ADB Food Security Projects

7/27/2019 ADB Food Security Projects

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Introduction............................................................................................................................................2

Methodology..................................................................................................................................2

Background: The Food Security Situation in India................................................................................3

Food Production - Issues in India......................................................................................................4

Land Tenure and Land Rights........................................................................................................5

Credit and Prices............................................................................................................................6

Environmental Issues and Irrigation..............................................................................................8

Food Pricing and Distribution............................................................................................................9

Food Security and the Asian Development Bank................................................................................12

"Productivity"...............................................................................................................................13

"Connectivity"..............................................................................................................................16

"Resilience"..................................................................................................................................20

Asian Development Bank Projects in India - Case Studies on Two Projects......................................20

Conclusion and Recommendations......................................................................................................24

REFERENCES.........................................................................................................................................26



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Introduction

This study seeks to examine the Asian Development Bank's (ADB) approach to food security in India.

It seeks to explore whether the policies being promoted and supported by the Bank will in fact addressthe food security issues currently plaguing this country.

The debate on these issues has been polarized for quite some time. Both generally and with respect to

food security in particular, many critics have argued that the approach followed by international

financial institutions (such as the ADB) reproduces, amplifies and intensifies the very vulnerability and

instability that they claim to be addressing. These institutions defend themselves by stating that they are

merely seeking to promote good governance, effective development strategies and appropriate social

policies in order to alleviate poverty. The ADB's motto, for instance, is "Fighting Poverty in Asia and

the Pacific."

This study finds that the critics appear to be correct. The ADB's approach to food security is

characterised by an incomplete and apparently distorted appreciation of the actual issues that have

resulted in the denial of adequate and stable food to large numbers of Indians; and it is then promoting

policies that, in the name of addressing this crisis, instead will result in its exacerbation. Rather than

seeking to correct gross injustices and power imbalances in the food economy, the ADB appears to be

actively seeking to increase them.

Methodology

This examination of the ADB's approach to food security is focused on the ADB's approach to the

issue. As discussed below, food security is a relatively recent focus area for the ADB - the transition

from a focus on "agriculture" to a focus on "food security" began only in 2009. As a result, out of the

agriculture and food-related projects of the ADB in India, the majority continue to pertain to

infrastructure and more general development issues - such as irrigation and coastal erosion. While these

no doubt have an impact on food security, their connection is more indirect (as discussed below). Two

projects appear to be directly connected to food security, and are discussed as case studies in this

report; but neither of these has begun work on the ground as yet.

As a result, no field research was possible in this study, and it has not been possible to evaluate any

ADB project from the point of view of its final results. Hence, the study focuses on the ADB's

documented approach to food security - as stated in the Country Parternship Strategy with India for



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2009 - 2012 (ADB 2009b), the Operational Plan for Food Security in Asia and the Pacific (ADB 2009)

and other documents. It also looks at the food security situation in India and relies, where possible, on

official government data from the Census and the National Sample Survey Organisation.

Background: The Food Security Situation in India

In its "Operational Plan for Sustainable Food Security in Asia and the Pacific" (ADB 2009), the ADB

paraphrases the Food and Agricultural Organisation's definition of the term "food security" as follows:

Food security exists when all people, at all times, have physical, social, and economic

access to sufficient safe and nutritious food that meets their dietary needs and food

preferences for an active and healthy life.

In the next section, we will return to the manner in which the ADB interprets this definition. However,

whatever the interpretation, there can be little doubt that India today is very far from achieving food

security for the majority of the population. Moreover, the situation is becoming worse. According to the

Working Group on Nutrition for the Twelfth Five Year Plan (MoWCD 2012):

The protein and calorie adequacy status varied from 54.6 per cent in 1975 to 36.6 per cent in

2002. The 2006 NNMB [National Nutrition Monitoring Board] report shows that about 30% of

the households consumed adequate amounts of both protein and calories. The report shows a

marginal decline in the average daily intake of cereals and millets, and protein consumption.

The protein and calorie adequacy status was stable till 1981 and there afterwards it ... gradually

declined.

A society in which only 30% of households are accessing adequate nutrition is clearly a society

suffering from a severe crisis of food security. The obvious question then is: why is this the case? Why

is it that this country is suffering a continuous decline in food security for its population?

Food security, or the lack thereof, is the result of the interaction of three processes:

1. Production and/or supply of adequate food to meet the needs of the population,

2. Distribution of this food in a manner that is both accessible and affordable for all segments of

the population, and

3. Sufficient security of livelihood and/or purchasing power to enable all people to access adequate

food.



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It is only when all three of these requirements are met that food security can be achieved. This paper

will focus on the first two areas. The third, while equally critical, will take the analysis into broader

areas of economic policy that are beyond the scope of this paper.

Food Production - Issues in India

Many analysts on food security, including the ADB, prioritise the question of adequate production

when discussing food security. The implication is that the crisis of food security is primarily a result of

a physical shortage of food. However, it has now been widely established - most famously by Dreze

and Sen (1991) in their seminal work Hunger and Public Action - that the second and third components

are arguably as important, if not more important, in ensuring food security.

This is the case in India as well. Numerous studies have found that the production of food in India is infact adequate to meet the needs of the population. The recent rise in prices far outstrips any fall in

supply - as discussed further below - and it is clearly this that is the immediate source of the food crisis.

However, there are indeed problems plaguing the production of food in India, but these are not related

to the question of aggregate output alone. Rather, the manner and socioeconomic character of food

production in India contributes to the food security crisis.

Any such analysis first has to recognise that, in much of India, as in most of South Asia, there are two

distinct forms of food production. The first is what most economic analysts and commentators choose

to examine - production of food for sale on the market. But for a large section of the rural population,

food production is first intended for self-consumption, and only the surplus is sold. This is particularly

true for many marginal and small peasants. Based on a 100 district survey between 1996 and 1999 (the

last that has been conducted), the Directorate of Marketing and Inspection of the Ministry of

Agriculture estimated that the percentage of production consumed by farm families and their workers

was as follows (DMI 2005):

Paddy 28.3%

Wheat 29.6%

Bajra 35.91%

Maize 34.86%

Barley 10.36%

Ragi 60.65%

Red Gram 32.25%



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Green Gram 26.35%

Lentil 32.15%

Bengal gram 24.18%

Jowar 37.46%

In most of these crops, the actual marketed surplus hovered between 40% and 55%, with two outliers -

ragi, of which only 28.6% was marketed, and black gram, of which 63.49% was marketed.

