Barley, Interest rates

1. Barley, a key ingredient for brewing beer promises to be a big opportunity to the farmers in Rajasthan. Companies like Pepsico and SABmiller are partnering with farmers for the supply of barley.

PepsiCo had signed a three-year memorandum of understanding (MoU) with more than 1,200 farmers from Sriganganagar and Hanumangarh districts of Rajasthan to produce high yielding malt barley for the United Breweries group (UB).

SABMiller India sources its barley from Rajasthan and Haryana. While it has a contract farming agreement with HAFED, in Rajasthan, it has a barley project called 'Sanjhi Unnati', for which it has tied up with an NGO, Morarka Foundation.

(source: Times of India)

2. Farmers are not benefiting with the lowering of interest rates. Agriculture cooperative banks and regional rural banks are forced to continue with the high interest rates while offering investment credit for agriculture development and allied activities. These banks offer agriculture investment credit at an interest rate band of 11-to-13% a year. The ticket size of their investment loans are typically less than Rs 50,000. By contrast, agriculture investment loans below Rs 50,000 from public sector banks these days are available at 8.5-9.5% per annum rates.

Sugarcane SMP, Bill Gates letter, Value Chain Financing and Conservation Farming

1. The sugar industry in the private and the cooperative sectors have united to pressure the government to announce high support prices for the commodity. Is it not surprising? In this cruel capitalist world, people are fighting to increase the price of commodity that they have to buy!

2. Bill Gates writes about his vision about agriculture in Africa in his annual letter. Very valid points brought forward.

3. This interesting article in ET talks about Value chain financing for agriculture sector. In value chain financing, a bank enters into an arrangement with some or all the players in a particular value chain to extend finance to them. A value chain basically constitute of three levels - farmers producing the primary commodity, an SME or an agent acting as intermediately or adding value to the produce and the large firms using this as raw materials.

4. From business standard: Over a thousand agricultural experts from around the world, who had gathered in Delhi last week for the fourth congress on conservation agriculture, deliberated an issue that is vital for sustaining high-growth agriculture without clashing with the environment.

Mobile handsets, Food Processing

1. Cellphone makers are betting on Rural India to revive the mobile phone sales which has started dwindling in top tier cities. Likes of Nokia, Samsung, Motorola and Spice are working on different business plans for these markets. This includes a separate distribution model, tying up with microfinance companies to offer handsets at easy instalments and launch handsets customised for the rural consumer. More details here.

The idea that I like the most is from Spice Mobile about "shared handsets". Shared handsets will allow many people to use the same phone with separate connections and hence reduce their cost of ownership.

2. Joint Secretary Ministry of Food and Processing India (MFPI) Ajit Kumar saidlack of food processing facility is resulting in annual loss of over Rs 48,000 crore of perishable and non-perishable commodities in the country. "We process only six per cent of the produce against an average processing of around 50-60 per cent in developed economies," He said.

Crop insurance, Debt waiver

1. Have you ever heard about Agriculture insurance company (AIC). It was set up to dispense insurance protection over agriculture and allied activities. Despite having such an organization in our country, crop insurance is rarely heard. There is hardly any effort to spread the awareness about various crop insurance schemes despite having so many rural banks, agriculture institutions and rural-based economy. This article list down some recommendations to increase the awareness and strengthen the agri-insurance.

2. Our ex-finance minister had given a generous 72,000 crore farm loan waiver in the union budget. This brought lot of happiness among the farmers and will probably fetch him some extra votes in the next election. However, he forgot, or pretended to ignore a fundamental problem. After giving this waiver, what will be the incentive for the profit-motivated banks to give fresh loans to farmers. And this is what farmers are facing today - non-availability of fresh loans. This story discusses this problem in detail.

Credit squeeze for Agriculture

The businessline story brings out an interesting point - Bank credit has been just Rs 95064 crore for the half year ending Sept,08. The target for the year is Rs 2,80,000 crore. So it is less than half the target till now. However our ever-optimistic stock-market-spokesperson cum finance minister is very optimistic - "We are well on the way to achieving the target (of Rs 280,000 crore). The banks have assured me that the target will be achieved”.

Respected Sir, there is a simple theory called incentive caused bias. If banks have to bear the brunt of your generous debt waiver, what would motivate them to lent money to farmers when it already so scare!!

MFIs selling farm loans to banks

Business-standard reports that private banks are buying loan portfolios from MFIs. Its a win-win kind of situation where MFI's benefit by reducing their asset size and hence increasing CAR, while banks try to meet the priority sector lending targets.

So banks are using these kind of tricks to extend 13.5 per cent of their advances as direct agricultural loans. This does not increase the credit availability for farmers so though this scheme may be good for MFIs and banks but may not be so for farmers.