India Bihar Agriculture: Building on Emerging Models of "Success" January 2007 Agriculture and Rural Development Unit South Asia Region Document of the World Bank CURRENCY EQUIVALENTS (As of March 31, 2006) Currency Unit - US$1.00 = Rs 45.39 Indian Rupee (Rs) INDIA-GOVERNMENT FISCAL YEAR April 1­March 31 Unit Measurements ha hectare mt metric ton kg kilogram gm gram BCM Billion cubic meter ACRONYMS AND ABBREVIATIONS AEZ Agricultural Export Zones IASL Indian Agribusiness Sytems Private AP Andhra Pradesh Ltd. APEDA Agricultural and Processed Food ICAR Indian Council for Agricultural Products Export Development research Authority IDWG Interdepartmental Working Group APMC Agriculture Produce Marketing IFPRI International Food Policy Research Committee Institute ATMA Agriculture Technology Management IIML Indian Institute of Management Agency Lucknow BCM billion cubic meter IPM Integrated Pest Management BH Bihar IRMA Institute of Rural Management Anand BOOT Build Own Operate Transfer ISO International Organization of BTT Block Technology Team Standardization CMIE Centre for Monitoring Indian JK Jharkhand Economy KCC Kisan Credit Cards COMPFED Bihar State Cooperative Milk producers' federation Ltd. M&E Monitoring and Evaluation CSO Central Statistical Organization MANAGE National Institute for Agricultural CSS Centrally Sponsored Scheme Extension Management DASP Diversified Agricultural Support MAP Medicinal and Aromatic Plants Project MOA Ministry of Agriculture DCSs District cooperative societies MP Madhya Pradesh EC Encumbrance Certificate MPCE Mean per Capita Expenditure ETS Electronic Transfer Station MSP Minimum Support Price FAC Farmer Advisory Committee NAIP National Agriculture Innovation FCI Food Corporation of India Project FIAC Farm Information and Advisory NAS National Accounts Statistics Center NATP National Agricultural Technology FIG Farmer interest group Project FMB Field measurement book NCAER National Council of Applied FO Farmer Organization Economic Research FPO Food Products Order NDDB National Dairy Development Board GCA Gross Cropped Area NGO Non Governmental Organization GSDP gross state domestic product NIA Net Irrigated Area GOB Government of Bihar NHM National Horticulture Mission GOI Government of India NPC Nominal Protection Coefficient GPS Global positioning system NSA Net Sown Area GW ground water NSSO National Sample Survey Organization HACCP Hazard Analysis and Critical Control O&M operation & maintenance Points OR Orissa HH Household p.a. per annum HYV High Yielding Variety PD Project Director ii PDFC Paliganj Distibutary farmers S&G sheep and goats committee SHG Self-Help Groups PIM Participatory Irrigation Management SPS Sanitary and Phytosanitary standards PJ Punjab SREP Strategic Research Extension Plans PPP Public Private Partnership ST/SC Scheduled Tribes/Scheduled Castes PRA Participatory Rural Appraisal TE Triennium RJ Rajasthan TKPD Thousand Kilograms Per Day R&D Research and Development UP Uttar Pradesh RoR Records of rights VAT Value Added Tax Rs/ha Rupees per hectare WALMI Water and Land Management Institute SAU State Agricultural Universities WB World Bank SAMETI State Agricultural Management and WUA Water Users Association Extension Training Institute WRD Water Resources Department SCB State Cooperative Banks Vice President: Praful Patel, SARVP Country Director: Michael Carter, SACIN Sector Director Constance A. Bernard, SASAR Sector Manager: Adolfo Brizzi, SASAR Task Team Leader: Rabih Karaky, SASAR Co-Task Team Leader Deepak Ahluwalia, SASAR iii Contents ACRONYMS AND ABBREVIATIONS......................................................................................ii Acknowledgments.................................................................................................... 1 Executive Summary................................................................................................. 2 1. Introduction............................................................................................................ 11 2. Parameters of Competitiveness ............................................................................ 16 A. Geography.......................................................................................................... 16 B. Human Capital .................................................................................................. 18 C. Agriculture Production..................................................................................... 21 D. Farming Support Services................................................................................ 28 E. Marketing........................................................................................................... 31 F. Infrastructure .................................................................................................... 33 G. Regulatory Environment.................................................................................. 37 3. Stakeholders' involvement in public services delivery....................................... 39 Agricultural Technology Dissemination .............................................................. 39 A. Need for Reform................................................................................................ 39 B. Experimenting with Reform: Decentralizing Agricultural Extension ......... 41 C. Performance of ATMAs in Bihar .................................................................... 43 D. Lessons and Emerging Issues........................................................................... 46 Participatory Irrigation Management ................................................................. 49 A. Need for Reform................................................................................................ 49 B. Experimenting with Reform: Participatory Irrigation Management.......... 50 C. Performance of Participatory Irrigation Management in Bihar.................. 51 D. Lessons and Emerging Issues........................................................................... 56 4. Building Commodity Supply Chains.................................................................... 60 A. Maize .................................................................................................................. 60 B. Dairy Sector ....................................................................................................... 67 C. Fruits and vegetables sector............................................................................ 72 C1. Litchi ............................................................................................................... 76 C2. Mango.............................................................................................................. 80 C3. Potato................................................................................................................ 81 D. Cross-cutting issues........................................................................................... 86 5. Toward an agricultural development strategy.................................................... 90 Stakeholders' involvement in public services delivery....................................... 90 Building commodities supply chains.................................................................... 91 Road ahead ............................................................................................................. 93 References...................................................................................................................... 105 iii Tables Table 1.1: Agriculture in Bihar and other states (%)........................................................ 12 Table 1.2: Subsectoral agricultural growth....................................................................... 12 Table 2.1 Comparison of agro related endowments­Averages 2002­03 ......................... 17 Table 2.2 Extent of flood-affected areas in selected districts, 2005................................. 17 Table 2.3 Literacy rates among farm households in Bihar............................................... 18 Table 2.4 Population, labor force and agriculture in Bihar and other states, 1999­2000. 19 Table 2.5 Poverty estimates for Bihar and India, 1999­2000........................................... 20 Table 2.6 Nonfarm income Shares in Bihar...................................................................... 21 Table 2.7 Agroclimatic zones of Bihar............................................................................. 22 Table 2.8 Distribution of rural households by size class in Bihar and India, 1995­96 .... 23 Table 2.9 Households leasing and area leased in Bihar, selected years, 1982­2000 (%) 23 Table 2.10 Growth rates in area production and yields of major crops, 1993­2003........ 25 Table 2.11 Real producers price trends for selected commodities in Bihar, 1993­03 (%) ........................................................................................................................................... 26 Table 2.12 Livestock ownership based on size of class of operational holding in Bihar, 2003................................................................................................................................... 27 Table 2.13 Households accessing technology through different sources (%) .................. 28 Table 2.14 Fertilizer consumption and use of farm resources by farm households, 2003­ 04 (%)................................................................................................................................ 29 Table 2.15 Average estimated production and arrivals for selected commodities at APMCs in Bihar, 2001­03................................................................................................ 32 Table 2.16 Level of infrastructure development in Bihar and other selected Indian states, 1996 and 2001 (%)............................................................................................................ 34 Table 2.17 Distribution of cold storage use in Bihar, 2005.............................................. 34 Table 2.18 Consumption patterns in Bihar ....................................................................... 36 Table 2.19 Income elasticity of demand for various consumption goods in Bihar, ......... 37 Table 2.20 Progress of reforms in agricultural markets (APMC Act), 2006.................... 38 Table 3.1 Estimated rates of return to investment ............................................................ 39 Table 3.2 Farmer interface with extension workers and research scientists in ATMA.... 44 Table 3.3 Farmers adopting new enterprises and improved technologies in ATMA....... 44 Table 3.4 Farm Level Yields Of Different Crops In Atma............................................... 45 Table 3.5 Performance of Paliganj WUA......................................................................... 53 Table 3.6 Responses from 25 WUAs................................................................................ 56 Table 4.1 Maize crop performance across selected states in India................................... 61 Table 4.2 Yield: Different types of maize cultivars in selected states of India, 2001 (t/ha) ........................................................................................................................................... 62 Table 4.3 Trends in real maize producer prices in selected Indian states, 1990-2003 ..... 63 Table 4.4 Price Movement of maize price in three Indian districts, 2003 (%)................. 63 Table 4.5 Cost of cultivation for maize in selected states, 2000­01................................. 64 Table 4.6Average animal productivity in kg/day ............................................................. 68 Table 4.7 Dairy cooperatives in Eastern India, 2004­05.................................................. 70 Table 4.8 Yields of selected fruits and vegetables products in Bihar and other Indian states (kg/ha)..................................................................................................................... 73 Table 4.9 Market yard arrivals to total market arrivals in the Patna area......................... 74 iv Table 4.10 Dispatches from the Hazipur mandi (%) ........................................................ 74 Table 4.11 Wastage estimates of selected fruits and vegetables across six main districts76 Table 4.12 Litchi prices in selected markets, 2003 (Rs/qtl).............................................. 77 Table 4.13 Contract farming for potato production in Punjab.......................................... 85 Figures Figure 1.1 Agricultural growth by states, 1993/94­2003/04 (%)..................................... 11 Figure 1.2 Coefficient of variation of agricultural growth across states (%).................... 13 Figure 1.3 Rural poverty rates in Bihar and other selected states, 1999­2000 (%).......... 13 Figure 2.1 Shares of gross cropped area and total output value by major crops, 2001­02 ........................................................................................................................................... 24 Figure 2.2 Farmers' attitudes toward farming in selected states, 2003 ............................ 28 Figure 2.3 Growth in SCB's credit to agriculture by state, 1995­2004 (%) .................... 30 Figure 2.4 Amount of outstanding loan per farm household (000 Rs) ............................. 31 Figure 2.5 Infrastructure of mandis in Bihar and other Indian states ............................... 32 Figure 2.6 Memberships in farmers' organizations and self-help groups ........................ 33 Figure 3.1 Public expenditures on agriculture and allied activities.................................. 40 Figure 3.2 People accessing technology through extension workers, .............................. 41 Figure 3.3 Expenditures on irrigation and flood control as percentage of agriculture GSDP, 1995­2004 ............................................................................................................ 49 Figure 3.4 Expenditures and revenue of the Irrigation Department (1993-94 prices)...... 50 Figure 3.5 Paliganj WUA: Water fee demand and collection .......................................... 53 Figure 3.6 Comparison between WUA and adjoining Non-WUA areas.......................... 55 Figure 4.1 Area under different maize cultivar during the rainy season (panel 1) and the winter season (panel 2) (%) .............................................................................................. 62 Figure 4.2 Difference in maize prices between Bihar and selected Indian states............. 63 Figure 4.3 Maize export parity, import parity, and producers' prices, 1980­2005.......... 65 Figure 4.4 Estimated margins along the maize value chain in Bihar (%)......................... 66 Figure 4.5 Milk production and per capita availability in selected states in India, 2003­04 ........................................................................................................................................... 68 Figure 4.6 Estimated margins along the litchi value chain in Bihar (%).......................... 79 Figure 4.7 Estimated margins along the mango value chain in Bihar (%) ....................... 81 Figure 4.8 Average difference in potato prices between Bihar and other competing states, 2003­05 (%)...................................................................................................................... 82 Figure 4.9 Estimated margins along potatoes value chain in Bihar.................................. 84 Boxes Box 3.1 Agricultural Technology Management Agency extension model....................... 42 Box 3.2 Development of supply chain for medicinal plants............................................. 48 Box 4.1 Makhana cultivation............................................................................................ 85 Box 4.2 National Agriculture Innovation Project............................................................. 88 Appendixes Appendix 1 Bihar's Rice and Wheat Economy................................................................ 95 v Appendix 2 Note on the Amendment of the APMC Act in Bihar.................................... 98 Appendix 3 Status of land registration and land records in Bihar and other selected states ......................................................................................................................................... 100 vi Disclaimer and copyright © 2006 International Bank for Reconstruction and Development /The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. The World Bank South Asia Sustainable Development Unit discussion papers are published to communicate the results of the Bank's work to the development community with the least possible delay. Therefore, the manuscript of this paper has not been prepared in accordance with the procedures appropriate to formally printed texts, and the World Bank accepts no responsibility for errors. Some sources cited in this paper may be informal documents that are not readily available The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, email pubrights@worldbank.org. vii Acknowledgments This report was prepared by a World Bank team led by Rabih Karaky and Deepak Ahluwalia, under the overall guidance of Michael Carter and Constance Bernard, with the advice of Fayez Omar and Adolfo Brizzi. The peer reviewers were Ejaz Ghani and Animesh Shrivastava. Dina Umali-Deininger provided helpful comments at various stages of the project, and Gajanand Pathmanathan provided much appreciated encouragement. The task team included Paul Sidhu, Javier Zuleta, Kelly Jones, Shalini Saksena, Nadia Islam, Sarita Rana, and Lilac Thomas. Background studies were prepared by Krishna Singh (Rajendra Agriculture University), K.V. Raju (Institute of Social and Economic Change), Derek Baker (Abel Projects of Denmark), Amit Sinha and V.N. Saroja (Indian Agribusiness Systems Private Limited), and Price Waterhouse Coopers. The report also is based on field discussions with various stakeholders, including the Government of Bihar, agricultural producers, laborers, traders, and private sector representatives, as well as academic researchers. The authors gratefully acknowledge the generous cooperation and valuable assistance provided by officials from the Ministry of Agriculture and the Water Resources Department in Bihar. 1 Executive Summary This study delves beneath the surface of Bihar's pervasive and persistent adverse economic environment to examine trends, constraints, and opportunities in selected segments of the agriculture and food sector. The study aims to do so by (a) providing insights and understanding of the underlying basis for competitive advantage in Bihar's agricultural economy, (b) analyzing cross-sectoral and product-specific elements that have shown some success and/or resilience, (c) examining the organizational, technical, economic, and institutional factors in an attempt to explain observed success, and (d) draw lessons that can be applied to other subsectors in Bihar and other parts of India. Bihar is among the poorest and least urbanized states in India. It ranks at or near the bottom of the list of the major states by many economic indicators. To list the challenges that Bihar's agricultural sector faces would be, to some extent, to catalogue poor performance and a poor basis for future development. Instead, this report focuses primarily on encouraging models of "success" that have emerged within this difficult environment and that could provide lessons on what is needed to develop the agricultural sector in the state.1 The models identified include, first, the decentralized approach to agricultural services delivery in the areas of agricultural extension and irrigation management. Second, case studies examine a number of agricultural commodities (maize, dairy, litchi, mango, and potato) to illustrate emerging challenges and options for entrepreneurial success and supply chain development. The Bihar development report (World Bank 2005) laid out a two-pillar strategy to enhance Bihar's growth performance by establishing a healthy investment climate to encourage entrepreneurial action (pillar 1) and to support human resource development through improved quality and access to social services, particularly for the poor and socially disadvantaged (pillar 2). A related ongoing dialogue between the World Bank and the Government of Bihar culminated in a partnership matrix that identified development priorities for Bihar and topics for potential collaboration and support. These included a specific request for analysis of specific agricultural subsectors (for example, dairy, fruits, and vegetables), to which this study is a response. The study coincides with the preparation phase of the World Bank-supported Bihar Rural Livelihoods Development Project. The project builds on observed success in agriculture, strengthens agricultural technology support services, and facilitates investments in various commodities and value chains. Agricultural Growth Relative to other states in India, Bihar is well endowed with natural resources, including arable land and water resources. Agriculture is at the core of the economy, generating 35 percent of the state's domestic product and employing more than three-quarters of the labor force. With 88 percent of the state's poor living in rural areas and with most of the poor depending on agriculture for a living, improving agriculture performance is crucial for improving rural livelihoods and reducing poverty. 1The report is not intended to be a comprehensive review of the agricultural sector in Bihar, nor does it claim to provide solutions for all the problems faced by the sector. Moreover, limits on the scope of the analysis mean that some significant topics for Bihar's agricultural and rural development (for example, flooding and grain procurement policy) have been omitted. Coverage of these topics is beyond the scope and the resources of this study. A short appendix on Bihar's rice and wheat is provided for the interested reader. 2 Notwithstanding year to year variability due to frequent flooding, over the last decade, the average annual agricultural growth in Bihar has been among the fastest in India. Between 1993 and 2003, Bihar's agriculture and allied GDP grew at 2.7 percent per annum, which followed only West Bengal and Andhra Pradesh among the major Indian states. Bihar thus has outperformed the traditional agricultural power houses states such as Punjab and Maharashtra. Among the agricultural subsectors, fisheries experienced a rapid (8 percent per annum) growth, albeit from a smaller base. Cereals continue to dominate Bihar's cropped area, with noticeable growth in maize production (6.8 percent per annum) driven by higher yields. Fruits and vegetable crops, which occupy 10 percent of the total cropped area, account for nearly 50 percent of the value of agricultural production. Milk is the most important livestock product, accounting for approximately one-quarter of the total value of agricultural output. Community and stakeholders' involvement in public services delivery Amidst a dysfunctional public agricultural research and extension system in Bihar, a recent initiative was piloted under the National Agriculture Technology Project (NATP). Its central institutional innovation is known as the Agriculture Technology Management Agency (ATMA). ATMAs were established in four districts of Bihar to (a) decentralize decision-making through bottom-up planning procedures involving farmers and the private sector, (b) integrate extension programs across line departments, and (c) link research and extension activities in each district. Early results indicate that the ATMAs have been successful in mobilizing farming communities into self-help groups focused on specific crops, and in organizing them into farmers' federations. These groups are undertaking various market-led activities such as the production of vegetables, medicinal and aromatic plants and mushrooms, bee keeping, and value addition through marketing and processing. The ATMAs also developed 25 public-private partnerships to link farmers with market information providers, input suppliers, and output buyers. ATMA pilots have improved interaction among farmers, extension workers, and researchers; increased farm productivity; encouraged adoption of new technologies; helped diversify crops, increased farmers' incomes, developed supply chains by linking farmers and buyers; and piloted contract farming (for example, for medicinal plants). The ATMA approach was piloted in six states besides Bihar. Encouraged by the model's success, GOI is scaling it up in over 250 districts of the country under a centrally sponsored scheme. In Bihar, this scheme covers 11 additional new districts. The major underlying factors that have contributed to, and are needed to sustain, the success of the ATMAs are (a) its design centered around the participation by key stakeholders (researchers, extension workers from different line departments, farmers' representatives, and nongovernmental organizations) in the preparation of the district level Strategic Research Extension Plan; (b) direct flow of funds from Government of India to the district-level ATMA; (c) training and capacity building provided by the National Institute for Agriculture Extension Management (MANAGE); (d) operational flexibility for the ATMA project director to focus on priorities and constraints identified by the farming community; and (e) concurrent independent monitoring and evaluation (M&E), which enables early identification of weaknesses and timely remedial actions. In another decentralized setting, Bihar has shown slow but steady progress in participatory irrigation management (PIM). The concept was initially piloted in the Paliganj distributary in the late 1980s, but for many years remained a one-off experiment. During the 1990s, the rapidly worsening fiscal situation and the deterioration of the existing surface irrigation assets led to a 3 renewed thrust for PIM. Presently, the PIM approach is being practiced in 32 schemes covering nearly 150,000 hectares (ha) of irrigated command area. The government has ambitious plans of expanding this to approximately 800,000 ha by the end of 2007. A comparative evaluation of nine schemes in which irrigation management has/has not been transferred to user groups shows that benefits have accrued to users in the form of improved water availability, enhanced crop productivity, increased area under irrigation in tail reaches, reduced conflicts in water distribution, increased water fee collection, and improved system maintenance. There also have been benefits to the state government in terms of reduced staff costs and operation and maintenance (O&M) expenditures. The major factors that contributed to PIM development in Bihar include (a) legal support through enabling legislation enacted in the mid-1990s, (b) empowerment of water users associations (WUAs) to collect water charges (unlike in most other states, in which charges are still collected by government departments) of which the WUAs retain 70 percent for O&M (the highest among states), (c) transfer of entire distributaries/subdistributaries to WUAs without system rehabilitation as a prior condition, (d) timely elections of WUA officers, (e) training and capacity building provided by the Water and Land Management Institute (WALMI), and (f) the commitment of the state's Water Resources Department to PIM. Building commodity supply chains Stakeholders' adoption of responsibility and improved functionality also characterize commodity sectors that have been examined in this study, namely maize, dairy, litchi, mango, and potato. An example is these commodities' minimal use of the APMC markets. Preferred exchange mechanisms have emerged that generate or preserve value added and allocate it to agents in the chain in an environment more competitive than the trader dominated mandis. As measured against those of other states, most of Bihar's products appear to have a genuine advantage in productivity levels and farm production costs. However, this advantage is not sustained through to the wholesale level, at which Bihar's prices are above those of its domestic competitors. Notably, transportation and wastage costs consume a significant part of the value chains margins in Bihar. There is evidence for international competitiveness although consideration of quality, brand power, and scale-sensitive transaction costs would indicate a barrier to entry to international markets for some of Bihar's products. Year-round production has been employed to advantage in maize. Maize production has grown significantly in Bihar over the last decade driven by increases in both areas and yields. Factors contributing to the expansion of maize include (a) irrigation, enabling the cultivation of winter maize, and (b) the availability of improved maize seed varieties brought in by private seed companies. The latter was facilitated by a major seed policy reform allowing private sector participation. Private companies, including multinationals, played a key role in research and development of improved maize seed varieties and in successfully extending their technology to farmers. Although the cost per unit area of maize is relatively high in Bihar due to irrigation and fertilizers costs, it is offset by high productivity levels and favorable off-season prices. Therefore, cost per unit of produce is competitive with that in other states. Year-round production also is favorable for feed processing for the rapidly developing poultry industry in neighboring states and throughout India. Farmers' margins differ widely between sales as maize crop (48 percent of total 4 margins along the chain) and as part of the feed processing chain (18 percent). In the latter, the largest share of the margins accrues to the feed processing industry outside the state or, in some cases, to small firms in Bihar. Despite the evident need for forward and backward linkages such as contracting, the maize sector remains dominated by spot markets. Nonetheless, farmers producing maize are able to generate commodity-tied credit more easily than those in other sectors, due to maize's generally acknowledged quality characteristics and ease of storage. A secure and workable payment system is one of the key aspects of the dairy industry in Bihar. Dairy development has followed a well established organizational model producing a product for which local demand continues to grow. The Bihar State Cooperative Milk Producer's Federation Ltd. (COMPFED), with key elements of support from the National Dairy Development Board (NDDB) in training and capacity building, especially in its early years, has increased milk production and procurement in the state. Successful adoption of the Anand model has reached the poorest sections of the population. COMPFED also has developed an integrated supply chain for liquid milk and other dairy products, provided support services, and increased income for its members. Product and market leadership have been other key factors of COMPFED's success in Bihar. COMPFED has fared comparatively better than some other state-level dairy cooperatives, especially those in the eastern neighboring states, in total number of district societies formed, total number of member households, total milk procured, and total daily liquid milk marketed. Field studies have shown that COMPFED's activities have had positive socioeconomic impacts on its member farm households. On average, cooperative member households have been better off than nonmember households in higher number of milch animals owned, higher milk marketed surplus, and, consequently, higher net dairy income received. Despite COMPFED's many advances, per capita milk availability in Bihar remains among the lowest in the country. Low animal productivity and COMPFED's limited penetration of the dairy market due to poor infrastructure and lack of investment remain major constraints. Just 15 percent of the milk marketed surplus is purchased by the cooperative. Risks persist of contamination from aged dairy processing equipment and spoilage during long hours of costly transportation. Several questions regarding its future direction surround Bihar's dairy performance. Having limited its penetration to a number of regions within the state, should Bihar's future initiatives be to expand milk catchment areas or to raise the number of suppliers within the existing catchments? If the latter, then should expansion be by attracting new members or expanding the herds of existing members? A second set of questions surrounds the dairy industry in Bihar and its competitive stance against the larger dairy cooperatives in India, such as Amul. Recommended actions to address these questions include (a) increasing milk supply by improving animal productivity through breeding and effective extension for animal husbandry; (b) increasing milk supply by deepening market penetration, improving the infrastructure, and developing the necessary linkages, (c) improving the quality of the milk produced and processed, (d) rationalizing COMPFED's transport, cooling and processing capacity in coordination with investment in new equipment within a strategic plan to deal with future competition. Another promising commodity in Bihar is litchi. The state produces 71 percent of national production and has 54 percent of the national area. The crop is exceptionally well suited to Bihar's physical environment, giving higher yields than in competing states. Litchi's wholesale price is below that of potential domestic and foreign competition, giving Bihar a comparative 5 advantage in both domestic and export markets. Litchi is widely acknowledged as an excellent prospect for Bihar's entry in international export markets, and much current investment is targeted at promoting and developing that. Litchi is highly perishable with a very short harvest period. These two factors make for unstable marketing that is not addressed in Bihar by cold storage and transport. Rather, a vertically coordinated contract system has evolved in Bihar in which orchards are leased by traders, who carry out all preharvest, harvest, and post-harvest operations. Leases are transferred from one trader to another. The main achievement of this vertical coordination has been the provision of early income to farmers that does not depend greatly on crop yield and work performed by the farmer. There are limited incentives, however, to address wastage and to farmers to maintain their orchards or invest in new varieties. Two marketing channels exist for litchi: fresh and processed. For maize, the processing channel offers the farmers a lower share of the total margins along the processed chain (8 percent) compared to the fresh one (42 percent). Wastage is