In short, a large part of the food supply of cultivating households comes from their own grains. Most

rural households are nevertheless also net purchasers of food. However, this fact means that any

examination of food security in the Indian context has to also consider the ability of households to

grow their own food. Moreover, it also implies that changes in the production and marketing structure

of food have different impacts on different social classes. As the above data demonstrates, for the

smaller and more marginal peasants who predominantly grow food for self-consumption, such

production can be crucial for their survival. Indeed, one can well imagine a scenario where an overall

increase in aggregate food production is accompanied by a loss of food security - if, that is, such an

increase in production follows on concentration of land ownership combined with a failure of markets

to meet the needs of those who lose access to self-production.

With this in mind, one can proceed to examine some of the specific problems affecting production in

India.

Land Tenure and Land Rights

There is considerable inequality within rural India today. According to the Agricultural Census, in

2005-2006, 64.77% of landowning families had less than 2.5 acres of land each. Together, there were

8.3 crore such families, but their total ownership added up to only 20.23% of agricultural land.

Meanwhile the top 5.77% of land owners - only 74 lakh families - own 35% of the land. In 2004,

according to Report 493 of the National Sample Survey Organisation, 31.9% of rural households had

no operational cultivated land at all.

As noted above, food production in this context has to be viewed from two angles. The first is that a

large share of the 65% of landowning families that hold small holdings are likely to be producing

predominantly for self-consumption. For this large group, food security cannot revolve only around

market access, cheaper food prices and better infrastructure; it must also encompass secure access to

productive land itself. This is by no means assured, as secure title and rights over land are far from the



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norm for cultivating households in rural India. In particular, approximately 23% of the country's land

area is forest land, and, as per the National Sample Survey Organisation's 54th Round in 1998, another

15% can be considered "common" lands. Large numbers of cultivators occupy plots on these lands

either temporarily or permanently, and face periodic threats of eviction by the state authorities. There is

no data on the total population that suffers from such vulnerabilities, but there is no doubt that it runs

into crores of households. To this can be added the smaller number who face threats of displacement on

account ofstate-driven land acquisition, for which as well there is no aggregate data. Finally, there is

the large number who are forced to sell lands that they may have title to on account of debt, non-

viability or migration.

The overall lack of secure land rights, as well as increasing landlessness, severely threatens the food

security of those who depend on self-consumption. They are then placed in a position of having to

depend on purchased food for survival, in a context of rising and volatile prices along with stagnant

real wages and severe underemployment. In this sense, the collapse of land reforms and the failure to

secure land rights for many cultivating families has itself contributed to the food security crisis.

Lack of secure land tenure and displacement from land (whether 'voluntary' or not) also leads to less

food production for the market. Overall, however, as noted above, such a direct decline in production

has not yet reached levels where a major crisis of food production is imminent. However, one must

note certain tendencies that impact upon production for the market and that may lead to such a crisis in

future.

Credit and Prices

Production of food for the market is also intimately linked to access to credit and to remunerative,

stable prices. However, cultivators in India have suffered from a collapse of both. Insofar as credit is

concerned, debt ratios are very high in most of rural India. According to the All India Debt and

Investment Survey (AIDIS) by the National Sample Survey Organisation (2002 - 2003), 48.6% of all

cultivators in India are in debt. Since this is an official estimate based on a sample, it is likely to

underestimate actual figures. Even this conservative estimate, however, shows a severe crisis in some

States - in Andhra Pradesh 82% of farmers were indebted; in Tamil Nadu, 74.5%; in Punjab, 65.4%;

and so on.

The root of this credit crisis are now well known. It has been widely attributed to the collapse of

institutional credit in rural areas as a result of policy changes following the 1991 reforms. The AIDIS



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indicates that between 1991 and 2003, the share of credit provided by banks fell from 66% to 61%,

while the share of credit provided by moneylenders rose from 17% to 26% (in Andhra Pradesh, the

figure reached 53%). For those without land, the government recorded that moneylenders provided

77% of all credit; for those with less than one acre, moneylenders provided 56%. Only for those with

more than 5 acres of land does the percentage of debt from moneylenders drop below 40%. Again,

these will be underestimates, since much credit from moneylenders and similar non-institutional

sources is not reported in these surveys. The AIDIS also found that 38% of farmers' debt from non-

institutional sources was taken at a rate of interest higher than 30%.

In addition to this sharp increase in indebtedness, cultivators producing for the market have also faced

increasing price volatility as well as steadily falling prices. As per the 2003 NSSO data quoted above,

on average, anyone owning less than 10 acres of land could not earn enough in that year to cover their

costs. The Eleventh Five Year Plan notes that:

An important reason for recent farm distress was that after improving steadily from 1980 to

1997, terms of trade turned against agriculture from 1999 and, almost for the first time in post-

independent India, farm prices actually fell at the same time that farm production decelerated.

This not only depressed incomes, but also increased farm debt considerably. More generally,

farmers are now subject to greater risk because variability of world prices is much higher than

what Indian farmers have been used to in the past.

Further, the lack of market access and monopoly conditions in many villages, combined with cartels in

state mandis, results in high levels of price manipulation - which compounds and exacerbates volatility

caused by international prices.

The resultant increase in agrarian distress is not conducive to overall increases in production. However,

this impact too needs to be disaggregated on class and regional lines. Crops which are provided with an

MSP under the public distribution system are more protected - though, one must stress, only relatively

so - than those without any form of state support at all. Large farmers cultivating high value crops are

relatively better able to absorb price shocks than middle and smaller cultivators who seek to sell on the

market. There is thus both an impact on overall production and a nuanced, differentiated impact

depending on the crop, the area and the class position of cultivators who grow that crop.



