The KisanBandhu: Creating a Globally Competitive Rural Growth Engine N. Viswanadham Executive Director, Global Logistics and Manufacturing Strategies Indian School of Business n_viswanadham@isb.edu Feb20, 2007

Contents State of Indian Economy Food supply Chain in India Rural Business Transformation KisanBandhu Retail supply Chain Conclusions N.Viswanadham

The Three Sectors of the Economy are Mutually Dependent Contribution to GDP Work Force Employment Agriculture 21% 60% Manufacturing 28% 17% Service 51% 23% N.Viswanadham

The Food Supply Chain In India N.Viswanadham

State of Indian Food Sector Strengths 1.Vast natural resources (cultivable land, water, seasons) 2.Established farming system 3.Growing economy 4.Supporting government policies (FDI, SEZ, subsidies) 5. Vital outsourcing hub Weaknesses 1.Small scale conventional farming 2.Primitive post-harvest methods 3.No channel master & many intermediaries farmers to consumers 4. Hardly any Food processing industry 5. Inadequate Cold chain infrastructure Potential to become a leading food supplier for the whole world Consequences 1.Surplus food wasted away 2.Low incomes to farmers 3.Inefficient supply chain 4.Not meeting the changing consumer preferences (processed hygienic food) Opportunities for 1.Cold chain infrastructure builders 2.Processed food manufacturers 3.Food packaging & logistics providers 4.Food retailers and exporters 5.IT and data analysts 6.Research Institutions

Benchmarking Food Chain Economic Integration Resources & Management Product & Value Chain Innovation Connecting Technologies Resources Resources Management Supply Chain Product Offering Logistics Economic Policies Information Technology Trade Tariffs FOOD SUPPLY CHAIN No Cold Chain No Supply Chain Visibility Packaging Duties High Protectionist Too many intermediaries Few Processed Products/Labs Abundant Inefficient and Fragmented Planning N.Viswanadham

Background for KisanBandhu Existing scenario is supply driven The farmer is unaware of the market, produces something and sells in a mandi or to an agent and wants to get a fair price & immediate payment. This must change. Need to create a system, where the farmer is made aware of the market demand and encouraged to produce to the requirements of the buyer The farmer should get right inputs ,Grow the right grade of produce (most optimal grade), trade it (double auction mechanism), and sell it to get maximum Net income The idea is to transform the way agriculture works, create a business orientation among the farming community Thus we propose – “Corporatization of Villages” N.Viswanadham

Rural Business Transformation KisanBandhu N.Viswanadham

Village as a Business System Resource Management Marketing Skills Financial Services Logistics Policies Village as a Business System Agriculture & Industry Farm labor Farm-inputs – Fertilizers, seeds etc. Value added Products Non-farm Community Processing Industries Technology N.Viswanadham

Core Business Processes Villages Production Procurement Processing Retailing Farm-inputs – raw materials adding value N.Viswanadham

ISB-Kisan-Bandhu Reliance Fresh HLL ITC Banks Logistics Provider Farmers Buyers Reliance Fresh HLL ITC Kisanbandhu Commodity Exchange Logistics Provider N.Viswanadham

Aggregator model For implementation ISB (Knowledge partner) Regional Call Centres (RCC) Knowledge sharing MCX Aggregator at Village and Higher Levels Forward contract Farmers Input credit NSEL Market players Fund transfer WR financing NBHC Bank N.Viswanadham

Retail Supply Chain

Retail: The Indian advantage There is a huge opportunity in this space 12 M retail outlets employing 21 M ( 7% of total work force) people 100% FDI is not allowed for foreign companies. Least saturated of global markets with small organized retail. The least competitive of all global markets studied Lower barriers of entry for big players Tremendous market size in both Urban, and Rural areas, Growth potential of 20-40% as in China Retail is going turbulent with entry of big players N.Viswanadham

Rural Retail Flow Chart The Indian postal service can take advantage of its vast network and logistical capabilities to transform itself into a profitable business and to bring a host of services to rural populations. N.Viswanadham

Conclusions India provides huge opportunities for Food supply chain stakeholders Retail, Food manufacturing are the Growth areas Halal hub (Export to South-East Asia, Middle East), Vegetarian hub (20% of Indian population + overseas), Organic food hub (Europe and USA), Sea food hub N.Viswanadham

Kisanbandhu Pilot model 3P Grading 3P Warehousing Logistics Service Commodity Exchanges Cyber-Intermediary Farmers Buyers Big Retailers Local buyers/ Other significant buyers Banks N.Viswanadham