significant in both chains, and it impacts farmers' share of total margins more than any other agent in the chain. Bihar has very little processing capacity; so much semiprocessed litchi travels elsewhere for further processing. Processing mango also tends to occur outside the state, even though Bihar is the fourth largest producer of mango in India, with 11 percent of national production. Mango is the dominant fruit in the state, which has nearly half of the total fruit area. Bihar mango yields are higher than those of neighboring states with the exception of UP. Fresh mango is a significant export product for India. Price analysis shows that, despite Bihar's significant infrastructural difficulties, Bihar's mango can compete with African and South American product. Domestic comparative advantage is possibly a more complex story in that Bihar appears to be competitive in one of two markets studied here: Jharkhand and Uttar Pradesh (UP). Bihar prices were found to be competitive with Jharkhand's. Furthermore, production seasonality could give Bihar an advantage to send the mango to southern states, where production peaks in April-May compared to June-July in Bihar. Although the marketed surplus for mango is high, losses are substantial due to lack of post- harvest activities and the absence of cold storage. The value chain appears to offer farmers 34 percent of available margins. This figure is much lower than it might be because of the impact of wastage and transport costs, which are particularly high for mango. In contrast to the conditions for fruits, storage and cold storage space in Bihar is readily available for potato, the state most important vegetable. Potato occupies over one-quarter of all vegetables' cropped area in the state. Bihar ranks third among Indian states in potato production. However, Bihar's potatoes have little apparent comparative advantage on domestic wholesale markets and only some comparative advantage on farm level markets. The cost of production per unit of produce is reported to be slightly lower in Bihar than that in its neighboring states of West Bengal and Uttar Pradesh, who together account for 77 percent of all India potato production. The regional price variation is significant. The reason that wholesale potato prices are much higher in Bihar than other states is due to seasonality of production and high cost of cold storage space. Nearly 50 percent of annual potato production is stored. Another quarter is lost to wastage; the remainder is sold in the mandis. Potatoes provide farmers approximately 15 percent of the available margins from either of the 2 chains studied here (peak and off season), and as with other commodities, the margins are influenced by the degree of wastage. Price gains to farmers from marketing potatoes in the off season are offset by the high storage costs. Wholesalers capture 6 much higher margins from potato stored and sold in the off season, which could explain the dominance of storage in Bihar of potato crop. Despite a long history in Bihar, potato production has not developed vertical linkages (as has litchi), either forward into further processing or backward to serve the farmers. Similarly, no private system of extension (as with dairy) or seed supply (as with maize) is apparent. Access to credit and provision of transparent pricing in the mandi have been identified as major problems faced by farmers. Conclusions and recommendations Although Bihar projects a bleak image to the outside world on its prospects for economic and agricultural development, the reality on the ground provides some encouraging findings. Yes, Bihar faces serious challenges to improve growth performance and strengthen public administration, services delivery, and the investment climate. Nevertheless, the state has had notable relative successes in certain segments of the agricultural sector that, if built upon, could provide lessons on how to move forward. This study is focused on these elements of success. Two noticeable areas were identified: Community and stakeholders' involvement in the design and delivery of public services, especially in the areas of extension services (ATMA) and irrigation management (PIM) Entrepreneurial success within the greater effort of building supply chains for specific agricultural commodities. To preserve, sustain, and scale up the success stories under these two areas, all stakeholders­­ public, private, and a partnership of both­­should take action. The study found that participatory activities and joint efforts are well established in Bihar. They follow the ATMAs and PIM models. However, both models need considerable support from both the Government of Bihar (GOB) and GOI to mature as vibrant institutions. Recommended actions for the ATMA model include adequate direct transfer of funds to the ATMAs; operational flexibility; continued training and capacity building; developing performance indicators; and monitoring, evaluation, and impact assessment. For the PIM, it is recommended to revitalize WALMI to support the capacity building at the level of WUAs, allow WUAs to fix water charges, provide updated landholding records and maps of designated command area to WUA, and establish grievance cell at project level to speedily resolve any disputes. Commodity-based analysis reveals that a common feature across all commodity supply chains is the high costs of wastage and transportation. For some commodities, these costs accounted for nearly 40 percent of the total margins along the chain. Lack of proper post-harvest handling and processing coupled with poor infrastructure and shortage of cold storage capacity are the primary causes of loss. If spoilage and transportations costs are reduced, all of the participants along the supply chain will benefit. Farmers will have more produce to sell, and post harvest players will gain from increasing economies of scale. Possibilities exist for public-private partnerships in the development of market infrastructure and market operations and management. A cold chain is a prerequisite for fruit and vegetable market development in Bihar, both to counter the significant spoilage problem and to access larger markets. The lack of private investment in Bihar has caused products to move out of state for value-adding activities. Although the legislation is not considered to be the major impediment to 7 private sector participation in Bihar, unlike most other states, amending the APMC Act will send a new message and facilitate private sector entry. The mandi board also could devolve the management of the existing facilities to the private sector to improve the quality of their infrastructure and services. Bihar has made little progress toward amending the APMC Act. With the notable exception of dairy, most of the commodity chains examined in this study have not established productive backward linkages with farmers or forward linkages with processors. Similarly, farmers have not embraced cooperation as a way to generate sufficient marketed surplus to take on product handling tasks with economies of scale Current market information services are poor: they are not standards-linked and do not report traded volumes. Farmers' effective use of information requires training in both decision-making and in pre- and post-harvest techniques to generate price advantages. Linkages between price and quality are apparent in the success stories examined here, and this mechanism can be scaled up in a sustainable and incentive-compatible manner. However, steps should be taken to invigorate the process, such as publishing market information on products standards, and certification and regulatory procedures and policies. By associating, producers could benefit from training and certification programs. As for maize, investment is needed in the development of improved varieties of fruits and vegetables with higher productivity levels, longer shelf life, and greater suitability for processing (such as litchi and mango). This could be done through sustained and effective linkages among agricultural universities, R&D institutions, and users of research output. This combination of agents (including the ATMAs) would enable optimal usage of research resources through an enhanced process of innovation, capacity building, technology transfer, value addition, and commercialization. Partnerships established in value chains research would help bring new knowledge to the level of application. In this way, partnerships would generate more value from agriculture by creating new employment opportunities, raising incomes, strengthening the competitiveness of Bihar's products, and reducing rural poverty. Little attention has been given to product quality and safety, which are essential to Bihar's developing its potential in horticulture production. Focusing on improving product and quality are the keys to mobilizing producers' effort to increase their own incomes. Farmers' ability to influence prices is limited to quality achieved. Upgrading quality, in turn, is only possible if quality is being measured and promoted in ways that market participants­­particularly farmers­­ can use. Enforcement of standards of food safety and quality is generally a public good linked closely to actions and responsibilities in the private sector. HACCP and certification systems should be encouraged in food processing. In related settings, and to promote Bihar's agriculture, mechanisms to monitor chemical residues and associated codes of practice should be put in place. Finally, Bihar can and should make better use of GOI schemes, and improve their accessibility. Poor uptake of government schemes greatly raises their unit costs, while further isolating agroindustry from its potential public-sector partners in development. While uncovering successes, this analyses is exposed areas of concern that should mobilize timely efforts at various levels to address them. This wide range of areas in which to take action includes (a) formation and capacity building of producers' organizations; (b) weak institutions for business information, coordination, and credit and risk management; (c) under-investments in physical infrastructure in both the public (for example, power and transport), and private (for example, quality standards and cold storage) sectors;(d) dysfunctional public institutions, even in cases of commercially viable opportunities; and (e) outdated laws and policies that negatively 8 impact the investment climate and deter private sector engagement from within and beyond the state. The analysis points to a change in the understanding of the role of the government in the development of the agricultural sector in Bihar. One common noticeable feature of the "success" stories considered in this report is the low level of government involvement in them. When communities are empowered and involved in the day-to-day management of the resources, and in planning and formulating schemes according to their own needs, positive results are bound to emerge. Accountability starts at the grassroots level and moves upwards, thus improving overall service delivery and benefiting all stakeholders, including the government. Similarly, when given the opportunity under a supportive policy environment, entrepreneurial activity picks up and the private sector gets involved in supply chain development. The government plays a key role in setting the overall strategy to develop the agricultural sector and facilitate its implementation within an enabling regulatory environment. As this analysis has shown, the government's role in coordinating capacity-building activities and funding the stakeholder-based group initiatives has been and remains crucial for their success and sustainability. Similarly, for commodity supply chains to develop, the government retains an important role in rehabilitating infrastructure, fostering public-private partnerships, encouraging investment, and amending key market legislation such as the APMC act. Just as important, the government also must provide a stable and supportive policy environment, strengthen land institutions, legalize tenancy, and computerize land records. 9 10 1. INTRODUCTION During the last decade, Bihar's agricultural sector has been one of the fastest growing in India. Between 1980 and 1992, Bihar's agriculture and allied services sector grew at just 1.6 percent per annum, compared to the national average of 3.1 percent. However, since 1993, growth in Bihar's agricultural gross state domestic product (GSDP) has accelerated (figure 1.1). Between 1993 and 2003, the all-India agricultural GDP grew at 2.2 percent per annum. The corresponding figure for Bihar was 2.7 percent, which ranked third to West Bengal and Andhra Pradesh among the major Indian states.2 Figure 1.1 Agricultural growth by states, 1993/94­2003/04 (%) Annual rate of growth -2 % -1% 0% 1% 2% 3% 4% West Bengal Andhra Pradesh Bihar All India Uttar Pradesh Punjab Karnataka Haryana Rajasthan Maharashtra Gujarat Madhya Pradesh Orissa Tamil Nadu Kerala Source: Estimated data from CSO, National Accounts Statistics, 2003. Note: Growth rates are for the Agriculture and Allied Services Sector GSDPs and are estimated using log-linear regressions. Agriculture is at the core of Bihar's economy. Approximately 90 percent of the state's population of 83 million (2001) reside in rural areas, and more than three-quarters (22 million of an estimated 28 million) of the workforce are employed in agriculture. In 2003­04 the contribution of agriculture and its allied services sector to the state domestic product was 35 percent. Although this is a reduction from 48 percent in 1980, it remains among the highest shares in the country (table 1.1). 2The comparison of pre- and post-1993­94 growth performance is influenced mainly by data considerations. Prior to 1993­94, GSDP data are available only for the erstwhile undivided Bihar. After 1993­94, GSDP series for the divided Bihar and Jharkhand are available separately. The 1993­2003 annual growth rate of agricultural and allied GSDP in undivided Bihar (sum of Bihar and Jharkhand) was 3.5%. This number confirms that the acceleration from the 1980s is not due simply to differences in coverage between the pre- and post-1993­94 GSDP series. 11 Table 1.1: Agriculture in Bihar and other states (%) Bihar Orissa Andhra Pradesh Uttar Pradesh West Bengal All India Real agriculture and allied growth 1980­1992 1.6 0.5 2.3 2.7 6.2 3.1% 1993­2003 2.7 0.1 2.8 2.2 5.4 2.2% GSDP/capita (2000) 3,650 6,278 11,154 6,638 10,757 11,752 Share of agric and allied 39.8 30.0 28.0 33.6 24.7 24.2% Agric and allied/capita 1,452 1,884 3,121 2,230 2,658 2,847 Sources: GOI Population Census, 2001. Agriculture (including livestock) accounts for over 90 percent of the agriculture and allied services sector. Between 1993 and 2003, the sector grew at an annual rate of 2.5 percent, compared to the national average of 2.1 percent. Of all components of the sector, the most rapid growth occurred in the fisheries subsector (8 percent), albeit from a smaller base (table 1.2). Table 1.2: Subsectoral agricultural growth Bihar India % share Growth 1993 to % share Growth 1993 to 2003 (% per 2003 (% per annum) annum) Agriculture 91 2.5 91 2.1 (including livestock) Forestry 4 3.3 5 1.8 Fishing 5 8.0 4 4.3 Agriculture and allied 100 2.7 100 2.2 GSDP Source: CSO National Accounts Statistics (various years) Bihar's agricultural growth is highly unstable with significant year-to-year variations. Between 1993 and 2003, the variability of agricultural performance in Bihar was the third greatest among major Indian states (figure 1.2). However, unlike states such as Rajasthan or Gujarat, in which high variability arises due to frequent droughts, in Bihar a primary source of variability is the floods that frequently ravage large parts of the north during the monsoon. The rapid spread of HYVs and fertilizer use on rainfed lands also has contributed to the instability because output from these lands is substantial in favorable years but falls off significantly in unfavorable ones. 12 Figure 1.2 Coefficient of variation of agricultural growth across states (%) 0 % 5 % 10% 15 % 20 % 25 % Gujarat Rajasthan Bihar Madhya Pradesh Karnataka Tamil Nadu Orissa Andhra Pradesh Kerala Maharashtra Haryana Uttar Pradesh India West Bengal Punjab Assam Source: Estimated­Data from CSO, National Accounts Statistics. Note: Coefficient of Variation of Agricultural Growth (1993/94 to 2003/04) is computed using the Cuddy La Valle Index. Improving agricultural performance is critical to the improvement of livelihoods and reduction of rural poverty in Bihar, which is the second most impoverished state in the country after Orissa.3 From 1999­2000, various estimates classified 30 million­38 million (40 percent­48 percent) of Bihar's 76 million rural inhabitants as poor. Unlike in other states, in which rural poverty tends to be concentrated in specific regions or household types, poverty in Bihar appears to be a more general affliction. According to Planning Commission estimates, 1 in 6 of India's poor lives in Bihar. Considering only rural areas, that number becomes 1 in 5. Figure 1.3 Rural poverty rates in Bihar and other selected states, 1999­2000 (%) Orissa Bihar Assam West Bengal Uttar Pradesh All India Maharashtra Tamil Nadu Andhra Pradesh 0 10 20 30 40 50 60 Source: GOI Planning Commission estimates, 1999­2000. 3Kijima and Lanjow (2003) actually found that Bihar rural poverty rates (48%) are higher than Orissa's (42%). 13 Problems and Constraints Bihar's agricultural sector has been plagued with numerous problems and constraints for a long time. These problems include: 1. Low productivity. The average yields of rice and wheat (the 2 most widely cultivated crops) are 20 percent­25 percent below the Indian average, and less than half that obtained in Punjab. 2. Slow diversification into higher value crops despite abundant water resources, suitable climate, and availability of labor. 3. Poorly developed rural road infrastructure, which limits access to markets, 4. Floods, water-logging, poor drainage, and inadequate public investments to expand and maintain surface irrigation systems. 5. Limited access to, and quality of, electricity, raising farmers' production costs as they have to rely on diesel to tap ground water resources, and deterring post-harvesting and processing investments. 6. Small and fragmented farms, together with a moribund formal credit system and widespread illegal land tenancy. These factors disincentivize private investment in land. 7. Lack of transparency in product marketing, specifically, the linkage among price, quality, and farmers' decisions. 8. Inadequate public research and extension services crippled by the lack of strategic focus, funding shortages, and the inability to effectively utilize available resources. Successes and lessons Despite the above gloomy picture, in the last decade, certain segments of the agricultural sector have made notable progress. First, Bihar's overall agricultural growth rate has accelerated during the last 10 years (figure 1.1). Second, encouraging models of institutional innovation and entrepreneurial success have emerged. These models could provide lessons about what is needed to help the agricultural/agribusiness sector thrive. They include: · Maize yields and production have accelerated as irrigation enabled winter maize cultivation, and hybrid cultivars (developed largely by the private sector during the 1990s) have been rapidly adopted by farmers across the state. Bihar is the third largest maize-producing state in the country. Maize is a key input to the rapidly growing Indian poultry industry. · Fruits and vegetables, grown on 11 percent of the cultivated area, account for more than 45 percent of the total value of agricultural output in the state.4 Among Indian states, Bihar ranks third and sixth in production of vegetables and fruits, respectively. During the 1990s, the total value of fruits and vegetables increased at a trend rate of over 9 percent per annum. Major fruits include mango, litchi, and banana. Bihar's litchi production accounts for approximately 70 percent of India's total, and litchi cultivation in the state has expanded rapidly to meet both domestic and export demand. · The dairy industry, and specifically COMPFED (the Bihar State Cooperative Milk Producer's Federation Ltd.), has been quite successful in building an integrated supply chain following the established NDDB dairy cooperative model. This supply chain 4In contrast, rice and wheat together grown on 70 percent of the cultivated area account for only 35 percent of the total value of agricultural output. 14 incorporates technical support to a network of 5,000 dairy cooperative societies with a membership of 250,000 households. COMPFED procures, processes, and markets a daily volume of approximately 500,000 kg of milk. · In terms of institutional innovations, the Decentralized Market Extension, or ATMA, model has shown success in technology transfer, increased productivity, promotion of diversification into higher value crops, and improved producers' market access by facilitating linkages with the private sector throughout the supply chain. The ATMA model was initiated under the World Bank's National Agricultural Technology Project in four of Bihar's districts. · Participatory Irrigation Management (PIM) also has shown some success. Approximately 30,000 ha irrigated by surface irrigation schemes have been transferred to water user associations (WUAs). The WUAs collect user charges, of which they retain 70 percent to maintain distributaries and minors under their control. The associations pass on the remaining 30 percent to the Irrigation Department to maintain the main canals.5 Encouraged by this success, GOB intends to transfer a total of approximately 1.3 million ha to WUAs over the next 10 years. Objectives of the report Against this background, the objectives of the study are to (a) provide insights and understanding of the bases for competitive advantage in Bihar's agricultural economy; (b) analyze cross- sectoral, and product-specific elements that have shown success and/or resilience (c) examine the organizational, technical, economic, and institutional factors to explain observed successes; and (d) draw lessons that can be applied to other subsectors in Bihar and other parts of India; The report focuses on encouraging models of success in Bihar that have emerged despite the perceived overall unfavorable environment in the state. Plan of the report The study is organized as follows. Chapter 2 provides a framework for understanding the competitiveness of Bihar's agricultural/agribusiness sector by examining the relative position of Bihar on a number of competitiveness parameters. The chapter also provides an overview of the sector and analyzes recent trends in Bihar agriculture. Chapter 3 addresses the institutional innovations in Bihar, namely, the decentralized Agriculture Technology Management Agency (ATMA) extension model, and the Participatory Irrigation Management (PIM) model. It examines their performance and their impact on, among other criteria, agricultural incomes, productivity, market access, and water availability. Chapter 4 analyzes specific agricultural commodities, namely, maize, dairy, and selected fruits and vegetables that are of particular importance to Bihar. Chapter 5 concludes with lessons learned and recommendations. 5Even in some of the states considered as leaders in PIM (Andhra Pradesh, Maharashtra), WUAs are not empowered to collect user charges, which still are collected by government departments. As a result, collections are much lower than they should be. 15 2. PARAMETERS OF COMPETITIVENESS Indian agriculture has undergone considerable change in the last 10 years. National food self-sufficiency has been achieved, although many poor households remain vulnerable. General economic growth, increased urbanization, and changing consumption patterns have generated a shift in national (and global) demand away from food grains toward high-value commodities including fruits, vegetables, and livestock products. The agriculture sector is set to respond to this trend by shifting from a production to a market orientation. Simultaneously, the role of the private sector is becoming increasingly important in post- harvest value addition and in developing efficient supply chains that would balance production and consumption under an enabling regulatory and institutional environment. This gradual transition is being observed in nearly all Indian states, albeit with varying rates of implementation and success. Although Bihar has, in many ways, missed out on the benefits of the rice/wheat green revolution, the question remains whether it can take advantage of its latent agro-enterprise potential. Active competition is likely to be found at the enterprise level, which responds to consumer requirements to develop low-cost systems and/or to differentiate products. Nonetheless, states' comparative advantage/disadvantage across a range of parameters (for example, factor endowment, infrastructure, regulatory environment) is likely to be significant in attracting private investment. This chapter provides an overview of the agricultural sector in Bihar and examines where the state stands on a number of cross- cutting parameters of competitiveness. A. Geography Location Bihar's location gives it good access to both domestic and international markets. The state is bounded by Nepal in the North, Jharkhand in the South, West Bengal in the East, and Uttar Pradesh and Madhya Pradesh in the West. Its proximity to Nepal, and to Calcutta, a major city with international air- and seaports, provides it with good opportunities for domestic and international trade in agricultural products. Natural resources Bihar is comparatively rich in natural resources and has significant irrigation potential from several sources. The state is endowed with fertile soils, ample rainfall, and an abundance of water resources. Bihar's average annual rainfall is 1234 mm, compared to an all-India average of 802 mm. A number of rivers (Ganges, Gandak, and Kosi) flow through the state. Bihar also has substantial groundwater resources, although these are lightly exploited (20 percent). These features give Bihar one of the highest ratios of net irrigated area to net sown area among Indian states (61 percent), comparing well with neighboring states of Jharkhand, Orissa, and West Bengal, for example. Only UP has a higher share (74 percent). The all-India figure is at 40 percent. 16 Table 2.1 Comparison of agro related endowments­Averages 2002­03 Average Average Gross Net Major GW gross net irrigate irrigate and potential sown sown d area d area medium Minor Level of GW available for area area irrigatio irrigatio development exploitation (000 (000 NIA/NSA n (%) (%) n (bcm/yr) State (000 (000 ha) ha) potential potential ha) ha) (000 ha) (000 ha) Punjab 7884 4246 7634 4048 95 3000 2967 93.8 1.0 Uttar Pradesh 25336 16705 17971 12312 74 12500 17999 37.7 44.4 Bihar 7927 5695 4556 3462 61 6500 6847 19.2 23.0 West Bengal 9645 5438 4947 2980 55 2300 4618 24.2 14.9 Andhra Pradesh 12157 10127 5042 3926 39 5000 6260 23.6 22.9 Madhya Pradesh 18613 14740 4765 4615 31 6000 11932 16.5 36.1 Orissa 8326 5763 2129 1319 23 3600 5203 8.4 15.6 India 183238 137091 75452 54492 40 58465 81428 31.9 245.8 Sources: CMIE data 2005, Indiastat.Com. Floods and droughts The frequency of floods and droughts has inflicted considerable human, social, economic, and environmental costs on Bihar and strongly influenced the operating environment of farm households. Almost every year, some 22 districts (more than 5000 villages) are damaged by floods. They represent almost 41 percent of the total cropped area. In some districts (Araria, Muzaffarpur and Sheohar), almost 100 percent of the cropped area is prone to flooding. The share of cropped area affected by flood is highest in the state's North Eastern zone (48 percent) followed by the North Western zone (36 percent), and the South (21 percent) (table 2.2). At the same time, approximately 33 percent of the state's area receives less than 750 mm of rainfall, which places Bihar in the category of chronically drought-prone States.6 Table 2.2 Extent of flood-affected areas in selected districts, 2005 District Flood-affected Cropped area (%) area (000 ha) Araria 255 100 Muzaffarpur 308 100 Khagaria 97 75 Katihar 194 70 Sitamarhi 123 58 Begusarai 99 53 Purnia 119 41 Champaran East 100 29 Champaran West 105 25 Source: Haque, 2005. 6Kumar 2005. 17 B. Human Capital Bihar's population of 83 million people represents 8 percent of the total Indian population. It has grown by an average of 2.8 percent from 1991­2001. This average compares to 1.7 percent for West Bengal, 1.6 percent for Orissa, and 2.1 percent for all India. As do those of neighboring states, Bihar's population features a low level of urbanization. Only 10 percent of Bihar's population lives in urban areas, compared to 18 percent for the entire country. Other socioeconomic indicators show that 33 percent of Bihar's rural population is literate, compared to 44 percent for all India. The state ranks particularly low for literacy rates among women in farm households: just 16 percent, or half the national average for women (table 2.3). Table 2.3 Literacy rates among farm households in Bihar Bihar Jharkhand Orissa West Uttar Madhya Punjab Andhra All Bengal Pradesh Pradesh Pradesh India Male 62 60 64 73 60 59 64 48 65 Female 16 18 22 44 19 22 48 21 31 Source NSSO 2005. More than three-quarters of the work force (77 percent) are employed in agriculture compared to 44 percent in the neighboring state of West Bengal and 59 percent for all India. Bihar's ratio of agricultural laborers to cultivators is 1.65, compared to 0.61 in UP and 0.88 in the country (table 2. 4). Agricultural laborers make up the largest proportion of the rural poor in Bihar. Bihar has some advantage over neighboring states in its low labor costs, as its agricultural wages are among the lowest in India. At the same time, however, the productivity of Bihar's agricultural labor is very low, which contributes to the persistent rural poverty. 18 Table 2.4 Population, labor force and agriculture in Bihar and other states, 1999­2000 Bihar Orissa Andhra UP West All India Pradesh Bengal Population (2000 census) Total (mns) 82.9 36.7 75.7 174.5 80.2 1027.0 Rural (mns) 74.2 31.2 55.2 137.8 57.7 741.7 Urban (mns) 8.7 5.5 20.5 36.7 22.5 285.4 Rural (%) 89.5 85.0 72.9 79.0 72.0 72.2 Labor force in agriculture % of total 77.4 64.7 62.3 66.0 43.9 59.2 Cultivators (% of total) 29.2 29.7 22.7 40.9 19.0 31.6 Agric laborers (% of total) 48.2 35.0 39.6 25.1 24.9 27.6 Agric laborers/cultivators 1.65 1.18 1.75 0.61 1.31 0.88 GSDP/capita (2000) 3,650 6,278 11,154 6,638 10,757 11,752 Agricultural GSDP/worker 4,285 4,845 6,779 7,185 7,227 7,603 Agricultural wage (1999-00) (Kharif, Rs/person-day) 40.04 35.29 45.32 53.25 61.29 50.77 Rural poverty rates 44 48 11 31 32 27 Sources: GOI, Population Census 2001, Commission of Agriculture costs and prices 2001­ 02, Planning Commission estimates, 1999-00 Rural poverty is severe, and tends to be concentrated among landless agricultural laborers' households and the scheduled castes/tribes (ST/SCs). After Orissa, Bihar is the poorest state in India.7 According to various estimates, in 1999­2000, some 30 million­ 38 million (40 percent­48 percent) of the 76 million rural inhabitants were classified as poor (table 2.5). The Planning Commission estimates that 1 in every 6 poor people in India lives in Bihar: this figure rises to 1 in 5 when considering rural poverty only. More than half (54 percent) of the landless agricultural laborers are in the lower 40 percent of Bihar's income scale. Agriculture-dependent households account for more than 75 percent of all poor households in the state. Households of SCs and STs, representing a little over one- fifth of the rural population, are overwhelmingly poor. Their average monthly per capita expenditure of Rs 390 compares to Rs 451 for all rural households in the state.8 7Kijima and Lanjow (2003) estimated higher rural poverty incidence for Bihar (48 percent) compared to Orissa (42 percent). 8NSS 58th round 2003. 19 Table 2.5 Poverty estimates for Bihar and India, 1999­2000 Poverty estimates for Bihar Head count (%) No. People (millions) Rural Urban Overall Rural Urban Overall Planning Commission estimates 2000 44 33 43 38 5 35 Deaton and Dreze 2002 41 25 39 31 2 32 Kijima and Lanjouw 2003 48 31 47 36 3 39 Poverty estimates for All India Head count (%) No. people (millions) Rural Urban Overall Rural Urban Overall Planning Commission official estimates 27 24 26 193 62 260 Deaton and Dreze 2002 26 12 22 188 32 219 Kijima and Lanjouw 2003 -- -- -- -- -- -- Source: Planning Commission 1999­2000, Deaton and Dreze 2002, Kijma and Lanjouw 2003. Rural Nonfarm The rural nonfarm sector provides an important source of income for rural households in Bihar.9 It accounted for approximately 39 percent of total household income in 1993­94 (NCAER 2000). However, agriculture is still Bihar's major source of rural income: 53 percent of income is derived from cultivation and 6.7 percent from agricultural labor. The share of nonfarm income sources to total income is significant across all income quintiles. Poor households receive much of their nonfarm income from self-employment, while wealthier households rely on regular nonfarm employment. The proportion of own-farm income to total income tends to rise as per capita income increases. The exception is the highest income quintile (the richest 20 percent of households), for which it falls steeply. Similarly, the income share generated from agricultural wages falls as income increases, with a sharp decline for the top 40 percent of rural households. Agricultural wage labor accounts for 24 percent of income for the poorest 20 percent of households, but just 0.4 percent of income for the richest 20 percent of households. 9Including Jarkhand. 