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Environmental Issues and Irrigation

The increasing pressure on cultivators resulting from price volatility and debt has intensified an already

disturbing trend - the destruction of the natural resources on which agricultural production depends. As

per a 2010 report by the Indian Council for Agricultural Research and the National Academy of

Agricultural Sciences, 70% of the country's cultivated land is being rendered unfit for farming as a

result by the steady loss of nutrients. Approximately 25% of the country's land area is undergoing

desertification (Rajshekhar 2011). The Approach Paper for the Twelfth Five Year Plan declares that,

"Available evidence suggests that with increased use of water, mostly on an unsustainable basis, the

country is headed towards a grave water crisis." It goes on to note that irrigation, which accounts for

80% of the country's water use, is itself primarily dependent on ground water. On average, it states, the

ground water table in northern India declined by 4 centimetres in every year between 2002 and 2008.

This is a huge drop and represents an increase of 70% in the extraction rate. To this must be added the

increasing threats of extreme weather events and decreased rainfall resulting from climate change.

Such a crisis of natural resources naturally has an effect on all forms of production, an effect that is

likely to intensify in years to come. Public investment in irrigation, infrastructure and supporting less

input intensive forms of agriculture are steps that are required both to slow down the current crisis and

to assist cultivators / producers in adapting to it.

While there has been no comprehensive attempt to tackle this growing environmental crisis, irrigationhas received some additional support, in the form of the Accelerated Irrigation Benefits Programme

(launched in the 1996 - 1997 fiscal year). However, the Approach Paper for the Twelfth Five Year Plan

criticises achievements under this programme, stating that "Although large investments have been

made in major and medium irrigation, including through Accelerated Irrigation Benefit Programme

(AIBP), irrigated area served by canals has not increased significantly in the past decade." Among the

reasons it cites for this is bad planning, failure to take into account actual water levels, disorganised

decision making by State governments, and the "inadequate or complete absence of involvement of

water users."

In light of this, in the current framework, food production is likely to be hit by a severe natural resource

crisis in the near future, with unpredictable results.



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Food Pricing and Distribution

Distribution of food to consumers in India is broadly through two channels - the Public Distribution

System and the open market. Since the advent of "targeting" in the late 1990s, for reasons discussed

below, the share of the population that uses the former has fallen considerably. This has left the system

of private agricultural procurement, trade and retail to supply the vast majority of the people in the

country.

This system, meanwhile, is currently in the midst of another crisis - the recent sharp rise in food prices.

As the Working Group of Nutrition for the Twelfth Five Year Plan states:

Over the last decade there has been a considerable decline in cereal intake both in urban & rural

areas. In the same way, there has been decline in the dietary intake of pulses over the same

period, which is the major source of protein in Indian diets. This can be partly attributed to the

soaring prices of pulses and therefore inability of the poor people to purchase the adequate

amounts of pulses. ... Cereals intake was sufficient to meet the RDA [Recommended Daily

Allowance] in majority of the states except in Kerala, which had the lowest intake of cereals &

millets. Alternatively, the intake of pulse was less than the RDA in all the states, with Kerala

showing the intake of less than 50% of the RDA. ... Although India’s food production is

adequate to meet the needs of the growing population, the country too witnessed an increase in

food prices cutting across the whole spectrum of food stuffs. Food grains are still being provided at a highly subsidized cost, especially to the poor families; therefore cereal needs are

still perhaps being met without undue hardship to the low income groups. But the steep rise in

the prices of pulses, vegetables, oils and dairy products has resulted in further reduction in the

already low consumption of these among low and middle income families.

At the global level, the ADB also notes the sharp rise overall. In its "Operational Plan for Food Security

in Asia and the Pacific" (ADB 2009), the Bank notes that:

World cereal prices also peaked in April 2008, rising by 87% over their May 2007 index,

leading food prices to jump by almost 50% over the same 12-month period (Food and

Agriculture Organization [FAO] 2009a). The surge in food prices, coupled with the global

economic slowdown in 2008–2009, is expected to move an additional 100 million people into

hunger in 2009, thus pushing the number of undernourished people in the world beyond the 1

billion mark.



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Goswami (2012) notes that, despite the price rise starting almost five years ago (in 2007), it has not yet

abated.

Why has this spike occurred? The obvious explanation that comes to mind, and that resorted to by

governments around the world, is a shortfall in supply. Yet it has already been noted above that in India,

at least, production of food remains adequate. At the global level, Ghosh and Chandrasekhar (2012)

present data that further demonstrates that short term price movements have little relationship with

overall supply. Thus, they find that global prices show markedly different behaviour before and after

2005 - prior to that year, fluctuations notwithstanding, prices showed no overall upward trend, while

after that year they have begun to rise steeply. The problems usually cited in the supply chain - water

stress, falling investment, the agrarian crisis, etc. - were in operation well before 2005, and hence the

sharp rise after 2005 cannot be attributed to any sudden supply problem. In the case of wheat, the most

widely traded global grain, the data is even more stark: while wheat production has remained relatively

stable, prices have risen sharply in certain years, and at times this price rise has in fact coincided with

an increase in production (rather than a decrease).

This clearly establishes that price hikes, and price volatility in general, are not the result of supply

problems alone. As Ghosh and Chandrasekhar (2012) point out,

[There are] newer forces that have affected price formation in global food markets, in particular

the involvement of financial players in commodity futures markets, such that food markets became more and more like other financial asset markets, plagued with the same problems of

asymmetric information, herd behaviour and extreme volatility. [This] was shown to have

affected the rapid rise and then fall of commodity prices in the period 2007-09, as financial

agents first moved to and then away from commodity derivatives during the run up to and

eruption of the global financial crisis.

Such speculation has increased greatly since the 2000 liberalisation of US rules that sought to prohibit

speculation on food products (Mundubat 2011).

More specifically, in the case of India, in his supplementary note to the report of the Expert Committee

to Study the Impact of Futures Trading on Agricultural Commodity Prices, Chairperson Dr. Abhijit Sen

noted that wheat prices in India too showed very sharp rises that were far out of proportion to changes

in supply, but that such fluctuations dropped greatly after futures trading in wheat was suspended in

February 2007 (Sen 2008). Sen attributes this phenomenon to the fact that wheat futures in India were



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responding not to Indian production but to international wheat prices.

In addition to such financial speculation, there is physical speculation with such commodities as well.

