2. Problemstatement Cause of the problemsBroad problem statements
Even though, In India more than
80% of the farmers are small &
marginal and Indian agriculture is
highly whether dependant. It is not
the only problem, the level of
technology infusion is quite less in
agriculture. Worsen the situation,
farmers are doing suicides and
young population is diverting away
from agriculture. Surprising by the
fact that more than 50% of Indian
population is still indulge in
agriculture but contributing 13%to
the Indian economy, it has been
sense that it would quite difficult for
Indian agriculture to cater to the
demand of exponentially rising
Indian population. We chose this
topic as we felt that current policies
and systems can be better
implemented to not only increase
the performance of Indian
agriculture but also reduces the
vagaries of the monsoon over the
sector
Reason for selecting this topic
Low rate of return due to small size of farms
High wastage of the perishable and food grains due to
inadequate storage facilities
Lower access to the Credit among farmers
High dependency of farmers on whether
Even though more than 50% population is indulge in
agriculture but the efficiency and wage are quite low
Market failure in Agriculture(unbalance in supply and
demand)
•Lack of irrigation facilities
•Lower accessibility of irrigation technology for the farmers (Similar to
cause 1)
•Information asymmetry regarding the wages in the market
•Efficiency is low due to lack of infrastructure(Similar to cause 1)
•Absence of proper identification of the target farmers
•The complication in Government processes and time taken to avail
the credit to farmers is quite high.
Lack of infrastructure and storage technology
•Lack of accessibility to the market
•Lack of appropriate and timely information about the future demand
• Externalities like subsides are creating market failure
•Lack of technology is the main reason
•Low involvement of private player in providing the technology to the
farmers
1
2
3
4
5
6
3. Infusion of technology through the use of Leasing(mechanical inputs) and
Microfinance model for non-mechanical(seeds, pesticides etc) inputs.
Solution 1
Production technology in agriculture
Non-mechanical technology
like tractors, irrigation
Mechanical technology like seeds,
pesticide etch
Infusion through the use of
microfinance model
Infusion by the use of financial
leasing to a farmers group
•The nationalize bank and Big equipment manufacturer
will participate in this scheme as the risk will be shared
and the credit will be in the form of financial leasing of
equipment. For the microfinance in others inputs the
existing vast network of microfinance system can be
used.
• Not only the amount of the loan to be distributed by
Government will increase(targeted loan + loan
distributed by bank)but also the numbers of the
farmers benefitting from the loan will increase due to
extensive network of the nationalized bank and
manufacturer.
•
• Farmers access to the credit will increase as the large
network of the microfinance and nationalized banks
will be used in this system.
• This system can prevent the farmers loans as
political agenda as the credit will be in the form of
financial lease where the ownership of instrument will
be with the banks and Manufacturer equally.
•This system will not be gender specific as women who
indulge in agriculture can approach the bank for the
loan.
•This system can infuse the technology in the system as
leasing and microfinance will be provide the
equipment and credit to the farmers.
•This system will be a group process, where huge
exchange of knowledge among the farmers involved as
group .
Merits of Proposed solution
Brief introduction – This system is inspire from the micro finance model
which involved in the leasing of instruments(mechanisation of farm) and
agriculture micro financing(non mechanical inputs) to a group of farmers.
The system will served the dual purpose , it will increase the technology
infusion in the system and will also help in risk mitigation for banks and
manufacturer by sharing of the risk as the ownership will be retained to
the banks and manufacturer . Ultimately this system will increase the role
of private manufacturer (which is the owner of most of technology) which
is currently missing in present system. This system will also increase the
knowledge transfer among the group of farmers.
•CurrentlyGovernment distribute the loan through the
multiagency network consisting of Commercial Banks
(CBs), Regional Rural Banks (RRBs) and Cooperatives.
So the role of other nationalized banks are quite low
due to higher risk in direct credit.
•Through this system, in 2012-13, Government was
able to distribute only 53% of the targeted loan(308025
out of 575000 targeted)
•In the current system only 13% of the farmers have
access to the credit.
•Near election, during the financial year 2008-09,, the
Government used loan as political agenda and gave
the loan waiver for small and marginal farmers.The
total amount estimated was716.8 billion rupees.
• Current Indian microfinance industry is women
specific as more than 90% of the members are
women.