20 Table 2.6 Nonfarm income Shares in Bihar Quintile Cultivation Agriculture Nonfarm Nonfarm Nonfarm Total Other Real wage labor wage self- regular nonfarm sources per labor employment employment sources capita income Lowest 29.810 24.0 23.5 18.6 3.1 45.2 1.0 1064 Q2 30.9 19.1 16.6 26.1 5.4 48.1 1.9 1951 Q3 43.8 14.0 11.4 21.1 7.4 39.9 2.3 2870 Q4 51.4 4.0 4.7 21.7 16.0 42.4 2.2 4137 Highest 4.5 0.4 1.0 10.0 23.0 34.0 1.1 8418 Total 52.8 6.7 6.4 16.5 16.0 38.9 1.6 3690 Source: Lanjouw and Shariff, 2002. Nonetheless, a recent study suggests that growth in the non-farm sector of Bihar is likely to have little effect on rural poverty reduction. Ravallion and Datt (2002) find that, among major Indian states, Bihar has the lowest elasticity of poverty reduction with respect to nonfarm output. The annual rate of poverty reduction for Bihar was estimated at 0.3 percent, compared to the national mean of 1.3 percent. West Bengal was found to be the best performer in pro-poor growth, with an annual rate of poverty reduction of 3.5 percent. Plausible explanations for these findings include a poor initial human resource base and unequal land distribution, both of which are characteristics of Bihar. C. Agriculture Production Agroclimatic zones of Bihar The Ganges River divides Bihar into two agro-ecological zones, North and South. These differ based on topography, climate, average rainfall, soil conditions, flood effects and resultant cropping patterns. The North region can be further subdivided into two zones: North East and North West. Salient features of the three agro-ecological zones, including their locations and the districts they occupy, are presented in table 2.1 The Southern zone is the largest in area and is characterized by low average annual rainfall but a significant share of irrigated area. The share of net irrigated area to net sown area is on the order of 61 percent, ahead of the other 2 agroecological zones. Almost all crops are produced in the South. Major crops include rice, maize, and pulses. Most horticultural crops tend to be grown in the South. The North Western zone has the highest average annual rainfall of the three zones. Next to cereal crops, this is the primary zone for fruits and vegetables production. Districts such as Muzaffarpur and Vaishali lead the zone in the production of mango, litchi, and banana. Other important crops include potato and (almost exclusively to this zone) sugarcane. Just as is the North East, the North Western zone is negatively impacted by floods, as more than one-third of the cropped area is destroyed when floods occur. The North Eastern zone of the state is the most vulnerable to flooding. Nearly half of its total cropped area is damaged during floods. In some districts (for example, Araria), floods are apt to wipe out the entire cropped area. Major crops grown in this region include 10Includes Jharkand. 21 rice, wheat, and maize (which comprises 50 percent of the cropped area in districts such as Begusarai). This zone also is known for the production of pineapples. Table 2.7 Agroclimatic zones of Bihar Zone Districts Area Area Rainfall Flood % of Net Area Major (million (%) (mm/yr) area net irrigated under crops ha) (% area area HYV CA) sown (%) (%) (2001) North West Champaran, 3.5 36.0 1275 36.3 40.2 29.7 37.6 Rice, West East Champaran, Wheat, Gopalganj, Maize, Siwan, Saran, Potatoes, Sitamarhi, Sugarcane, Madhubani, Mangoes, Darbhanga, Litchis, Muzaffarpur, bananas Vaishali, Samastipur, Sheohar North Saharsa, 2.0 21.1 1224 48.0 18.3 8.8 8.7 Maize, East Madhepura, Jute, Purnia, Araria, Pineapples Kishanganj, Katihar, Khagaria, Begusarai, Supaul South Bhojpur, Rohtas, 4.1 42.9 1103 21.3 41.5 61.5 53.8 Rice, Patna, Jahanabad, Wheat, Nalanda, Gaya, Gram, Nawada, Guava, Aurangabad, Mangoes, Munger, Potatoes Bhagalpur, Banka, Buxar, Jamui, Lakhisarai, Sheikhpura, Bhabuta (Kumarai) Sources: Haque 2005 and authors' calculations. Land Although labor is relatively abundant and wages are comparatively low in Bihar, land is the limiting factor of production. The combination of a dense rural population and a large share of agricultural employment places significant pressure on land use in Bihar. The net sown area represents approximately 62 percent of the total reported area, compared to the all-India sown area of 47 percent. Bihar's land holdings are highly fragmented. The average rural farm size is 0.75 ha, compared to 1.41 ha for all-India. As result, the overwhelming majority of farm households in Bihar are marginal or small farmers (table 2.8). 22 Table 2.8 Distribution of rural households by size class in Bihar and India, 1995­96 Bihar India Bihar India Bihar India Bihar India Area # hhs # hhs % of % of Total land Total land Avg. Land Avg. Land (ha) (000) (000) total hhs total hhs possessed possessed possessed possessed (000 ha) (000 ha) (ha) (ha) 0­1 11344 71,179 80 62 3871 28121 0.34 0.40 1­2 1,526 21,643 11 19 2018 30722 1.32 1.42 2­4 941 14,261 7 12 2,566 38,953 2.73 2.73 4­10 314 7,092 2 6 1,749 41,398 5.57 5.84 >10 29 1,404 0 1 479 24,163 16.52 17.21 All 14155 115,580 100 100 10682 163,357 0.75 1.41 Source: Agricultural Census 1995-1996 Inequality in land ownership and insecure land tenure have exacerbated the rural poverty situation in Bihar and deterred investment. Leasing land is forbidden in most Indian states except under special conditions. Various legal loopholes and implementation difficulties have meant that leasing agricultural land continues in many places but usually is concealed. which gives rise to a number of negative issues, such as exclusion from formal credit channels, that can exploit lessees, particularly the landless, marginal, or small farmers who make up the majority of lessees (National Commission of Farmers 2006). Although policy reforms have been scheduled for some time, there has been little progress on them. Thus, reducing rural poverty in Bihar would require effective implementation of reforms to secure the rights of tenants, who are mostly small and marginal farmers, and the landless. Table 2.9 Households leasing and area leased in Bihar, selected years, 1982­2000 (%) Households Leasing-In Area Leased-in to Total Area Cultivated Land size (acres) 1981-82 1999-2000 1981-82 1999-2000 Landless 34.53 22.63 100.00 100.00 0­1.0 53.57 36.09 62.63 58.15 1.0­2.5 36.99 28.57 37.52 27.62 2.5­5.0 34.48 5.19 18.87 3.88 5.0­10.0 10.00 0.00 4.21 0.00 10.0-20.0 3.85 11.11 0.97 5.04 20+ 0.00 1.17 0.00 1.98 Sources: A.N. Sinha Institute of Social Sciences 1982, Institute of Human Development 2002- as reported in IASL, 2006 Major crops Bihar's total land area is 9.4 million ha, 84 percent of which is counted as gross cropped area (GCA) (approximately 7.9 million ha). The net sown area is 5.7 million ha, representing 72 percent of GCA. Nearly 85 percent of total cropped area is under food grains, followed by vegetables (7 percent), and fruits (3 percent). Other crops such as oilseeds and sugarcane account for the rest (5 percent). Detailed crop analysis establishes rice (43 percent), wheat (26 percent), maize (7 percent), potatoes (4.2 percent), and mangoes (1.9 percent) as the crops that occupy the largest areas in Bihar. 23 Figure 2.1 Shares of gross cropped area and total output value by major crops, 2001­02 Cropping Pattern Value of Output from Agriculture (% area under cultivation 2001-02) (Avg for 2001 and 2002) (1993-94 prices) Wheat Straw s and 26% Stalks Pulses Paddy 5% 4% 43% Maize Sugar 7% 2% Oilseeds 1% Others Jute Fruits and Vegetables 1% 1% Vegetables 7% Pulses 50% Wheat 8% Fruits 13% 3% Sugarcane Fibres Oilseeds Paddy 1% 2% 2% 20% Maize 4% Source: CMIE data 2005. Bihar has experienced little diversification away from cereal crops, reflecting the subsistence nature of farming in the state. Rather, the area of paddy has risen from 37 percent of total cropped area in 1981 to 43 percent in 2001. Paddy, wheat, and maize combined occupied 76 percent of GCA in 2001­02, but contributed only 37 percent of the total value of agricultural output. Recently, rice production increased by 2 percent per annum, driven primarily by increasing sown area. Rice and wheat yields are much lower than those in neighboring states and at the national level. During the TE 2003, rice yields averaged 1461 kg/ha in Bihar, compared to 2494 in West Bengal and 1989 for all India. Similar outcomes were observed in wheat: Bihar managed 1912 kg/ha to trail West Bengal (2240 kg/ha) and all India (2698kg/ha). Between 1993­94 and 2003­04, wheat production declined by 0.3 percent per year. Maize production grew at an impressive annual rate of 6.8 percent. This growth has been due to increases in both areas and yields, and to the cultivation of irrigated winter maize and the availability of improved quality seeds brought in by private seed companies, who have a strong presence in Bihar. Indeed, Bihar's average maize yields during the TE 2003 reached 2422 kg/ha, surpassing the all-India average of 1833 kg/ha, and approaching the levels of the high-producing states such as Punjab (2518 kg/ha). Fruits and vegetables, which occupy just 10 percent of the total cropping area, account for 50 percent of the total value of agricultural output. Bihar ranks third in the country in vegetable production and sixth in fruit production. Major fruit crops include mangoes, litchis, bananas, guava, and pineapples. Major vegetable crops include potato, okra, tomato, and brinjal. Bihar leads the country in the production of okra, litchis, and guava; and ranks third in the production of potatoes and mangoes. However, despite Bihar's abundant water resources and fertile soils, productivity levels have remained low. Bihar ranks twelfth and fifteenth among major states for vegetable and fruit yields respectively. 24 Table 2.10 Growth rates in area production and yields of major crops, 1993­2003 1993/94-2003/04 Share of area Area Production Yield Crop (%) (%) (%) (%) Rice 45.1 1.6 2.1 0.4 Wheat 26.8 0.6 -0.3 -0.9 Maize 7.6 3.0 6.8 3.7 Jowar 0.0 -3.0 3.0 5.6 Bajra 0.0 -8.8 -2.9 6.9 Barley 0.2 -5.0 -2.9 2.2 Ragi 0.2 -8.8 -9.1 -0.3 Gram 0.9 -5.3 -4.7 0.7 Arhar 0.5 -1.8 -0.1 1.7 Groundnut 0.0 -3.4 -9.0 -5.4 Rapeseed 1.2 0.4 1.3 0.9 Sugarcane 1.3 -1.5 -1.1 0.4 Potato 1.9 1.5 1.7 0.2 Jute 1.9 1.6 1.5 -0.1 Source: CMIE various years Mango occupies 48 percent of Bihar's total fruit area, and Bihar's production represents 11 percent of Indian mango production. Mango is grown in all three zones of the state. From 1991­92 to 2002­03, production of mango has shrunk by 3.5 percent annually, driven by a decline in both yields and areas. Low productivity of mango orchards, low rates of technology adoption, and poor marketing have contributed to this decline. However, Bihar's mango yield during the TE 2003 (9MT/ha) was higher than the all India- average (8 MT/ha) and those of neighboring states such as West Bengal and Orissa. Still, Bihar's mango yields are just half those of Uttar Pradesh. Litchi, guava, and banana expanded in terms of area and production. Litchi production grew by 3.2 percent per annum between 1991/92­2002/03. Banana and guava production each expanded by 2 percent over the same period. Bihar is India's leading producer of litchis, accounting for approximately 70 percent of national production. Although the state's climate is very suitable for litchi cultivation, yields declined slightly (0.4 percent per annum) over the last decade. Inadequate planting materials and poor arboriculture contributed to this stagnation. Potato is the most significant vegetable grown in Bihar. In 2003 the state produced 6 percent of total national potato production. The largest potato producers in India are Uttar Pradesh and West Bengal with 44 percent and 30 percent, respectively. The total potato cropping area of all three states represents 71 percent of all potato sown area in the country. Potato-cropped area in Bihar alone accounts for 11 percent of all India. During the last decade, Bihar potato production has grown steadily at the modest rate of 1.7 percent per annum, driven entirely by a similar growth in area. However, potato yields have been stagnant at less than half the all-India average. Other important vegetables are brinjal, okra, and tomatoes. 25 Real price trends Although consistent data are difficult to find, there is evidence that real commodity prices have increased in Bihar over the last 10 years, with price movement favoring maize and potatoes. Such price movement also has been one of the factors contributing to the expansion in maize production and for potatoes' persistence as the state's primary vegetable commodity. Table 2.11 Real producers price trends for selected commodities in Bihar, 1993­03 (%) Rice Wheat Maize Jowar Bajra Potato Tobacco 1993-03 0.6 1.6 1.3 0.1 0.0 4.4 3.5 Source: CMIE database various years Livestock Bihar's livestock sector accounted for approximately one-quarter of the total value of agricultural output in TE 2002­03. Milk is the most important livestock product at approximately 50 percent of total livestock output, followed by meat (24 percent) and other livestock products. During 1993/94­2002/02, livestock grew at a rate of 1.7 percent per annum. According to the 2003 livestock census, there were approximately 10 million head of cattle in Bihar, only 10 percent of which were cross bred. Livestock activity is concentrated among landless and marginal households with less than 1 ha of land. Approximately 35 percent of rural households in Bihar reported owning cattle, 20 percent buffalo, and 15 percent sheep and goats (NSSO 2003). However, of all rural households owning cattle and/or buffalo in Bihar, more than three-quarters of them had less than 1 ha of land. Sheep and goats tend to be even more concentrated among landless and marginal rural households. 26 Table 2.12 Livestock ownership based on size of class of operational holding in Bihar, 2003 % Size of No. % share class of Of No. share % share of opera- HH No. Of Of % of % of of total of total total tional No. Of with HH with HH HH % of HH HH HH HH with HH holding HH cattle buffalo with with with with with buffalo with (ha) (000) (000) (000) S&G cattle buffalo S&G cattle S&G (000) <=0.04 5082 759 428 747 14.9 8.4 14.7 18.8 17.8 42.7 0.04-1 5238 2371 1410 842 45.3 26.9 16.1 58.7 58.7 48.2 1-2 943 622 410 124 65.9 43.5 13.1 15.4 17.1 7.1 2-4 329 224 115 32 68.0 34.8 9.6 5.5 4.8 1.8 >4 80 66 37 5 82.4 46.9 6.1 1.6 1.6 0.3 All 11673 4042 2400 1749 34.6 20.6 15 100 100 100 Source: Author's calculations based on NSS 59th round, 2003. Note: S&G = sheep and goats. Fisheries Fish production has been growing at over 8 percent per annum, and its share in total agricultural GDP has nearly doubled in 10 years. In 1993 the share of fish production in agriculture and allied value added was 2.9 percent. In 2003 this share rose to 5.8 percent. Today fish production accounts for 2 percent of the gross state domestic product (GSDP) in Bihar. As mentioned, Bihar is well endowed with water resources in the form of ponds, tanks, and major flowing rivers. North Bihar features Chaurs and Ox-bow lakes. In 2003­ 04, Bihar produced 266,000 tons of fish, or 7 percent of the total Indian inland fish production. Fishing is a major rural occupation in Bihar, but it is not commercially oriented. Nearly 4.6 million rural households (40 percent of rural households in Bihar) are engaged in fishing, which is one of the highest proportions in India. There are over 500 fish societies in Bihar. However, their function is unclear, as these societies have not been very engaged in helping fish producers with good quality input and market access, and in providing technical and commercial know-how. Productivity remains low for a number of reasons, including low quality and availability of fish seed and poor feeding practices. An institutional obstacle to progress with fish is the arrangement for pond lease. Despite the involvement of cooperative-type agencies, both the terms and conditions of leases discourage investment. On the output side, lack of access to markets and the absence of storage and processing facilities inhibit growth. Attitudes toward farming NSS estimates show that fewer than half of Bihar's farm household heads claim to "like farming." This figure is lower than for any other state in the country (NSSO 2003) (figure 4.3). The proportion of households that dislikes farming, claiming it is not profitable, lies between 17 percent and 30 percent for all Indian states. In Bihar, it is at 36 percent, which Bihar's farmers claim is due to risks (11 percent) and other reasons. 27 Figure 2.2 Farmers' attitudes toward farming in selected states, 2003 80 40 75 70 35 elbati gni 65 of pr mraf 60 30 55 ngikil not-ti 50 25 45 %40 20 ngikil 35 not 30 15 % AP PJ MP AI UP JH WB BH Source: NSS 59th round 2003. D. Farming Support Services Extension and access to information Farm households in Bihar rely primarily on input dealers and progressive farmers for information. Technology transfer (TT) through the public extension system is negligible. In a national survey (NSS 2003), approximately 10 percent of households that accessed information on modern technology in Bihar reported obtaining it from extension workers, the lowest of the states (table 2.13). In the absence of public extension, farmers have relied on mass media (radio/TV/newspaper), private input dealers, and other progressive farmers for accessing information, but overall awareness and penetration of modern technology remains low. Table 2.13 Households accessing technology through different sources (%) State Extension Input dealer Other progressive farmers Orissa 57 26 24 West Bengal 52 37 41 Punjab 51 45 86 India 46 51 53 Madhya Pradesh 45 52 35 Uttar Pradesh 43 53 59 Andhra Pradesh 36 57 55 Bihar 10 59 59 Source: NSS 59th round 2003. Access to inputs Total fertilizer consumption in Bihar has increased from 34 kg/ha in 1980 to approximately 80 kg/ha in 2003, but remains low compared to other states. Table 2.14 shows that per-hectare fertilizer consumption in Punjab is more than twice that of Bihar. In Uttar Pradesh and West Bengal, it is more than 50 percent higher than in Bihar. However, 28 the share of cropped area in Bihar that is under high-yielding varieties increased from 40 percent to almost 60 percent during the same period. The proportion of farmer households using farm inputs in the winter season exceeds those using them in the Kharif season. More farm households use fertilizer, improved seeds, and pesticides in the Rabi (winter) season vs. the Kharif season. The difference is due primarily to the availability of irrigation in the winter season. For instance, 43 percent of farm households use improved seeds in the rabi season compared to the all-India level of 34 percent. In the Kharif season, the reverse is true: just 34 percent use improved seeds, compared to the national average of 46 percent (table 2.14). Table 2.14 Fertilizer consumption and use of farm resources by farm households, 2003­04 (%) Farmer households using Fertilizer Fertilizer Organic manure Improved seeds Pesticides Veterinary consumption Services Kg/ha Kharif Rabi Kharif Rabi Kharif Rabi Kharif Rabi Kharif Rabi Orissa 41.4 76 15 65 10 19 10 41 10 31 8 Madhya Pradesh 55 59 52 40 39 29 21 28 23 19 14 Bihar 80.5 59 91 32 34 34 43 40 46 19 18 India 89.8 76 54 56 38 46 34 46 31 30 22 West Bengal 122.4 89 72 54 43 63 58 80 65 32 29 Uttar Pradesh 126.7 78 88 48 56 48 53 39 35 26 21 Andhra Pradesh 136.8 81 30 69 28 68 30 71 30 41 30 Punjab 184 54 55 36 35 44 46 52 52 66 71 Source: NSS 59th round 2003. Of all certified seeds available to Bihar's farmers in 2001­02, one-third were improved maize seeds. This represents a two-fold increase over 1999­00. Maize production, especially winter maize, has been hailed as a success story in Bihar. Multinational seed companies are selling improved seeds in the state, which is helping to increase maize productivity levels. The maize value chain will be analyzed later in the report. Availability of credit Access to formal credit is poor in Bihar. The state has one bank branch for every 22,248 persons, compared to the national average of 15,000 (GOB 2006). Bihar's Credit Deposit Ratio in 2005­06 was 30 percent, up from 21 percent in 2001­02. Data from State Cooperative Banks (SCBs) indicate that their lending to agriculture throughout the country reached Rs. 952 million in 2004, up from Rs. 249 million in 1995. Bihar's share of this amount fell from 5 percent to 2 percent during this period. Agriculture lending by SCBs in Bihar grew by approximately 2 percent per year during 1995-2004, but reached 8 percent for 2000­04 following the bifurcation of the state. Although an improvement,11 this figure still compares very poorly to other states in India (figure 2.3) 11Four years is a relatively short period to draw a definite conclusion on the growth of agricultural lending in Bihar. 29 Figure 2.3 Growth in SCB's credit to agriculture by state, 1995­2004 (%) West Bengal Uttar Pradesh Punjab India Andhra Pradesh Madhya Pradesh Orissa Bihar 0% 10% 20% 30% 40% 1995-2004 2000-04 Source: CMIE 2005. To the year 2005, more than 17,000 Self-Help Groups (SHGs) had been financed by banks through their priority lending schemes in 38 districts. The plan for 2006­07 is to raise the number financed to 24,000 SHGs and advance Rs. 480 million through the scheme. Approximately Rs. 1.5 million has been advanced through the 201,389 Kisan Credit Cards (KCC) distributed in the state through the various banks. The number of KCCs targeted for the year are 566,751, making this a 35 percent target achievement. Nearly 44 percent of farm households contract their debt from moneylenders (NSS 2003). In this respect, Bihar is second only to Tamil Nadu (52 percent). On the uses of loans, only 33 percent of farm households contract loans for capital and current agricultural expenses. Typically, the largest share of loan uses is for consumption, marriages, and ceremonial expenditures. NSS data also indicate that, on average, the amount of outstanding loan per farm household in Bihar is among the lowest in the country (figure 2.4). 30 Figure 2.4 Amount of outstanding loan per farm household (000 Rs) Punjab Andhra Pradesh Madhya Pradesh India Uttar Pradesh Orissa West Bengal Bihar 0 10 20 30 40 50 Source: NSS 59th round 2003. E. Marketing Additional income generation from Bihar's agriculture and food sector will require addressing product quality, delivery, and pricing. Despite technical, institutional, and organizational barriers, Bihar's agricultural sector is growing. However, income growth has not mirrored this trend. The challenges ahead are to ensure that (a) more value is added to production and (b) some of that extra value is channeled to farmers. Currently, value tends to be added outside the state, and Bihar generally lacks marketing mechanisms to respond to farmers' needs. Marketing is crucial to a successful diversification and commercialization of Bihar agriculture and accelerated farmer income growth. In Bihar, a small share of local production finds its way to the regulated markets. Just as do other Indian states, Bihar has a number of regulated markets (mandis) (95), principal market yards (67), and rural hats (855) that handle some of the marketing of major agricultural commodities in the state. These venues are supervised and controlled by the state agriculture produce marketing board under the provisions of the Bihar state Agriculture Produce Marketing Act (1960). Data on market arrivals indicate that a very small share of agricultural production finds its way to the markets (table 2.17). This small share is due to the facts that the (a) amount and quality of market infrastructure and support services are poor, and (b) transportation and informal transaction costs discourage farmers from going to the markets. 31 Table 2.15 Average estimated production and arrivals for selected commodities at APMCs in Bihar, 2001­03 Production Price Value of % Arrival Arrival as % Value of % in MT (Rs/Qtl) Prod share in MT % of Share Arrivals share (Rs.lacs) in Production in (Rs.lacs) in vop Arrivals Value of Arrival Rice 5130800 813 416878 25 428557 8.4 21.6 34820 30.4 Wheat 4212100 638 268521 16 407669 9.7 20.6 25989 22.7 Maize 1457150 500 72858 4 231254 15.9 11.7 11563 10.1 Gram 69700 1813 12633 1 28508 40.9 1.4 5167 4.5 All oils 115000 1453 16704 1 27175 23.6 1.4 3947 3.5 Potatoes 1436900 425 61068 4 332899 23.2 16.8 14148 12.4 Vegetables 6719100 561 457144 28 403296 6.0 20.3 22605 19.8 Fruits 2957500 1198 354161 21 123514 4.2 6.2 14791 12.9 -- -- 1659966 100 1982871 -- 100 133030 100 Source: Author's calculations based on data from Bihar state Agriculture Marketing board 2001-2003. It is recognized that a considerable share of agriculture production in Bihar is bound for home consumption, thus lowering the marketable surplus. However, additional important factors are prohibiting producers from accessing the markets. In a recent World Bank study (2005), Bihar ranked third to bottom among states in the level and quality of its regulated markets' infrastructure. It also came fourth from last in the level of farmers' satisfaction with existing market conditions (figure 2.18). As another consideration, Bihar's density of markets (per million ha of sown area) is relatively low. There are 7 principal regulated markets for every million ha of area in Bihar compared to 22 in the neighboring state of Andhra Pradesh. Issues concerning Bihar's market infrastructure include the number of available markets, alternative channels, and the role of contract farming. All of these are to be addressed in pending amendments to Bihar's marketing legislation. Figure 2.5 Infrastructure of mandis in Bihar and other Indian states 14 12 seu 10 8 val ane 6 M 4 2 0 RJ MP PJ AP UP JK BH WB OR Amount & Qualityof Infrastructure available at Mandis Farmers' satisfaction with the infrastructure in the Mandis Source: World Bank report, 2005. 32 Cooperatives/producer organizations Outside the dairy sector, the cooperative movement in Bihar is weak. Although Bihar had 32,552 registered cooperatives in 2000, most of them (with the exception of dairy societies) generally are believed not to be serving as true cooperatives. For example, fish cooperatives (1125) are said to be essentially a means of securing access to ponds. Given Bihar's fragmented and atomistic farm structure and tenure system, organizational action promises benefits from economies of scale, increased market access and power, as well as reduced transaction costs. Figure 2.6 Memberships in farmers' organizations and self-help groups Kerala Andhra Pradesh Tamil Nadu All-India Gujarat West bengal Uttar Pradesh Bihar 0 5 10 15 20 25 % Farmers Org SHG Source: NSSO 59th round 2003. F. Infrastructure The quality of Bihar's infrastructure and peoples' access to it both have been persistent problems. In most districts, existing infrastructure is inadequate and is a major impediment to the development of the economy in general, and the agricultural sector in particular. Of all the villages in India that are not connected to a road, 13 percent are located in Bihar. Only half of the state's villages are connected to a road. Furthermore, the conditions of the roads prevent year-round service for agricultural inputs and product marketing. Only 44 percent of Bihar's roads are surfaced, compared to 58 percent for the whole country. Power availability is extremely poor. Just 5 percent of rural households have access to electricity, one of the lowest rates in the country. In Punjab, for instance, the equivalent number is 90 percent. In Bihar, power cuts are very frequent, ranging between 6­15 hours a day in many places. The lack of reliable power acts as a deterrent to private investment, particularly in manufacturing and food processing. Agriculture's share of power consumption in Bihar is approximately 27 percent. Faced with shortage of electricity, farmers shift to costlier diesel pumps for irrigation. According to the NSS estimates, 97 percent of Bihar farm households irrigate their lands using diesel pumps, the highest proportion of any Indian state. 33 Table 2.16 Level of infrastructure development in Bihar and other selected Indian states, 1996 and 2001 (%) Andhra Bihar Madhya Orissa Punjab Uttar West All pradesh pradesh pradesh bengal india Villages connected by 86 48 28 49 97 50 49 57 road (1996­97) (%) Rural HH with access 60 5 62 19 90 20 20 44 to electricity (2001) (%) Source: CMIE, infrastructure, 2003 Post-harvest infrastructure and facilities Bihar has just 160 rural godowns with approximately 17,000 tons of capacity: 0.12 percent of the country's godowns. As of March 2005, there were 9,483 rural godowns in India with a total capacity of 14.2 million tons. Punjab's share of this capacity is the highest (24 percent or 3,015 godowns), followed by Andhra Pradesh, Uttar Pradesh, and Haryana (all with 10 percent­20 percent each). The Food Corporation and the Central and State Warehousing Corporations also have significant storage space: 71.6 million tons throughout India, mostly for food grains. Just 1.35 million tons (2 percent) of this space is in Bihar. Input materials (seeds and fertilizers) and Public Distribution System stocks dominate this available space. The public procurement system in Bihar is negligible (although increasing in the last two years). Moreover, limited warehouse capacity would inhibit the roll-out of leveraging assets through negotiable warehouse receipts, and deprive Bihar farmers of an important marketing and credit channel. Cold storage capacity also is inadequate. Bihar produces 10 percent of all vegetables in the country and more than 7 percent of all fruits production. Yet, only 5 percent of the total storage capacity in India is in Bihar. Of the 238 cold storage units available, 187 were used for potatoes. Regarding capacity, 77 percent of these units are used to store potatoes only; the remaining 23 percent are multipurpose. The majority (92 percent) of the state's cold storage facilities is owned by the private sector and 8 percent by cooperatives. Table 2.17 Distribution of cold storage use in Bihar, 2005 Commodity India Bihar Capacity Capacity Units (lakh tons) Units (lakh tons) Potato 2800 159.68 187 6.99 Multiple purpose 1073 32.66 51 2.11 Fruits and vegetables 123 0.45 0 0 Meat and fish 445 1.72 0 0 Milk and milk products 209 0.80 0 0 Others 98 0.21 0 0 Total 4748 195.52 238 9.1 Source: Planning Commission 2005. Food processing Less than 2 percent of India's horticultural produce is processed. This low figure compares to 83 percent in Malaysia, 78 percent in Philippines, 70 percent in Brazil, and 70 percent in the USA (CII- McKinsey FAIDA reports 2002 and 2005). In 2000 Bihar had 63 food processing units registered under the Fruit Products Order (FPO), (slightly up from 58 34 in 1997), 40 percent of which are reckoned not to be in working condition. A range of factors impede the development of food processing, including some consumer preference for fresh food, product varieties unsuitable for processing, and the slow development of vertical linkages in the farm and food industries. Throughout India, taxes and duties ranging from 21 percent­23 percent are levied on various branded food items. In Bihar several changes are underway that would both reduce tax rates on branded food products and shift their burden by changing them into value-added tax (VAT). Bihar has adopted the export of horticultural produce as a priority, but it has been slow to develop. An Agri Export Zone was created in 2002 by the GOB under the Agricultural and Processed Food Products Export Development Authority (APEDA) scheme. The scheme covers litchi and other fruits, vegetables, and honey in the districts of Muzaffarpur, Samastipur, Hajipur, Vaishali, East and West Champaran, Bhagalpur, Begusarai, Khagaria, Sitamarhi, Saran, and Gopalganj. Its role was to promote the export of fruits, vegetables, and other agricultural products grown in the state. To date, just 7 functional plants have been registered under the scheme. The Department of Food Processing Industries, Government of India (GOI), estimates that, over the next 10 years, it will invest or facilitate investment of Rs. 69.7 billion in the food processing industry in Bihar. This amount will equate to 4.65 percent of the total investment in the sector in the country. Quality standards and grading Standard quality grades for fruits and vegetables are not used in Bihar. For milk, fat content, plate counts, and other standards are used, and some processing plants are HACCP and International Organization for Standardization (ISO) certified. The Patna (Bihar) laboratory of the Directorate of Marketing and Inspection is (responsible for quality certification of agricultural products under the "AgMark" scheme), is to cease operations at the end of 2006 due to the lack of demand for its services. The directorate (under the Department of Agriculture and Co-operation-Government of India) has 23 AgMark laboratories that processors can approach for voluntary certification of quality and the right to display the AgMark Stamp. Of the 1300 grading units that exist in the country only 3 are situated in Bihar. The total value of Bihar's graded produce is negligible. In contrast, in Maharashtra, Uttar Pradesh, and Tamil Nadu, the aggregated share of the value of graded produce is as high as 75 percent of the national value. Bihar has significant post-harvest losses. Every year, substantial losses are incurred among perishable products. As much as 39 percent of tomato's production is wasted. Similarly, 39 percent of mango production and 22 percent of litchi production are lost annually due to the lack of proper post-harvest activities and facilities. 35 Demand For most households, rice continues to dominate consumption expenditures in Bihar. The average share of monthly expenditures on rice for households in the bottom rural quintile is 20 percent, compared to 11.3 percent for those in the richest rural quintile. Similarly, the average share of monthly expenditures on rice for the bottom urban quintile is 15 percent, in contrast to 2 percent for the richest urban quintile. Conversely, monthly expenditures on milk are positively correlated with income levels: wealthy rural households tend to spend nearly three times the share of disposable income on milk than do poor rural households. The average budget share spent on milk for the richest quintile is 13 percent compared to just 4 percent for the bottom quintile. Fruits appear to be an additional stage in income development. High-income urban households spend the most on fruit, but this amounts to only 1 percent of their disposable monthly income. Table 2.18 Consumption patterns in Bihar Rural Urban Low income High income Low income High income Rs per Percent mpce Rs per Percent mpce Rs per Percent mpce Rs per Percent mpce capita capita capita capita /month /month /month /month Rice 55 21 80 11 56 16 47 3 Other cereals 48 18 82 12 60 17 78 4 Milk 9 3 81 11 15 4 92 5 Animal products 6 2 20 3 12 3 24 1 Vegetables 28 10 59 8 32 9 69 4 Fruits 1 1 9 1 2 1 25 1 Other food 35 13 103 14 52 15 330 16 Education and health 9 3 57 7 19 5 444 20 Other nonfood 73 27 212 29 93 26 854 43 Source: NSS 58th round, 2002­03. Income remains the key determinant of households consumption. Regression analysis reveals that, compared to rice, both fruits and milk show high income elasticities of demand. These elasticities indicate that, as incomes rise, the demand for fruits and milk products will increase at a much faster rate than that for food grain commodities. If average rural income was to increase by 10 percent, demand for milk would rise by 24 percent, and demand for fruits would increase by 20 percent. Similarly, a 10 percent increase in urban income would trigger a 12 percent increase in consumption demand for milk and 15 percent in consumption demand for fruits. Elasticity estimates also indicate that much of the growth in the markets of fruits and milk, and to a lesser extent, vegetables, will depend on the consumption behavior of poor households. 