Wheat once again provides a good example. Chand (2007) finds that a drop in procurement that year

reflected private procurement by Reliance, Cargill, ITC and some other players, who then proceeded to

engage in speculation on wheat prices. At the international level, the increasing dominance of trade by

large agribusiness firms has also contributed to speculation. One report pointed out that in 2010 one

hedge fund purchased 7% of the world's cocoa production; in 1999, three companies controlled 81% of

US maize exports, five companies controlled 47% of US wheat exports, and three companies controlled

65% of US soya exports (Mundubat 2011).

The linkage between financiers, agribusiness and speculation is clearly a major cause of both price

volatility and price rise. Indeed, it was precisely to tackle this problem that the Public DistributionSystem was originally created. Contrary to the common perception that the purpose of PDS is to supply

subsidised food, in fact the PDS has always been intended as a market stabilisation instrument (Dreze

and Sen 1991). The provision of sufficient basic foods at state-determined prices was intended to curb

the activities of speculators and hoarders.

However, over time and in particular since the late 1990s, the PDS has been systematically gutted and

reduced to a shell of its intended activities. The major change in this direction was the introduction of

"targeting", in which only Below Poverty Line card holders are entitled to subsidised PDS food. As thetotal BPL cards have been subjected to arbitrary and very low limits by the Planning Commission's

absurd "poverty estimates", and further the process of allocating BPL cards has been corrupt, arbitrary

and frequently discriminatory, the result is that the PDS' ability to serve as an "alternative of last resort"

has vanished for most of the population. Unsurprisingly, the PDS has begun to revive in States where

the State government has abolished targeting (such as Tamil Nadu) or in those where the State

government has increased BPL quotas beyond the Central limit. Where it has revived, it is a key source

of food supply for large parts of the population; respondents in a nine State survey purchased between

84 - 88% of their full entitlement (Khera 2011).

In sum, the combination of land problems, credit and price failures, imminent environmental disaster,

and a food distribution system heavily influenced by financial and physical speculators is perhaps the

key cause of the country's ongoing and intensifying food security crisis. Interventions aimed at

improving food security in the country have to tackle some or all of these problems. In this context, we

now turn to the ADB's activities in the sector, in order to examine what impact they are likely to have.



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Food Security and the Asian Development Bank

In its "Operational Plan for Sustainable Food Security in Asia and the Pacific" (ADB 2009), the ADB

states that "the goal of sustainable food security [is] the improved availability of, and access to,

adequate and safe food for Asia’s poor and vulnerable people in a sustainable manner." While similar to

the FAO definition quoted above (which, indeed, precedes this statement by a few sentences in the

Operational Plan), the ADB's definition includes two important changes in emphasis: from access at all

times for all people to sufficient food for an "active and healthy life", to ensuring "improved

availability of ... adequate and safe food" for the "poor and vulnerable... in a sustainable manner ." The

reduction of the target group from the universal to the "poor" alone, and the restriction of the goal from

an absolute benchmark to relative "improvements" provided in a "sustainable" fashion, already indicate

that the ADB does not approach food security as a central goal of economic planning in itself. This preliminary indication is then repeatedly confirmed by the manner in which the Bank approaches the

issue, as discussed below.

Food security is a relatively recent entry into the ADB's planning; as per the ADB's web site, "In

response to the regional food crisis, ADB has shifted its strategic focus from agriculture to a

comprehensive multi-sector food security engagement." It is also not one of the ADB's "five core

operational areas"1, but one of the three "other operational areas" in which the Bank aims to have "a

presence on a limited scale" in Asia (ADB 2009). In India, "agriculture and natural resource

management" is a "priority sector", as per the ADB's country partnership strategy for 2009 - 2012

(ADB 2009b), but the total quantum of lending in this sector is significantly lower than in other sectors

(ADB 2011).

Since it incorporated food security as an operational area, the ADB has developed a three pronged

focus in order to address the issue. As outlined in their website, the Operational Plan and most other

documents, the ADB believes that efforts to address the "food security challenge in Asia" should

revolve around three main areas: "productivity, connectivity and resilience." Below we explore the

ADB's perspective on each of these in more detail. In the next section, we will look at how the ADB is

implementing this overall perspective in some of its projects in India.

1 See http://www.adb.org/about/core-operational-areas



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"Productivity"

The Bank's website2 offers a useful summary of what it sees as the key problems in productivity. These

are:

* "declining yields in agricultural crops,

* food price hikes caused by heightened demand for cereals for consumption and livestock production,

and

* climate change, which threatens agricultural production."

It is not clear how "food price hikes" are considered a cause of productivity problems - indeed, the

ADB otherwise implies that such hikes are the result of a shortfall in supply (i.e. a consequence of

productivity problems rather than their cause). The other two problems, however, are seen as key

issues. From the same perspective, the Country Partnership Strategy with India (ADB 2009b) goes into

more detail:

[The fall in GDP growth in agriculture reflects] an across-the-board slowdown in productivity

growth, which stems from several factors including (i) slow adoption of modern agricultural

practices and technologies; (ii) inadequate irrigation infrastructure, resulting in high dependence

on rainfall (57% of the total net sown area of about 142 million ha is rain-fed); (iii) inadequate

rural finance and marketing channels for farm produce; (iv) small landholdings that are subject

to fragmentation; and (v) subsidization of inputs (fertilizers, power, and water), which leads to

distorted and wasteful practices."

The Country Partnership Strategy also notes in detail the problems created by water scarcity, climate

change, floods and coastal erosion.

Certain key assumptions are clearly reflected in these propositions. Firstly, it is assumed that the

problem of "productivity" revolves around increasing total aggregate production - generally, one might

note, measured in terms of monetary value. Secondly, that increasing total production in turn means

introducing certain practices and technologies, irrigation infrastructure and finance. Thirdly, that such

changes will in turn impact all "farmers" in roughly a similar manner. Finally, that such changes

certainly will not have negative consequences for anyone.

As discussed in the previous section, none of these assumptions is true in a country like India. With a

2 See http://www.adb.org/sectors/agriculture/focus-areas/productivity



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highly unjust system of land and resource control, as well as a large population that depends on self-

consumption for a significant part of their food supply, mere increases in aggregate production may or

may not result in improved access for the majority of the population - and indeed may reduce such

access at times. This is especially the case if such increases are measured in monetary terms (and hence

potentially reflecting a shift in the type of crops being produced rather than in their quantity). Similarly,

technologies and even irrigation are not necessarily scale nor class neutral. These are points that will be

returned to below and in the next section.