• There are no Government scheme regarding
technology infusion. For the technology specific loans,
farmers are depends upon banks where banks ask for
collateral.
• In current system, many barriers will come into
picture as only single farmer will involved in credit
taking.
• Interest rate are highly subsidies(7% initial and 4%
if paid fully).
Existing system
Why not renting as an alternative sources – In renting there will be too
much risk for manufacturing due absence of risk sharing mechanism.
•The repairing and maintenance will be done by Manufacturer in renting
while in leasing the repairing will be done by farmer leasing equipment.
•Renting is for limited time and at the time of the need renting may be
unable to fulfil the requirement but in Leasing, equipment will be available
for whole year.
4. Implementation of solution
• Use of mobile
technology
• Use of mass and print
media like T.V
• Use of direct
communication like
group interview
• Awareness though the
KVKs and agri research
centre.
• Use of existing
network pvt. channels
Awareness
•Increase the ease in the
process by less paper
work
• Incentivization of scheme
through initial discounts
in interest rate
•Use of prevalent
equipment brand known
in particular area
•Reduction in
approachability barrier by
going to farmer doorstep.
•Help of NGO to mediate
the farmers
encouragement
• Evaluate the
acceptance of scheme
among people
• Evaluate the system for
the availability &
reach
• Evaluate the system for
leakage
• Evaluate for the initial
impact on productivity
• Evaluate impact of
barriers like disputes
Evaluation
• Provide the product to
the farmers group
• Provide them training
for the product usage
• Check for the
authenticity of the
farmers group
• Ensure the timely
delivery of the product
• Lower the paper work
to ensure quick deliver
Purchase
• Monitor the group for
the regular meetings
for the exchange of
idea and collection of
payments
• Monitor them for the
proper infusion of
technology
• Monitor the market for
new technology in
agri- sector
• Monitor the impact of
technology
Monitor
• Provide easy access to
the services of the
leased product
• Make the services cost
effective
• Provide the incentive
to the farmers making
the timely payment of
the product
• Check for revising the
option of re- leasing
after completion of
term
After sale
StepsinvolvedStakeholder
Govt.mass media,
channels, Kirishi Vigyan
Kendra(KVKs), print
media, Private channels
Main stakeholder -NGO
But Manufacturer, bank
and Government, will
also mediate this.
It will be evaluate by the
risk sharer
Manufacturer, bank and
Government
Manufacturer and
Government will involve
here
NGO, Government will
involve here
Manufacturer,
Government will involve
here
Financialandhuman
resource
Assumptions –
•Manufacture will include his operating cost, material cost and profitability in the final price
•According to a system the cost of NGO per farmer group has been calculated as20000(for 8 years)
•Effective interest rate will be 5%.(Normally 8% but in case of timely payment it will be 5%)
•Government cost will be ( Normal interest rate (12%)- subsidized interest rate(5%)
•The cost has been calculated as per group
•Time take has been considered as 8 years
•UseofKVKsto
spreadthe
knowledgeabout
theproduct
•UseofAgri-
researchcentre,
agriculture
Universityto
innovatenew
technology
•Existingmicro-
financestructureto
providecreditfor
thenon-mechanical
input
•UseofDordarshan
tospreadthe
awarenessabout
thescheme
•Governmentcredit
schemesfor
agriculture
•Existingcentral
government
schemesfor
microfinance
•StateGovt.funding
agrischeme
clubbedwiththis
model
•Nationalizedbank
asapartofrisk
sharingmechanism
•Fundingfrom
international
resources
•Fundingby
microfinanceagencis
Leveraginggovt
.structure
Funding
Generalequipment(can
beincreased)
5. Impactofsolution
Increase in yield after
technology infusion
Accessibility(reach) of the
system
Number of farmers
connected initially
Increase in farmers’ no.