36 Table 2.19 Income elasticity of demand for various consumption goods in Bihar, Commodity Rural Urban All Rice 0.37 0.11 0.33 Other cereals 0.50 0.28 0.47 Milk 2.36 1.21 1.85 Animal production 0.76 0.50 0.69 Vegetables 0.86 0.59 0.76 Fruits 2.06 1.55 2.00 Other food 1.18 1.15 1.20 Educ-health 1.41 1.62 1.82 Other nonfood 1.13 1.32 1.22 Source: Authors' estimation based on NSS 58th round, 2002. G. Regulatory Environment Over the last three years, excise duty on a number of products has been reduced in Bihar. From 2001­02 onward, preparations of fruits, nuts, and vegetables (including jams, jellies, marmalades, fruit juices) attract no duty. For sauces, ketchup, and broths, excise duty also has been abolished. In March 2003, the excise duty on sugar confectionery and biscuits made with the aid of electric power was reduced from 16 percent to 8 percent. Value-added tax was introduced in Bihar in April 2005 to replace local sales tax. With the introduction of VAT, the plethora of taxes currently in place will be either abolished or phased out. The Central Sales Tax will be phased out, and Special Additional Tax will be abolished. VAT's biggest benefit is that it could unite India into a large common market. Unification would translate into better business policy. Companies could optimize based on the logistics of their operations rather than on tax minimization. Reduced transit times for transportation and lower inventory levels will boost earnings. For Bihar, with its high horticultural produce, this could mean access to more players and markets. Market regulation In contrast to a number of other states (Punjab, Andhra Pradesh and Madhya Pradesh), Bihar has taken little action toward amending its state Agricultural Products Marketing Act. As have many other states, Bihar has formulated its own APMC Act along the lines of the APMC enacted by GOI in 1972. The latter restricts wholesale trading in agricultural commodities to regulated government market yards. This restriction eliminates any possibility for backward linkages between processors/exporters and farmers, and segments the supply chain of agricultural commodities, rendering them inefficient. GOI has now circulated a model Act that eliminates the exclusive state regulations and permits the private sector to develop wholesale markets and procure directly from farmers. Some early drafts of amendments have been circulated by the Bihar State Agricultural Marketing Board (appendix 2), but no action has yet been taken. 37 Table 2.20 Progress of reforms in agricultural markets (APMC Act), 2006 Stage of reforms Name of states/union territories States/UTs in which reforms to APMC Madhya Pradesh, Himachal Pradesh, Punjab, Sikkim and Act has been done as suggested Nagaland, Andra Pradesh (ordinance issued on 10th May, 2005) States/UTs in which reforms to APMC Maharashtra, Rajasthan, Haryana, Karnataka, Gujarat and NCT Act has been done as partially of Delhi States/UTs in which there is no APMC Kerala, Manipur, Andaman and Nicobar Islands, Dadra and Act and hence not requiring reforms Nagar Haveli, Daman and Diu and Lakshdweep States/UTs in which APMC Act already Tamil Nadu provides for the reforms States/UTs in which administrative Orissa, Assam, Mizoram, Arunachal Pradesh, Tripura, action is initiated for the reforms Chattisgarh,Meghalaya, JandK, Uttaranchal, Goa, West Bengal, Uttar Pradesh, Pondicherry and Chandigarh States/UTs in which there is no progress Bihar and Jharkhand Source: GOI: Directorate of Marketing Inspection 2006. The Essential Commodities Act (1955) was intended to ensure the availability of reasonable prices of essential mass consumption items, including foodstuffs, by providing states with considerable powers to control and regulate production, supply, and distribution. This act is still in place although not believed to be much of an issue. According to the act, officials can search premises and confiscate products if they suspect that the act has been violated. The Bihar State Regulation of Cold Storages Act (1992) requires operators to be licensed to operate a cold store facility in the state. There are no restrictions on the number of cold stores. By a 2000 amendment, rental of a cold store also is no longer regulated. An owner can refuse to store a product even if there is space in the facility if s/he believes that the produce is likely to damage what is stored or may be stored in the cold storage. The Licensing Officer can be approached to check the validity of the claim of the cold store owner Law and order Difficulties with law and order have reduced Bihar's attractiveness to investors. However, statistics suggest that Bihar is less lawless than its reputation suggests: it ranks 27th in 35 states and Uts in the descending order of crime rates per population. Associated with the climate of lawlessness is the reported presence of exploitive interventions in taxations within certain areas of the state. The controlling individuals (Rangdhaari) extort a fee on each transaction, thought to amount to 2 percent­5 percent. It is not clear to what extent existing market-related legislation reduces or supports such extortion. 38 3. STAKEHOLDERS' INVOLVEMENT IN PUBLIC SERVICES DELIVERY This chapter looks at two institutional reforms piloted in Bihar in recent years. The first is experimenting with a decentralized agricultural technology dissemination system in selected districts and the second is piloting participatory irrigation management in selected surface irrigation schemes. In both cases initial results are encouraging, but a lot remains to be done if the institutional reforms promoted under these pilots are to be sustained and become capable of wider application. Agricultural Technology Dissemination A. Need for Reform Productivity growth in agriculture is based largely on application of science, technology, and information. Studies consistently show high returns to investments in agricultural research in developing countries, averaging over 40 percent (table 3.1). A recent paper on comparative returns to public investments in R&D, irrigation, roads, education and electricity in China and India showed that public investment in R&D contributed the most to promoting agricultural growth in both countries (Fan, Zhang and Zhang, 2002). Table 3.1 Estimated rates of return to investment in agricultural research Region Number of Median rate of estimates return ( %) Africa 188 34 Asia 222 50 Latin America 262 43 Middle East/North Africa 11 36 All Developing Countries 683 43 All Developed Countries 990 46 All 1772 44 Source: Alston and others 1998. Public expenditures on technology generation and dissemination in Bihar are low by national and global standards. At the all-India level, the public sector spends approximately 0.4 percent of agricultural GDP on agricultural research and education; the average for developing countries is 0.6 percent; and the industrialized country average is 2.6 percent. In Bihar, the figure is less than 0.2 percent, among the lowest in the country. Furthermore, 95 percent of this spending is used for salaries and 5 percent by establishment expenses, leaving no funds for operational expenses needed to carry out relevant research. 39 Figure 3.1 Public expenditures on agriculture and allied activities (% of agriculture GSDP) 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Bihar All States Source: Estimated using data from RBI, State Finances, RBI (several issues); CSO, National Accounts Statistics. Note: Agriculture and Allied Activities include Crop Husbandry, Animal Husbandry, Dairy Development, Fisheries, Forestry, Soil and Water Conservation, Agricultural Research, and Education and Co-operation. The story is similar for the extension services provided by various GOB departments. Aggregate expenditures on the departments handling crop husbandry, animal husbandry, soil and water conservation, dairy, fisheries, forestry, research, and education have declined steadily since the mid-1990s and are now approximately 1.8 percent of agriculture GSDP (figure 3.1). These levels are among the lowest in the country; the national average is nearly twice as much at 3.5 percent of agricultural GDP. Expenditures on crop husbandry, and animal husbandry in particular, have fallen substantially in real terms. Bihar's public sector agricultural research and extension system became largely dysfunctional by the mid-1990s. The system consists of the Rajendra Agricultural University for agricultural research and education; seven research centers/stations of the Indian Council of Agricultural Research for commodity and location-specific research; and various departments of the state government that provide agricultural extension and regulatory services. The agricultural research and extension system remained ineffective in developing and disseminating appropriate technologies to the farmers in the state. With the addition of weak institutions, paucity of operational funds, and lack of a clear strategy, the system became largely dysfunctional. In a national survey conducted by the NSS in 2003, less than 0.5 percent of farmers in Bihar reported accessing information on modern technology from extension workers­­ the worst record across all states (figure 3.2). The human resource base, which was developed in 1960s and 1970s, had eroded due to retirements, intellectual isolation, and lack of in-service training. Other weaknesses included dilapidated infrastructure; lack of mobility; centralized top-down command and control approach; weak research-extension-farmer linkages; and a lack of focus on areas of relevance, opportunity, and comparative advantage. Consequently, Bihar was unable to make any worthwhile use of the over 15,000 staff employed in the public sector for addressing the problems faced by the agricultural sector. 40 Figure 3.2 People accessing technology through extension workers, main states (%) Bihar Uttar Pradesh Rajasthan Punjab Haryana Kerala West Bengal India Assam Orissa Maharashtra Madhya Pradesh Andhra Pradesh Karnataka Tamil Nadu Gujarat (percent) 0 5 10 15 20 25 Source: NSS 59th Round 2003. B. Experimenting with Reform: Decentralizing Agricultural Extension In late 1990s, the Government of India and the World Bank began exploring new approaches to agricultural extension. The result was a new decentralized, farmer-centered extension approach that focused more directly on agricultural diversification and increasing farm income and rural employment. The central institutional innovation that emerged to address the problems of the extension system was the Agricultural Technology Management Agency, or "ATMA" model, which was introduced at the district level. The model was designed to (a) decentralize decision-making through "bottom-up" planning procedures that would directly involve farmers and the private sector in planning and implementing extension programs at the block and district levels; (b) integrate extension programs across the line departments (more of a farming systems approach), and (c) link research and extension activities within each district. This model was pilot-tested in Bihar and 8 other states (covering 65 districts) under the World Bank-funded National Agricultural Technology Project (NATP) and the Diversified Agriculture Support Project (DASP) from 1998­2005. Bihar established four ATMAs. Following the generic operational design (box 3.1) the ATMAs were established under NATP in Muzaffarpur, Munger, Madhubani and Patna districts in 1999, 2000, 2001 and 2002, respectively. In all the 68 blocks of these districts, Block Technology Teams (BTTs), Farmer Advisory Committees (FACs) and Farmer Information and Advisory Centres (FIACs) were set up and provided internet connectivity. The organizational set up of ATMAs in Bihar was similar to other states except that in two ATMAs (Patna and Madhubani) the Project Directors (PDs) were taken on deputation from the State Agricultural University (SAU), whereas in other ATMAs, they were mainly from the state Departments of Agriculture. 41 Box 3.1 Agricultural Technology Management Agency extension model The Agricultural Technology Management Agency (ATMA) is a quasigovernmental organization registered under the Societies Registration Act of 1860. It operates under the direction and guidance of a Governing Board (GB), which determines program priorities, allocates funds, and assesses program impact. The composition of the GB provides an equal balance between the heads of the line departments and research units within the district and the stakeholder representatives­­farmers, women, and disadvantaged groups, and private sector firms within the district. The GB reviews and approves the Strategic Research and Extension Plan and annual work plans, and set policies and procedures for ATMA operations. ATMA Management Committee (AMC) serves as the Secretariat of the GB and is responsible for coordinating and integrating extension and research activities within the district. The Project Director (PD) of ATMA chairs the AMC, which includes the district heads of line departments, zonal research station, Krishi Vigyan Kendra (Agriculture Science Centre), nongovernmental (NGO) representatives, and two representatives from farmers' organizations. ATMA personnel include PD, who is supported by a Deputy PD, accountant, computer operator, secretary, driver, and peon. The PD and DPD are taken on deputation, and all the support staff is hired on contract. To facilitate research and extension linkages within the district, if the PD is from the research system, then the DPD is from the extension system and vice-versa. Actual implementation of ATMA activities is done by the line departments. Block Technology Team (BTT) consists of block-level line department (agriculture, horticulture, animal husbandry, dairy, fisheries, forestry and sericulture) officers and is headed by the most senior officer. The BTT consults with the Farmer Advisory Committee (FAC) and develops a comprehensive extension program called the Block Action Plan (BAP) consistent with farmer needs. Farmer Advisory Committee (FAC) is composed of farmers who represent different socioeconomic categories of farmers within the block. The FAC advises the BTT on extension priorities for the block. It also reviews and approves the annual BAP prepared by the BTT before its submission to ATMA for funding. Then, the FAC monitors and provides feedback to BTT on BAP implementation. Farm Information and Advisory Center (FIAC) is a block-level facility which includes an office for the BTT convener, meeting room, and office space for the operator of the FIAC computer, with internet connectivity. FIAC has become the single- window delivery mechanism for extension programs within the block. The internet access is an important source of information for all participants. Farmers Organizations (FOs) are key elements of the group approach that focuses on diversification into high-value crops and products. The farmers are organized into farmer interest groups around specific crops or products for which there is a market demand and that are appropriate for the agroecological conditions and resources of different farmer groups. To successfully supply different markets, achieve economies of scale and create an efficient supply chain these groups are organized along crop or product lines as block and district level farmer federations. Source: Singh 2006. District strategic research and extension plans (SREPs) were prepared by participatory bottom-up planning. For the ATMA districts, SREPs were prepared collectively by researchers (from state agricultural universities, or SAUs), extension workers (from all line departments), farmer representatives, and other stakeholders (NGOs, private sector) through participatory rural appraisals. The researchers also took into account agroecological conditions, available facilities and emerging market opportunities. This process joined the research and extension staff--in many cases, for the first time in a joint activity--with farmers from the representative villages within the district and the private sector. Collectively, the staff listened to farmers' problems, then translated these concerns into research and extension priorities. After completing a SWOT12 analysis, they developed a SREP that was presented to the ATMA Governing Board for approval. Based on the SREP, the BTTs prepared the annual block action plans, making appropriate changes to address emerging opportunities and constraints. 12Strengths, Weakness , Opportunities, and threats 42 The ATMAs adopted the farmer group approach to promote diversification to high-value crops and products. In pursuing this market-driven approach to extension, the farmers were organized into farmer interest groups (FIGs) around specific crops or products for which there was a market demand and that were appropriate for the agroecological conditions and resources of different farmer groups. In addition, to successfully supplying different markets, getting these groups organized also was essential to achieve economies of scale and to create an efficient supply chain. Once the different FIGs were formed at the village level, they soon began to organize along crop or product lines as block- and district-level farmer federations. C. Performance of ATMAs in Bihar ATMAs mobilized farming communities and developed public-private partnerships. The four ATMAs have been functional for just 3­5 years, and it is very early to judge the impact of the new extension approach. Evaluation of the ATMA program in Bihar was undertaken by an independent agency, the Indian Institute of Management Lucknow (IIML). The sample size consisted of 145 farmers randomly selected from each ATMA district and 45 farmers from the adjoining non-ATMA district. Early indications suggest that the ATMA pilots were successful. In the project districts, 2708 Farmer Interest Groups were formed (including 411 Self-Help Groups of women) around specific crops or products and organized into 22 Farmer Federations. They were supported through exposure visits to successful farmers within and outside Bihar, training, demonstrations, and on-farm and adaptive trials. These groups are now undertaking numerous activities such as producing vegetables, medicinal and aromatic plants, and mushrooms; bee-keeping; vermiculture; fisheries; dairy; floriculture; marketing; as well as processing and other value-adding activities. The ATMAs also developed 25 public-private partnerships to supply seed, planting material, fertilizers and other inputs; to procure and process agricultural produce; to maintain FIACs; and train farmers. The main emphasis was on empowering farmers by linking them with multiple sources of information, technologies, and markets rather than providing subsidized inputs. ATMAs have improved interaction among farmers, extension workers and researchers. State-wide results from the 2003 NSS survey indicated that only 0.5 percent of farmers accessed information on new technologies from extension workers. Since then, in the ATMA districts, the two-way interactions between farmers and extension workers and between farmers and researchers have considerably increased (table 3.2). More farmers are visiting/approaching extension staff and scientists to seek technical guidance on agriculture. Similarly, extension officers and scientists are visiting a higher number of farmers to share knowledge and to obtain their feedback. 43 Table 3.2 Farmer interface with extension workers and research scientists in ATMA districts Baseline 2002 2004 %t farmers visiting extension workers and researchers Village extension worker 11 42 Block-level extension worker 16 56 District-level extension worker 5 19 Extension staff of agribusiness firms 16 31 Research scientists 17 28 % extension workers and researchers visiting farmers Village extension worker 11 45 Block-level extension worker 19 75 District-level extension worker 4 20 Extension staff of agribusiness firms 11 24 Research scientists 5 30 Source: Indian Institute of Management Lucknow 2005. ATMAs have promoted diversification of farming systems and adoption of new technologies. In the ATMA districts, vegetable crop area increased on average by 5.5 percent. Approximately 15.6 percent farmers in these districts have adopted dairying and other livestock production enterprises to supplement their incomes. Other new activities adopted include bee- keeping; fisheries; and cultivation of medicinal and aromatic plants, exotic vegetables, and flowers (table 3.3). Farmers also adopted improved technologies demonstrated by the project. Table 3.3 Farmers adopting new enterprises and improved technologies in ATMA and non-ATMA districts (%) Enterprise/technology ATMA Non-ATMA districts districts Adoption of new enterprises/activities in the farming systems Dairying and animal husbandry 15.6 6.6 Vegetable production 15.1 9.6 Fruit production 2.5 0 Production of medicinal and aromatic plants 0.7 0 Fishery and duckery 3.5 0 Bee-keeping 6.7 0.7 Floriculture 1.1 0 Production of exotic vegetables 0.7 0 Adoption of new technologies by farmers Integrated pest and nutrient management 6.2 0 Balanced use of fertilizers 3.5 0.7 Sowing of crops in rows 2.0 0 Source: Indian Institute of Management Lucknow 2005. Productivity and farm incomes have increased. As a result of adopting new enterprises and improved technologies, farmers have achieved higher productivity levels of crops (table 3.4). From 2002­04, Households' income increased by 11.6 percent to Rs. 99,423 in ATMA districts, compared with an increase of 7.2 percent to Rs. 85,331 in non-ATMA districts. 44 Table 3.4 Farm Level Yields Of Different Crops In Atma And Non-Atma Districts (quintals/ha) Crop ATMA districts Non-ATMA districts Paddy 33.65 32.60 Wheat 32.10 27.09 Groundnut 9.99 9.00 Lentil 11.71 10.22 Gram 9.64 8.89 Moongbean 11.46 10.41 Source: Indian Institute of Management, Lucknow 2005 and K.M. Singh 2006. Note: Farm-level data were collected from randomly selected farmers in ATMA districts and in adjoining non-ATMA districts. ATMAs facilitated development of supply chains in a number of commodities. For the development of supply chains for medicinal and aromatic plants, ATMA Patna organized farmers into farmer interest groups, facilitated development of backward (to supply planting material and other inputs) and forward linkages (to procure produce) with the private sector, and provided/arranged training and other logistic support (Singh and others 2005). Following encouraging results in the district, ATMA Patna also promoted cultivation of medicinal and aromatic plants in adjoining districts. As a result, the number of farmers growing aromatic plants increased from 60 in 2000 to more than 1500 in 2005. They produced 38 MT of aromatic oils from 299 ha with the net income increasing from Rs. 8,500 to Rs. 25,375/ha Another 348 farmers produced 87 MT of medicinal plants from 46 ha with net income of Rs. 7,000 to Rs. 49,000/ha. Similarly, ATMA Madhubani mobilized farmer interest groups to cultivate Boro rice, introduced a new high yielding "Gautam" variety, and effectively used "exposure visits" to successful progressive farmers to disseminate improved cultivation practices. In three blocks of the district, the area under Boro rice increased from nil in 2000 to approximately 10,000 ha in 2004­05. These farmers have achieved productivity levels of up to 6 tons/ha (compared with 1 ton/ha earlier due to cultivation of photo-sensitive Agahani paddy). They formed a Boro Vikas Samiti (Farmer Federation) to expand the area under this crop in the district. The four ATMAs developed a portfolio of approximately 45 such success stories, which can be replicated on a larger scale. State-level institutes were not able to provide adequate support to ATMAs. The performance of the Inter-Departmental Working Group (IDWG) was weak. The IDWG, under the chairmanship of the Development Commissioner, was responsible for providing policy guidance and oversight to the ATMA program in Bihar. The IDWG also did not ensure the continuity of ATMA and BTT staff. IDWG established the Bihar State Agricultural Management and Extension Training Institute (SAMETI) very late, and the latter was never fully staffed. Thus, SAMETI was not able to provide appropriate capacity building, training, and mentoring support to the ATMAs. 45 D. Lessons and Emerging Issues The main reasons for the initial success of the ATMA program appear to be: · Participatory preparation of SREP by involving all stakeholders. · Operational flexibility to focus on micro level priorities and constraints identified by farming communities. · Adequate representation of farmers on the ATMA Governing Board and FAC, which helped in deciding extension priorities and monitoring of implementation progress. · Smooth and timely flow of sufficient funds directly from GOI to ATMAs. · Freedom and flexibility to ATMA PD to manage ATMA activities with no interference from state headquarters. · Sensitization, training, and capacity building support provided by the National Institute for Agricultural Extension Management (MANAGE), Hyderabad, in the institutional and operational innovations introduced under the new extension approach. · Phased development of ATMAs (one/year), building on the implementation experience from Phase I (Muzaffarpur) to Phase IV (Patna). · Concurrent monitoring and evaluation by an independent third party (IIML). This M&E which helped in the early identification of weaknesses and taking of remedial measures. Based on the success of ATMA pilots, the model is being scaled up to over 250 districts of the country through a GOI-funded, centrally sponsored scheme. In Bihar this scheme covers 11 new districts in addition to the 4 ATMAs set up under NATP. GOI is meeting 95 percent of the operational costs while GOB will provide the funds for ATMA staff salaries, civil works, and vehicles. Since the salaries of some of the State Agricultural Universities (SAUs) staff on deputation as Project Director (PD) ATMA are higher than the district heads of the Agriculture Department, GOB is not paying the salaries of the former. As a result, district heads are holding the additional charge of PD ATMA, which is adversely affecting the ATMA program. As indicated above, the training and capacity-building support provided by the SAMETI continues to be weak. Similarly, the state-level IDWG is not providing adequate policy support and oversight to the ATMA program. GOI has made some major changes to the ATMA model, while implementing this centrally sponsored scheme. These changes include an approximately 60 percent reduction in budget, coverage of only 10 percent of the blocks in a district, inadequate support to MANAGE for technical backstopping of ATMA program in the states, weak monitoring, and lack of an effective mechanism to ensure that the states meet their obligations under the scheme. Earmarked funds for district programs are provided for 14 specific activities. These tied funds curtail ATMAs' operational freedom to focus on micro-level priorities. The flow of funds from GOI to ATMAs also is not smooth. The four ATMAs set up under NATP are still at a formative stage and the 11 new ATMAS are yet to start any worthwhile activities. To mature as vibrant institutions, ATMAs require considerable support from GOB and GOI. To ensure the sustainability of the ATMA program in Bihar, six urgent actions are recommended for GOB: · Appoint full-time ATMA staff for a minimum term of three years and ensure that PDs and Deputy PDs represent different sectors such as crops, horticulture, livestock, and fisheries, as well as research and extension. · Provide adequate funding to rehabilitate civil works and to procure vehicles and need- based equipment for ATMAs and FAICs. 46 · Ensure smooth and timely flow of funds to ATMAs. · Provide operational flexibility and freedom to PDs in managing day-to-day ATMA activities. This requires sensitization and training of District Magistrates and state heads of line departments. · Sensitize IDWG so that it gives clear policy directions for convergence of line department programs at district and block levels, and provides oversight to the ATMA program. · Provide adequate funding and ensure that SAMETI is fully staffed, and proactively meets the training and capacity building needs of the ATMAs. Similarly, four actions are recommended to GOI for the success of ATMAs in Bihar and other states: · Transfer funds directly to ATMAs (as done under NATP) instead of channeling through a state agency. Provide flexibility in the use of funds to address micro-level priorities and opportunities, rather than following a prescriptive one-size-fits-all approach. · Enhance level of funding for district programs by approximately 150 percent so that the ATMAs are able to undertake an adequate number of appropriate activities. · Directorate of Extension, Ministry of Agriculture (MOA), GOI, and MANAGE should proactively engage with the state governments to ensure their commitment to the ATMA program, including re-energizing the IDWGs and SAMETIs, and organizing regular regional review workshops. · Develop performance indicators for monitoring implementation progress and impact; hire an independent third party for concurrent M&E and impact assessment; and implement a robust mechanism to address identified weaknesses. 47 Box 3.2 Development of supply chain for medicinal plants ATMA-Patna worked as the lead agency orchestrating and facilitating development activities that resulted in a supply chain being established for selected medicinal and aromatic plants (MAP), such as Vinca Rosa, in Patna. To identify marketable crops to be introduced, ATMA-Patna assessed local conditions using various Participatory Rural Appraisal (PRA) techniques. ATMA began by organizing producer groups at the village level to create the framework that could produce a substantial quantity of MAPs on a sustainable basis. The sustainability is essential to make it economically viable for a company to continuing sourcing the material from the same groups of farmers. To successfully produce MAPs in the district, ATMA-Patna had to identify crops for whose product there was a stable and growing market. All of the known companies working in the herbal and medicinal crops sector were contacted through e-mail, telephone, and personal meetings to identify their requirements for specific MAPs. Vinca Rosa, also known as periwinkle, was one such crop. It contains approximately 65 alkaloids, of which indol, robesin, and serpentine are most prominent. Vinca Rosa leaves contain alkaloids such as vincristine and vinblastine, which treat certain types of cancers. ATMA also investigated the technical feasibility of producing Vinca Rosa in the district by entering into discussion with potential buyers for this crop. Leaders of five newly established Farmers Interest Groups (FIGs) were invited for an open discussion with the Managing Director of a Buyer Company in the presence of the ATMA leadership. The FIG members were shown a draft agreement and asked for their input. All doubts of FIG leaders were addressed, and a contract was signed, with the ATMA director becoming the facilitator for both the FIGs and the Company. To augment capacity building among each FIG, an effort was made to select those farmers who were the most responsive to new cultivation techniques. Training these FIGs was carried out by a team of experts in medicinal plants cultivation. KVK became a key demonstration and training site for future groups of farmers. Farmers were trained in the technologies of producing and handling and the post-harvest processes of Vinca and other MAPs. Technical publications were prepared in the local language, and these extension materials were distributed among trainees to enhance learning. Newly organized FIGs also were sent on exposure visit to farms in other adjoining states such as M.P., Chhattisgarh. These visits had a very positive impact on the attitudes of these farm leaders about the potential of MAPs. Seed supply from reputable organizations was arranged by ATMA. The production of the first Vinca Rosa crops was carefully monitored by both ATMA and company representatives to ensure that no chemicals were applied at any stage of plant production or post-harvest processing. After harvest, the crop was shade-dried 4­5 days, sun dried, and then cut into small pieces and packed for shipping to the company's Patna office. Quality tests were then performed on the samples taken from each lot. The purchase price was US$40, or Rs. 2000 per quintal (qtl), which the company paid to the FIGs after obtaining satisfactory test results. Representatives from ATMA were present at each stage of this process to ensure that the terms of the contract were carefully adhered to by both the FIGs and the company Source: Singh and others 2006. 48 Participatory Irrigation Management A. Need for Reform During the 1990s, public expenditures on irrigation in Bihar declined significantly. From approximately the late-1980s, capital as well as revenue (current) expenditures on irrigation and flood control as a percentage of agriculture GSDP fell consistently for roughly a decade (figure 3.2). While the decline in capital spending was steeper and more noticeable,13 the reduction in revenue expenditures had a more immediate effect on the efficiency of existing surface irrigation systems. Figure 3.3 Expenditures on irrigation and flood control as percentage of agriculture GSDP, 6% 1995­2004 5% 4% 3% 2% 1% 0% Revenue Expenditures Capital Expenditures Source: Estimated using data from Reserve Bank of India (several issues); CSO, National Accounts Statistics. Inadequate attention to operations and maintenance (O&M) led to a serious decline in the efficiency of existing irrigation systems. Revenue expenditures have acquired a pejorative meaning of being nonproductive, but they perform critical developmental needs. As an example, O&M in irrigation prolongs existing assets' lives and maintains their productivity. Bihar's irrigation infrastructure suffered considerably from inadequate resources for O&M during the 1990s. This scarcity was a critical driving factor behind the institutional reforms that were initiated in the sector at that time. However, staff salaries and other establishment expenses of the Water Resources Department (WRD) were protected (figure 3.4)14, and low water charges (and collection rates) exacerbated the shortage in O&M resources. As a result, maintenance suffered, leading to loss of conveyance capacity of irrigation canals. As per data available from WRD, canal irrigated area in the state declined by 0.3 million ha between 1990 and 2001. 