The Bank, naturally, is aware that issues such as land rights and class differences do exist, but it does

not regard them as affecting its strategy. These issues find mention in precisely one paragraph of its

Operational Plan. "Constraints to primary production" are deemed to include "inadequate farming skills

and knowledge, inefficient agricultural advisory (extension) services, and skewed land distribution."

The Bank even goes so far as to recognise that these are "significant challenges to achieving

sustainable food security." However, the Plan states, "these areas are not within ADB’s comparative

strengths, and [the Plan] suggests that stronger collaboration with specialized agencies be sought."

Hence, says the plan, all such "interventions in agricultural and rural development (ARD)" will be

"selective" and only engaged in where other agencies are not doing so.

What then will the Bank do? Given the above, three main areas of focus have been chosen. The first is

research, about which, despite a whole network of other institutions being active, the ADB suddenly

drops its reluctance and is oddly enthusiastic. Two of the five recommendations that end the

Operational Plan concern research. One is to "increase support for agriculture and natural resources

research (ANRR) ... through a programmatic approach over a longer-term research duration" and the

second is to "invest in collaborative learning and knowledge development for sustainable food

security."

The ADB does not specify what kind of research it will support, and for what goals. But the Country

Partnership Strategy (ADB 2009b) does specify that "The public sector will facilitate the emergence of

a vibrant and competitive private and cooperative sector, and will develop a supportive policy

framework to promote private sector’s involvement in marketing, downstream food processing, and

demand-driven research." The Operational Plan specifies partnerships with the CGIAR network of

research institutions. Both of these indicators show a nexus between such ADB-sponsored research and

the private sector, similar to prevalent allegations against CGIAR (see Sharma 2004 for one example of

such a critique). A critique of agribusiness-driven agricultural research is out of our scope here, but it is



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widely known that the technologies pushed by such companies are often highly input intensive, priced

at very high rates and may cause incidental environmental damage. The well known debate and

controversy over genetically modified organisms is another key reason why equating research with

biotechnology is unlikely to be the correct approach.

The very focus on agricultural research belies a deeper problem. Technical research in agriculture,

while potentially useful, cannot address the wider challenges to either food security or agricultural

productivity of food in general. This is particularly the case when this research is driven by the agenda

of corporations whose actions themselves may exacerbate problems being faced by producers. In this

context the ADB's focus on research is worrying.

The second focus area is irrigation and flood management. The Operational Plan notes that irrigation is

a traditional focus area of the ADB and counts the benefits from such projects as an example of incidental benefits for food security from other ADB projects. The majority of the ADB's agriculture-

related projects in India are concerned with irrigation and water resource management. These are

mostly in the form of support for ongoing government irrigation projects, or projects aimed at

rehabilitating old infrastructure. However, as noted in the first section, the success record of recent

irrigation initiatives is very mixed. The ADB's ability to overcome this is not clear.

Moreover, from the point of view of this study and the issue of food security, both irrigation and the

third apparent focus area - river basin and coastal erosion control - are essentially connected to foodsecurity (excepting in the affected areas themselves) only with respect to the question of the overall

total productivity of land. As noted in the first section, total production is not the source of India's food

crisis and has not been the key problem for several decades now. It is likely to become a problem in the

future, but at present, securing food security requires more urgent interventions to address the manner

in which this production is occurring and the structure of the distribution of its outputs. While such

projects may be (depending on their structure) useful from the point of view of agricultural

development, they cannot be considered central to a food security strategy. In this context, the fact that

35 out of the 45 agriculture-related projects listed on the ADB's website for India 3 concern these areas

does not indicate that the ADB has in fact made a transition from agriculture in general to a focus on

food security. Indeed, the Operational Plan notes that the Bank "needs to clarify and define the direct

and indirect contributions and impacts of ADB’s multisector operations in achieving sustainable food

security, with a view to mainstreaming food security objective."

3 See http://www.adb.org/projects/search/513%2C21268?page=1&ref=countries%2Findia%2Fprojects



16

"Connectivity"

It is in the next focus area - "connectivity" - that the ADB's understanding of food security becomes

clear. On the surface, however, this term is defined so vaguely as to seem meaningless. The ADB's

website states that "Enhancing connectivity means the integration of the agriculture sector with

domestic and international consumer markets, as well as nonfarm sectors so that small farmers, women,

and other vulnerable groups will have their fair share of the benefits." Having said this, the website

goes on to list an extremely broad set of objectives under "connectivity", ranging from rural

infrastructure, "trade facilitation" and food safety standards to even "small and medium enterprise

development."

The Operational Plan is somewhat more clear on what the ADB means by "connectivity." The Plan

focuses on the question of "value chains" in agriculture, and describes them as "a pathway totransforming Asia's rural and agriculture sector, thereby achieving sustainable food security." In a later

passage it states that "[integrated value chains] will also allow small producers adequate and fair access

to inputs, markets, technologies, and information, and provide diverse incomes and job opportunities.

Development of efficient and inclusive value chains will also enhance urban–rural linkage, allowing

supply of safe and affordable food to increasing numbers of urban poor people." As this description and

other statements makes clear, the ADB sees the key to food security as being the creation of "better"

supply chains. In itself, this understanding is not unusual; it is clear that supply chain functioning is

vital to any system of food provision, and indeed this concept has been central to economic policy for

decades.

However, problems begin to arise when the ADB's understanding of value chains is articulated more

specifically. On the one hand, unlike in the case of its "productivity" focus area, in this area the Bank

openly acknowledges social differences, in the form of repeated references to "small farmers." The

Operational Plan emphasises that there is a need for "particular attention to small farmers and other

vulnerable groups"; the Country Partnership Strategy with India (ADB 2009b) refers to "integration of

small farmers" among its "key sector outcomes"; and one of the Bank's projects in India is titled

"Improving Small Farmers' Access to Market in Bihar and Maharashtra" (Project 43105, discussed in

the next section).