enrolling for this scheme
Satisfaction level of all
stakeholders
Used of underutilized
capacity due to involvement
of banks and manufacturer
Use of existing channels of
the banks and manufactures
Utilization of waste land due
to availing of technology
Use of existing micro-finance
channels for microfinance
loan
Connecting government
credit scheme to increase
the reach
The interest rate charged
can be used to invest
further
Rates of interest will be
quite low so Govt. policy
can be used to sustained it
Funding from the foreign
institution can be used
here
Some profit sharing
mechanism of sharing the
profitability with farmers
Risk sharing among Govt,
manufacturer, banks and
farmers
NGO mediated group
leasing
Regular meeting of
farmers group
Feedback system from all
stakeholder(monitoring of
satisfaction)
GPS system in the Leased
instrument
Regular payments will be
kind of monitoring system
• Due to technology
infusion the yield
will increase
Yield increase
• No NPA for banks
• Manufacturer risk
reduction by
indulging in renting
or directly selling
instrument on
finance
Risk reduction
• Lot of investment
will come from
nationalized banks
so it will be kind of
utilization of
resources of banks
and other players
Use of under
utilized
resources
• The technology like
drip irrigation can
be used to improve
the waste land.
Thus it will add in
the income of
farmers
Waste land
improvement
• Clubbing this plan
with Govt.’s credit
scheme will
increase the
utilization of credit
scheme(2012-13
utilization was only
53%)
Use of Govt.
recourses
• As most of young
generation is
quitting Agriculture
. This increase in
yield will definitely
increase the faith
in this profession
Restoring faith
• As the whole
system is based on
NGO mediated
group leasing,
there will be
definitely sharing
Knowledge
sharing
Criteria of measuring the impact Scalability of the solution Sustainability of solution
Appropriate monitoring
mechanism
Possible impact on all stakeholder
6. Challengesandmitigation As the concept is
of group leasing
then there will be
issue regarding
the usage limit of
the instrument
Usage and
instalment criteria
Area based usage &
payment system-
means the leasing
instalment and the
usage will be directly
proportional to the
area of land the
farmer possess
It is true that
productivity of land can
be increased through
but still the dependency
of yield on whether
can’t be neglect
Again due to the
concept of group
leasing the contribution
in the regular repairing
can be a issue
There is can be chance
that farmers can show
the undisciplined
regarding the leased
instrument(selling in
very cheap price in
market)
It would be quite
difficult to use the drip
irrigation system under
leasing system as drip
irrigation system is
restricted to a single
field
Tractor is not the only
instrument required in
agriculture. Farmers will
need other regular
equipments too
As agriculture is
whether dependant so
there can be chance of
irregular payment from
farmers in case of low
crop
The R&D investment in
technology like
developing draught
resistance seed can
really help to mitigate
this problem
Again this problem can
be solved by the
contribution in total
repairing amount which
is proportional to the
land of individual
farmer
It is true that the tractor
is not the only
instrument in agriculture
but most of other
instrument depend upon
tractor and usage of
other instruments are so
low that a rending
system can be used.
•Due to highly subsidize
system farmers will
prefer it as a single
owner but still leasing in
group should consider
due to benefit of
exchange of knowledge
in group.
•Use of other irrigation
system
The chances of these
kind of irregularity will
be quite less whole
process from selection of
group to monitoring is
mediated by reliable
NGOs
Basic concept of group
leasing is suggested to
come out of this problem
as group members can
help each other in paying
the instalment.
There will be some
flexibility in payment
option
StillWhether
dependency
Repairing issues Instrument selection Use of irrigation system System leakage
Ensuring regular
payment
Unit Wise Cost Analysis
Cost of Equipment( divided over a period of 8
years including interest cost)
1. Model Cost of all equipments utilized
over a period of years 10,00,000 rupees
EMI ( assuming 96; montly installment for
8 years at interest rate of 12%) -
DEMANDED BY MANUFACTURERS 16,253 rupees
EMI ( assuming 96; montly installment for
8 years at interest rate of 5%) - RATE
FARMERS CAN COMFORTABLY BEAR 12,660
Cost borne by Government 3,593 rupees
General Administrative Expenses ( 2 % of
equipment cost) for 8 Years 20,000 rupees
Total Annual Cost borne by Govt and NGO 6,093 rupees
Year
Additional
Farmers
included each
year
Total No of
Farmers
Benefitted
Total Annual
Cost of Scheme
( In Crore)
1 400000 400000 30
2 400000 800000 61
3 400000 1200000 91
4 400000 1600000 122
5 400000 2000000 152
6 400000 2400000 183
7 400000 2800000 213
8 400000 3200000 244
7. Infusion of technology through the use of microfinance(agriculture specific) and micro
leasing as an alternative of direct credit to the farmers
Solution 2
Market Failure
Information
Asymmetry
Market Access
•Information Symmetry-
1) Providing information on mobile proactively
2) Forecasting of demand for specific products to
reduce price volatility in market
3) Online availability of historical data of production,
market, price etc.