13Since the late-1990s, public investment in the sector has revived. The GoI Accelerated Irrigation Benefits Program has contributed to this revival. 14The information is for combined Bihar and Jharkhand untill 2000, and for Bihar alone, subsequently. 49 Figure 3.4 Expenditures and revenue of the Irrigation Department (1993-94 prices) 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: GOB WRD 93-94 Note: Expenditure and revenue figures have been deflated using the GSDP deflator. O&M Expenditure Es tablis hment Expenditure Revenue Co llected B. Experimenting with Reform: Participatory Irrigation Management Involvement of water users in the management of irrigation systems was seen as a way of sustainably addressing the O&M issue. Bihar was among the earliest states in India to experiment with transferring management of irrigation schemes to water user associations (WUAs).15 However, this remained a one-off experiment until a 1994 comprehensive review of the state's irrigation sector, by the Second Bihar Irrigation and Drainage Commission, embraced farmer involvement in the management of irrigation schemes to improve their performance and their financial self-sufficiency. This was in response to the rapidly worsening financial situation and deterioration of existing irrigation assets. The commission noted: "Farmers' participation in the management through better involvement, i.e., in operation, maintenance, assessment and collection of water rates, is essential not only for the betterment of farmers' economy. Rather, it is a must for the survival of the system as it would meet the aim of both the farmers and the managers." The commission also has recommended that WRD officials be trained "to work in cooperation with farmers." It is apparent from the commission's report and other GOB documents that many farmers and irrigation officials came to see irrigation management transfer as the only way to improve the situation in places such as the Sone Command Area, which was in dire need of major repairs and rehabilitation. Farmers felt that if they waited for the government to fix the system, it would never get done. Similarly, many officials felt that, under the existing financial circumstances, the state could not raise the resources needed for government agencies to take on the responsibility of repairing the systems. A 2005 WRD paper confirms that "...the existing irrigation system was breaking down and urgent remedial action was called for­­that 15 In the Bihar context, "irrigation management transfer" refers to transfer of management responsibilities (not ownership) of government-managed irrigation systems to groups of farmers, or WUAs. Policy-makers have come to consider transferring management as a way to reduce pressures on thinly stretched government finances while improving irrigated agricultural production and ensuring the long-term sustainability of irrigation systems (Geijer and others 1996, Klozen and Samad 1995, Vermillion 1991, Brewer and others 1999). Several countries have made major efforts in this direction. Clear and consistent evidence on the impact of management transfer is only now beginning to emerge. A review of assorted studies at the global level (Vermillion 1997) includes a mix of positive and negative results. However, most of the reviewed studies report positive results, particularly improvements in water distribution and finance. 50 the person having the maximum stake in the proper management of irrigation water, namely, the farmer, must have participation in the management of irrigation system."16 Legislation was enacted to enable farmers' involvement in irrigation management. Farmers' participation gradually became an acceptable and important feature of irrigation policy and culture in Bihar, particularly in the Sone and Gandak commands. The state showed great interest in the concept. The state enacted a series of progressive laws enabling farmers' participation in irrigation management, including the Bihar Irrigation Act, 1997, and the Bihar Irrigation Flood Management and Drainage Rules, 2003. The central government also played an important role through national programs such as the Command Area Development Program, with its emphasis on involvement of WUAs, which also influenced irrigation management transfer policies in Bihar. Participatory irrigation management expanded beyond Paliganj. Following the recommendations of the Second Bihar Irrigation and Drainage Commission and enactment of enabling legislation, the PIM approach was expanded to 11 more schemes in 2001, and in December 2005 another 20 schemes were transferred to WUAs. By February 2006, nearly 150,000 ha of irrigated command area had been transferred to WUAs. WRD has an ambitious plan of further expanding the PIM program to cover an estimated 800,000 ha by end-2007 and 1.6 million ha by 2012. Three aspects of the transfer approach followed in Bihar are noteworthy: 1. Scale of transfer. In Bihar, right from the inception, entire distributaries/subdistributaries were transferred to WUAs for O&M. Bihar's WUAs typically covered an area upwards of 1500 ha, and the O&M responsibility for this area was transferred to them.17 In other states, PIM efforts began by transferring O&M of minors­­typically encompassing a command area of 200 ha or less­­to a single WUA. The underlying strategy was that, over time, these WUAs would federate upwards to the distributary and project levels. 2. Collection of water charges. GOB empowered WUAs to collect water charges (at rates fixed by the government) and retain 70 percent of them for their own O&M. The remaining 30 percent was passed on to WRD for O&M of the main canal and headworks. In contrast, most other states continue to vest collection of water charges with government departments then share the revenues collected with WUAs. While exact sharing percentages vary by state, in no state is as much as 70 percent of the revenues shared with WUAs. 3. Rehabilitation. Unlike other states, Bihar transferred its schemes to WUAs without WRD having carried out any rehabilitation. This policy was recently changed whereby GOB has promised to carry out minimum rehabilitation in the future before transferring schemes to WUAs. C. Performance of Participatory Irrigation Management in Bihar In December 2005, in cooperation with the Water and Land Management Institute (WALMI) and the PIM Cell of WRD, Patna, a rapid survey of nine schemes in which irrigation management had been transferred to WUAs was carried out.18 For comparative purposes, performance in these schemes was compared with adjoining nontransferred schemes across a variety of parameters. The following is an assessment of performance based on this information. In presentation, Paliganj is treated separately because the PIM experience there is of much greater duration. The other eight schemes are ones in which management was transferred to WUAs only a few years ago. 16"Status Paper on Participatory Irrigation Management: Bihar Model" 2005. 17Within the distributary, village water user committees also were established. 18These were Paliganj; RPC-3; RPC-5; Manjhouli; Adampur; GC-3; GC-6; Raghupur; and Bahupar (all in Sone Command Area). 51 Paliganj WUA: Trend setter Paliganj Distributary originates from the Patna Canal­the main canal of the Eastern Sone System­and has a cultivable command area of approximately 11,000 ha covering 9000 farmers. In 1988 WALMI, the training branch of WRD, with support from USAID, took the lead in initiating an action research project in the Paliganj area of Sone Command Area. The system's infrastructure had considerably deteriorated. Upper-end farmers commonly breached the canal and blocked it with logs. There were pronounced social tensions arising from caste and land-tenure related issues. WRD officials avoided the command area because of attacks by angry farmers. The action research team, supported by USAID funding, spent the first six months initiating a dialogue with the farmers. The team's efforts culminated in what is described as a "landmark meeting" between the farmers and the team on March 17, 1989. The farmers agreed to the distribution of water along the canal. Even after the closure of the USAID-funded project, WALMI continued (although on a reduced scale) to strengthen the Paliganj WUA. The Memorandum of Understanding signed in 1989 with WRD contains four key provisions: (a) WRD will guarantee delivery of a fixed proportion of available flow in the Sone River to the head of the Paliganj Distributary; (b) GOL will transfer responsibility for O&M of the distributary and its subchannels to the Paliganj Distributary Farmers Committee (PDFC); (c) PDFC will collect irrigation fees on behalf of the government and will keep 70 percent of the fee to cover its costs of O&M, with the remaining 30 percent transferred to WRD to cover costs of O&M of the main system; and (d) WRD will guarantee to undertake major repairs of the distributary and its subdistributaries in case of an emergency. Completion of field channels created confidence in the new organization. Completion of field channels was possible with active support from the Sone CADA, which helped construct field channels in 17 villages and initiated construction in another 35 villages. When it became apparent that WRD could not rehabilitate the system due to lack of funds, the PDFC and the village committees mobilized resources to undertake various maintenance tasks, which improved water distribution along the distributary and the subdistributaries. PDFC was registered as a legal society in 1994. Rehabilitation done by farmers improved irrigation services. Following physical restoration of works by the water users, peak discharge has reached up to 90 percent of the designed water discharge of 180 cusecs, and the irrigated area increased from approximately 3800 ha in the mid-1990s to over 5000 ha in 2003 (table 3.5). The number of waterings also has increased with head reach plots obtaining water for irrigation 8­10 times and tail-enders also able to get it 5­6 times compared to 0­2 times in the mid­ 1990s. Owing to all of these efforts of WUA, land prices in tail-end areas have increased 2­3 times within the last decade. In recent years, concerns about sustainability have emerged in Paliganj. First, owing largely to financial and staff constraints, WALMI and WRD withdrew from their guiding role in technical and organizational aspects. Their absence reduced the accountability of the new set of Paliganj WUA office- holders. The new office-holders also complained of not receiving any training in irrigation management. 52 Table 3.5 Performance of Paliganj WUA Particulars Before Present (Pre-1995) (2005) 1.Water received in canal 130 cusec 165 cusec 2.Water received during July 20 days 30 days 3.Area irrigated 3845 ha 5059 ha* 4.Water received by tail-end land for irrigation from canal 0­2 times 5­6 times 5.Govt. expenditure on Irrigation and Revenue Depts. Rs. 8 lakh No expenditure 6.Value of tail end land per ha Rs.20­40,000 Rs. 50­120,000 7.Quality of seeds used for sowing Home seeds Hybrid seeds 8.Technology in practice Old New 9.Paddy yield (quintals/ha) 25 50 10.Wheat yield (quintals/ha) 10 30 11.WUA meeting Regularly Irregular 12.Members attending meeting Village level committees and a few members Few VLC 13.WALMI involvement Yes No 14.Involvement of technical experts Yes No Source: Raju 2006. Notes: Information is based on discussions with farmers and local engineers of WRD * = level achieved in 2003. The second main concern is the decline in water fee collection as a percentage of water fee demand. Water fee demand is assessed by the revenue wing of WRD based on its estimate of area irrigated­this estimate is typically disputed by the WUAs as an overestimate. Actual collections are much less than the assessed demand, and this gap has widened in recent years (figure 3.5).19 As per the MOU between the government and the WUA, GOB's share to maintain the main canal is 30 percent of the assessed demand (not 30 percent of actual collections). Since collections are much less than demand, the actual share paid to government varied between 50 percent­60 percent over 1999­2002 (per data available from the rapid survey). As a result, the WUA was left with inadequate resources to properly maintain the distributary. Taken together, the above factors jeopardize the future sustainability of the PIM arrangement in Paliganj. Figure 3.5 Paliganj WUA: Water fee demand and collection 1200 1000 800 600 400 200 0 Total Demand Actual Collection 19Apart from the assessed demand itself being an overestimate, as claimed by WUAs, not all WUA members are paying their just charges, which add to the widening gap. 53 Performance in the other WUAs In the eight schemes (other than Paliganj), performance across a number of parameters was compared with adjoining nontransferred schemes (figure 3.5). Three key observations are: 1. Improved water availability. In the absence of gauge records at water regulation points, it was not possible to compare actual discharge against designed discharge levels. However, visual observations and discussions with farmers indicated that, owing to improved maintenance in the post-WUA scenario, water flows have increased by 15 percent­25 percent compared to previous levels. In most cases, this has contributed to increased number of waterings. Significantly, water availability in tail-end areas also improved, thus benefiting 20 percent­30 percent of the total command. In contrast, in non-WUA areas, tail-end areas remain deprived owing to lack of proper maintenance. Indeed, in non-WUA areas, the big push to adopt the WUA approach is coming from the tail-end areas. 2. Increase in water fee collection and maintenance expenditures. A significantly larger percentage of farmers in PIM areas (35 percent­75 percent) paid water charges compared to non- PIM areas (20 percent­35 percent). Maintenance spending per ha also was more in PIM areas than in non-PIM areas, which remain dependent on the government for any maintenance. WUAs also were able to hire persons for water regulation and distribution and could pay their salaries from the water charges collected. 3. Gains from improved water supply also have resulted in enhanced crop productivity levels Improved water supply has raised crop yields. Yields of paddy and wheat are 10 percent­20 percent higher in WUA-managed schemes compared to adjoining non-WUA schemes. These evident benefits have spurred the willingness of farmers to pay for the services delivered by the WUA. 54 Figure 3.6 Comparison between WUA and adjoining Non-WUA20 areas A. Farmers paying the water fee (%) B. Maintenance and repair expenditures (Rs/ha of Canal Command Area) 0% 40% 80% (Rs./ha) 0 10 20 30 40 50 60 Badhupar Badhupar RPC-5 RPC-5 RPC-3 Adampur GC.3 RPC-3 Adampur GC.3 GC.6 GC.6 Manjhouli Manjhouli Raghunathpur Raghunathpur Adjoining Non-WUA WUA Adj. Non-WUA WUA C. Design discharge received (%) Kharif Season Rabi Season 0% 20% 40% 60% 80% 100% 120% 0% 20% 40% 60% 80% 100% 120% Badhupar Badhupar RPC-5 RPC-5 Adampur Adampur RPC-3 RPC-3 GC.3 GC.3 GC.6 GC.6 Manjhouli Manjhouli Raghunathpur Raghunathpur Adjoining Non-WUA WUA Adjoining Non-WUA WUA D. Paddy yields E. Wheat yields (Qtls/ha) (Qtls/ha) 0 20 40 60 80 0 10 20 30 Badhupar Bahupar RPC-5 RPC-5 RPC-3 RPC-3 Adampur Adampur GC.3 GC.3 GC.6 GC.6 Manjhouli Manjhouli Raghunathpur Raghunathpur Adj Non-WUA WUA Adj Non-WUA WUA Source: Raju 2006. 20 Note: The Non-WUA area adjoining RPC-3 is Maner, adjoining RPC-5 is Dhana, adjoining Manjhouli is Danapur, adjoining Adampur is Patna, adjoining GC.3 is Sonbarsa, adjoining GC.6 is Kharaghar, adjoining Raghunathpur is Parahuti and adjoining Badhupar is Khumbabad. 55 Views from recently formed WUAs. On December 5, 2005 the Water Resources Department transferred another 20 irrigation schemes to WUAs spread over the Sone and Gandak Command Areas. On December 17, 2005, these 20 new WUAs along with 5 older WUAs were invited to a 1-day orientation in WALMI, Patna. At the end of the day a discussion session was coordinated to understand participants' views. Their responses are summarized in table 3.6. Table 3.6 Responses from 25 WUAs Focus Summary of Farmers Responses 1. Who influenced formation of WALMI, Paliganj WUA WUA? 2. Benefits expected from WUAs a) Less control by WRD officials, b) use rights and control of all resources: canal lands, bunds, trees, water allocation and distribution 3. Help required from WRD a) System restoration before transfer, b) more and better communication between WRD and WUA, c) adequate and timely supplies in the transferred systems ensured, d) right to information ensured. 4.Criteria to assess WUA a) Monthly meetings and attendance, b) conflict resolution, c) water fee performance collection, d) area irrigated across crop seasons, e) extent of tail-end area irrigated, f) good understanding between village-level committee and distributary-level committee 5. Capacity building a) Very important. Needed to: b) create awareness of water use and required suitable cropping pattern and cultivation methods (such as SRI paddy), c) maintain and repair system, d) maintain and update all relevant records, e) facilitate provision of agricultural inputs and forward linkages, and f) form subject committees and monitor them. g) Visit well-functioning WUAs (in and outside the state) to learn lessons. 6. Changes expected after WUA a) Timeliness and adequacy of water supply, b) canal system maintenance, formed c) better control of resources, d) increased powers and responsibilities to control WUA affairs and system operation. 7. Long-term (decade) vision a) WUAs have full control of canal system, b) farmers get all benefits of irrigated agriculture, c) WUAs formulate 3-tiered, project-level federation to control water allocation and distribution, and provide forward and backward linkages to all farmers, d) improve water quality levels in some places, e) ensure the repayment of World Bank loan, if any, disbursed for PIM in Bihar, f) utilize all CADA funds and staff to implement on-farm development works in all state command areas, g) ensure WALMI conducts year-round PIM training programs, h) over time, ensure that all WUA executive committee members are trained in WALMI. D. Lessons and Emerging Issues In the 1980s, WRDs in India were skeptical of any form of transfer of responsibilities to WUAs. In a reversal, after varying degrees of experimentation during the 1990s, several states now favor transfer. The question now is not whether decentralized collective action in irrigation systems is necessary, but under what circumstances it can work most effectively and how state government agencies can facilitate the transfer. As are many other Indian states, Bihar is searching for effective options. After initial experimentation in Paliganj, in recent years, the government has issued several orders in Bihar to facilitate the transfer. Early results from the experimentation point to a number of gains, but concerns remain about sustainability, fee collection, and WUAs' overall capacity. The main gains include improved water availability resulting from WUAs taking the initiative to carry out long-needed repair and maintenance. Across the various divisions and 56 subdivisions of WRD, field staff have begun to realize that WUAs help them in four important ways: · WUAs have taken on the responsibilities of water distribution and conflict resolution, reducing the workload of thinly stretched WRD staff. · WUAs have reduced obstructions to canal flows and damage to canal systems by taking responsibility for maintenance and repairs. · Water fee collection has improved in areas in which WUAs have taken over O&M functions. These two obvious successes have galvanized WRD to support and promote more WUAs in the state. · GOB has experienced significant savings from not having to pay for revenue collection. Water fee collection is not all that smooth. The Government fixes water charges, and each year the revenue wing of WRD assesses water dues based on its estimates of area irrigated. This exercise determines the amount of money (30 percent of assessed demand) that the WUAs must share with the government. WRD's estimate invariably is disputed by the WUA as an overestimate. Actual collections are less than assessment because not all farmers pay what is demanded of them. Consequently, after paying the amount due to the government (30 percent of assessed demand, not of actual collections), the WUAs are left with less than the required resources to carry out their share of O&M. A sustainable solution to this problem must be found soon. Otherwise, the risk is that the WUA will soon tire of collecting money of which the government takes much more than 30 percent, resulting in the O&M of the system again being neglected. One way forward, as is being planned in Maharashtra, is for WRD to stop fixing water charges and percentages, but agree upfront with the WUA on the actual amounts needed to maintain the main canal and the headworks (per agreed technical norms). The WUA would pay these amounts to the government each year. WUAs then should be empowered to independently determine water charges depending on their O&M needs, with the government playing no role in this regard. WUAs suffer from weak capacity. The capacity building and hand-holding role that WALMI played for WUAs during the early years of PIM in Bihar gradually has dissipated. A vacuum has emerged in this regard that affects the newer WUAs in particular. They have not received adequate training to take on the myriad aspects of O&M: water management, technical upkeep of systems, fee collection, record-keeping, and conflict management. During interactions with the study team, most WUAs requested capacity building at various levels. It is crucial that WRD provide capacity building on a priority basis. Transferring O&M to nascent community institutions does not mean that these institutions can fend for themselves with no capacity building and no basic external monitoring and mid-course corrections in the initial years after transfer. Rural areas of Bihar are deprived of several support facilities that exist in other states of India. In certain cases, WUAs have stepped in to fill the breach, including procuring paddy on behalf of the public procurement system, and supplying agricultural inputs to members. This has become essential, as users asserted, owing to the absence of local support organizations that can effectively play these roles in Bihar. While this expansion of the WUA role is understandable, it should be recognized that trading activities require capital and commercial skills that in most cases are not available among executive committee members. In fact, practical difficulties of purchasing paddy directly from farmers (for example, storage and milling) have emerged in some cases. 57 Hence, to retain transparency and credibility, any expansion of the WUA role should be carefully thought out and debated by the entire user community. Any investments in commercial ventures that carry risks of losses are better financed from separate sources (additional member contributions or commercial borrowing), and their records should be maintained separately. Provisions should be made to protect the economically and socially vulnerable groups. Disaggregating based on land ownership alone often deprives a number of economically vulnerable groups from accessing the resource and reaping the benefits of improved irrigation management. Vulnerable groups include the landless, agricultural laborers, sharecoppers, and poor tenants. Moreover, social discrimination often implies that members from particular social groups often are under-represented on WUA committees and are marginalized in decision- making, distribution, and management of the resource. Transferring O&M to water users should carry with it the necessary checks and balances that provide for accountability, entitlement, transparency, and procedures to ensure the participation of vulnerable groups. Other lessons emerging from Bihar include that: · WRD should carry out minimum rehabilitation of the system in partnership with WUAs prior to the actual transfer of O&M. Bihar took the decision to do so early in 2006. · Most WUAs complain that landholding records and maps of the actual designed areas of their command (supposed to be provided by WRD at the time of transfer) are not made available to them. Their lack obviously affects WUAs ability to function effectively. Improved cooperation in managing field issues is needed between WRD's field staff and WUAs. Lack of adequate WRD staff at the field level also needs to be addressed. · Establish a grievance cell for the WUAs and a mechanism to quickly resolve disputes. · Bihar also can learn from the experience of other states in PIM. Many of these lessons, learned over the years, are now being practiced. These include: From Andhra Pradesh 1. Permanency of WUAs. Amendments have been made to make the WUA a permanent body. Initially, one-third of the committee members of the WUA would retire at the end of two years. An additional one-third would retire after 4 years, and the remainder would retire after 6 years. Vacancies are filled regularly and each member serves a term of six years. 2. Tail-end representation. The position of vice president is provided for. Committee members elect the president and vice president. The persons in positions will have two- year terms. The WUA command area is divided broadly into upper and lower halves. If the president is from the upper half, then the vice president will be from the lower half, and vice versa. 3. Co-opting PRI representatives. In 2002 the government of Andhra Pradesh issued an ordinance that co-opts office-holders in Panchayat Raj bodies into the managing committees of WUAs with no voting rights. From Maharashtra 1. President's post is rotated among the managing committee members who represent head, middle, and tail reaches. 2. Delineation of areas at all levels, that is, WUA, Distributary Committee, and Project Committee, shall be notified by canal officers. In other states, the district collector makes 58 this decision. From Madhya Pradesh 1. The project committee shall have two nominated members, one each from Water Resources and Agriculture Departments, and they will not have any voting rights. One of them will coordinate with all related departments. 2. To increase women's participation, the wives (without land titles) of the landholders are considered as members of WUA. However, where both husband and wife are the landholders, only the wife is considered a landholder under the Act. 3. The constitution of WUA subcommittees is compulsory for following aspects: (i) water distribution; (ii) system rehabilitation; (iii) canal disputes and resolution; (iv) resources, budget, and social security; (v) irrigation water charges collection; and (vi) women's participation. From Gujarat 1. Canals must be rehabilitated prior to transfer. WUAs will contribute 10 percent. 2. General order for such work must be offered first to WUAs, then to NGOs, and, if both decline, then it is carried out by WRD. 3. When the work is entrusted to WUA, one-third of the estimated cost paid by WRD in advance. 4. WRD has issued instructions to simplify the procedure for purchase of material and quality control when works are entrusted to WUAs. 5. WRD may transfer a canal before rehabilitation to willing WUAs after signing an MOU, whichshall include jointly agreed estimates for rehabilitation work to be done by WRD and the physical and financial targets to complete the work. 59 4. BUILDING COMMODITY SUPPLY CHAINS In this section, the authors used several criteria to select a number of agricultural commodity subsectors for a more detailed analysis. The first criterion was to capture representatives of both crops and livestock. The second was to represent different economic agents involved in agricultural activities: private-sector-driven, cooperative, or other organizational arrangements, including elements of public-private partnerships. The objective is to analyze the commodities that have shown (a) potential for growth and employment generation, (b) opportunity for economies of scale and supply chain development (including, processing, and exports), and (c) scope for rural poverty reduction and inclusion of the different social groups, despite the much-discussed unfavorable environment in Bihar. By understanding how the selected subsectors operate, light would be shed on the enabling factors contributing to their success and the constraints that impede this further development. Lessons drawn could then be applied to other subsectors of the agricultural economy in Bihar. The authors chose the following commodities: maize, dairy (specifically milk), and selected fruits and vegetables crops (litchi, mango, and potato). The choice of commodities should not suggest that these are the only promising subsectors for agricultural development in Bihar and that other commodities are to be ignored. However, because these commodities satisfy some or all of the criteria listed above, they present interesting cases to study. The analysis is based primarily on a combination of primary and secondary sources, with a short complementary survey. A. Maize Maize is the third most important cereal crop grown in India. It follows rice and wheat. In 2003 cropped area under maize in India reached 7.3 million ha for a total production of 15 million tons. Although significant, India's maize production is still far below the major maize- producing countries around the world, such as the United States, which has an annual production of more than 250 million tons, and China, with 120 million tons. Nonetheless, maize production jumped by 50 percent between 1993 and 2003, and maize area increased by 23 percent over the same period. In 2003 Bihar contributed to nearly 10 percent of national production, putting the state in third place in maize production. During the last decade, maize production increased substantially at the rate of 6.8 percent per annum, driven by both increase in area and productivity. During the TE 2003, maize productivity in Bihar ranked fourth among Indian states, and Bihar's highest yields are comparable to those in the most productive grain-producing states. Today maize takes up to 7 percent of the total sown area in Bihar and contributes 4 percent of the total value of agricultural crop production. 60 Maize is grown in almost all the districts of Bihar. The leading district is Begusarai in the North East zone, in which 50 percent of cropped area is devoted to maize. Begusarai alone accounts for 10 percent of Bihar's total maize area. Other important districts include Samastipur in the North Western zone with 28 percent of its cropped area covered by maize and Bhagalpur in the South with 16 percent. Table 4.1 Maize crop performance across selected states in India Annual growth rate 1993­2003 State Yield Area Production Yield (kg/ha) (%) (%) (%) (TE 2003) Andhra Pradesh 3074 6.8 9.2 2.2 Karnataka 2588 7.7 4.2 -3.2 Punjab 2518 -1.7 1.5 3.3 Bihar 2422 3.0 6.8 3.5 West Bengal 2365 -3.9 -6.1 -2.3 Haryana 2210 -6.8 -2.5 4.7 India 1833 1.5 3.5 2.0 Madhya Pradesh 1728 1.6 5.2 3.5 Maharashtra 1576 5.8 7.1 1.2 Gujarat 1485 2.2 5.7 3.4 Uttar Pradesh 1450 -2.1 -2.2 -0.1 Jharkhand 1444 1.4 -- 1.9 Rajasthan 1129 1.1 4.9 3.7 Orissa 1052 -1.3 1.2 2.5 Source: CMIE database. Two major factors contributed to maize expansion in Bihar: irrigation and the use of improved hybrid seed varieties. First, with rich water resources and available irrigation in the winter and summer season, irrigated area under maize increased and so did the yields. Today maize is grown throughout the year in Bihar, and increasingly in rotation with wheat and potato. Winter maize dominates total maize production in the state with a 42 percent share. Kharif maize amounts to 32 percent, and summer maize contributes to the remaining 26 percent. Selected districts' maize yields for a number of states in rainy and winter seasons are presented in table 4.2. It appears that Bihar has made use of the potential of hybrid cultivars more than other states. 61 Table 4.2 Yield: Different types of maize cultivars in selected states of India, 2001 (t/ha) Rainy season Winter season State District Irrigated Local Hybrid Local Hybrid area/GCA (%) Bihar Munger 40.5 1.5 5 2 6 Siwan 51.8 1.6 5.5 2.2 6.5 Begusarai 48.8 2 6.5 3 7.5 MP Chindwara 14 1.2 2.5 1.4 3 Mandsaur 24.2 1.5 3 1.7 3.2 Jhabua 13.3 1 2 1.2 2.5 Uttar Behdraich 19.9 1.8 3.6 2 4.5 Pradesh Hardoi 60.4 1.4 2.5 1.6 3.5 Bulandshar 95.8 1.57 3 -- -- Rajasthan Banswara 24.2 1.4 2.8 -- -- Bhilwara 41.5 0.9 1.6 -- -- Udaipur 33.3 1.2 2 -- -- Source: Joshi and others 2005. Improved hybrid maize seed varieties were made accessible to farmers by the active presence of maize private seed companies in India in general, and in Bihar particularly. This availability was triggered following major seed policy reform (1988) that facilitated private sector participation in the maize seed industry. Today a large number of hybrid maize seed distributors operate in Bihar. They represent multinational companies, most of which are based in Andhra Pradesh. The uptake of improved hybrid maize seeds during the winter season is much higher than that in the Kharif season, thus contributing to much higher maize yields in the winter season. Figure 4.1 Area under different maize cultivar during the rainy season (panel 1) and the winter season (panel 2) (%) 100 100 4 10 2 90 90 6 18 80 47 45 80 70 63 70 58 47 % 60 82 % 60 in in 50 ae 50 100 100 90 40 23 40 80 Ar 30 earA 30 30 29 20 32 20 43 32 10 11 23 10 13 0 7 5 0 Rajasthan MP UP Bihar AP Karantaka Rajasthan MP UP Bihar Hybrid Composite local Hybrid Composite local Source: Joshi and others 2005. 