Value Chain Interventions – Imperatives for
Livelihood Development
Dr.
Smritishikha Choudhury
Assistant Professor
Maniram Dewan School of Management
Krishna Kanta Handiqui State Open
University
Guwahati, Assam
Dr.
Nripendra Narayan Sarma
Professor
Maniram Dewan School of Management
Krishna Kanta Handiqui State Open
University
Guwahati, Assam
Abstract
The
business firms that subscribe to the traditional view of marketing which is
centred around selling, have the best chance of succeeding in economies and
markets marked by shortages of goods. In these markets, consumers are not fussy
about quality, features or style. However, in an emerging economy like India,
there are different buyers with individual wants, perceptions, preferences and
buying criteria. In this context, the business firms see themselves as part of
a value creation and delivery process. They need to make interventions in value
chain by involving suppliers, distributors and customers.
The
business organizations are increasingly becoming responsive towards social
responsibilities mainly because of a voluntary urge in some and for compulsion
in many. The business organizations driven by an urge to increase profit with a
sense of social responsiveness need to make interventions in the value chains
to benefit the society as stakeholders. These interventions in some cases
facilitate micro entrepreneurship and livelihood development.
After
discussing the rationale and importance of value chain in Indian context, the
paper will draw some inferences from case examples like Emami Mobile Traders
and Emami Village Shops.These programmes are aimed at addressing rural poverty
by providing a regular and sustainable self-employment opportunity to the
unemployed rural youth. There are other cases like BASIX, Gujarat Cooperative
Milk Marketing Federation Ltd, Lizzat Papad and Project Shakti.
In
a country like India, a higher priority to agriculture can achieve the goal of
reducing poverty and inspire inclusive growth. Since agriculture forms the
resource base for a number of agro based industries and agro services, it would
be more meaningful to view agriculture not as farming alone, but as a holistic
value chain. From this perspective, the value chain would include interventions
in farming, wholesaling, warehousing, processing and retailing. The paper
explores interventions in agricultural value chain also.
Based
on the interventions in value chain the paper concludesthat with a sense of
social responsiveness the corporate and non-corporate sector can make
substantial towards livelihood development.
1.
Introduction
The traditional
views of marketing are that the firm makes something and then sells it with
marketing taking place in the selling process. The firms that subscribe to this
view have the best chance of succeeding in economies marked by goods shortages
where consumers are not fussy about quality, features or style. In an emerging
economy or in a developed economy, there are different buyers with individual
wants, perceptions and preferences, and buying criteria. In this context, firms
now see themselves as part of a value creation and delivery process. In this
process, there arises many opportunities for enterprise development, employment
generation and livelihood development. In this paper an attempt has been made
to explore these issues.
2.
Theoretical Framework:
·
The
concept of value chain
Michael Porter
proposed the concept of value chain as a tool for identifying ways to create
more customer value. According to this model, every firm is a synthesis of
activities performed to design, produce and market, deliver, and support its
product.
The value chain
identifies nine strategically relevant activities- five primary and four
support activities- that create value and cost in a specific business (Kotler
et.el.2013). The elements are presented in Table 2.1
Table
2.1
|
Primary Activities |
Support
Activities |
|
Inbound
Logistics |
Procurement |
|
Operations |
Technology
development |
|
Outbound
Logistics |
Human resource
Management |
|
Marketing |
Firm
Infrastructure |
|
Services |
|
The firm’s task is to examine its costs and
performance in each value creating activity and look for the ways to improve
it.
The firm’s
success depends not only on how well each department performs its work, but
also on how well the firm coordinates departmental activities to conduct core
business processes. These processes include:
i. The
Market Sensing Process
ii. The
New Offering Realization Process
iii. The
Customer Acquisition Process
iv. The
Customer Relationship Management Process
v. The
Fulfilment Management Process
To
be successful, a firm also needs to look for competitive advantages beyond its
own operations, into the value chain of suppliers, distributors, and customers.
Many business firms today have partnered with specific suppliers and
distributors to create a superior value delivery network, also called a supply
chain.
3.
The Indian Scenario
The Indian
marketing environment provides tremendous opportunities for value creation and
value delivery. For the lack of value interventions, India has formidable problems.
