(1) Restructuring Central Sector Schemes for Agri-Sector Development in North Eastern India
Category: FIELD NOTES
written by Miftahul Islam Barbaruah (MDM Class of 2010), India
Industrial licensing, concessional finance and investment subsidy, tax holidays, growth centers and freight equalization are some of the conventional ways in which government supports the private sector. The private sector in the field of agriculture represents small to large agri-entrepreneurs across various agricultural value chains. Investment by the private sector is of prime importance to scale up the production and to induce market-led agricultural development of the north eastern region.
However, evaluation studies conducted in recent years indicates poor participation of the private sector. This paper summarizes restructuring needs and implementation hurdles of existing government support schemes from the perspective of private sector. The paper takes a holistic view instead of focusing on individual schemes, and the analysis is based on the rapid appraisal of experiences of select agri-entrepreneurs in the region and of key officials in a few implementing agencies. Larger consultation is required to validate the issues and corresponding suggestions highlighted in this paper.
Suggested areas for restructuring
Supply chain management. The comparative and competitive advantage of a firm depends on efficient supply chain management. Inadequate scale and scattered production clusters makes aggregation of produce and post-harvest handling difficult and costly in north east India. The schemes meant to encourage value addition should give entrepreneurs in the region incentives for planned initiatives and investments aimed at the creation of sustainable backward linkages. The recent National Rural Livelihood Mission aptly focuses on the creation of institutions of the poor e.g. Federation of SHGs. The private sector should get appropriate incentives to participate in these missions.
Project level Handholding. One of the biggest challenges of the region’s first generation entrepreneurs is how to get local handholding technical assistance for design, mobilizing resources, initiating and up-scaling their projects on profitable terms. Handholding in this context includes assistance in networking, relationship management, and continuous firm level guidance for effective management of supply chain. The mandate of a majority of government implementing agencies in the agriculture sector is mainly about creating awareness and providing initial knowledge or subsidized farm inputs. This is inadequate. Government schemes should encourage the creation of demand of handholding services provided by local private firms. They must ensure quality engagement between these services-based firms and entrepreneurs. Regional development finance organizations like NEDFi can incubate local agencies with expertise in agriculture project management and enterprise development for such services.
Revision of ceiling. The assistance provided by some government support schemes for the private agricultural sector is subject to a ceiling or upper limit on project size. Many companies interested in large projects with modern technologies find this ceiling de-motivating. Schemes for north east India should be designed to attract medium to big players. Such players are usually capable of managing the inherent risk of remote areas. The revision of this ceiling keeping in mind the changing requirements of entrepreneurs, and based on inflation and development of the market place, is a prerequisite.
Cost Assumptions. Cost assumptions about the schemes are often not applicable to the ground situations within the region. Schemes should recognize realities and bring in mechanisms to address the constraints.
Asset ownership. In a number of north eastern states, business and trade licences, land rights and ownerships are reserved for members of the dominant tribe. Though it’s important to protect rights of vulnerable tribes, in today’s world of global value chain integration, inflexible adherence to such rights prevents private sector investment and flow of technology. This is one of the bottlenecks for low private sector participation in government schemes. Larger stakeholder engagement and government facilities for policy innovation is of paramount importance. Government schemes should be sensitive to this constraint and extend all possible flexibility to private sector investors.
Balance corporatization. Though it is essential to engage corporate houses for commercial agriculture, such engagement should keep in mind diverse land use in the states of north east India. This is linked to food security of vulnerable tribes. Government schemes should provide ample encouragement to the corporate sector for local stakeholder engagement and to invest in up-scaling of traditional practices.
Capacity building and leadership. A great number of entrepreneurs in the states of north east India are first generation entrepreneurs. Majority of farmers’ institutions are also in the nascent stage of development. Schemes meant for the northeast should give maximum importance to this critical weakness. Local entrepreneurs in the region are mostly dependent on the mainland for modern technology and plants / machineries. They also have limited ability to evaluate technological options. Tradefares and exposure visits, tool room facilities are some of the important initiatives that empowers local entrepreneurs as these help them test and evaluate modern technology and machinery, besides facilitating partnerships at national and global levels. Another important issue is the provision for leadership development in scheme implementing agencies. This leadership is required for relationship development withing private sectors.
Scheme implementation hurdles
The experience sharing with local entrepreneurs and officials of implementing agencies revealed the following as hurdles:
- Awareness and outreach about the schemes are very low.
- Limited focus on empowerment of nodal offices within the region, which doesn’t prevent the duplication of work and the reduction of waiting time.
- Timely release of earmarked funds.
- Smoothening of project appraisal by adopting a standard format (transparent appraisal including online tracking of applications )
- Poor monitoring of disbursement of subsidies, as schemes often fail to deliver benefits to deserving enterprises.
- Missing coordination between state line departments and central agencies like NHB, APEDA etc., as implementing agencies often complain of inadequate leveling of assistance amount for similar scheme activities between two or more agencies.
- Poor leadership about and championing of local issues, because state line departments and facilitating agencies need to follow up private agency applications.
The conventional political economy approach has inordinately relied on the capacity of the central government and its bureaucratic arrangements for the economic development of states in north east India. This approach has manifestly failed. We need to focus on strengthening local private institutions to support entrepreneurs. State governments should take a proactive role in investment friendly, transparent regulatory, and framework appraisal tasks.
In a liberalized economy, new schemes and policies should take a market-oriented approach to give due importance to comparative advantage, technological efficiency and return on investment. There should be a balance between political, economic and cultural factors in listing priorities. Larger engagement of stakeholders is essential both in the design and implementation of schemes. We should not forget that the private sector is one of the major stakeholders in the development process.
About the writer
Miftahul Islam Barbaruah (MDM Class of 2010) is a trained development worker and social entrepreneur based in Guwahati (Assam), India. He is currently the Director of Vet Helpline (India) Pvt. Ltd and Chief Development Strategist of Fellowship for Agri-Resource Management and Entrepreneurship Research (FARMER). Mr. Barbaruah acknowledges inputs from Mr.Amit Jain, Mr.Abhijit Saikia, Mr. Mahesh Deori, Mr.Amba Jamir and Mr.Bidyut Baruah. You may send comments on this article to Mr. Barbaruah at firstname.lastname@example.org or email@example.com