62 Favorable price realization also has contributed to the expansion of maize production in Bihar. Real maize prices have increased by 1.3 percent per annum during the last 10 years. This pattern applied throughout India during the 1990s, but was pronounced in Bihar, as well as Karnataka. The price increase was driven in part by the surging feed demand from the livestock sector, which grew at a faster rate than feed production. Maize farm harvest prices have slowly rebounded following the dip in 2000­01. Table 4.3 Trends in real maize producer prices in selected Indian states, 1990-2003 Andhra Madhya Uttar West All Bihar Pradesh Pradesh Pradesh Orissa Bengal Karnataka India 1993­2003 1.3 0.1 0.1 -0.9 -0.2 -0.7 2.3 -0.4 Source: CMIE data 2005. At the wholesale level, Bihar's maize prices are similar to those of other major states in the Kharif season, but Bihar prices are relatively high in the winter season. Figure 4.2 demonstrates these relations (1.00 indicates price parity between states: ratios > 1.00 indicates higher price in Bihar). During the Kharif season, maize wholesale prices compare similarly to those in other maize-producing states. However, given that Bihar is one of few states in which winter maize production is dominant, interstate price variability is higher for winter maize. Wholesale maize prices in Bihar are 17 percent­26 percent higher than those of other competing states. Figure 4.2 Difference in maize prices between Bihar and selected Indian states 1.4 1.26 1.26 oitaR 1.17 1.18 1.19 1.2 1.09 0.98 0.99 0.99 1.00 1.0 ceirP 0.8 e 0.6 esalloh 0.4 0.2 W 0.0 Andhra Karanataka Rajasthan Madhya Uttar Pradesh Pradesh Pradesh September Prices (03-04) April Prices (03-04) Source: CMIE data 2005. However, intramonthly price variability is lower in Bihar than in other states. This stability likely is due to the year-round availability of maize. Table 4.4 shows maize price movement in one district each of Bihar, Andhra Pradesh, and Maharashtra. The Bihar district-level prices are the least volatile of the three. Price stability is one of the factors sought after by processing plants. However, most existing plants in Bihar are small and serve only their local markets for meals and animal feed. There are no starch-manufacturing units in the state. Table 4.4 Price Movement of maize price in three Indian districts, 2003 (%) Districts State < 2 2-5 >5 Nizamabad Andhra Pradesh 73 18 9 Sangli Maharashtra 58 28 14 Khagaria Bihar 89 6 5 Source: www.mcxindia.com 63 Cost of cultivation Higher yields and favorable prices compensate for higher production cost/ha, so that Bihar's cost/unit of crop is competitive. The higher production cost is due primarily to irrigation costs and additional fertilizer use, especially in the winter season. Irrigation costs are of the order of 750 Rs/ha in Bihar compared to 95 Rs/ha in Andhra Pradesh, 156 Rs/ha in Uttar Pradesh, and 172 Rs/ha in Karnataka. Similarly, maize farmers in Bihar pay, on average, 2193 Rs/ha for fertilizers and manure. Their counterparts in AP and UP pay 1776 Rs/ha and 824 Rs/ha, respectively (Commission for Agricultural Costs and Prices,2002). Table 4.5 Cost of cultivationfor maize in selected states, 2000­01 2000-01 Rajasthan Bihar Karnataka Andhra HP MP UP Pradesh Cost of cultivation* 10267 9952 8701 8193 6426 4032 8069 Rs /ha Cost of cultivation 456 359 436 353 380 596 223 Rs/Qtl Yields Qtl/ha 10 25 35 21 13 7 16 Source: Reports for the Commission for Agricultural Costs and Prices 2002. Note: * = Cost of cultivation includes production costs and imputed family labor. Demand The demand for maize in Bihar is divided mainly between human consumption and animal feed. Other minor uses, such as starch production, tend to take place outside the state. Nearly 50 percent of total demand is for home consumption. Maize is used to make gruels and in breads. Cereals and maize still constitute major commodities in the consumption basket of most Biharis, particularly the poorer. Maize is a key ingredient of poultry and livestock feeds. The rapidly increasing poultry industry in India is enabling Bihar to capitalize on its advantage in maize production. In the last 10 years, production of chicken meat in India increased at an annual rate of 14 percent, and egg production increased by 6 percent. The country's requirement for poultry feed is increasing at over 10 percent per annum, and this trend also is happening in Bihar also. The poultry and cattle feed market constitute 35 percent of the demand for maize in Bihar, despite there being very little poultry production in the state. With the populations' increasing disposable income, it is expected that consumption will shift from grains toward livestock products. This change will create higher demand for maize for feed mills and less for direct human consumption. Bihar increasingly is becoming internationally competitive in maize production. Prior to the 1990s, domestic producers' prices were higher than import parity, but this situation has reversed since that time, suggesting that Bihar maize production increasingly is competitive with imports. In fact, very little maize is imported into India.21 Average nominal protection coefficients (NPCs) have declined from approximately 1.2 during the 1980s, to 0.8 from 1990­2004.22 Average annual producers prices in Bihar have approached export parity prices in recent years (figure 4.3). India is a net exporter of maize, and exports have increased exponentially in the last 10 years at a 21This also could be due to high tariff rates. 22A truer measure of competitiveness would be comparison of domestic resources costs (DRCs), rather than just nominal protection coefficients (NPCs), which is what the ratio of domestic to international price, gives us. However, correctly measuring DRCs is a substantive exercise requiring data that are not easily available and is beyond the scope of this study. 64 rate of 50 percent per annum to reach 7.6 percent of national production in 2004. Maize is exported in three different forms: meal, starch, and pure commodity. It is not clear how much of Bihar's maize is exported, but quality considerations and interseasonal price variations are likely to play key roles. Figure 4.3 Maize export parity, import parity, and producers' prices, 1980­2005 800 700 600 ltQ/ 500 400 Rs300 200 100 0 1980 1985 1990 1995 2000 2005 Import parity Domestic Price Export Parity Source: World Bank databases. Linking farmers to markets is the key to improve the efficiency of the maize supply chain and to improve the producer's share of the consumer's rupee. There are at least two channels for maize in Bihar, one each for human consumption and processing into animal feed. Since maize is produced throughout all districts, there is little movement of the grain within the state. However, maize from Bihar is often taken out of state. Notably for a cereal crop, just 15 percent of maize production is sold in the mandis. Brokers/traders play an essential role in marketing the grains. The two supply chains are as follows; · Channel I. Maize consumed as a cereal: Farmers-brokers-mandi-wholesaler- retailer-consumer · Channel II. Maize processed into poultry feed: Farmers-brokers-mandi-poultry feed processor-retailer-poultry farmer. Value-chain analysis of the two channels shows that the farmer's share of the total margins is much higher for the maize used as a cereal commodity (channel I) than for the processed maize (channel II).23 The farmer's share of total margins is 48 percent under channel I, compared to 18 percent under channel II). Processing cost takes up the larger share of total margins under channel II. The broker's and the wholesaler's (processor) shares follow the same pattern declining in relative terms under the processed maize supply channel. The retailer's share of total margins is higher in channel II, in which maize is processed and sold as poultry feed. Finally, transportation costs are significant amounting to 6 percent of total margins under channel I. Increased attention to quality and higher margins to traders were major issues identified by farmers. All farmers agreed that, over the last five years, quality had become more important as a criterion for pricing. Over 95 percent of the farmers interviewed agreed that margins for traders had increased, advances to them were being made by buyers more often, and unbiased market information was more available today than five years ago. They all stated that training and extension had not helped them in any significant way, and they all noted their inability to get 23"Total margin" is defined as final consumer price minus cost of production at the farm level. 65 quality seeds and fertilizers as well as accessing power and water. They all also mentioned the need for a fair and transparent pricing system to get them the best price. Figure 4.4 Estimated margins along the maize value chain in Bihar (%) Source: IASL field work, 2006. Brokers claimed that they added value through cleaning and repacking the corn as well as through transporting it to the mandis. Additional issues that brokers raised were that roads were poor and transportation options limited; that with increasing corn production, more and more brokers were entering the market; and that better flood control, water supplies, and power supply would substantially improve the crop. They all disagreed that margins were increasing for traders or that they were getting advances from their buyers. Wholesalers and retailers, too, complained of increasing competition and diminishing returns. Millers raised the issue of poor power supply and its negative impact on manufacturing as well as the short supply of corn, necessitating a network of brokers throughout the state to ensure quality and quantity of supply. Millers also pointed out the difficulty of accessing bank credit. Bihar has some comparative advantage in maize production. In recent years both production and productivity have increased, driven by the increased availability of improved seed varieties and irrigation, which enabled winter and summer cultivation. The commodity sector still suffers from a number of constraints, primarily the complete absence of training, extension, and technology transfer. The presence of the private sector is visible in areas that have adopted improved seed varieties. However, farmers are not getting sufficient training in other improved maize technologies, such as herbicides, pesticides, or post-harvest management practices. The market for maize is very thin, with much of the production being sold in local villages and consumed at home. Traders play an essential role in moving the grain to additional markets, 66 albeit with increased transportation costs and higher margins. A collective effort to market could give farmers a higher bargaining power, improve market access, and minimize transportation costs. Direct contracts for feed supply, for example, may be a means to maintain farm-based comparative advantage. B. Dairy Sector Dairying is an important enterprise in Bihar. It provides supplementary income, employment, and nutrition to thousands of small rural households. Total milk production in Bihar reached 3.2 million tons in 2003­04. This amount represented 3.6 percent of total national production, estimated at 88 million tons. In the same year, Uttar Pradesh was the largest milk- producing state in the country with approximately 15 percent of total production, followed by Punjab (9.5 percent), Rajasthan (9.2 percent), Andhra Pradesh (7.5 percent), Maharashtra (7.2 percent), and Gujarat (7.1 percent). Milk is the most important livestock product in Bihar, representing 50 percent of total value of livestock's output. Between 1993 and 2003, the value of milk production grew at 2.6 percent per annum, to reach US$850,000. More than three-quarters of rural households with milch animals have an average land holding of less than 1 ha. After a major decline following the state's bifurcation, milk production has grown at 5.5 percent per annum, albeit from a low base. Interestingly, production trend data indicate that the fastest growing milk-producing states in the last 5 years have been Orissa, in which milk production has grown at 8.7 percent p.a., followed by AP (7.5 percent), Gujarat (5.9 percent), and Bihar (5.5 percent). States like Kerala and Karnataka have experienced milk production declines of 7.3 percent and 5.2 percent p.a., respectively. Aggregate Indian production grew at 2.6 percent during the same period.24 Despite the increase in production, per capita milk availability in Bihar remains among the lowest in India. In 2003­04, the per capita availability was a meager 100 g/day compared to 898 in Punjab and 643 in Haryana. The Nutritional Advisory Committee of the Indian Council of Medical Research recommends a minimum level of 220 g/day. The world average is at 285 (Sharma 2003). 24Growth rates were calculated for 5 years (2000­05), a relatively short period to judge a turnaround in milk production in Bihar. 67 Figure 4.5 Milk production and per capita availability in selected states in India, 2003­04 16 900 14 750 12 600 y T 10 da/s MM 8 450 6 gm 300 4 2 150 0 0 PJ HY RJ GJ UP AP MP TN KN KR MH WB BH OR Production Per Capita Source: www.indiastat.com 2003. Bihar's animal productivity ranks very low compared to other states in India.25 In 1998­99 average yields for a cross-bred cow, an indigenous cow, and a buffalo in Bihar were 4.9 kg/day, 1.6 kg/day, and 3.4 kg/day, respectively. These yields compare very poorly to the better milk- producing states such as Gujarat and Punjab. Even when judged against neighboring states in the generally less productive eastern zone of India, Bihar's animal productivity levels exceed only Orissa's. Yields in West Bengal and UP were much higher. The problem is accentuated by the small share of milk produced by cross-bred cows (less than 5 percent) compared to indigenous cattle (27 percent), buffaloes (57 percent), and goats (11 percent). Table 4.6Average animal productivity in kg/day in selected Indian states, (1998-99) State Cross- bred Indigenous Buffaloes cattle cattle Punjab 8.7 2.8 6.3 Gujarat 8.1 3.0 4.0 West Bengal 7.2 2.1 5.7 Uttar Pradesh 6.1 2.1 3.9 Bihar 4.9 1.6 3.4 Orissa 3.9 0.5 1.8 All India 6.5 1.9 3.9 Source: www.indiastat.com Consumer demand for dairy products has been steadily increasing. According to household consumption data, rural poor households spend 3 percent of their per capita monthly food expenditures on milk alone. The share jumps to 11 percent for the upper rural quintile. Similarly, 25It must be noted that low cattle productivity is a common problem across India. Despite the large cattle population in the country, average productivity is among the lowest in the world. According to FAO, the average yield of cows in India in 2004 was 800 kg/year, compared to a world average of 3100 kg/year. The US level was 8400 kg/year. 68 urban poor households in Bihar spend 41 percent of their per capita monthly food expenditures on milk, compared to 51 percent for the urban rich. Estimates of income elasticity of milk demand among rural households yielded a value of 2.4, vs. 1.2 for urban households, and an overall value of 1.85 for all households. These elasticities indicate a strong demand for milk as incomes continue to rise. It also indicates that demand by rural households will greatly influence the future marketing of milk. Dairy development in Bihar began in earnest after the state cooperative milk producer's federation­­COMPFED­­came into existence in 1983. COMPFED was the implementing agency of Operation Flood in Bihar (following the Anand model) and is the apex organization for dairy cooperative societies and unions. COMPFED is the largest player in dairy business in the state and has developed an integrated supply chain for liquid milk and other dairy products. COMPFED's achievements include outreach; increasing milk production and procurement; product and market leadership; provision of support services; increased income for producers; and social, economic, and political empowerment of its members. COMPFED has fared comparatively well alongside other state cooperatives, particularly those in the eastern states. More than 5000 district cooperative societies (DCSs) have been formed in Bihar with a total membership exceeding 250,000 farmers­­more than any other cooperative in India­­although the average number of farmers per society is smaller in Bihar than in West Bengal and Orissa. The social and gender decomposition of the DCS suggests that COMPFED has been able to reach the poorest sections of the population, although it is not clear to what extent they have been involved in the executive responsibilities in the cooperative. Nearly 15 percent of COMPFED's members are women, 9.5 percent of members are from the scheduled castes/scheduled tribes group (SCs/STs), and 47 percent belong to other backward classes (OBC). Milk procurement by COMPFED's cooperative unions has more than quadrupled from a low 114,000 kg/day (TKPD) in 1994­95 to more than 480 thousand kilograms per day in 2004­05. This growth surge puts the Bihar milk producers' federation among the top 10 in the country in quantity of milk procured. By comparison, Gujarat's milk producers' federation, which ranks first in the country, procured 5857 TKPD in 2004­05. Nonetheless, COMPFED surpassed other milk cooperatives in Haryana, MP, and the rest of the eastern states. However, because of low animal productivity and other problems such as floods in some of the milk-producing areas, Bihar's average daily milk procured per society is approximately 96 kg/day, which is only slightly higher than low-producing Orissa (86 kg/day) and much lower than West Bengal's estimates 138 kg/day. However, according to COMPFED estimates, its average daily procurement per functional DCS has increased by nearly 8 percent per annum over the last 7­8 years to reach 148 kg/day in 2004­05. 69 Table 4.7 Dairy cooperatives in Eastern India, 2004­05 State # of District # Farm Average Total Milk Average Milk Liquid Cooperative Members # procurement procurement per marketing Societies (000) Farmers (000 Kg/day) society (Kg/day) (000 per liters/day) society Bihar 5023 254 51 482 96 293 West Bengal 2367 184 78 326 138 33 Kolkata ­ ­ ­ ­ ­ 759 Orissa 1896 130 69 164 86 151 Sikkim 194 7 36 7 36 7 Tripura 84 4 48 3 36 9 Jharkhand 80 2 25 6 75 173 Nagaland 76 3 39 3 39 4 Assam 66 3 45 4 61 7 Source: NDDB's website and authors' calculations. Only 15 percent of the milk surplus in the state is procured by COMPFED. This translates into 8 percent­9 percent of Bihar total milk production, 45 percent of which is bound for home consumption. Procured milk is weighted and tested for fat content and adulteration. Pricing is based on one composite sample per society, which sets the price for that society. This is different from other collection systems in India, particularly in Gujarat. There, a sample is taken from every producer's milk can, tested for fat content, and priced accordingly. This practice is seen by some farmers as less remunerative for higher fat contents and has prompted some farmers to remove some of the fat from the milk and sell it separately to brokers and/or directly to consumers. Procurement prices offered by COMPFED generally are lower than those of its competitors (brokers, distributors, restaurants, or hotels). Survey data indicate that COMPFED procures buffalo milk with 6 percent fat at Rs 11/liter, and cows milk with 4 percent fat at Rs 9.9/liter. If they sold directly to brokers and or private households, producers typically would get Rs/liter 12­ Rs/liter 15.5. However, at least three factors help offset this price discount. First, COMPFED operates year round, in both flush and lean seasons. Thus, pricing is certain and maintained, and marketing risks are eliminated for the milk producers. This consistency has significantly benefited the farmers and thus increased membership. Second, the integrated structure of the federation provides for holistic solutions for the members including animal health and artificial insemination (AI), fodder and feed supply, and extension and veterinary services. The corporation provides inputs and services to the societies in the form of AI services, vaccines, and in some instances, cattle feed. There are three cattle feed plants that produce 200 MT of feed per day. Third, COMPFED has emphasized strict professionalism and market orientation, and gaining members trust and confidence. Priority has been placed on sustaining the financial incentives of members with timely and regular payments to producers. COMPFED runs 11 dairy processing plants operating at near full capacity. Many of the plants are 20­30 years old and in need of improvement and equipment upgrading. The oldest dairy plant was built in 1974, and the most recent one in 1989. Current processing activity is estimated at 720,000 liters per day, against a capacity of 760,000 liters per day, with COMPFED procuring milk from traders outside the cooperative system as well. The equipment in the dairy plants is relatively old and in need of renovation. COMPFED pays the DCS on the basis of 70 weight in kg. Each 100 liters corresponds to 130 kg of milk. The difference is used toward the operation and maintenance cost of the society and the procurement of cattle feed and fodder seed. COMPFED's liquid milk and other dairy products are marketed across the states of Bihar, Jharkhand, and West Bengal. In 2004­05, the average daily liquid milk marketed reached 467,000 liters per day, giving COMPFED a market share of 30 percent­40 percent of liquid milk in Bihar. Liquid milk typically is packaged as 200 ml, 500 ml, and 1 liter. Retail prices for milk range between Rs/liter 11 for skim milk (1.5 percent fat) to Rs. /liter 18 for full cream milk. Approximately 10 percent of the milk procured is processed into more than 16 dairy products and marketed under the brand, Sudha. Main products include lassi, ghee, and local confectionaries. More than 75 percent of the ghee marketed in Bihar is made by Sudha. Analyses have shown that that net margins in ethnic dairy products could be as high as 30 percent for lassi and 35 percent for kheer. However because of their short shelf lives, these products have not been commercialized on large scale. Recently, COMPFED has diversified. It is packing honey and selling it in Patna under the Sudha brand. Lack of quality control for raw milk and processed products remains a limiting factor in improving overall productivity and accessing new markets. COMPFED's milk processing plants are mostly International Organization of Standardization (ISO) and Hazard Analysis and Critical Control Point (HACCP) certified. However, the low quality control and monitoring of raw milk and processed products for bacteriological quality, risk of contamination from old equipment, and risk of spoilage due to long hours of transportation are persistent problems. The socioeconomic impacts of COMPFED on its member farm HH have been positive. Field studies have shown that, on average, cooperative member households have been better off than nonmember households (Prasad and others 2000). First, it is estimated that there is 7.6 percent higher number of milch animals on member households than that of nonmember households. Second, member households market nearly 15 percent more milk than nonmember households. Finally, the annual net dairy income per household was comparatively higher than that of nonmember households, providing member households with additional income to allocate toward other operational and consumption expenses, or savings. Poor infrastructure in Bihar has limited COMPFED's market penetration. Only 29 of the 38 districts in the state are covered by COMPFED and different milk unions. The federation is estimated to collect approximately 10 percent of the milk produced in the state. However, the off- take of liquid milk is less than 3 percent of the liquid milk sold in the state. Transport and spoilage logistics are two causes of these problems. With only five cooling centers at its disposal, COMPFED can handle limited amounts of milk in remote or new areas. Private vendors and processors are known to use toxic chemicals (urea, formaldehyde) to stop milk spoiling during transport or storage. Although large, COMPFED membership also is variable. A collection center interviewed during the study reported that its membership fluctuated between 60 and 120 members depending on the season. A member is expected to sell his/her entire production to the federation (except what s/he retains for own consumption). However, opportunities such as separate sales of fat and fluid milk to vendors offer attractive options beyond COMPFED. Bihar's dairy industry has followed a well-established organizational model to produce a product for which local demand continues to grow. Using a proven organizational model is a very strong basis for success and one that overcomes most of Bihar's apparent shortcomings as a 71 commercial agroindustrial center. Nonetheless, for this important agro-industry to grow, five key issues must be addressed: 1. Increase milk supply by improving animal productivity. Possible action would address how to best enhance the genetic potential of the largely indigenous breeds of cattle in Bihar through appropriate selection programs and/or cross breeding. Improving the quantity and quality of feed and fodder also is essential. It should be coupled with an effective extension system on animal husbandry management and improved access to veterinary services. 2. Increase milk supply by deepening market penetration, improving the infrastructure, increasing investment, and developing the necessary linkages. There is potential to expand both the area of milk catchments as well as the number of suppliers within the existing catchments' area. However, for expansion to happen, infrastructure must be improved and investment in maintaining and renovating old facilities and building new ones must increase. Other interventions should focus on building backward linkages between the milk cooperatives, other dairy companies, and milk producers; and on mobilizing producers into organizations to facilitate the linkages and minimize transaction costs. 3. Improve the quality of milk produced and processed, which requires a number of actions. First and foremost, improving infrastructure to reduce distances traveled by milk would decrease spoilage. Second, raise farmers' awareness about the importance of good quality milk through extension and communication campaigns. Ideally, these campaigns would be coupled with price incentives for those who produce high quality milk. 4. A rationalization of COMPFED's transport, cooling, and processing capacity is needed in combination with investment in new equipment. The number of milk collection centers that are equipped with cooling and storage facilities and quality testing equipment must be increased. Increasing the numbers would reduce spoilage and allow for testing on site, while separating the good quality milk from the lower quality grades. Second, reduce the risk of contamination at the processing plants by following strict hygiene standards and replacing outdated equipment. Finally, enhance the shelf life of milk products through investing in better packaging technologies, or engaging the research community and the private sector in joint research and development activity to do the same. 5. COMPFED and its cooperative unions must develop a strategic stance against the influx of processed products (and possibly fluid milk) from outside the state. As leading dairy states (particularly Gujarat) develop and market their surpluses, Bihar's poorly developed products and marketing linkages are coming under threat. The dairy cooperative model has real application in Bihar. However, the future growth of the dairy industry faces infrastructural and organizational barriers. To overcome them, an investment program that target economies of scale alongside capacity utilization and a state-level match of demand with supply is needed. C. Fruits and vegetables sector Bihar is one of the major producers of vegetables and fruits in India, with 9.8 percent and 6.7 percent of national production, respectively. The state ranks third and sixth among other 72 states in the production of vegetables and fruits, respectively. The area under vegetables in 2003 reached 609,000 ha, or 10 percent of the aggregate vegetables area in the country. Similarly, Bihar has 7.8 percent of the total fruit area in the country, or 295,000 ha. Although fruits and vegetables occupy just 10 percent of the state's cropped area, they contribute to 50 percent of the total value of crop output. In the first few years following the bifurcation of the state, the area cultivated for fruits and vegetables shrank by an average of 3 percent per year. This total was largely driven by a decline in vegetables' area by an average of 4.6 percent per year. This was partially offset by a small average increase of 1.6 percent in fruits' area. Major vegetable commodities include potatoes, brinjal, cauliflower, okra, and tomatoes. Mangoes, litchis, and bananas constitute the state's major fruit crops. Major fruit-growing districts include Muzaffarpur, Vaishali, East Champaran, West-Champaran, Dharbhanga, and Samastipur. In the case of vegetables, major districts include Patna, Nalanda, Muzaffarpur, Vaishali, and Kathihar. In general, Bihar's fruits and vegetables' yields compare poorly with those of other Indian states, with the exception of litchis and okra. Bihar's yields are much lower than those of other states in mangoes, potatoes, and tomatoes. However, they are among the highest for okra and litchis. Table 4.8 Yields of selected fruits and vegetables products in Bihar and other Indian states (kg/ha) Crop Orissa Bihar WB UP Punjab All India Vegetables 11535 14015 14381 19003 17203 14415 Potatoes 10189 9895 23819 22977 20206 18408 Tomato 13 16 14 40 24 16 Okra 8 15 10 14 7 10 Fruits 6148 11184 12541 12409 14155 11258 Litchis 2725 10523 10230 -- -- -- Mangoes 4 9 3 16 10 8 Source: CMIE data 2005. Although Bihar is richer in water resources than many other states, improving the yields would entail providing for a wider genetic base with higher producing varieties, technological and pest management support, proper orchard management, and strengthening post-harvest management to enhance the shelf life of the product. Mandi markets are the mandated sales outlet for fruits and vegetables products. Yet in Bihar, just 6 percent of vegetable production and 4.2 percent of fruit production end up at the APMCs. As perishable products, they are unlikely to be transported far because of the poor road network and absence of cold storage. Often dependent on traders for credit and information, farmers are put at a disadvantage and end up selling at lower prices to avoid spoilage of their products. The absence of the open-auction-sale system and quality grades and information systems discourages farmers from going to the mandis; these elements are particularly influential for producers of fruits and vegetables. A study conducted by the National Horticulture Mission found that 3 percent­40 percent of the marketable surplus in the Patna district is channeled through the mandis.26 Notably, mango 26 The National Horticulture Mission was established under the GOI's Ministry of Agriculture to target horticultural production and extension, post-harvest management, and marketing. 73 and litchi use the mandi the least of any crops. Tomato's use is just 12 percent, and even potato is only 38 percent. The study found that the market receives products from 10­100 kms away. Mangos travel 80­100 km to Patna, fresh vegetables less than 50 km. Table 4.9 Market yard arrivals to total market arrivals in the Patna area for select horticultural products, 2003 (%) Produce Arrivals in market yard Banana 39 Potato 38 Onion 28 Brinjal 26 Guava 25 Cauliflower 12 Tomato 12 Cabbage 11 Okra 11 Litchi 6 Mango 3 Source: IASL, 2006 (based on data from National Horticulture mission). Based on dispatch data from the Hazipur mandi, the same study found that, on average, 60 percent of the fruits and vegetables that leave the mandi are further marketed within the state. The remaining fruits generally go to Delhi, the vegetables to Jharkhand (mainly Ranchi and Jamshedpur). From there, products move around the country and/or are exported. Market history varies among products (table 4.10): Okra, brinjal, and guava leaving the Hazipur market appear to remain entirely within the state, while only 55 percent of litchis are marketed within Bihar. Similarly up to 30 percent of the mango and 30 percent of the tomatoes leaving the mandi are marketed outside the state. Table 4.10 Dispatches from the Hazipur mandi (%) Within Produce Within market area district Within state Outside state Total Banana 10 15 40 35 100 Potato 20 40 20 20 100 Onion 20 40 10 30 100 Brinjal 20 40 40 ­ 100 Guava 15 25 60 ­ 100 Cauliflower 10 20 40 30 100 Tomato 10 20 40 30 100 Cabbage 15 20 30 35 100 Okra 20 50 30 ­ 100 Litchi 5 20 30 45 100 Mango 15 15 40 30 100 Source: IASL, 2006 (based on data from National Horticulture mission). 74 Bihar's uptake of centrally sponsored programs has been primarily in technical matters (nurseries, protected cultivation, and integrated pest management, or IPM), with no marketing activities. This breakdown contrasts with Jharkhand, Punjab, West Bengal, and Uttar Pradesh, in which significant shares of State National Horticulture Mission funds have been targeted at markets. The National Horticulture Mission was established under the GOI's Ministry of Agriculture to target horticultural production and extension, post-harvest management, and marketing The lack of adequate cold storage and post-harvest activities and facilities have resulted in losses throughout the marketing system that range 10 percent-40 percent depending on the commodity. Nearly 40 percent of the existing cold storage infrastructure capacity is not in working condition, and the equipment that is in working condition has 60 percent actual storage capacity. This capacity is inadequate considering the demand for cold storage and the prospects for horticultural crops in the state. Waste is exacerbated by poor handling of the produce, inadequate loading and unloading practices for perishables at mandis, improper bagging, and poor infrastructure (roads and electricity). 