In this regard, let us see the farm perspectives.
3.1 Farmer definition and real income for farmers
There
is a formal definition of ‘farmer’ as stated by Debroy and Desai (2019),
‘farmer’ means a person who earns his or her primary livelihood by one of the
following:
a. By
growing crops; or
b. By
producing other agricultural commodities.
With
the above in view, farmers can include the following:
a.
Who owns agricultural
land and are primarily engaged in agricultural activities for their livelihood.
b.
Those who do not own
land but are also primarily engaged in agricultural activities for livelihood
(tenant farmers).
c. Those
who own agricultural land but this does not provide the primary means of his or
her own livelihood.
The farmer definition indicates the vast
gamut of activities required for farm intervention. During the period 2014 to
2018, the average year on year growth of rural wages was 4.7 %. With average
inflation at 4.2 %, the real wage grew only at 0.5 %, compared to 6.7 % during
the period 2009-2013. The slowdown has resulted in a stark decline in the
growth of real income for farmers from 6.7 % to 0.5 % which led to very
pathetic condition of farmers and lead them to even commit suicide (telegraph
2019).
3.2
Monsoon and Farmers’ Livelihood
The
Economic Survey 2018 indicates that almost 52 % of all farms are dependent
completely on monsoons. Access to irrigation is a big problem. The share of net
irrigated area to total cropped area was even lower, at around 35 %.
Consequently, the livelihood of farmers continues to remain vulnerable to the
vagaries of monsoon (Debroy and Desai,2019). One bad monsoon year can put
farmers and their families into a debt trap that may take years to recover.
Farmers have remained prone to distress for the structural deficiencies in the
farm sector.
Comprehensive social security and agricultural sector
reform programme needs to be undertaken, though we have some, which are
mentioned below:
i. Pradhan
Mantri Annadata Aay Sanrakshan Abhiyan (PM-AASHA) for income assurance.
ii. Pradhan
Mantri Fasal Bima Yojana (PMFBY) for reducing external risks and liberalising
access to markets.
iii. Agricultural
Land Leasing Act, passed in 2016, which provides a ready to use framework for
states to legalize and liberalise agriculture land-leasing.
iv. Pradhan
Mantri Kisan Samman Nidhi (PM-KISAN) which provides cash flow support and
support for processing agriculture related inputs.
3.3.1
Farmers’ Suicide in Kerala
In
the Wayanand district in Kerala, 371 debt-ridden farmers took their lives
between 2000 and 2005. The number of farmer suicide deaths seems smaller than
in states like Maharashtra. In 2018-19, a number of indebted farmers in Idukki
district died by suicide. The district, famous for tourist places like Munnar,
remains industrially backward. In 2018, over 11,000 hectares of farmland was
estimated to have been ruined. The soil condition deteriorated because of flood
and non technical cultivation. The global prices of crop like pepper, a major
crop of the region, dropped to half. The situation became further complicated
for lack of proper title deeds, limited access to bank finance. The farmers
were served repayment notices sent by banks and financial institutions, despite
a moratorium declared by the state government on farm and educational loans.
The government set up Kerala State Farmers’ Debt Relief Commission after the
suicide crisis in 2005. The Idukki crisis, if not resolved by options like full
waiver of loans, long term financing etc., would intensely further because of
harsh summer already under way. This is an example which substantiates need for
value intervention (economic times, 2019).
3.3.2
Vegetable Farmers in Palasbari Incurring Heavy Losses
A
survey in Palasbari indicated that over 100 vegetable farmers of Futuri village
in Palasbari Revenue Circle in Kamrup district of Assam have been incurring
heavy losses in sale of their vegetables produced in several hundred acres of
alluvial sandy loan land located on the banks of Bramaputra.
The farmers indicated that the
output value (sale price) was very less compared to input cost (investment).
Quality of seeds provided by the Government was also cited as a reason which
demotivates the farmer to continue farming (www.assamtribune.com)
3.4 Budget 2019-20-
Will It Help India’s Farmers?