4) Ensuring availability of mobile to registered
farmers.
5) Ensuring availability of information and product
about quality seeds, fertilizers, seller etc.
6)
Proposed solution
Brief introduction – Market failure occurs when resources are inefficiently
allocated due to imperfections in the market mechanism.
Existing system
Externalities
•Market Access
1) Encourage co-operative approaches to marketing
for smallholders
2) Improve smallholder farmers’ marketing skills
through entrepreneurship training
3) Reduce market distortions to improve
opportunities for all strata of agriculture worldwide
4) Policies for facilitating private sector to invest in
agro processing industries.
•Externalities
1) Free electricity
2) Subsidies on fertilizers
•Information Symmetry-
1) Kissan Call centre, KVK and other government agencies
all of them responds to issue raised by farmers.
2) The farmers sows crops based on last two or three
years data which fetched high price.
3) Online data is not available for farmers
4) In India only 83 % of house hold has the mobile
penetration and rural penetration is only 69%
5) Government is providing information but not ensuring
the availability of best quality seeds and fertilizers.
6)
•Market Access
1) No cooperative successfully working at state level.
2) There are APMC markets available for selling the
product but they are very inefficient.
3) Government is developingAEZ and other centres
to provide opportunities to all farmers.
4) Self initiatives of private sector for backward
integration to ensure availability of raw materials
for there products.
•Externalities
1) Appeasement policies of various sate government
which has led to excessive use of ground water and
same pattern of cropping.
2) Subsidies on Urea has led farmers to grow those
crops only where urea is used. This has increased
salinity of soil and hence affected the soil quality.
8. Implementation of solution: Information Asymmetry
•Database of farmers should be
maintained at state level
•Mobiles phones should be
made available to farmers
based on data base
•Dedicated department for
maintaining historical records
and forecasting should be set
up
•The price movement on daily
basis should be monitored.
Awareness
• Shortage as well as surplus
information should be
available on line.
•Adulterated seeds are sold in
the market, to ensure best
seeds as well fertilizers are
available to farmers the
information about the shops
and centres should be
available to them
•The soil testing should be
done at farmers door step
encouragement
•Small farmers should be
encouraged to form
cooperative.
•These cooperative should
than market the product
•The cooperatives should
try to form fruit and
vegetable hypermarkets.
•This would help them to
market crops directly to
customer
•Training should be given
for improving the
entrepreneual skills.
Evaluation
•The backward integration
of private players or
industry with the
farmers.
•The private trader should
engage with farmers right
from sowing to selling.
•A contract between both
so that farmers will have
guaranteed buyer and
traders would have
regular supply for their
trade commitment
Purchase
•Food processing industry
should be given tax
incentives for setting
plants in rural areas .
•Opening of centre of
excellence in states for
R&D activities, other
requirement for
processing industry.
•Credit facility and
technical expertise for
locals to open food
processing industry
Monitor
•Avoid rolling out populist
measures for farmers
•No free electricity for
farmers
•Using Aadhar card for
transfer of subsidy to
farmers instead giving it
to industry.
•Converting Aadhar card
in a card system such
that the money is stored
in card and the card can
be used as buying agent.
After sale
StepsinvolvedStakeholder
Govt.mass media,
channels, , NGO, mobile
phone companies ,
farmers
Main stakeholder –
Government, Farmers,
Industry, traders, banks
It will be evaluate based
on results and
participation of farmers
Manufacturer and
Government
NGO,Government Manufacturer,
Government
Financialand
humanresource
• PPP model can serve as a good strategy to implement this solution
• In addition to decrease in the expense burden on any party it will also lead to Multi fold improvement in efficiencies.
• The overall amount on subsidy would be decreased subsequently in next few years and that money should be diverted to build capital infrastructure.
• World class institutes can be partnered with to have easy access to technology and development of long term human resource in India.
• Simultaneously a new generation of indigenous workforce should be developed through promoting targeted education programs.