75 Table 4.11 Wastage estimates of selected fruits and vegetables across six main districts in Bihar, 2004 Commodity Share of Quantity Share of Value of value of Production wasted Wastage total wastage wastage (000 tons) (000 tons) (%) wastage (millions Rs) (%) Mango 509 198 39 41.1 864 47.5 Banana 273 49 18 10.2 213 11.7 Litchi 54 12 22 2.4 231 12.7 Papaya 24 2 10 0.5 14 0.7 Guava 68 10 15 2.1 32 1.8 Cauliflower 120 22 18 4.5 59 3.3 Brinjal 113 16 14 3.3 25 1.4 Chilli 79 4 5 0.8 68 3.7 Onion 117 29 25 6.0 91 5.0 Tomato 82 32 39 6.7 14 0.8 Potato 449 108 24 22.3 209 11.5 Total Estimated ­ 482 ­ 100 1819 100 Source: Planning Commission and authors' calculations. The marketable surplus of fruits and vegetables products is high. On average, approximately 70 percent­80 percent of fruits and vegetables production is estimated as marketable surplus. For banana it is thought to be 82 percent. A small percentage of F&V products is consumed by the growers, and wastage accounts for the rest. Without the ready market among Bihar's poor for the low grade, and poor quality spoiling products, wastage estimates would be higher than reported. Although most fruits and vegetables are sold fresh, a low rate of processing activity is taking place. A number of food processing plants are registered under the food processing order. Five plants each have a processing capacity of more than 250 MT. Processing activities include canning pineapples, jam and pickles from mango, tomato sauce, litchi juice and pulp, and lime for squash and as pickles. Increased processing would not only improve producers' access to markets but also make use of the low grade fruits and vegetables products, thus reducing losses. C1. Litchi India is one of the largest producers of litchis in the world, with 476,000 tons produced over an area of 54,000 ha. Bihar leads all states with 71 percent of total national litchi production and 54 percent of the national area. West Bengal ranks a distant second with 13.4 percent of national production. Litchi is exceptionally well suited to Bihar's physical environment in terms of temperature, altitude, soil conditions, and water availability. The major litchi-growing districts are located primarily in the Northwestern region of Bihar. They include Muzaffarpur with 17.8 percent of total state production followed by Vaishali (13.2 percent), Sitamarhi (7.9 percent), East Champaram (6.9 percent) and W. Champaram (5.5 percent). Over the last decade, litchi production increased by 3.2 percent p.a., driven largely by an expansion in litchis' area of 3.5 percent p.a. Although productivity has been stagnant over the same period, litchis' yields in Bihar are the highest in India. In 2003­04, litchi production reached 76 11.6 tons/ha, compared to 10.1 in West Bengal and 8.8 as the Indian average. Factors such as inadequate planting materials and poor maintenance of litchi orchards by contractors contributed to this stagnation. The value of litchi production represents 4 percent of state's total value of fruits and vegetables production, from just 2.5 percent of the cropped area for fruits and vegetables. In a practice unique to litchi, trees are leased by traders from farmers. Lease payments range from Rs. 500­700/tree depending on age and variety, and feature an advance payment of approximately 15 percent. All pre-harvest, harvest, and post-harvest operations are carried out by the trader. Agreements are annual, and generally not written down as contracts. Crop failure probably leaves the farmer with just the advance payment. It also is common for the agreements to be transferable, so they are traded among intermediaries. This arrangement makes it difficult for processors to enter into direct contracts with farmers and provide support services. As a result, orchards are not well maintained, and productivity is low. Litchi's wholesale price in Bihar is below that of competing states, giving Bihar a comparative advantage in both domestic and export markets. In 2003 the average price for litchis was 959 Rs/qtl compared to Rs/qtl 2041 in Kolkata, Rs/qtl 2067 in Dehradun, and Rs/qtl 1792 in Guwahati. Bihar's prices are far below those of potential foreign competitors.27 Litchi is widely acknowledged as an excellent prospect for Bihar's entry to international export markets, and much current investment is targeted at promoting and developing that outcome. However, to complement these findings, nonprice factors such as variety, quality, and seasonal advantages in supply should be examined. Table 4.12 Litchi prices in selected markets, 2003 (Rs/qtl) Patna Kolkata Dehradun Guwahati May June May June May June May June Min 600 500 1540 2300 1921 2404 1600 1200 price Max 1500 2525 3045 2500 2213 2910 2000 4000 price Average 959 1346 2041 2400 2067 2661 1792 2201 Arrivals 505 1740 269 3 4006 2409 31 108 Source: NHB mission. There are two marketing chains for litchi in Bihar: fresh and processed. Litchi is highly perishable. Absentee landlords and growers lease their orchards to brokers who harvest and sell to local and regional markets or to processors. Processors turn the litchi into pulp used to prepare litchi juice, and from there the product goes to the retailer and on to the final consumer. However, most production follows the first chain, as just 10 percent is thought to be processed. The two supply chains are: · Channel I: Fresh litchi; Farmer-broker/contractor-wholesaler-retailer-consumer. · Channel II: Processed litchi; Farmer-broker/contractor-wholesaler-pulp processor-juice processor- retailer-consumer. Value-chain analysis reveals that transport and wastage costs are significant. They extract a large share of total margins along the litchi supply chains (figure 4.6). It was found that 27 27Israel, Mexico, Taiwan, and United States. 77 percent of the total margins under fresh litchi are consumed by transportation and wastage. This figure falls to 14 percent for processed litchis­­still significant. The distribution of margins among the major participants in both chains shows that farmers extract the largest relative share of the margins in the fresh litchi supply chain, whereas processors do so under channel II. Farmers retain 42 percent of the total margin under the fresh litchi value chain, compared to 8 percent under the processed litchi supply chain. Contractors who lease the orchards from farmers incur the cost of maintaining the trees, packing and sorting the production and transporting the produce to the mandis. They retain 11 percent of total margins under channel I and 2 percent under channel II. Litchi losses are significant: nearly 22 percent of annual production is lost along the supply chain. Litchi deteriorates very rapidly after harvest, and the onset of a characteristic brown color renders the product unmarketable. Fumigation typically is used as a post-harvest treatment to reduce browning. Fruit cracking after harvest also is a problem. The Agricultural and Processed Food Products Export Development Authority (APEDA) has drawn up a series of steps to enhance litchi quality, detailing procedures for production, inspection, harvest, peeling, de- stoning, sorting and grading, receipt at pack house, acceptance of produce, sulfur treatment, packing, cooling, storage, handling and container loading, and transport. Pre-cooling and transportation in refrigerated vehicles are essential to improve the post-harvest life and quality of the fruit. 78 Figure 4.6 Estimated margins along the litchi value chain in Bihar (%) Source: IASL field work 2006. Several factors limit the expansion of litchi production in Bihar. These include a narrow cultivar base, poor arboriculture, high incidence of insect pests, poor post-harvest management, and shortage of planting material. Priorities for new varieties include a longer shelf life and smaller seeds. The main litchi varieties grown in Bihar are Shahi and China. Their very short shelf lives combined with a very compact ripening and harvesting season are major hurdles to effective marketing and provide for very short processing season. Cracking fruit is another major limiting problem for the cultivation of litchi. Furthermore, litchi is highly susceptible to a variety of pests and diseases. In the absence of a proper extension service, and proper orchard management by brokers, no testing is done on the safety (pesticide residues) and/or quality of the fruit. Litchi is exceptionally well suited to Bihar's physical environment. Its wholesale price in Bihar is far below that of potential foreign competitors as well as competing provinces. A vertically coordinated system has evolved in Bihar that secures supply and credit provision throughout the chain. The system could be developed to include information exchange and quality control issues. Litchi is widely acknowledged as an excellent prospect for Bihar's entry to international export markets, and much investment is targeted at promoting and developing that outcome. Establishment of a cold chain is an essential step in the development of most of Bihar's agricultural and food industry, but for litchi it is a prerequisite for access to markets. 79 Existing stakeholders in the litchi chain have not, to date, invested in this cold chain and have reported that they have no plans to do so. While the lack of investment in new trees puts a time limit on Bihar's dominance of the domestic litchi market, lack of cold chain investment denies large-scale access to international markets. In recent years, there has been attempts to export litchis from India. Although some export has taken place, packaging and lack of quality standards remain impediments to increased exports. To address these issues and promote litchi export, APEDA is setting up an Agriculture Export Zone (AEZ) in various districts, including Muzzafarpur, Samstipur, Hajipur, Vaishali, and East and West Champaran.28 C2. Mango As the dominant fruit in Bihar, mango occupies 48 percent of the total fruit area and accounts for 11 percent of national fruit production. Bihar is the fourth largest producer of mango in India after Andhra Pradesh, Uttar Pradesh, and Karnataka. Mango is grown in all districts, with Darbhanga, Samastipur and Muzaffarpur leading all others. From 1991­92 to 2003­04, production of mango has declined annually by 3.5 percent driven by a decline in both yields and areas. Bihar's yields during the TE 2003 (9 MT/ha) were 14 percent higher than the all-India-average and topped those of neighboring eastern states, including West Bengal (3 yields are just half those of Uttar Pradesh (16 MT/ha). Bihar mango's production is constrained by a number of problems. Orchards are neglected and in need of rejuvenation; cultivation technology is old and outdated. There is a need to improve orchard establishment and management following modern techniques. For this, a strong extension system is needed to transfer modern technology to farmers and establish demonstration plots. Planting material is inadequate in terms of quality, which further affects quality and yields. Moreover, the varieties grown often are not preferred on export markets. Mango is mostly sold on spot markets by farmers, although in some parts of the state a litchi-like leasing system operates. Typically, the supply chain for mango includes farmers selling their fruits to wholesalers on to the retailers and to the final consumers. Mango producers generally are not able to generate credit on the basis of standing crop. Rather, they are paid only partially by traders upon purchase, with a balance due only after the trader sells the product. According to the survey conducted in this study, mango producers sell small volumes that precludes sorting and other post-harvest actions The value-chain analysis shows that producers' share in the total margins is 34 percent (figure 4.7). Transportation and wastage costs are high (49 percent of total margins) and clearly influence farmers return from the crop. It is estimated that 25 percent - 40 percent of mango production is lost annually in Bihar due to lack of adequate post-harvest management and infrastructure, improper handling, poor packaging technology, inadequate transport infrastructure, and absence of storage and marketing facilities. 28APEDA website. 80 Figure 4.7 Estimated margins along the mango value chain in Bihar (%) Source: IASL field work 2006. Most of Bihar's mango is consumed within the state, with some sent to neighboring states of West Bengal, UP, and to Delhi. Production seasonality could give Bihar an advantage to send the mango to southern states such as MP and Maharashtra, where production peaks in the months of April-May, compared to June-July in Bihar. Price comparison with two adjacent markets, Jharkhand and UP, reveals that Bihar's prices are competitive with those of Jharkhand, but not UP. India exports both fresh and processed mangoes. Fresh mango is a significant export product in India, albeit to low-value nearby markets (Bangladesh takes 63 percent by volume). Preliminary analysis shows that Bihar's mango can compete with African (Senegal) and South American (Brazil, Mexico) product, despite the significant infrastructural difficulties in Bihar. A more in-depth analysis that accounts for variety and quality difference and seasonal advantage through early and late varieties is needed to complement this finding. Processed mango is apparently a well-established and successful Indian export, and one that is diversified over several lucrative markets. There is a potential for counter-seasonal exports to fill gaps left by (southern hemisphere) African and South American producers. C3. Potato Potato is the single largest vegetable crop grown in Bihar. In 2003 the state produced 6 percent of national potato production, compared to 44 percent in Uttar Pradesh and 30 percent in West Bengal. The total potato cropping area of these 3 states represents 71 percent of all area sown to potato in the country. Bihar takes 11 percent of the national area. Bihar's potato 81 production has been stable during the last decade growing at a modest rate of 1.7 percent p.a., driven entirely by a similar growth in area. The crop is nearly grown in every district of Bihar. It is estimated that nearly 25 percent of the area under vegetable production is allocated to potatoes alone. The most commonly grown potato variety in Bihar is the local red one. The crop is usually grown in the winter season and adapts well to the state soil and physical climatic conditions. However, potato yields have been stagnant. Very little productivity gain has been achieved. Potato yields in the state are less than 50 percent than those of UP, West Bengal, Punjab, and the all-India levels. In 2003 potato yields were at 10 tons/ha in Bihar, compared to 24 tons/ha in West Bengal and 23 tons/ha in Uttar Pradesh. The cost of potato production in Bihar is lower than in neighboring states. Based on survey estimates, the cost of potato production in Bihar is 1.2 Rs/kg, compared to 1.8 Rs/kg in West Bengal and 2 Rs/kg in Uttar Pradesh. Significant inter-monthly price variability reflects the seasonality of potato production. The price of potato is low from January to April-May, then increases to its maximum between September and December. The seasonal characteristic of potato production suggests the potential to adopt early and late varieties, and to set up short-term cold storage facilities to mitigate the variability. Potato wholesale prices in Bihar are the highest among other competing states. Available data on wholesale prices indicate significant regional variation among the potato-producing states. Between 2003 and 2005, Bihar wholesale potato prices exceeded those of West Bengal by an average of 121 percent. The percentage difference was much higher for the farther state of Punjab. Several factors contributed to the significant price differentials, such as seasonality and availability of produce, and scarcity and high cost of storage space. Figure 4.8 Average difference in potato prices between Bihar and other competing states, 2003­05 (%) 180% 164% 165% 160% 133% 140% 121% 120% 100% 80% 60% 40% 20% 0% Bihar/West Bihar/Uttar Bihar/Punjab Bihar/Uttranchal Bengal Pradesh Source: CMIE data 2005. Potato is one of the few vegetables crops in Bihar for which APMC market arrivals constitute a large share of total sales, although at 23 percent, it is still small by other states' standards. Moreover, the 23 percent exceeds the combined arrival percentage of all other vegetable crops, estimated at 6 percent. One reason why potato arrivals are higher than those of other vegetables is the continuous demand for potatoes by cold-storage owners. However, because cold storage space is limited, farmers sell their products to brokers near or at the mandis. 82 Almost 80 percent of Bihar's cold storage space is occupied by potato. Available cold storage in Bihar in 2004 was at 238 units, of which 187 units were used exclusively for potatoes. This number represents 77 percent of space capacity and implies that 700,000 tons of potatoes (50 percent of Bihar's production) are stored annually and then sold as seed and/or table potatoes. After the remaining 23 percent of production is sold in the mandis, the rest is largely wasted. The value-chain analysis reveals that seed alone accounts for 45 percent of the cost of production of potato in Bihar. Costs of inputs such as seeds, fertilizers, and pesticides are high, and the irrigation cost also is significant at 21 percent of total production costs. Low yields reflect low quality of potato seeds (although expensive) and improper application of fertilizers and agrochemicals. Unlike the rapid development of improved maize seed production and availability, potato seeds remain largely of low quality. Most of the potato produced in Bihar is used is for table purposes. A negligible quantity is used for processing, and, notably, subsistence consumption by farmers is rare. Two supply chains for potatoes are detailed below and reflect the seasonality of potato production. Channel I reflects the peak producing season and channel II is the off season. Market participants are the same under the two channels with the exception of the cold storage activity for the off-season supply chain. The two supply chains are: · Channel I. Peak season (February-March); Farmer-wholesaler-retailer-consumer · Channel II: Off season (July-August); Farmer-cold storage-wholesaler-retailer-consumer. The value-chain analysis shows that the farmers' share in total potato margins is small, of the order of 16 percent in both the peak and the lean season. Despite the higher prices in the lean season, the cost of storage offsets some of the gains for farmers, while reducing wastage. Similar to other fruits and vegetables, transport and wastage costs are significant. Wholesalers stand to gain significantly from storage in the off season, as seen in the increased margins (figure 4.9). This explains the dominance of storage in Bihar's potato crop. 83 Figure 4.9 Estimated margins along potatoes value chain in Bihar Source: IASL field work 2006. Despite its long history in Bihar, potato production has not developed vertical linkages, either forward into additional processing or backward to serve the farmers. There is no registered unit processing potatoes into chips, powder, or other such products in Bihar. Furthermore, no private system of seed supply or extension is apparent. Moreover, formal credit markets have little application to potatoes so that repayment of informal loans dominates sales decisions. This study revealed that access to credit and provisions of transparent pricing in the mandi were major problems faced by farmers. Potato is a good candidate for contract farming. If enabled under a new APMC legislation, it could boost production in the state, improve productivity, generate credit to producers, and provide extension and other support services. Results from Punjab, where small potato producers went under contract with Pepsi to produce potato chips, show that the gross margins for contracted producers were 62 percent higher than those for producers who sold in the open market (table 4.13). 84 Table 4.13 Contract farming for potato production in Punjab Contract Non-contract Difference (%) Price (Rs/ql) 546 316 73 Yields (q/acre) 69 82 -16 Gross return (Rs/acre) 37883 25961 46 Total Variable costs (Rs/acre) 21288 15689 36 Gross margin (Rs/acre) 16595 10272 62 Source: IFPRI presentation , 2005 Box 4.1 Makhana cultivation A unique enterprise to Bihar is Makhana cultivation. Makhana is a plant grown in standing water for the production of seeds (guri) that are processed (cracked or popped) for their pulp (pop). It is sometimes grown in integrated systems with fish, but primarily ponds produce only Makhana. Makhana pop is traditionally consumed as a snack or high-protein, low-fat food or sweet component, as well as being a source of traditional medicine. More recently, pop has been marketed in urban Indian and export markets as branded, packaged snacks, high-protein drinks, pharmaceuticals, and protein and mineral supplements. Although Makhana is present in many countries, its cultivation and processing is rare outside India. Bihar produces approximately 85 percent of all Indian Makhana, and more than 90 percent of the total national area under Makhana is found in the state. Major Makhana-growing districts in Bihar include Dharbanga and Madhubani. Available data indicate that Makhana production was of the order of 30,000 MT in 1995­96, with a productivity estimate of 0.8 MT/ha. Production tends to be concentrated among small and marginal landholders and among caste-based family groups of fishermen with commercial linkages to traders and processors. As with litchis, the largest share of Makhana production (75 percent) is marketed through preharvest contractors. The remainder is sold at the village markets. It is estimated that the marketable surplus of Makhana is quite high and, after being processed, is sold primarily to wholesalers and retailers. A large part of the produce is sold outside the state in major consumption hubs like Delhi, Kanpur, Bhopal, and Mumbai. Similarly to other agricultural commodities in Bihar, Makhana also is faced with a number of challenges. Traditional production is labor intensive, relies on saved seeds and low chemical inputs, and uses some hazardous procedures. The crop has a 9-month cycle with a single harvest in August­October, which makes the producers credit dependent and subject to distress sales. Households do their own storage and basic processing. However, the small volumes and lack of standards reduce the value of the finished product, make it costly to transport, and expose it to environmental risks. Past commercial processing has involved give-and-take arrangements within the chain, and a variety of credit-driven linkages up and down the chain. Little extension and information services serve the chain. Transport is slow and difficult. Dried products are disadvantaged by weight-based transport tariffs. Proposals to improve the sector involve eight integrated initiatives: · Transparent system of pond leases · Improved harvest and post-harvest techniques · Improved quality, quantity, and reliability of input supply linked to seasonal credit · Empowerment of smallholders with cooperatives, both local and through an apex-led hierarchy · Rationalized transport system, including negotiation of weight-based bulk transport tariffs · Encouragement of branding and product standardization · Promotion of backward and forward linkages · Provision of extension, advisory, and training services. The Development of Makhana has emphasized market-led product development, and transmission of sustainable shared benefits throughout the chain. The prime movers in marketing Makhana insist on their own services to control quality of service and target it correctly. Pledge arrangements for input delivery are 85 favored over credit from banks or existing local sources. Proposed product standardization is industry driven and implemented as part of a service package throughout the chain. D. Cross-cutting issues The share of value generated by Bihar's fruits and vegetables far exceeds their share of arable land. The same is true for their shares of capital (credit as well as processing capacity), infrastructure (for example, storage), and public goods (particularly research and extension). Fruits and vegetables are well adapted to not only Bihar's physical environment but also the fragmented and atomistic farm structure, although tenure insecurity might be expected to select against long-term investment in fruit trees. Despite Bihar's status as a major producer of fruits and vegetables, most of these crops are traded outside the APMC system with substantial dominance by intermediaries. Examples include litchi, for which a unique system of contracts has developed, and potatoes, for which storage among seasons plays a major role. Across products and whatever marketing channel is used, spoilage consumes a significant part of margins in Bihar. The state's combination of highly perishable products, poor roads, and lack of refrigeration can effectively serve only the local markets. Therefore, any expansion in markets requires infrastructural development. Where infrastructure exists but is a constraint, lengthening the harvest seasons is one option, albeit one requiring strategic thinking and organizational change. Alternatively, scheduling production to take advantage of seasonal gaps is even more demanding of the existing infrastructure and the limited scientific base. While Bihar enjoys a production-level cost advantage over rival states for most fruits and vegetables, this has not generally translated into an advantage at the wholesale price level. This disjunct indicates inefficiency between field and market, of which wastage and transport no doubt are major components. However, the sustained wholesale price difference also indicates that products from other states cannot easily be brought in as substitutes. Hence, Bihar's local markets are somewhat protected by its poor infrastructure. The challenge of serving markets outside the state is to overcome infrastructural problems for products that are competitive in outside markets while fully utilizing domestic markets for products that other states cannot supply cheaply. Obviously, Bihar requires improvements in roads and power supply and distribution to which everyone will have access. However, storage and the cold chain can be more easily controlled by private ownership within Bihar or by a public-private ownership that serves local firms favorably. Possibilities exist for public-private partnerships in the development of market infrastructure and markets operations and management. A cold chain is a prerequisite for fruits and vegetable market development in Bihar, both to counter the significant spoilage problem and to access larger markets. The quantity and quality of market infrastructure in Bihar are among the lowest in India. Bihar has a desperate need to improve markets infrastructure, governance, and management to make them more effective in responding to farmers' needs. The private sector could play an important role in this regard if the policy environment (amending the marketing act) and the investment climate were conducive. Lack of private investment in Bihar has seen products moving out of state for additional value-adding activities. The mandi board also could devolve the management of the existing facilities to the private sector to improve the quality of their infrastructure and services. Once updated and improved, markets could be linked with the national commodity exchange and futures prices. Ideas such as warehouse/cold storage receipts systems also could be piloted then. 86 Amend the APMC Act. Although the APMC Act is not considered the major impediment to private sector participation in Bihar (unlike in most other states), amending it would send a new message and facilitate private sector entry. Bihar may be in a better position than many other states to undertake this policy reform for several reasons. First, the quantity and quality of the mandis' infrastructure is very poor. Second, despite the 1 percent marketing cess that they collect, a large number of mandi committees in Bihar are running significant losses. The market reform would enable an increase in the quantity and quality of the produce, better market management with private sector partners, higher market investment activity, and possibly higher employment generation across more developed supply chains. Amending the act also would facilitate the development of backward linkages and incentives for service providers to establish their businesses to serves the value chains, thus transferring technology and knowledge to the farmers. With the notable exception of dairy, most of the commodities chains examined in this study have not established backward linkages with farmers nor forward linkages with processors. Similarly, farmers have not embraced cooperation as a way to generate sufficient marketed surplus to interest buyers. The formation of a vegetable cooperation, a la COMPFED, has been widely discussed in Bihar, with some suggesting that the new cooperative could be a subsidiary of COMPFED itself. However, an important step would be to train producer groups and link them with buyers (exporters and/or processors) through long-term relationships, possibly via contract farming. Efficient linkages within a product's supply chain are key to improve the competitiveness of the product and increase efficiency in both input and output transactions, thus reducing their costs. The concomitant reductions in risk and shared information between contracting parties would narrow margins and in turn remove more uncertainty for farmers. Successful contracts then would be deepened to include extension and other forms of assistance to farmers, as well as commercializing credit to rural people. The service of providing market information on prices and volumes of horticultural crops traded in major outlets in Bihar requires serious improvement. Current market information services are poor: they are not standards-linked and do not report traded volumes. Farmers' effective use of the information delivered requires training in both decision-making and in pre- and post-harvest techniques to generate price advantages. Linkages between price and quality are apparent in the success stories examined here, and this mechanism can be scaled up in a sustainable and incentive-compatible manner. However, steps should be taken to invigorate the process, such as preparing market information packs on products opportunities, marketing channels, products standards, and certification and regulatory procedures and policies. Once prepared, information could be disseminated through the media commonly used by farmers in Bihar (radio and television). Plans also should include capacity building for different stakeholders through training trainers on pre- and post-harvest horticultural techniques. Here again, associated producers could benefit from training and certification programs. 87 As in the case of maize, investment is needed to develop improved varieties of fruits and vegetables with higher productivity levels, longer shelf lives, and greater suitability for processing (for example, litchi and mango). These improvements could be done through sustained and effective linkages between agricultural universities, R&D institutions and users of research output. The combination of agents (including the ATMAs) would enable optimal usage of research resources through an enhanced process of innovation, capacity building, technology transfer, value addition, and commercialization. Partnerships established in value chains research would help bring new knowledge to the applied level. Partnerships thus would generate more value from agriculture, creating new employment opportunities, raising incomes, strengthening the competitiveness of Bihar products, and reducing rural poverty. The World Bank recently launched the National Agriculture Innovation project (NAIP) in India. NAIP aims at accelerating collaborative development and application of agricultural innovations among public research organizations, farmers, private sector, and other stakeholders. Box 4.2 National Agriculture Innovation Project The objective of the NAIP project is to contribute to the sustainable transformation of Indian agriculture from a sector of food self-sufficiency to one in which a market orientation is equally important to alleviate poverty and generate income. The specific objective is to accelerate the collaborative development and application of agricultural innovations among public research organizations, farmers, private sector, and other stakeholders. NAIP is designed to strengthen the Indian Council of Agricultural research (ICAR)'s role as a catalyst of change in the national agricultural innovation system, and to fund partnerships in value chains and livelihood research consortia which will strengthen the research and development networks in these areas, benefiting all players involved and contributing to some of the higher level objectives mentioned above. One of the project's components aims at establishing market-oriented collaborative research alliances to sustainably improve selected agricultural production-to-consumption systems (PCSs) (supply chains). These alliances will be achieved by encouraging the different organizations (public, private, NGOs, farmers groups, international organizations) involved in producing, harvesting, processing, and marketing a particular product to join forces in a consortium framework. They then would compete for funding intended to improve the profitability and sustainability of the product's PCS. The system includes the technologies used to grow and process the material as well as the social, institutional, and economic environment in which these processes operate. Partner organizations will be jointly responsible for the governance, design, and implementation of research programs, and the application of innovations throughout their supply chain. Source: World Bank database project portal. Little attention has been to product quality and safety, which are essential if Bihar is to capitalize on its potential in horticulture production. This change is the key to mobilize producers' effort to increase their own incomes. Farmers' capacity to influence prices is limited to quality achieved, and this in turn is possible only if quality is being measured and promoted in ways that market participants­­particularly farmers­­can use. Enforcement of standards of food safety and quality is generally a public good linked closely to actions and responsibilities in the private sector. Existing processing units give little to no consideration to quality standards. Poor hygiene and low-quality processing is common. However, with more than 35 percent of fruits and vegetables production leaving the state, and with increased income levels, quality is becoming a key factor in products' competitiveness. Even farmers interviewed for this study indicated that, in the last five years, quality has become a much more important factor in price determination. Quality would be of paramount importance to compete at the international level. Good agricultural practices, good hygiene and sanitation, and important systems such Hazard Analysis and Critical Control Points (HACCP) should be encouraged. 88 In related settings, and to promote Bihar's agriculture, there should be monitoring mechanisms in place for chemical residues and associated codes of practice. Farmers should be given clear instructions on how to apply chemical products (for example, pesticides) and the quantities that they should administer to minimize residue build-up. The capacity to manage sanitary and phytosanitary (SPS) risks also has emerged as an increasingly important component of international competitiveness in horticultural trade. Bihar should make better use of government schemes and improve their accessibility. The state is accessing a number of centrally sponsored schemes to develop the horticulture sector and its supply chains. These schemes cut across multiple areas such as agriculture, horticulture, commerce, and food processing and industry. Examples include the declaration of the agriculture export zones through APEDA, setting up food parks with agro-processing units, and the national horticultural mission. APEDA has declared a number of districts in Bihar as agricultural export zones (AEZs) for litchis. Although available, information about these and other schemes should be made easier to access by small and medium entrepreneurs and processors who are interested in investing in the sector. 