Proposed Grant Assistance India: Improving Small Farmers’ … · 3 Agribusiness Infrastructure...

Grant Assistance Report

Project Number: 43105 July 2010

Proposed Grant Assistance

India: Improving Small Farmers’ Access to Market in

Bihar and Maharashtra (Financed by the Japan Fund for Poverty Reduction)

CURRENCY EQUIVALENTS (as of 30 June 2010)

Currency Unit - Indian rupee (Rs.)

Rs.1.00 = $0.022 $1.00 = Rs 46.48

ABBREVIATIONS

ADB Asian Development Bank AIDIP Agribusiness Infrastructure Development Investment Program APMC Agricultural Produce Marketing Committee CPS country partnership strategy FF&V fresh fruit and vegetables GDP gross domestic product GIU grant implementation unit GoI Government of India IFC International Finance Corporation JFPR Japan Fund for Poverty Reduction NCB national competitive bidding NGO nongovernment organization PAC project advisory committee SHG self-help group

NOTES

In this report, "$" refers to US dollars.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

Vice President X. Zhao, Operations 1 Director General S. H. Rahman, South Asia Department (SARD) Director T. Matsuo, Director, Agriculture, Natural Resources, and Social Services

Division (SANS), SARD Team Leaders M. Mongiorgi-Lorenzo, Senior Rural Development Economist, SARD

M. Watanabe, Rural Development Specialist, SARD

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JAPAN FUND FOR POVERTY REDUCTION (JFPR)

JFPR Grant Proposal

I. Basic Data

Name of Proposed Activity Improving Small Farmers’ Access to Market in Bihar and Maharashtra

Country India

Grant Amount Requested $3,000,000

Project Duration Three years

Regional Grant No

Grant Type Project

II. Grant Development Objective(s) and Expected Key Performance Indicators

Grant Development Objectives: The impact of the Project will be the increased income of small-scale farmers in Bihar and Maharashtra through access to alternative higher-return markets. The outcome will be the enhanced integration of small-scale fresh fruit and vegetable (FF&V) farmers, including female and scheduled caste (SC) and scheduled tribe (ST) farmers, into the horticulture value chains in those states. The outputs of the Project will be: (i) 2,000 small-scale farmers are organized into 20 effective farmer groups (6 in Bihar, 14 in Maharashtra); (ii) 4 well-performing farmer groups are developed into producer companies (1 in Bihar, 3 in Maharashtra); (iii) 20 farmer groups and 4 producer companies are trained in business, technical, and organizational management skills; and (iv) farmer groups and producer companies establish long-term mutually beneficial agreements with buyers.1 The activities comprise: (i) formation of farmer groups and producer companies; (ii) capacity development; (iii) facilitation of farmer-buyer linkages; and (iv) project management, monitoring, and evaluation.

Expected Key Performance Indicators (maximum 5 indicators): (i) Twenty farmer groups (6 in Bihar, 14 in Maharashtra), comprising approximately 2,000

farmers, are successfully organized in a financially sustainable manner. (ii) Four well-performing farmer groups are turned into self-sustaining producer companies (1

in Bihar, 3 in Maharashtra). (iii) Members of farmer groups are trained in business, technical, and organizational

management skills that enable them to interact with markets. (iv) Farmer groups (at least 20% in Bihar and 50% in Maharashtra) enter into higher-value

markets by the end of the Project. (v) Project beneficiaries' income increases by 30% within 3 years after the Project.

III. Grant Categories of Expenditure, Amounts, and Percentage of Expenditures

Category Amount of Grant Allocated in $ Percentage of Expenditures

1. Consultant Services 258,000 8.6%

2. Local training and workshop 1,015,000 33.8%

3. Small civil works 120,000 4.0%

4. Equipment and supplies 98,000 3.3%

5. Grant management 702,000 23.4%

6. Other inputs 746,000 24.9%

7. Contingency 61,000 2.0%

Total 3,000,000 100.0%

1 Buyers refer to organized wholesalers and retailers, exporters, and food processors.

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JAPAN FUND FOR POVERTY REDUCTION

JFPR Grant Proposal Background Information

A. Other Data

Date of Submission of Application

30 November 2009

Project Officers (Name, Position) Marzia Mongiorgi-Lorenzo, Senior Rural Development Economist Makiko Watanabe, Rural Development Specialist

Project Officers’ Division E-mail, Phone

SARD/SANS [email protected], 632.5988 [email protected], 632.5162

Other Staff Who Will Need Access to Edit and/or Review the Report

N.A.