One of the
promising schemes for farmer is PM KISAN. This is a scheme for small farmers
for income transfer. The Budget Speech promised that ‘vulnerable landholding
farmer families having cultivable land up to 2 hectares will be provided direct
income support at the rate of Rs. 6,000 per year. The income support will be
transformed directly into the bank accounts of beneficiary farmers, in three
equal instalments of Rs. 2000 each’. It
was expected that around 120 million small and marginal farmers would benefit
from the expected annual expenditure of Rs. 75,000 crore (telegraph 2019).
The cost of production
for wheat is slightly more than Rs. 30,000 per hectare and that for rice is
above Rs. 40,000 per hectare. Assuming a double cropping pattern cost per
hectare would be at least Rs. 70,000 per year. In case of two hectares, the
figure will be Rs. 1,40,000. The transfer of Rs. 6,000 is unlikely to provide
any tangible benefit by the ‘historic programme’.
Across the country, in
rallies, protests, marches, farmers have repeatedly made some clear demands.
Resolving issues of land rights, ensuring affordable inputs, resolving problems
of water management, providing access to credit for both machinery and working
capital at reasonable rates, ensuring a fair system of crop insurance,
protection against natural and economic disasters; responsible trade policy
that does not make farmers bear the brunt of global price volatility (Jayati
Ghosh, telegraph, 2019).
So far 27.4 million small and
marginal farmers have received the first instalment of Rs. 2000 under PM-KISAN.
The process requires state government to cooperate at every step
(https.economictimes.indiatimes.com, 15.03.19).
3.5
Agriculture Survives-India Survives
In
a country like India, a higher priority to agriculture can achieve the goal of
reducing poverty and inspire inclusive growth. Since agriculture forms the
resource base for a number of agro based industries and agro services, it would
be more meaningful to view agriculture not as farming alone, but as a holistic
value chain. From this perspective, the value chain would include interventions
in farming, wholesaling, warehousing, processing and retailing. The paper
explores interventions in agricultural value chain also.
India accounts
for only about 2.4 % of the world’s geographical area and 4 % of its water
resources. However, it supports 17 % of the world human population. About half
of Indian population still relies on agriculture as its principal source of
income. Agriculture contributes 14 % of GDP. Agriculture can be termed as
India’s largest private sector activity.
A higher priority to agriculture can
achieve the goals of reducing poverty and inspire inclusive growth.
Since agriculture forms the resource
base for a number of agro based industries and agro services, it would be more
meaningful to view agriculture not as farming alone but as a holistic value
chain which includes farming, wholesaling, warehousing, processing and
retailing. Achieving 8-9 % growth in GDP
and growth without inclusiveness will not be meaningful if there is no
agricultural growth.
A country cannot prosper without
having a secured food basket and that too available to all at affordable price.
The country’s population is growing faster than its ability to produce food
grain and with the limited rather with reduced resources, we have to feed 150
crore people in 2020-22.
Source:
Unity, SBI
Indian
Agriculture is in the state of crisis and over the years it has become an
unviable activity. A recent study conducted by Centre for the Study of
Developing Societies (CSDS) suggests that 76 % of the farmers want to give up
farming. Majority of the farmers believe that they are not getting proper
remuneration for their produces which leads to bleak future and they were
demotivated. As there is less profit and respect for farmers compared to
developed countries, the farmers of this generation were preparing their next
generation for other jobs which will create vacuum in this industry and create
lots of unemployment (www.csds.in).
4.
Case Examples of Value Chain Interventions
The
business organizations are increasingly becoming responsive towards social
responsibilities mainly because of a voluntary urge in some and for compulsion
in many. The business organizations driven by an urge to increase profit with a
sense of social responsiveness need to make interventions in the value chains
to benefit the society as stakeholders. These interventions in some cases
facilitate micro entrepreneurship and livelihood development.
After
discussing the rationale and importance of value chain in Indian context, the
paper will draw some inferences from case examples like Emami Mobile Traders
and Emami Village Shops. These programmes are aimed at addressing rural poverty
by providing a regular and sustainable self-employment opportunity to the
unemployed rural youth. There are other cases like BASIX, Gujarat Cooperative
Milk Marketing Federation Ltd, Lizzat Papad and Project Shakti etc. Some of
these successful cases will be discussed in this section.
