Agri value chains are complex systems that integrate different stakeholders like farmers, processors, wholesalers, retailers, and consumers. For the Agri value chain to be more effective there is a need to strengthen nexus between all the stakeholders for seamless integration of quality farm production and processing, enhanced storage, and distribution system. Strategic investment in processing, traceability, safety & quality of products, inventory management and cost reduction approaches can make the Agri supply chain robust.
Processing is a crucial sector as it provides a link between farm produce and the consumer. Investment opportunities exist for bringing in new technologies used to transform raw agricultural produce into a form that can be consumed. Investments can be in primary processing, which includes conversion of raw farm output to intermediate products by applying processes like shelling, hulling, milling, polishing, crushing, packing etc. This is usually required for cereals, pulses, and oilseeds. Investments are also required in value–added processing, which includes conversion of farm output to value–added products by applying activities like baking, fortification, flour milling refining etc.
Production and distribution of safe, high-quality products is an increasing challenge faced by Agri value chain stakeholders. Some of the common causes for the inability to maintain the safety and quality of products include poor storage and warehousing practices, delays in transportation, and extreme weather. These challenges can be overcome by investing in the manufacture of high quality and safe products by selecting the best raw materials, applying the right production processes, and testing methods. This also includes choosing an accredited testing laboratory, packaging, and dependable logistics. Since it is not possible to maintain high quality Agri products if the produce and ingredients are of poor quality, it pays to invest in sourcing quality ingredients and produce, from reliable and responsive suppliers. This will make it easier to maintain quality throughout the supply chain and minimize the chances of supply shortages and poor quality. Investments are also needed in the development of modern warehouses and logistics providers as they do not have adequate scientific and technical facilities to store and transport perishable commodities like seafood, fruits, vegetables, etc. Nearly 40 per cent of horticulture produce is wasted annually because of inadequate storage and transportation facilities.
To control costs and maintain quality, and satisfy customers, inventory should be rigorously managed. Too much or too little is not good for sustaining the value chain. Investing in modern inventory management solutions can help in managing inventory effectively. A solution that will enable real-time visibility to the inventory, throughout the supply chain, either on-site, off-site or in-transit. It should also support IoT, RFID, and other real-time and automated tracking technologies so that the inventory data is accurate and reliable. For a more complex supply chain, investing in sophisticated network solutions that can sense demand and adjust or create orders on the fly, to keep inventory levels optimal. In general, the more visibility one has for the supply chain, the more effectively one can manage it. To support inventory management, investing in the best suppliers, experienced and reputable logistics partners, and the right technology can facilitate a more efficient supply chain.
Traceability, or the ability to track the product through different stages of the supply chain, is now becoming a necessity as consumers now want to know the source of all products and their ingredients. Blockchain is regarded as a promising technology for enabling traceability in the Agri supply chain. Investing in Blockchain, a digital platform technology where stakeholders can store and share information across a network and enable users to look at all transactions simultaneously and in real-time.
The level of investment in Agri value chains is currently insufficient. Private investment in the agriculture sector can play an important role in making the supply chain more robust. Sources of finance for private sector investments in agricultural value chains are growing. These include own-savings, local and international banks, impact investors, financing institutions, and agricultural investment funds. Government has rolled out several initiatives to attract investment in the Agri supply chain. According to the Department for Promotion of Industry and Internal Trade (DPIIT), the Indian food processing industry has cumulatively attracted Foreign Direct Investment (FDI) equity inflow of about US$ 10.24 billion between April 2000 and December 2020. Furthermore, Government has also approved a PLI scheme for the food processing sector with an incentive outlay of Rs 10,900 crore (US$ 1,484 million) over a period of six years starting from FY22. Government plans to triple the capacity of food processing sector in India from the current 10% of agriculture produce and has also committed Rs. 6,000 crore (US$ 936.38 billion) as investments for mega food parks in the country, as a part of the Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA). The scheme envisages creation of mega food parks, agro processing infrastructure, integrated cold chain infrastructure and expansion of food processing capacity in the country. The 39 mega food parks (located in 24 states), sanctioned by the Ministry of Food Processing Industry, are currently at different stages of implementation. The government has approved 297 cold chain projects out of which 183 projects have been completed. The Government of India has allowed 100% FDI in marketing of food products and in food product E-commerce under the automatic route.
To sum up, improving the enabling environment for the private sector, promoting responsible investment, improving the policy and regulatory framework can help maximize finance for investment in Agri value chain.
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