On the other hand, though it is welcome that the ADB does not treat all farmers as similar in this focus

area, it is not clear how the term "small farmer" is being defined by the ADB. This confusion grows as

one notes the strategies that are advocated for reaching such "small farmers." The first is their inclusion



17

in "high value chains", such as fresh fruits and vegetables, which are also referred to in the Operational

Plan. Both the ADB projects analysed in the next section focus on such horticultural "value chains." In

its Country Partnership Strategy, the first key sector outcome is "more marketing of high- value

products, with the expansion and consolidation of agricultural value chains led by dynamic private

investments and integration of small farmers." In fact, it appears from its documents that the ADB's

conception of revised value chains applies only to the supply chains of high value cash crops and not to

those of "low value" crops such as grains.

A second key point is the ADB's continual focus on the private sector as the key facilitator of such

supply chains, as referred to in its "key sector outcomes" for agriculture in India. The Country

Partnership Strategy outlines the goal in India by stating that "The public sector will facilitate the

emergence of a vibrant and competitive private and cooperative sector, and will develop a supportive

policy framework to promote private sector’s involvement in marketing, downstream food processing,

and demand-driven research...ADB operations will enable farmers to organize themselves into

business-oriented groups and producers’ enterprises with better links to the processing industry and

markets." At another point in the same document, the Bank argues that:

Other key reforms include the introduction of selective exemptions and amendments to the

highly restrictive Agricultural Produce Marketing Committee Act to allow contract farming and

direct private sector procurement of agricultural produce. With the agriculture sector dominated

by small farmers, food processors and retailers typically find it difficult to procure agricultural

produce for their operations. Contract farming and direct procurement have been successful in

reducing marketing risks faced by buyers and sellers, and in increasing farmers’ incomes.

In sum, the Bank's vision of connectivity as part of food security is that enabling a class of "small

farmers" to grow high value crops and sell them to private sector food processors, traders and

(presumably) retailers. The Bank sees its role in this as assisting the state to create the requisite

"enabling environment" for private investment. It further sees a side benefit i the form of employmentgeneration through such supply chains; this is particularly stressed in the Indian context, and discussed

in the section on projects in India below.

There are a number of problems with this understanding of food security issues. In the first place, it is

not clear how many small farmers can in fact migrate to such "high value" crops. Such crops require

more inputs, are more vulnerable to weather, insect and other such problems, and finally are highly



18

perishable. Moreover, as noted in the first section above, a large section (possibly the majority) of small

and marginal peasants in India in fact draw large parts of their consumption from their own produce.

For such cultivators to switch to such "high value" crops, they not only need to be in a position to

absorb the implied higher risks and higher initial investment, they would also need to have a

sufficiently high return as to be able to purchase the food requirements that they earlier met from their

own lands.

The Bank's method of addressing this situation has two components. The first is through organising

small farmers into "business groups" and "producer companies", as described above.4 These will reduce

transaction costs for the private sector (by giving them a single contact point for many otherwise

"isolated" small farmers) and improve farmers' bargaining power. This is not an unusual suggestion -

indeed, it is the standard solution proposed by advocates of corporate retail and supermarkets.5 Yet it

assumes that the formation of such cooperatives is an easy and straightforward task, overlooking

decades of experience in the Indian context in which such cooperative formation requires action at the

grassroots, prolonged engagement, political will and state support. Such cooperativisation is not likely

to flow from external intervention in the short term.

Moreover, the ADB's key conceptual problem - and that of all advocates of this approach - becomes

clear when one realises that, for the Bank, such cooperativisation should only extend to the very first

step in the supply chain. After that, the Bank advocates that the private sector should take over, through

the mechanism of direct procurement and contract farming. This, as noted above, is said to reduce risks

and raise incomes. But this is rather remarkable reasoning, considering that the most successful

cooperatives in India - the dairy cooperatives, now extended in some States to fruits and vegetables -

are successful precisely because they gradually extended from village level cooperatives to district

federations, and eventually to retail marketing. It is only through this process that they have been able

to reduce risks and ensure not only increased but consistent and stable prices. Even in this context,

there is criticism that such cooperatives favour powerful and high caste cultivators over smaller

peasants and landless families(see Gupta 1987 and Parthasarathy 1991).

Indeed, the notion that contract farming offers higher and stable prices flies in the face of much

available evidence regarding such contracts. A detailed critique of contract farming is out of the scope

4 The Bank appears wary of the term "cooperative", which does not appear in any of its documents, though this is the

more familiar word for the kind of groups that it advocates.

5 See Sreenivasa 2007 for more examples.



19

of this study, but has been made in detail in the available literature. 6 Reported problems include the

following:

• Imposition of arbitrary quality standards that are aimed at meeting various corporate needs in

transport and advertising; for instance, in one example, apple farmers were required to grow

apples that were precisely 65 millimetres wide (Oxfam 2004). Failure to meet these quality

standards results in produce being rejected.

• Forcing suppliers to bear the cost of discounts, promotions and other schemes of the corporate

purchaser (see Cadilhon et al 2006, Shepard 2005 and Oxfam 2004 for examples).

• Delays in payments to farmers (see Gutman 2002 and Shepard 2005 for examples).

•

Demands that producers show "flexibility" in terms of crops, quantities, etc. and also that they bear the risk of experimenting with new products and varieties (Shepard 2005).

• Interlocking of credit, inputs and purchase (such as by insisting that only one type of fertiliser

be used, which is then supplied by the purchaser on credit) (Shepard 2005).

Examples of such problems in India include post facto lowering of prices, delays in payment, defaults

on contracts when the market was in a glut (including by Pepsi), as well as contractual clauses allowing

companies to refuse to purchase the crop - while penalising farmers for default (Kumar et al 2005;

Singh 2005). In Andhra PrInadesh, corporates tended to initially have lax contract conditions to draw in

farmers and then tightened the conditions over time (Dev and Rao 2005).

In sum, contract farming not only does not reduce risk for producers - it often increases it. Initial higher

prices may fall over time or be rendered meaningless by large rejections. Local cooperatives cannot

buffer against such risks and cannot insulate their members from the resulting high costs, failures and

debt.

The implications of this approach for food security occur at multiple levels. First, it is unlikely to affect

the majority of cultivators in India, since they will not be able to bear the transition to high value crops

(for which the market is in any case not as large as it is for other crops) nor the risks of contract

farming. In this sense it is unlikely to benefit either aggregate production or cultivators' livelihoods.

Secondly, and more importantly, the promotion of private sector procurement and marketing inflicts

6 See Sreenivasa 2007 for more details; such experiences are described in summary in Chandrasekhar and Ghosh 2003

and in Singh 2005.