Sector Agriculture and natural resources

Subsectors Agricultural production and markets

Theme (i) Economic growth (ii) Capacity Development

Subthemes

(i) Widening access to markets and economic opportunities

(ii) Organizational development (iii) Client relations, network and partnership development

Targeting Classification GI

Name of Associated ADB Financed Operation

Agribusiness Infrastructure Development Investment Program (AIDIP)

Executing Agencies

Bihar: State Department of Agriculture Maharashtra: State Department of Co-operation & Agricultural Marketing

Grant Implementing Agencies TBD2

B. Details of the Proposed Grant

1. Description of the Components, Monitorable Deliverables and/or Outcomes, and Implementation Timetable

Component A

Component Name Formation of Farmer Groups and Producer Companies

Cost ($) 689,000

Component Description Farmers will be grouped into farmer groups, either by using existing groups or forming new ones if appropriate groups do not exist. Small-scale FF&V farmers will be grouped based on the needs of either (i) the private investors, who, under the associated

2 For details on the selection of Implementation Agencies (IA), refer to Section D and Appendix 5.

mailto:[email protected]

mailto:[email protected]

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Agribusiness Infrastructure Development Investment Program (AIDIP) loan, will develop the FF&V value chains3 into which small-scale FF&V farmers4 will be integrated, or (ii) the buyers, who will enter into long-term purchase agreements with the farmer groups. Farmer groups will enable farmers to: (i) aggregate their produce into larger volumes; (ii) improve productivity and quality through group access to production, post-harvesting, and other extension and training services; (iii) reduce production costs through volume input purchases; (iv) improve farmers’ capacity to meet the requirements of higher-return markets through training in organizational management and marketing; (v) strengthen their negotiating power; and (vi) engage in other joint activities of benefit to group members. These improvements will help small-scale FF&V farmers establish links to alternative value chains that provide higher returns. Activities under this component include the following:5 1. Identification of production clusters: About 20 production clusters6 along the value chains will be identified for development under the Asian Development Bank (ADB)-funded AIDIP—14 FF&V production clusters in Maharashtra and 6 in Bihar. 2. Formation of farmer groups: Within each production cluster, approximately 100 farmers (the minimum number of farmers that would interest an organized buyer) will be selected to form each farmer group (see Appendix 5 for selection criteria). The Project will determine the farmers' ability and willingness to participate in the proposed groups. This will be done at the outset through a participatory meeting with all interested farmers, to be followed up by individual meetings with farmers that appear to be viable for group membership. Should it be deemed necessary (for socio-cultural reasons, for example), women's sub-groups will be formed within the farmer groups. The type of structure for the farmer groups will be determined through consultations with the stakeholders, analysis of the local context, and best practices, which recommend beginning with informal groups coordinated by elected lead farmers and then gradually formalizing them (see Appendix 5 for details). 3. Role of lead farmer: Each farmer group will be divided into sub-groups of 25 farmers each7 (within walking distance of the lead farmer). Each sub-group will elect a lead farmer to oversee the

3 The term "value chain (VC)" is used to characterize the interconnected, coordinated set of links that take place as

agricultural products' transformations and transactions take place along a chain of interrelated activities between primary production and the consumer.

4 For the purpose of the JFPR project, small-scale farmer is defined as farming five acres or less.

5 Details of the activities may change based on consultations with the private investors and analysis of the local

context. 6 A production cluster is a natural geographical concentration that constitutes a large number of farmers producing

the same or similar crops, within a radius of 4 to 5 kilometers. 7 Lead farmers would not be able to deal with a larger group without this impacting on their own farming operations.

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group, to act as mentor and coordinator of the farmers, and to be the focal point for various group activities, such as establishing demonstration plots and on-farm training.8 4. Development of operational procedures: The Project will develop operational procedures for the farmer groups, through focus group discussions and community participatory meetings, and seek to obtain the agreement of the prospective group members to abide by them. The farmer groups will develop common use facilities, jointly approach and negotiate with buyers, and carry out other joint activities for the benefit of the members. The structure of the groups will depend on the needs and desires of the members. 5. Introduction of a revolving fund: The Project will introduce a revolving fund in each farmer group as a means of financing common use services and facilities, such as extension services, post-harvest facilities, machinery, and equipment. Each farmer group member will pay a membership fee at the outset. The Project will provide a matching grant on a 1:1 basis to the funds collected from the members. The funds will be replenished every year by the members through compulsory contributions, which represent a small percentage of their sales proceeds. 9 The fund will continue to revolve beyond the Project with farmers' annual contributions, and hence will continue to be managed by the members. The Project will encourage women members to manage the revolving funds, so as to take advantage of women's financial management experience gained through Self-Help Groups10 (SHGs) and involve them directly in communal activities. 6. Formation of pilot producer companies: Two years after the start of the Project, at least three farmer groups in Maharashtra and one in Bihar will be selected for graduation to producer companies,11 based on their quality and effectiveness as farmer groups. The selected groups will act as ―centers of excellence‖ for the other farmer groups. The most important role of the producer company will be to manage all aspects of the group marketing program. Ownership of the producer company will be organized through the purchase of shares by the farmer group members. The establishment of the producer company will require professional management and specialized training in accounting; sales and

