|
|
Economy
|
|||
|
|||
Economy |
Private Sector in Rural DevelopmentWhile the Nepali government is exhorting the private sector to go the rural areas, the private sector institutions are lamenting at the lack of business viability to do so. Against this background is a blueprint proposed by one of India’s corporate leader which may be relevant to Nepal as well though the proposed model is based on Indian conditions. In his speech at his company’s AGM in June this year, M.S. Banga, Chairman of Hindustan Lever Ltd. and Chairman of Nepal Lever Ltd. as well, drew examples from countries like Brazil and proposed a model (see figure) in which the private sector companies take a lead in rural development by setting up Farmer Service Centres (FSC) at different locations. The attraction of the model lies in that it is profit-oriented and thus practical for the private sector. Though the model also resembles the cooperatives in terms of benefits, it functions quite in line with a joint stock company. Making calculations for wheat costs in India, Banga concludes that his model would result in a reduction of Indian Rs. 2.50 per kg in wheat price for the consumers. This is possible because the commissions and handling costs for both agricultural inputs and outputs will reduce saving in farmer’s costs and supply chain costs. As proposed by Banga, the FSC is to run as a private enterprise between the food processor and a number of other input providers such as a bank, fertilizer/seed producer, and so on. Either the food processor or agri-input provider should take the lead in establishing the model, he suggests. Enumerating the benefits from the model, Banga says, agri-inputs would be made available directly to the farmer making these more affordable as the wholesale and retail margins will vanish. Similarly, credit and insurance would be available to the farmer at reasonable rates, and the centre would provide extension services to ensure farmer’s access to best practices in, what he calls, Precision Farming techniques, meaning the methods in which the farmer does not need to mechanise but still can improve the productivity through good agronomical practices. In his example of Brazil, Banga notes that the South American country is the world’s largest orange juice producer, with a 50% global market share. Multilateral partnerships exist there between the farmers, processors, banks and other support agencies, governing the entire span of operations based on long-term contracts. But such a model will not work effectively unless the enablers required for it are in place. Banga has identified four broad areas of the enablers (see the accompanying box) and these may be equally relevant to Nepal. Calling for redirection of government efforts, Banga argues for removal of all restrictions on the movement and storage of food grains and to improve information availability as well as creation of a Futures Market. This will ensure that the crop planning is more demand-driven. This seems to be in line with the thrust proposed in Agriculture Perspective plan (APP) of Nepal in implementation for the last several years, but suffering from a lack of seriousness on the part of the government. The frequent complaints of sugarcane farmers against sugar mills would not be there had such an arrangement of futures market been in place, it can be argued. Production increase in itself rather creates problems to the farmers as experienced in the last winter’s rice crop in Nepal. Recognising this Banga proposes that the role of state owned food corporation should be redefined and it should be made the nodal agency for export of the surplus production. In this regard, he gives the example of Australian Wheat Board (AWB). Initially set up to ensure adequate food supplies and controlled prices, AWB has over the period progressed to being a corporate entity undertaking farmers’ support activities like marketing wheat abroad as a ‘single window’ and providing mechanism for efficient risk management. The second enabler for the model, as suggested by the HLL chief, is amendment in the legal framework. In this connection, Banga argues that forward contracts should be permitted enabling the processor to contract for a crop even before it is sown. Similarly, he also suggests that enforceability of contracts between the farmer or farmer groups and the processor should be enhanced to protect both farmer and processor equitably. In another suggestion, Banga demands reorientation of the laws to facilitate innovation and value addition. Complaining that the present laws prescribe very restrictive regime for the formulation of food products by stipulating all the ingredients and the levels at which these can be used, Banga says, new ingredients are essential to innovation. Therefore, he suggests to bring the laws in line with international Codex prescribed for food trade which is widely followed in the world. Then Banga suggests to refocus enforcements more on ensuring compliance rather than prosecution. For this, his recommendation is to form a National Certifying Agency to ensure that hygiene and safe practices are followed by manufacturing units rather than allowing prosecutions to be filed by any official. Arguing for rationalization of fiscal levies, Banga suggests to do away with multiple taxation on agricultural products. Further, he points out, packaged foods attract higher tax rates while same food products sold loose or unpackaged are either exempt or subject to very low rates of taxes. "This encourages sale of loose commodities which are often sub-standard and/or adulterated." Apart from these, the HLL chief also proposes to make packaging mandatory for agricultural products. Banga’s blueprint is inspired by the fact that his company is heavily involved in food-processing. But the HLL Chief also reminds that agricultural sector is an important potential demand base for industry and services, in addition to being the supply base for food and raw material. "Already, almost half the demand for FMCG goods and black & white television sets, pressure cookers, table fans, sewing machines, watches and other consumer durables comes from rural consumers", he notes. Enablers for Banga mode
Laws & By-laws Hindering Agri-business
Source: Compiled by Agro enterprise Center (AEC), and translated by New Business Age. Some provisions may have changed. Still, they are basically posing almost the same problems. |
|
Business news | Legal side | I-Tech | Corporate | Cover Feature | HR Focus | Economy & Policy | Editorial | Personality | Showbiz | Interview | Last Word | Sectoral | Marketing | World Trends | Stock Taking | No Laugh | Poll | Tourism | Main | Past | Send your feedback to the editor: bizline@mos.com.np 1999 © Mercantile Communications Pvt. Ltd. P.O. Box 876, Durbar Marg, Kathmandu, NEPAL. Tel : 977 1 220 773, 243 566 . Fax: 977 1 225 407. Reproduction in any form is prohibited without prior permission. No part of the articles which appear in the internet version on NEW BUSINESSAGE may be reproduced without the permission of Mercantile Communications Pvt. Ltd. For reprinting rights, please write to us. Send us your feedback:contact us . This site is best viewed at : 800 X 600 resolution |