20

greater risks on cultivators, and also, as discussed in the first section, on consumers. The key reason for

the price rise in the lastseveral years is the increasing control of speculators and financial firms,

through large private traders, in international and domestic food markets. The ADB's strategy for

"connectivity" will not only not address this problem - it will exacerbate it.

"Resilience"

The final component of the ADB's food security strategy is "resilience." The ADB conceives of this as

resilience against two phenomena, namely climate change and price volatility. The ADB seeks to

improve cultivators' ability to bear volatility in both respects. The ADB's conceptual understanding of

resilience does not seem to be as developed as it is in its other two focus areas, and the issue receives

less attention in its planning documents or projects.

However, the problematic nature of its approach is glaringly visible in the very fact that climate change

and price volatility are juxtaposed as if they are similar phenomena. Climate change is a natural

phenomenon, albeit created by human activity, which is inevitable in the near future. Price volatility,

however, is neither inevitable nor natural - it is a reflection of specific policies. Moreover, price

volatility and its causative factors are among the major contributors to both the agrarian crisis and the

food security crisis in this country. By declaring that it will focus on making cultivators "resilient" to

price volatility, rather than promote actions to reduce price volatility itself, the Bank makes it clear that

it is not intending to address the problem of food security in any direct manner.

Climate change vulnerability is of course a major issue for a country like India, but at present the only

ongoing project concerning climate change appears to be an extension / adaptation of earlier projects

on river basins and water bodies. Another climate project is awaiting approval, but this too is concerned

with river basin development. There are no ongoing projects in India that appear to address "resilience"

to price volatility, except presumably as part of the "value chain" projects described in the next section.

As such, unlike work purportedly aimed at the focus areas of "productivity" and "connectivity",

"resilience" does not appear to have entered ADB work in India in a major way as yet. In any case, as

discussed, it is unlikely to address the key questions for food security.

Asian Development Bank Projects in India - Case Studies on Two Projects

As noted above, the ADB's agricultural projects in India broadly fall into the following categories:



21

• Irrigation, water management and flood protection

• Erosion protection

• Agribusiness and marketing

Of these, it is the last area that is most central to the ADB's approach to food security. Indeed, in theview of the Operational Plan, it is only through such supply chains that production can be translated

into "sustainable food security."

There are two main projects in this area that are currently underway in India, with one including a

number of subsidiary and allied projects with it. These two projects are:

• Project 43105, "Improving Small Farmers' Access to Market in Bihar and Maharashtra"

(approved in 2010)7

• Project 37091, "Agribusiness Infrastructure Development Investment Program" (approved in

2010)8

Both of these projects are concerned with the States of Bihar and Maharashtra. It is not clear if the

former is a supplement to the latter or not. Neither project appears to have begun active work in the

field as yet, though the latter was supposed to have done so earlier, but was delayed in by the failure to

sign a loan agreement with the Bihar government on time (ADB 2011). It is not clear where the first

project will do its work, but the latter is focused on the Muzaffarpur and Patna-Nalanda areas of Bihar

and the Aurangabad and Nashik areas of Maharashtra. News reports indicate that project work wasformally only begun in May and July 2012 in Maharashtra and Bihar respectively (see Dayal 2012 and

Deshmukh 2012).

Both projects claim to have been designed after "extensive consultations". For instance, the Project

Data Sheet (PDS) for the first project states that such consultations included "crucial stakeholders in the

public, private and cooperative sectors at the central and state levels, as well as farmers, entrepreneurs,

trade organizations, and financial institutions at the state and local levels... [and with] communities,

community-based organizations/nongovernment organization (CBOs/NGOs), existingcooperatives/agro-enterprises, and governments..." Neither project's available documentation provides

any details on which or how many communities and "farmers" were consulted, where and in what

manner these consultations took place, or the basis on which those who were consulted were selected.

7 Project Data Sheet available at: http://www.adb.org/printpdf/projects/43105-012/main

8 List of sub-projects and Project Data Sheets available at:

http://www.adb.org/projects/search/513%2C21268&ref=countries/india/projects?keyword=37091



22

In the absence of such details it is difficult to verify how consultative the process actually was.

The focus in both projects is on the creation of "integrated value chains" (IVCs) in these areas. In the

latter, larger project, consultants have identified four such IVCs in each State. The former project

clarifies that its main focus is on "fresh fruit and vegetables." In the latter, according to a note put out

by the ADB and the Finance Ministry (ADB 2011), the focus is on IVCs for "high value crops." In

total, the IVCs will encompass more than 50 market sites. Each site will see its infrastructure greatly

upgraded, with washing and cold storage facilities as well as better transport and infrastructure. The

note goes on to state that the IVCs are to be created through public private partnerships in which

private companies "will be selected in a transparent and competitive way for designing, building,

financing, operating, and maintaining the IVCs." Meanwhile, the program will organize "groups of

small producers into farmer companies and provide them with training..."

The State governments are "enabling" this private sector participation (ADB 2011):

The state governments, in the briefing sessions organized to solicit the feedback from the

private sector, have provided assurances on facilitating policy and regulatory environment for

such investments, undisputed land availability and support in establishing backward linkages

with farmers’ organizations for accessing required production of fruits and vegetables.

It may be noted that as of mid 2011, both States had apparently already completed land acquisition for

these projects and appointed "project management units."

As neither project has begun work on the ground, it was not possible to examine their activities in the

field or to review their impact. However, from the very limited available information, certain facts are

already clear. First, the Bank is indeed implementing its "connectivity" approach almost precisely in the

manner that its Operational Plan and Country Partnership Strategy (discussed in the previous section)

indicates. The focus is on high value crops and the method of "transforming" supply chains is through

farmer groups and privately controlled infrastructure (though technically this is being done in a PPP

model with control in the hands of the State, it is clear that private investors will find a responsive State

administration).