4.1
Amul
Gujarat
Cooperative Milk Marketing Federation’s Amul is one of the largest food brands
in the world in terms of number of customer franchise. The milk marketing
federation with about 3 million farmer members sells dairy products through a
network of 5000 dealers and 1 million retailers, supported by one of the
longest running and best loved campaign in India. Its ice-cream and chocolate
milk business have survived the entry of MNCs (Kotler et. el.2013, p.541).
4.2
Grameen Bank
Grameen Bank has
been a pioneer in selling financial services in rural areas. What started as an
experiment in the Chittagong district of Bangladesh has evolved into a fully
fledged bank covering over 81,000 villages and reaching more than 8.35 million
borrowers(Kotler et. el.2013, p.336).
4.3
Basix
Organisations
like BASIX in India are delivering financial services based on the model
developed by Grameen Bank(Kotler et. el.2013,
p.336).
4.4
Emami trading
Emami, a FMCG
company, launched an innovative programme in 2006 involving two schemes- Emami
Mobile Traders and Emami Small Village Shops. The programme was a part of its
CSR initiative. The programme aimed to address rural poverty by providing a
regular and sustainable self-employment opportunity to the unemployed rural
youth. The scheme while guaranteeing regular income to the participating
individuals, enabled the company to extend its markets to the rural interiors
and to ensure the availability of genuine products at the doorsteps of the
village population(Kotler et. el.2013,
p.480-481).
4.5
Project Shakti and Shaktimaan of HUL
Hindustan
Unilever Limited launched a scheme in 2001 using mobile traders. The
salespersons on bicycles would visit villages with a population of less than
2000 and haats also (periodical market in villages where buyers and sellers
meet). They target small villages which are not on the radar of big companies
due to poor accessibility. There are women mobile traders who are the link between
the external world and women in rural areas as most of them are not allowed to
make frequent visits to public markets(Kotler
et. el.2013, p.480-481).
As Hindustan
Unilever was contemplating in the late 1990s how to increase the rural reach,
SHGs based on the Grameen Model of Microfinance flourished across India. HUL
started ‘Project Shakti’ by tapping the SHGs in one part of rural Andhra
Pradesh. The idea was to create low risk, profitable micro-enterprise
opportunities for women, who became direct to home distributors of HUL
products. Sustainable micro enterprise opportunities were created for SHG women
in rural area (Kashyap 2012, p.182-183).
Shaktimaans,
distributors on bicycles, were recruited by HUL in 1,50,000 remote villages
with population of less than 2000 (which are beyond the reach of the company’s
redistribution stockists) to distribute their products in remote villages. A
Shakti entrepreneur can easily earn his livelihood because of this intervention
(Kashyap, 2012, p.217).
4.6
Naga Coffee
Nagaland has
been able to offer high altitude coffee mainly because of value chain
interventions.
In the early
1980s, the government of Nagaland started coffee plantation. But due to
middlemen farmers would get only Rs. 10-15 a kilo and were left disillusioned.
They had no direct access to market. Political unrest further worsened the
situation which led to abandoned of firms.
In 2015, a PPP
called Naga Coffee was formalised with MoU between Department of Land
Resources, Nagaland and Noble Cause, a South African Company. The Naga
entrepreneurs have joined in the project to promote home grown coffee.
Employment is being generated in the value chain. With the support of coffee
shops, farmers have started earning their livelihood. Naga coffee is being
exported to South Africa, Dubai and Bahrain (Avantika Bhuyan, www.economictimes.indiatimes.com,
16.03.2019, p.21).
India has been a
developing country. It means economically it is not strong, socially it is not
stable and in security aspects it is not self reliant. That is why it is called
a developing country. TIFAC (Technology Information Forecasting and Assessment
Council) identified important areas to transform India- education, healthcare,
agriculture, information and communication, infrastructure and critical
technology (Kalam, 2002, p.74).
The Ministry of
Education of China has launched schemes to train teachers and improve
infrastructures for digital education in improvised areas. This requires
resource sharing of teaching equipment like tailored mobile phone carrying
particular apps for learning Mandarin. The Open University of China will assist
in building cloud classrooms for poverty stricken areas. The University will
offer digital courses for primary and middle schools in the region and local
faculty will receive technical guidance (www.xinhuanet.com).