•UseofKVKsto
spreadthe
knowledgeabout
theproduct
•UseofAgri-
researchcentre,
agriculture
Universityto
innovatenew
technology
•Existingmicro-
financestructureto
providecreditfor
thenon-mechanical
input
•Useof
Doordarshanto
spreadthe
awarenessabout
thescheme
•Governmentcredit
schemesfor
agriculture
Leveraginggovt
.structure
•Central
Government
•StateGovernment
•International
FinancingInvestors
•Worldbankand
Inter-government
financingsources
•PPPmodelusing
bothdomesticand
international
corporations
•Fundingbymicro
financeinstitution
Funding
Implementation of solution: Market Access
Implementation of
solution: Externalities
9. Impactofsolution
• Due to technology
infusion the yield
will increase
Yield increase
• Better flow of
information
regarding quantity
and selling prices
across various
markets
Price Volatility
• Use of mobile and
other relevant
technologies on a
greater and
efficient level
Technology
Penetration
• Due to increase in
stability in rural
income as
reflected in
increase standard
of living
Better
economic
returns
• Using present
Government
policies like Aadhar
to plug the leakage
and better
targeting of
existing schemes.
Efficient use of
government
resources
•This will make
farming an
attractive business
opportunity thus
contributing to solve
the national food
security problem
Restoring faith
• Forming of a
centralised record
body to enable
intelligent and
timely use of data
for improved
decision making
Knowledge
dissemination
Price difference of similar
crops across different
market
Consumption pattern of
citizen monitored to
forecast the demand
Number of completed agro
industry projects in a year
across various states
Share of rural income in
state GDP
Decline in rural migration
Diversification of crop
grown
Criteria of measuring the impact
Use of Aadhar schemes to pin
point the beneficiaries and
reduce leakage
Use of existing channels of
government and private
sector institution
Formation of cooperative will
enhance the productivity and
coverage
Use of existing mobile
network and technologies
Specific software application
to guide the farmers in day to
day activities such as mobile
apps
Scalability of the solution
Dedicated agency for
monitoring real time
updates to various
databases
Daily record of quantity
sold and prices across
various markets
Contribution of rural
income in state GDP
measured through
interstate comparison
Comparison of historical
data
Pattern of Sale of seeds
Appropriate monitoring mechanism
Possible impact
10. Challenges and mitigation
Penetration is still low
which needs to be
brought to a significant
level before any
progress can be
achieved
Lack of adequate IT
infrastructure
Fiscal incentives for
private sector to
provide necessary
infrastructural support
such as Road, IT,
telecom, water,
electricity etc.
The literacy level is still
very low especially for
women and people lack
awareness about
various schemes and
policies of Government
Inherent inhibition and
stubbornness to
continue using old in
efficient ways of
farming practices.
There may be leakage in
terms of incorrect
information by
fabricating data
Investors are vary of
investing in rural
economy due to lack of
security and extensive
administrative hurdle
Government leaders
announcing populist
measures to win
support without caring
about the fiscal health
Because of
unavailability of centres
of excellence in country
there is shortage of
experts .
Revamping of rural
literacy programs both
for children and adults
Awareness camps at
the door of farmers.
Selection of few farmers
in village and
demonstrate them the
usefulness of the
technology
• Educating farmers
using NGO and
leaders about the
intended benefits and
losses because of
various policy
initiative.
• Active involvement of
farmers in policy
decision making .
•Involvement of village
panchayats in approval
and setting up of
development project
•Amendment in
regulation for investing
in rural areas.
Centralised computer
system in association
with schemes such as
Aadhar may prevent
such type of leakages.
• Partnering with
international
universities to
promote research and
talent development in
country.
• Longterm approach to
establish indigenous
centres of excellence
Rural illiteracy and
awareness
Switching to new
technology
Excessive Populist
offerings
Administrative hurdles
for investors
System leakage
Unavailability of experts
in concerned fields
Unit of Analysis House Hold
Average family Size 6
Rural Population in the Country (approx) 69%
Indian Poulation (2011 census) 121 crores
Number of House Holds 13.9 crores
Present Mobile Phone penetration 69%
Extra Mobile phone requirements (one
per house) 4.3 crores
Cost of operation per Family ( includes operative
cost of call centers, data collection cost,
maintenance cost, cost of information
assimilation and dessimation etc. ) 150
rupees per family
per month
Estimated Cost per month 2,083 Crore per month
Annual Cost assuming active season of 10 season 20,825 Crore per month
Finance Analysis
* Data in the aove analysis corresponds to the 2011 census where ever appliable