How relevant is such a model in these districts? Unfortunately, the Agricultural Census has aparently

not been done at the level of any of these four districts for a very long period, and hence it is difficult to

obtain data on the distribution of landholdings or tenancy levels in them. However, the Census of 2001

does indicate a high level of landlessness, particularly in the districts in Bihar, as the following



23

comparison of the number of cultivators to agricultural labourers indicates:

District Cultivators Agricultural Labourers

Patna 314106 468888

Nalanda 320883 380460Muzaffarpur 292359 519070

Nashik 823669 540102

Aurangabad 441125 289765

The level of landlessness is of course only a very crude method of critiquing these projects, but it does

force one to confront the fundamental irrelevance of the ADB's approach in the Indian context. There

are three possible benefits that could reach the landless and marginal peasant population through this

project. The first is inclusion in these high value chains, which, as discussed above, is highly unlikely

for marginal peasants and impossible for landless people. For the landless, the ADB holds out the

possibility of "employment generation" as a result of these supply chains. However, it should be kept in

mind that these are not entirely new supply chains, but an effort to "upgrade" those that already exist

through a PPP model. Thus, in order to generate employment, the 'new' supply chain has to generate

sufficient new jobs to employ those who were originally working in the supply chain (as well as

additional new people). However, in 2005, 99.4% of the units and 86.8% of the jobs in food processing

were classified as falling in the unorganised sector (Dev and Rao 2005). In such a context, introduction

of large private players with capital intensive strategies into this sector may well result in displacementrather than generation of employment.

Thus it is likely that few marginal farmers and landless workers will benefit from the ADB's project.

Indeed, they will not even benefit as purchasers of food, which mostly does not include such "high

value" crops. The ADB appears to be promoting a model of "transformation" of supply chains whose

key immediate beneficiaries will be some private investors and companies and, possibly, a narrow class

of cultivators. In the longer run, both producers and consumers would then be subject to the risks

introduced by such a supply chain. These include the problems associated with contract farming anddirect procurement mentioned in the previous section. More fundamentally, they potentially strengthen

the element of speculation and profiteering in the food supply chain, empowering private entities to

exercise their control over vital links in a manner that has already been shown to be risky. Such

speculation can have a ripple effect even on markets for non-"high value" crops. While improvement in

infrastructure is always welcome, the question is open as to why such improvement should be done in



24

such a manner.

In particular, it appears highly doubtful that such projects will contribute to addressing the food

security situation in the country in any meaningful manner. Rather, they may in fact increase the risk of

further food security crises.

Conclusion and Recommendations

Before concluding, it is important to note that the Bank is not, in any direct sense, "pressurising"

government officials into these projects. As noted above the Bank does not have a major focus on

agriculture in its lending to India. Moreover, in all of its documents, including the Country Partnership

Strategy and its note with the Finance Ministry (ADB 2009 and 2011) the Bank repeatedly cites the

Eleventh Five Year Plan and numerous other Government of India policy announcements that adopt thesame approach. Clearly there is a broader shared understanding at work here between the government

and Bank, as well as other forces.

In light of the recent history of developments in India's food sector, it is no exaggeration to say that this

shared understanding has greatly contributed to the ongoing food crisis. As discussed in the first

section, the current food security crisis was neither inevitable nor related to some kind of massive

supply shortage created by rising incomes and populations. Rather, the factors at work are much more

short term and much more directly influenced by economic policy. Unfortunately, the ADB's responseto this situation - along with elements of the Central and State governments - appears to be based on

burying the real facts under a pile of rhetorical buzzwords while strengthening the very forces that have

created the crisis.

Thus we have seen that most of the Bank's agriculture-related projects in India will not have any impact

on food security directly; while the projects that could have done so are promoting the opposite. Thus

the Bank's activities will likely have no impact on food security in india and may in fact worsen the

situation. There is an urgent, desperate need to address the food crisis in India in its increasinglyinhuman dimensions; but the ADB's way of supposedly addressing it is, unfortunately, no way at all.

In order to address the food security issue in India, then, the following areas of action - whether by the

ADB or otherwise - can be considered:

• Strengthening the Public Distribution System: As the only public, accountable supply network

in the country with a crucial effect on prices, the PDS continues to play a critical role in food



25

security - a decade of targeting notwithstanding. Reforms to improve the PDS can be far more

effective in tackling the than the interventions currently underway by the ADB. As outlined in

Khera (2011), there are several ways in which the Public Distribution System can be

strengthened. These include computerised tracking of supplies and quantities, SMS alerts to the

public and shop owners regarding deliveries of supplies, and more efficient storage and

procurement. ADB support for such projects will require a fraction of the investment currently

being put into "integrated value chains" and will deliver the ostensibly intended goals with far

more effectiveness.

• Investing in support for low-impact, low-input agriculture: In addition to true cooperatives,

small farmers and marginal peasants can gain considerably from propagation of methods of

agriculture that reduce environmental impacts, water consumption, and dependence on chemical

inputs. Such techniques are already well known and require better extension services as well as

more sustained public support. Once again, supporting such actions by the government would

be a better fit for the ADB's ostensible objective of tackling climate change and increasing

"resilience" than its current approach.

• Strengthening and expanding cooperatives: It is often claimed that the cooperative movement in

India has been plagued with problems related to bureacratisation and lack of internal

democracy, and hence the way forward cannot be through such bodies. But this is to mistake a

failure in approach for a failure of principle. The ADB's own stated approach of organising

farmers into "producer companies" and what are essentially marketing cooperatives can be

extended to the wholesale and, eventually, to the retail level. This would simultaneously address

the problems of speculative activity in the supply chain as well as the issues being faced by

producers and cultivators. It would require a more long term, sustained intervention, however.

• Halt support for privatisation of supply chains: Supporting PPP models for infrastructure and

handing over critical elements of the supply chain to private companies flies in the face of the

Indian and global experience over the last decade. Advocating and promoting direct corporate

procurement from farmers and contract farming will, in the long run (despite apparent short

term benefits), threaten the livelihood security of farmers, increase price volatility for

consumers and further encourage speculative activities in the supply chain. ADB promotion of

such activities should be stopped.



26

• Strengthen support for land reform and land rights : As noted repeatedly in this study, access to

land remains a critical constraint for the food security of many small and marginal cultivators as

well as for landless workers. Rather than ignoring this issue, the ADB should at the least state

that it is in favour of implementation of India's land reform laws, distribution of ceiling-surplusland and security of landholdings for forest dwellers and those cultivating without title.

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ADB Food Security Projects

Documents

Transcript of ADB Food Security Projects