procurement contracts with farmers. For further queries on the solution please contact the undersigned:
Mr. Kirit Goyal, Director Gazelle Information Technologies Pvt. Ltd.
Mr. Kanishk Maheshwari, Consultant (Supply Chain Planning) Oracle Solution Services India Pvt Ltd.