8 The lead farmers are to be paid a small monthly stipend supported 100% by the Project during year 1 and 50%

during year 2, with the production group becoming responsible for providing financial support for the lead farmer during year 3 and thereafter. This will ensure sustainability and constitute a part of the Project exit strategy.

9 The amount of the membership fee and the compulsory annual contribution will be determined through consultations with the target beneficiaries.

10 Self-help groups are voluntary, small group nonprofessional organizations formed by people with a common problem or situation, for the purpose of pooling resources, gathering information, and offering mutual support, services, or care. In India, women's SHGs comprise on average 15–20 women.

11 There are legal provisions in India for establishing commercial companies with owners consisting of farmers and farmer groups. The aim of organizing such producer companies is to enable farmers to operate on a more businesslike basis.

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inventory management; personnel management; product design and development; packaging; and other general management topics (see capacity development component).

Monitorable Deliverables/Outputs

20 organized and fully functioning farmer groups comprising 2,000 active farmer members by the end of the Project.

Revolving funds operating effectively in 20 farmer groups by the end of the Project.

4 producer companies registered and fully functional by the end of the Project.

Implementation of Major Activities: Number of months for grant activities

Month 1-3: Identification of production clusters Month 4-8: Formation of farmer groups, lead farmer selection Month 4-6: Development of farmer group operational procedures Month 10-36: Introduction of revolving funds. Month 24-36: Formation of 4 producer companies.

Component B

Component Name Capacity Development

Cost ($) 1,353,000

Component Description In order to improve farmers' capacity to meet the requirements of higher-return markets, this component will carry out a broad range of capacity development activities. They include: (i) business skills; (ii) technical skills; and (iii) organizational management skills through in-class, on-site, and exposure visits. Activities under this component include: 1. Training needs assessment: For each farmer group, the Project team will conduct a needs assessment. Separate needs assessments will be conducted for female farmers (see Appendix 5 for the assessment criteria). 2. Training curriculum and module development: Based on the needs assessment, the Project will develop new or adapt the existing training curriculum and modules for each farmer group. If necessary, the curriculum and modules will be tailored for male and female members. Training will include: (i) business skills; (ii) technical skills; and (iii) group management skills. Training will be provided at times and places convenient for both male and female group members. Refresher training will be provided each year as necessary (see Appendix 5 for selection criteria). 3. Identification of resource persons: When the training curriculum and modules have been developed, the project team, in consultation with the stakeholders, will identify possible resource persons for each module from a variety of institutions such as the line departments, research institutes, universities, nongovernment organizations (NGOs), and the private sector. 4. Employment of extension agents: For the technical skills

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training, each farmer group will recruit one qualified professional extension agent 12 and two village youths as village extension agents. 13 The professional extension agent will (i) train lead farmers in improved production and post-harvest practices in a "learning by doing" approach; and (ii) monitor progress and provide continuous technical advice. The village extension agents will report to the professional extension agent and work closely with the lead farmers. The employment of village agents will have the additional benefit of providing under-employed farm youths with marketable skills. 5. Establishment of demonstration plots: The professional extension agents, together with the farmer group members, will establish demonstration plots at each lead farmer's farm. The plots will serve to graphically illustrate the benefits of applying improved production methods and better crop varieties, and provide an incentive for farmers to adopt these practices. 6. Exposure visits: The Project will organize exposure visits whereby farmer groups visit other successful farmer groups developed under the Project. 7. Special training for producer companies: For the four producer companies to be formed in Year 3, the Project will conduct another training needs assessment, design the curriculum, and train the members, using external resources.


At least 70% of all farmer group members receive training by the end of the Project.

Twenty professional extension agents are recruited.

Forty village extension agents (2 per group) are recruited and trained.

Eighty lead farmers (4 per group) are selected and trained.

Eighty demonstration plots (4 per group) are established on lead farms.

Four producer company management teams receive training.