89 5. TOWARD AN AGRICULTURAL DEVELOPMENT STRATEGY Agriculture is the backbone of Bihar's economy. In the near term, agriculture may be the state's only viable means to achieve income growth and reduce rural poverty. Evidence suggests that, over the last decade, Bihar's agricultural sector has grown at a rate exceeding that of traditional agricultural states such as Maharashtra and Punjab. On the other hand, Bihar's growth has been highly variable because of recurrent flood problems. Flooding has impeded the sector's capacity to deliver much needed social and economic benefits throughout the food production and marketing system. Government's efforts in addressing the needs of all stakeholders involved and delivering on support services have had little success. This lack of success has been due largely to lack of a clear strategy, weak institutional capacity and absence of accountability, as well as concerns about security and lawlessness. Stakeholders' involvement in public services delivery In the midst of this adverse environment, alternative organizational models focusing on community involvement and transfer of responsibilities from state to stakeholders have emerged and are enjoying some success. These decentralized beneficiary-based initiatives have offered a way forward to improve agricultural public services delivery in the state. The initiatives piloted in Bihar to deliver two of the most visible and important public services in the agricultural sector­­ agricultural technology and surface irrigation­­confirm that the involvement of local stakeholders in decision-making and implementation can improve development outcomes. Early results from the ATMA pilots show that bottom-up planning processes involving farmers in the preparation of strategic research and extension plans and in the subsequent determination of appropriate interventions led to the mobilization of farming communities into common interest groups and farmers' federations. These interventions improved interaction among farmers, extension workers, and researchers; encouraged adoption of new technologies; helped in crop diversification; increased farmers' incomes; developed supply chains by linking farmers and buyers; and piloted contract farming (for example, of medicinal plants). As social mobilization, training, capacity building, and market intelligence became the critical "new" inputs, the government's role shifted from being a supplier of subsidized inputs to a supplier of knowledge. Specialized institutions, such as the National Institute for Agricultural Extension Management (MANAGE), played a significant part in the process. The shift in emphasis was enabled also by selecting qualified, experienced individuals (including from outside the government system) able to lead multidisciplinary teams for the position of Project Director of ATMA and then empowering these individuals with operational flexibility and freedom. An important catalyst that ensured this freedom was the direct flow of funds from GOI to ATMA, without hindrance from state headquarters. In addition, concurrent independent M&E enabled early identification of weaknesses and taking of appropriate remedial actions. Together, all of these factors led to a meaningful and actionable participative exercise. The ATMA approach was piloted in six other states besides Bihar. Based on its success, the model is being scaled up in over 250 districts of the country through a GOI-funded scheme. In 90 Bihar, this scheme covers 11 additional districts beyond the original pilots. However, one area of concern with the new scheme is that the flow of direct funds from GOI to the district-level ATMA has been altered. This change risks that priorities and interventions again may be set at the state rather than the district level, thus nullifying the decentralized decision-making that was a major determinant of success in the ATMA pilots. For the model to be replicated and scaled up successfully, GOB/GOI need to ensure that the operational flexibility and funding that was enjoyed by the ATMAs under the NATP is maintained. Bihar has shown slow but steady progress in a second community-involvement setting: participatory irrigation management. An evaluation of nine schemes in which irrigation management was transferred to user groups compared with adjoining areas in which participation has yet to happen showed that more benefits accrued across the board to users in the participatory management group. These benefits were improved water availability, enhanced crop productivity, increased area under irrigation in tail reaches, increased water fee collection, and improved maintenance of the system. Participatory management also benefited the state government in reduced staff costs and O&M expenditures. The state government put in place legislative changes to ensure an enabling legal environment for the independent functioning of WUAs. Training and capacity building of WUAs was a critical new function in which specialized institutions such as the Bihar Water and Land Management Institute (WALMI) played a significant role. The state government also ensured that elections to WUAs were held on time. Monitoring performance and building capacities of WUAs is a continuous process that must continue even after the initial transfer of management to them. Without suitable replacements being found, the diminishing role of WALMI in this context is a concern that must be addressed. In addition, conflicts can arise within WUAs or between WUAs and WRD field staff from time- to-time and in its new role the government has to step in and resolve them. In this context establishing an effective grievance cell for WUAs at the project level is a priority. It should be noted that the involvement of communities does not absolve the government from its responsibilities. Rather, the nature of government's role changes as focus shifts from top-down uniform interventions to a bottom-up approach that takes into account stakeholders demands in selecting appropriate local interventions. Reforms in regulations and institutions are needed to deal with an expanded role for community organizations and private service providers. As governmental efforts increasingly move toward social mobilization and capacity building of communities, skills to do so are needed within government departments. This necessity makes training and capacity building as important for of government staff as for the communities they serve. Building commodities supply chains The analysis of selected commodities supply chains indicate that Bihar appears to have a genuine comparative advantage in productivity and farm production costs. Unfortunately, this advantage is not carried through to the wholesale level, at which Bihar's prices are above those of its competitors. Workable mechanisms to raise the incomes of farms within the commodity supply chains have developed, albeit at a slow pace. Notably, only a tiny fraction of Bihar farm produce goes to the mandated APMC marketed channels. Furthermore, transportation and spoilage costs appear to consume a significant part of the value chain margins across the range of the commodities analyzed. 91 As a means of establishing efficient supply chains, organizational change has been applied only in the dairy sector by COMPFED. However, despite having increased cooperative membership beyond that of neighboring states and achieved substantial production increases, COMPFED's local market penetration remains small, and its competitive position relative to largest cooperatives in India is questionable. Consolidation of COMPFED's gains will require stabilization of membership within seasons and improvement in milk productivity. While dairy consumption is expected to continue to grow, improved competitiveness will require new investment, rationalized use of capacity, and systemic change to improve product quality and safety. COMPFED's greatest achievement probably has been to enlist the loyalty of farmers due to reliable year-around sales and payments. Its next challenges include (a) increasing milk supply by deepening market penetration and improving animal productivity, (b) improving the quality of the milk produced and processed, (c) upgrading old equipment to increase efficiency and minimize the risk of contamination, and (d) rationalizing transport, cooling, and processing capacity. A dairy development strategy formulated to respond to these challenges necessarily would advise better use of available financial and technical assistance from the center and/or enlisting donors' support. Cooperative formation and stability in the dairy sector have been inspired by strong leaders applying well-known lessons and have been based around a significant capital item. A strategy for Bihar's small farmers should focus on cooperative solutions, drawing on experience of organizational change as described above and the potential for new marketing arrangements as embodied in reform of the APMC Act. As well as benefiting members, cooperatives offer low- cost conduits for training and extension and for the injection of capital into the agricultural sector. Evidence from the study also suggests that the development of Bihar's agricultural supply chains is thwarted by credit and payment practices. While dairy farmers have embraced COMPFED's payment model, producers of fruits, vegetables, and other crops have little respite from forced sales due to credit repayment demands. Maize producers appear to be better able to generate credit than others, possibly due to maize's well-defined and accepted quality standards. This has helped mobilize demand for hybrid maize seeds, which have been supplied by competing private firms following the liberalization of the seed policy. However, the maize model is not an unambiguous success, because farm production advantages are not maintained through to wholesale price levels. On the other hand, based on multiple growing seasons and good husbandry practice, reductions in transactions costs would appear to offer greater competitiveness with other states. Initially, a productive strategy requires attracting feed processors. A second strategic goal would be to systematically rewrite the APMC Act to facilitate flexible private trading, establishing price-quality linkages by using contracts, and freer product movement. The private sector's response to potential gains­­the wide margin between farm and retail prices, and savings possible from reducing spoilage­­has been slow in terms of business organization or practices. The transactional setting remains fairly traditional/under-developed. Trade is largely on spot markets; there are few backward/forward linkages; finance and risk-bearing arrangements seem to be under-developed; and there is little in-state processing. The practice of leasing litchi trees does not seem to achieve an optimal balance between income security for the producer and the incentive to look after and rejuvenate orchards. Obviously any development strategy for litchi will address export markets, and this focus will accentuate both quality requirements and logistical demands. As a robust marketing channel, the tree-leasing model may well be exploited to constructive effect, but only by extending relationships over multiple years and providing incentives for replanting and other crucial management steps. 92 Opportunities exist for public-private partnerships. In particular, value-adding private sector initiatives may be complemented by R&D, training, and tailoring of public services such as customs or quality certification. Experience from ATMA's pilots is valuable here. Strategic development of public-private partnerships will need to feature targeted public services of high quality: provision of market information, R&D, and training. Quality standards and certification need to be promoted. While the strategy calls for a more aggressive state role in public infrastructure (power, roads, and water supply), private market infrastructure (for example, storage, transport, and pack houses) needs to be placed in the hands of the people who will make the best use of it. Strategy then should involve mechanisms for leasing or selling facilities to the private sector on condition of accepted levels of market conduct. State and central governments would need to collaborate on enabling the required legislative change. The achievement of the strategy is dependent on the state's treatment of the private sector as a participant in agricultural development. Road ahead This report has revealed success stories in Bihar agriculture that can be replicated elsewhere. The report has identified significant achievements in certain elements of the sector that have shown resilience despite the overall negative environment in the state. The analysis has shown that any future agricultural strategy for agricultural development in Bihar should feature two pillars. The first pillar is community and stakeholder involvement in the design and delivery of public services. Global, national, and Bihar's own experience show that this approach works. In an environment in which institutional capacity is weak and corruption is endemic, stakeholder participation has proven a successful means to improve accountability and developmental outcomes. In this context, it is encouraging to note that recent GOB policy pronouncements emphasize the importance of decentralized efforts in areas such as health and education. Similar ideas also need to be woven into developing a vision and strategy for scaling up reforms efforts in the agricultural sector. The second pillar is the development of commodities supply chain systems within an enabling policy environment. Organizational success is evident in dairy, private sector engagement in the maize seed industry, and productivity advantage in fruits and vegetables commodities. These achievements should be built on to address the many remaining challenges and constraints that impede the efficiency and competitiveness of Bihar's agricultural supply chains. Lack of value addition and shortage of cold storage and processing facilities have fueled transportation and wastage losses that extract a substantial share of the available margins. Access to credit, market information, and business development services are still lacking. Insecurity of land tenure, poor infrastructure, and absence of law and order block the engagement of the private sector, which has been slow in taking initiatives. Amending market regulation and absent linkages weaken the supply chains. While uncovering successes, the analysis exposed areas of concern that should mobilize timely efforts to address them with action plans at various levels. These areas of concern cover a wide range of issues including (1) formation and capacity building of producer organizations, (2) weak institutions for business information, coordination, credit, and risk management; (3) massive under-investments in physical infrastructure (for example, power and transport), (4) dysfunctional public institutions, even in commercially viable situations in which obvious gains were to be had from entrepreneurial action, and (5) outdated laws and policies that harm the investment climate and deter private sector engagement. 93 The analysis points to a change in the understanding of the government's role in developing the agriculture sector in Bihar. One common feature of the "success" stories considered in this report is the low level of government involvement. When communities are empowered and involved in the day-to-day management of resources, as well as in planning and formulating schemes according to their own needs, positive results are bound to emerge. Accountability starts at the grassroots and moves up, thus improving overall service delivery and benefiting all stakeholders, including the government. Similarly, when given the opportunity under a supportive policy environment, entrepreneurial activity picks up, and the private sector gets involved in supply chain development. The government plays a key role in setting the overall strategy to develop the agricultural sector and facilitate its implementation within an enabling regulatory environment. As this analysis has shown, the government's role in coordinating capacity building activities and funding stakeholder-based group initiatives has been and remains crucial for their success and sustainability. Similarly, for commodity supply chains to develop, the government retains an important role in rehabilitating infrastructure, encouraging investment, and fostering public private partnerships. Amending key market-related legislation (such as the APMC Act), strengthening land institutions (such as legalizing tenancy), and improving implementation (such as computerizing land records) all will contribute to a stable and supportive policy environment. 94 Appendix 1 Bihar's Rice and Wheat Economy No study of Bihar would be complete without addressing the importance of the state's rice and wheat economy. Both crops dominate the cropping map in the state, occupying 70 percent of crop area. The objectives of this report do not target these two subsectors, so they are not analyzed in detail in the text. Rather, the authors dedicate this brief appendix for that purpose. On average, Bihar produces approximately 5 million tons of rice and 4 million tons of wheat annually. Its population consumes approximately 7.5 million tons of rice and 6 million tons of wheat.29 On balance, therefore, Bihar has been and continues to be classified as a "foodgrain- deficit" state. Faster growth in Bihar's rice economy would benefit not only the state but also the nation. Approximately 50 percent of farming households in Bihar cultivate rice, traditionally for subsistence but increasingly for the market. Improved productivity in rice cultivation would directly improve their livelihoods. Average rice yields in Bihar are 25 percent­30 percent lower than the national average and less than half of those obtained in Punjab­­indicating the productivity gains that can be realized with available technologies. However, from a national perspective, it is now widely recognized that, due primarily to rapidly diminishing groundwater resources, northern states such as Punjab need to diversify out of intensive rice cultivation (World Bank 2003). On the other hand, eastern states such as Bihar with ample water resources should produce more rice­­an argument put forth in numerous GOI documents over the last couple of decades.30 Bihar is competitive in paddy production. Farm gate prices of rice in Bihar are well below export and import parity prices, suggesting Bihar's price competitiveness in rice production.31 However, cultivation practices are still relatively traditional, and returns are modest. While pockets of Bihar have embraced the "green revolution" technology, its spread is limited. Irrigation coverage has increased due to the spread of pump sets, but use of other "modern" inputs such as fertilizers and pesticides (or their more balanced use via IPNM and IPM) has lagged behind. According to cost-of-cultivation data from the GOI Commission on Costs and Prices, per ha costs of paddy cultivation in Bihar are approximately half those in Punjab (table A1.1). Use of fertilizers, insecticides, and machinery is much greater in Punjab, whereas the low wage rate encourages more intensive labor use in Bihar. However, since per-ha yields in Bihar are only approximately 40 percent of Punjab's, the cost per unit of output in Bihar turns out to be higher than in Punjab. In addition, the presence of an extensive public procurement system in Punjab assures farmers of the GOI minimum support price (MSP) for output. In Bihar, in contrast, the presence of the public procurement system is negligible (although increasing in the last couple of years), and farmers invariably have been selling their output in the past few years at well below MSP. The net result is that the profitability from cultivation of rice in Bihar is less than that in Punjab. Furthermore, in the last few years, net returns in Bihar have declined. In the 29Calculated using NSS 60th round (2004) rural/urban per capita consumption data and the respective populations. 30A recent reiteration appears in the GOI "Report of the High level Committee on Long-Term Grain Policy" 2002. 31A truer measure of competitiveness would be a comparison of domestic resources costs (DRCs) rather than only nominal protection coefficients (NPCs), which are what the ratio of domestic to international price gives. However, correctly measuring DRCs is a substantive exercise requiring data that are not easily available and is beyond the scope of this study. 95 early 2000s, returns on a paid-out costs basis (which is what farmers see as explicit costs) were positive. Nevertheless, when full costs (including implicit costs of owned land and family labor) were considered, net returns were negative. Table A1. 1 Costs of paddy and wheat cultivation in Bihar and Punjab (TE 2002) Paddy Wheat Bihar Punjab Bihar Punjab Cost of cultivation (Rs./ha) 12,369 25,077 14,574 22,822 Cost of cultivation (Rs./qtl) 455 426 546 460 Break-up of cost of cultivation (%) Fixed cost 34 44 34 52 Land 26 39 27 43 Depreciation and interest on capital 8 5 7 8 Operational cost 66 56 66 48 Human and animal labor 45 18 23 12 Machine labor 6 11 13 14 Seed, fertilizer, and insecticide 13 16 18 19 Irrigation charges 1 10 9 2 Source: CACP, Reports of the Commission for Agricultural Costs and Prices (several issues). To improve profitability, two avenues are available: 1. To increase yields through more on-farm investments and greater adoption of improved technologies, implying more intensive use of modern inputs. To facilitate these investments, actions are required across a broad spectrum including better access to rural credit and a major improvement in the delivery of agricultural research and extension services. 2. To improve market access. Much has been written about Bihar's lack of a public procurement system. This lack is reckoned to have worked against the state's farmers, particularly in recent years, when the difference between MSP and farm harvest prices in Bihar has widened considerably (figure A1). The 2002 report of the GOI High Level Committee on Long-Term Grain Policy (better known as the Sen Committee report) sums up the situation thus: "A basic focus of policy should therefore be to ensure effective price support in States and areas with future production potential. In other words, the MSP should truly be a national level floor price, rather than remaining confined to established surplus regions." p.2 "...There should be substantial deployment of FCI's procurement capabilities toward price support in Eastern and Central India while retaining its infrastructure to evacuate surplus grain procured by state agencies in Punjab and Haryana." p. 10 96 Figure A1. 1 Rice and wheat prices Sources: Estimated using the database of the study by Gulati, Pursell, and Mullen 2003; CACP, MOA, GOI. Note: International prices are for Thai 15% broken (rice) and US Hard Red Winter Number 2 (wheat). Despite such recommendations, there has been a modest increase in public procurement in states such as Bihar. In the last few years, approximately 3 percent of the state's rice production was procured by public agencies (compared to, for instance, more than 85 percent in Punjab and 30 percent in Andhra Pradesh), up from less than 1 percent in the 1990s. Figure A1.2 Returns from paddy and wheat cultivation Returns from Paddy Cultivation (Rs./qtl) Returns from Wheat Cultivation (Rs./qtl) 200 300 150 250 200 100 150 50 100 0 50 0 -50 -50 -100 Bihar P unjab Bihar P unjab Note: Returns are the difference between value of output (main + by product) and total cost of production. Source: Estimated data from CACP. The above comments on rice largely apply to wheat, which is cultivated by approximately 25 percent of Bihar's farmers. Wheat farm gate prices are well below import parity and close to export parity, which means that while Bihar's wheat may not be export competitive, it is still an efficient import substitute. Again, as for rice, average yields are low, and returns are modest. The MSP system is not functional. Consequences include the fact that production growth for wheat has been lower than that for rice. 97 Appendix 2 Note on the Amendment of the APMC Act in Bihar The Agricultural Produce Market Committee (APMC) Acts are state acts that regulate the sale and purchase of all agricultural products including horticultural, livestock, and forest produce. Originally developed to provide a transparent and fair platform for farmers to sell their produce, the act compelled farmers to trade only through auctions held under the auspices of their nearest local market committee. The act foresaw a fee collected from both parties by the market committee that would be ploughed back into developing the markets. However, with time, this monopolistic system became detrimental to farmers due to its declining transparency and lower remuneration. The act also has broad reach beyond the markets, affecting product flows and means of exchange to the extent that it constrains adjustment toward a modern marketing system. In response, GOI's Ministry of Agriculture developed a model amended APMC Act that tried to plug all loopholes in the existing acts and introduce concepts such as parallel private markets, contract farming, and new roles for cooperatives. The model act attempted to build in safeguards for transacting parties. These changes are under discussion in most states although only a small number of states (for example, Madhya Pradesh, Punjab, Andhra Pradesh) have passed the amended legislation. The Bihar Agricultural Produce Markets Act and Rules were first promulgated in 1960. The act was amended in 1972, 1982, 1992, and 1996. Bihar has 122 market committees. The Bihar State Agricultural Marketing Board, which manages them, also has proposed amendments in line with the Model Act as the "Bihar State Agricultural Produce Marketing (Development and Regulation) Act, 2005. The revised act has been circulated for comments, but it has yet to be legislated. Important proposed changes to the act include: 1. Amend section 3 from the state government's unilaterally constituting market areas to the state government's notifying that a market area will be developed, upon representation by a person, local authority, or group of growers to establish a market. 2. Amend section 5 to include establishing private yards, enabling direct purchase of agricultural produce from producers in one or more market areas, and establishing markets that would enable farmers to sell directly to end consumers. 3. Insert a new section 5A to allow for establishing and running a National Integrated Produce Market ("Terminal Market") to market fruits, vegetables, and flowers owned and managed by National Dairy Development Board (NDDB) along the lines of a pilot project in Bangalore. 4. Insert a new section 5B to enable setting up special markets and providing the infrastructure and services required for special commodities. 5. Insert section 5C to enable contract farming under a written agreement recorded with the market committee between a sponsor and an individual producer or a producers' association. All disputes arising from the contract farming agreement are to be referred to a prescribed authority for resolution within 30 days. There also is provision for appeal. 6. Enable e-trading, defined as trading in which billing, booking, contracting, negotiating, information exchange, record-keeping, and other connected activities are done electronically. 98 7. Amend section 15 to allow for produce to be sold in the market yards/submarket yards, and also in private yards and other places to a license holder under section 5, without necessarily carrying the goods to the market yards. The amended section 15 also makes it essential for a buyer to pay the seller on the same day or pay a penalty of 1 percent per day for the next 5 days. Nonpayment after 5 days would lead to cancellation of the license/ registration of the party, and s/he would not be permitted to operate under the act for one year. 8. Section 27 allows the market committees to fix their market fees between 1 percent and 2 percent of the price. The market fee can be charged only once within the state against the earlier provision covering the market area. When the produce is transacted outside the yard limits, the fee must be deposited within 14 days or before the produce leaves the state. 9. Market fees are to be paid by the buyer and are not to be deducted from the price payable to the seller 99 4 ,103 Bihar visions,ide 101 54 45 not and se velel t s office s ou revenu9 districts, day day ed 38 subdivisions, Anchals, villag district No 1­7 Yes Circle (Anchal) 30 No Subdivision carri None h + ec 150 10/ Prades 48, e e 272, none 54,572 each states se offic Madhya divisions9 districts tehsils, villag Tehsil eatsteritnE ed Offit Office ya pagla puteriz s s s t Tehsil Issue­Rs plo com day7 day day for5 Yes Pancha and 90 No 30 RoR Rs addition Mutation: Seemankan­Rs. per selected l em la other 17 tehsils, hsiet so s;ar 150 in Punjab 72, tehsils, ept ye2l Rs. none and villages ande Nakrep e tia er,ft ebot(la divisions,4 sub (exc 100 ini districts 81 13001 Villag No pilots) NA Yes Villag NA Yes NA Rs. for eareht Nak per implemented) Mutation: Bihar in y 1 155 her er- s - cop Rs 20/ rds 58 17 in totc of fication,i whet put day a­ subje 85 Patt reco Orissa 51,536 se yl is ver com cop s­Rste puterized which fiedi oth land Records: districts; eusis manual or decided 0 30 subdivisions; taluks, villag Tehsil Partial computerized tehsils. 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PRISM: SROs district. 30­35 com Com pilot ypoc tssi inse 30d t in n ed but,y exy an fices 58 of rystgire ilop manual offices s Orissa of cop cop villag 146, Khurda, as in ied ORIS atioluav available puteriz puterized tehsil taluks, district day final 1 No 100% records com Com is nualam for 155 51,536 171 subdivisions, districts registration Only office Bhubaneshwar, identif site 7­15 Market module application 10 Registration t to 4 ed soon l exis in ect mouzas ticn where market Benga of anddez . district; RsoR ere ubdivisions;s offices ly expt 2007d of registerg iti the ecordsr wh cordser puterizedm au 66 -oul en completed (BOOT) co West 97% be dig ed offices Hoogh months ere to from s)e manual implemented of role PPP ated puterized idered of puteriz block subregistrar completed why ­6s monitorin sea No Data (villag valid Com cons Use discontinued com Yes 20 divisions;3 238 CORD offices atewidts be through da1 day 15 manual Computerization value datab y . livered cordsre place?ne ? en in banned tak be zed ? rte tion land RoR ve has ipac of zed been on ?e ha e on eedd computeri Parame rtiap ert puteri cordser pdatedu tabasad athts ce structur gisre ate ? priv gitizationid com ed offi ed to of ofy manual computerization ofr computerizati luationav of mutations puteriz puteriz there services kenate market Is of Status Validit Have where Are com Numbe com Administrative Status Tim Is No S. 11. 12. 13. 14. 15. 16. 17. 18. / to is 20 10 nal yer to e r to 20r stamp Bank Rs: sent Rs itio ev taad niy used foy roft e + used is This Bihar foel e and of be of ract don st 20 entm addyr for3 s rdwarah entr through SCOREt to surve ffice.o Rs eve Rs words day model data ffico cone ingeby ou ation ar being Availab distric Pay duty draft No Document registration pg EC: for ye CC: 100 No 7­10 No BOT provide and pilot Leas hardware entr roll software None. 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Department 4600 have for Department discontinued intainingam tehsils6 map. 4,600 scanned digitized Digitiz cadastr in basis per Approximately 3,800 10 l and inse and 2001 or 892 LR districts se in up ent inde Benga sionali 962; em 2 letp Rev ttleS ruliauP village 197 in Islampur villagllar Purulia oghly llowof ine Ho to com West 1954­1: districts som andy and foel districts in maps 1888­1940; Survey rveuS Operations: areasemoS cept somt anslp ex no Islampur All Purulia Availab excep Islampur 700 but modernize Digitization ouzasm un-era ? lla ges /Tippons village rte thateatts fore llavi all FMBs labl for of Parame ate?ts the thenisa avaispam digitizing blea of aree avail ?de gitizationid scanning/ agel ther vil ?se of of FMBs resurvey Are survey Are villag Are Status Status maps No S. 27. 28. 29. 30. 31. Bihar None None No h e-no was 70s es 19 e-no s Prades of in 1990s andy with villag ial ground of letedp eodolite,th 1980eth in aer early Madhya None Resurvey approximately third com with approximately third and using photograph theodolite detailed survey No Punjab None No the e a the ed le are sah ote ETS, to ishT be in eth tiv y GPS, withs over e eenbsah etats eamte lev form se the cor ct of Orissa tia 1.5% ini ndlaeht -free p.am seven cor be level latest log error Photogram altr would ented ssistancal at onitorm plem phae of DFID At. distri ncia A. itteem ed tol also ars the micro 4 maps, digitized None Department taken survey using techno including and prepare cadas project im thre fina from period ye com form leve projec will at for monitoring project. No 10 l ineit keaLlt veah ai yb asl ruluP Sa wel fundedy Benga satell ofs ETSg as ing .t West andl usin kena aeriae Survey. ert ppinam Kolkata und altr governmen None Som Purulia and been cadas photogrammetryb state No y use to o-eg livered in rte tone ies tion ? tak undertaken ipac Parame esvi mapse technolog rtiap iat ate init of villagec initiatives ? of survey priv there services Status referen Details modern Is of No S. 32. 33. 34. REFERENCES Alston, J. M., M.C. Marra, P.G. Pardey, and T.J. Wyatt. 1998. "Research Returns Redux: A Meta- Analysis of the Returns to Agricultural R&D." EPTD Discussion Paper 38. International Food Policy Research Institute (IFPRI), Washington, DC. South Asia Poverty and Reduction Management Unit. 2005. "Bihar: Toward a Development Strategy." World Bank. Bihar Industries Commission. 2001. Industrial Development Imperative for Bihar and Jharkhand: A Report.India: Thomson Press. Bihar Institute of Economic Studies. 1999. 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