South Africa is another example where large numbers of students were learning
with the help of YouTube. Government of India has also taken initiative in this
regards. SWYAM, SWYAM PRABHA, NEPTL etc. are some of the government’s initiatives
towards value chain intervention.
5.
Imperatives
In 1960, the
agriculture sector employed about 74 % of the population. This came down to 62
% in 1992 and is expected to fall further, though the demand of agricultural
products will double. During the last
century, the world has changed from being an agriculture society, to an
industrial society, where the management of technology, capital and labour
provide the competitive advantage.
Ancient India
was an advanced knowledge society. Knowledge has many forms. It is acquired
through education, information, intelligence and experience. It is available in
academic institutions, workplaces, shop floors.
Knowledge, though closely linked to education, comes equally from
learning skills.
There is an
abundance of unorthodox, earthly wisdom in our villages. There are hidden
treasures of knowledge in our environment. Knowledge has always been the prime
mover of prosperity and power. India had the culture of knowledge sharing, not
only through the tradition of guru-shishya but also through the travellers who
came to Nalanda and other universities.
A.P.J. Abdul
Kalam (2002) has stated some very important issues related to knowledge
society. A knowledge society has a two-dimensional objective of societal
transformation and wealth generation. Some of these issues stated by Kalam are
mentioned as follows:
·
The societal
transformation is in respect of education, healthcare, agriculture and
governance. These will lead to employment generation, high productivity and
rural prosperity. The tank of wealth generation requires core areas like IT, biotechnology,
technology etc. There are multiple technologies and appropriate management
structures that have to work together to generate a knowledge society (Kalam,
2002,p.74-125).
·
The father of Green
Revolution, C. Subramaniam dreamt of second green revolution by setting up a
national agro foundation to develop hybrid seeds, to adopt small and marginal
farmers, to provide the farmers soil testing facility to provide access to
information and also to offer opportunities to earn more (Kalam, 2002,p.126).
·
Linking the villages by
road network and providing state of the art telecommunication connectivity,
virtuous cycle of more connected people, attracting more investment and more
investment attracting even more people can be created (Kalam, 2002,p.130).
·
Rural development is an
essential need for transforming India into a knowledge superpower and high
bandwidth rural connectivity can take education and healthcare to the rural
areas(Kalam, 2002,p.132).
·
Development is a
security centric phenomenon- from poverty to food security, social security and
thereafter national security (Kalam, 2002,p.139).
·
TIFAC took up a project
to enhance agricultural production in Central Bihar and Easter India (15
villages in kharf season of 1998). The system approach consisted of soil
analysis, seed choice, cultivation seasons, fertilizer selection, and farmer
training. The collaborative approach resulted in double increase in wheat
yields (Kalam, 2002,p.142).
6.
Conclusion
Based
on the interventions in value chain the paper concludes that with a sense of
social responsiveness the corporate and non-corporate sector can make
substantial towards livelihood development. The situations like suicide of
farmers can be avoided with proper implementation of schemes for the needy
people. The systematic value chain intervention in agriculture and education
can lead the society for higher growth and development. As highlighted by
Kalam, if proper technology and infrastructural developments were made the
society can prosper in near future.
References:
·
Kalam APJA (2002), Ignited minds: unlashing the power within
India, Penguin India
·
Kotler, P., Keller,
K.L., Koshy, A., & Jha, M. (2013). Marketing
Management: A South Asian Perspective. New Delhi: Pearson Education.
·
KashyapPradeep(2012), Rural
Marketing, Second Edition, Pearson, New Delhi,
·
The
Economic Times, Kolkata, 07/03/2019, p.12, Pharmacies for the Farm by Bibek
Debroy and Kishore Desai
·
Rural
Reality, The Telegraph, 19/03/2019, p.6
·
The
Economic Times, p.16, 10-16 March, 2019, Grim Reaper by Indulekha Aravind
·
www.xinhuanet.com,
xinhua/english.news.en accessed on 18/03/19
·
Jayati
Ghosh, Budget 2019-20- Will It Help India’s Farmers, The Telegraph, February
2019
·
www.csds.in (2019 report)
·
www.assamtribune.com (6July,
2017)
·
www.economictimes.indiatimes.com ( Kolkata edition,
15-03-2019, p.3)
