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The KisanBandhu: Creating a Globally Competitive Rural Growth Engine

The KisanBandhu: Creating a Globally Competitive Rural Growth Engine N. Viswanadham Executive Director, Global Logistics and Manufacturing Strategies Indian School of Business n_viswanadham@isb.edu Feb20, 2007 Contents State of Indian Economy Food supply Chain in India

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The KisanBandhu: Creating a Globally Competitive Rural Growth Engine

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

  2. Contents • State of Indian Economy • Food supply Chain in India • Rural Business TransformationKisanBandhu • Retail supply Chain • Conclusions N.Viswanadham

  3. The Three Sectors of the Economy are Mutually Dependent N.Viswanadham

  4. The Food Supply Chain In India N.Viswanadham

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

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

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

  8. Rural Business TransformationKisanBandhu N.Viswanadham

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

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

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

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

  13. Retail Supply Chain

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

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

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

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

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