Month 3-4: Baseline study and rapid needs assessment Month 4-5: Training curriculum & module development,

identification of resource persons Month 3-5: Recruitment of extension agents Month 5-6: Establishment of demonstration plots Month 5-30: Training Month 15: Exposure visits #1 Month 24-36: Training for producer companies Month 30: Exposure visits #2

12

The agent’s salary and expenses will be supported as outlined in footnote 8. The agents are likely to be recruited from the private sector, such as from input companies (seed, fertilizer, or pesticide companies) or technical staff from relevant NGOs.

13 The village extension agents’ salary and expenses will also be supported as outlined in footnote 8.

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Component C

Component Name Facilitation of Farmer-Buyer Linkages

Cost ($) 299,000

Component Description

An important constraint to linking farmers to buyers is lack of knowledge, experience, and confidence on the part of small-scale FF&V farmers in dealing with corporate buyers. This component aims to help farmers and buyers identify and develop sustainable partnerships that are outside the traditional marketing systems. This component will first focus on Maharashtra, where alternative marketing opportunities are greater for small-scale FF&V farmers. Once the Bihar FF&V farmers have made progress in organizing and upgrading their productive capacity, the Project will help link them with buyers involved in the value chain facilities developed under AIDIP. Such buyers will include organized retailers and wholesalers. 1. Identification of potential buyers: The Project will assist farmer groups in identifying potential buyers that are interested in establishing a partnership with small-scale FF&V farmers. The primary focus will be to link the farmers with the private investors that will be developing FF&V value chains under AIDIP. 2. Facilitation of farmer-buyer negotiations: The Project will help lead farmers set up meetings with potential buyers and provide guidance to develop appropriate strategies to forge a mutually beneficial agreement with buyers. Agreements could be in various forms, including contract farming agreements. The Project will help the lead farmers to ensure that the terms of the agreements are equitable. 3. Transaction monitoring: The Project will monitor the transactions between farmers and buyers, develop a transparent dispute resolution mechanism between the buyer and the farmers, and assist the lead farmers in addressing any problems that arise during these transactions. Follow-up by Project staff during the actual transaction is important as a means of safeguarding the farmer-buyer relationship and ensuring that the process proceeds smoothly (for example, the Project will advise the lead farmers on price determination). 4. Identification of future intermediaries: The Project will help identify qualified organizations (e.g., local NGOs) or individuals (e.g., lead farmers) that would be interested in acting as intermediaries between the farmer groups and buyers beyond the Project. Such intermediaries could be important for long-term sustainability and diversification of the farmer groups' marketing efforts. This will also represent a part of the Project exit strategy. 5. Marketing support for producer companies: Once four producer companies have been established, the Project will assist these companies by identifying buyers, negotiating, and providing

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guidance throughout the transaction.


In Maharashtra:

At least 50% of the farmer groups enter into long-term supply agreements with organized wholesale or retail buyers, processors and/or exporters.

In Bihar:

At least 20% of farmer groups enter into long-term supply agreements with organized wholesale or retail buyers, processors and/or exporters.


Month 8-30: Identification of buyers Month 8-30: Facilitation of farmer-buyer negotiations Month 8-36: Transaction monitoring Month 24-36: Marketing support for producer companies

Component D

Component Name Project Management, Monitoring and Evaluation

Cost ($) 659,000

Component Description This component supports the following activities: (i) overall project coordination, supervision, management, and reporting; (ii) preparation of work plans, implementation guidelines, and procedures for grant financing; (iii) poverty impact assessment; (iv) annual independent external auditing; and (v) final dissemination workshop. 1. Baseline survey: A baseline survey will be carried out to collect sex-disaggregated information and data on a set of agreed socioeconomic indicators (see Appendix 5). Gender analysis of the baseline information and data will be used in drawing up the detailed design and implementation arrangements of the Project, thereby ensuring their suitability for the local context. 2. Poverty impact assessment: Impact assessment (with-without and before-after) at the household level will be conducted. To measure the impact of the Project, the levels of household income before and after the Project will be measured among production cluster farmers that joined the farmer groups and those that did not. 3. Final workshop: The final dissemination workshop will be held with representatives from the relevant government agencies, IAs, lead farmer representatives, relevant donors, and NGOs to share the impact and outcome of the Project, and recommend and seek consensus regarding further actions.


Comprehensive project work plan, implementation schedule, and guidelines prepared and attached to the grant implementation memorandum.

Funds for each component utilized efficiently and transparently.

Inception, quarterly progress, and completion reports; evaluation of staff performance; financial reports; and poverty

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impact assessments prepared and submitted on time and of good quality.

Final workshop carried out upon completion of the Project.

Implementation of Major Management Activities: Number of months for grant activities

Month 1-36: Project management, monitoring Month 4-6: Baseline survey Month 33-35: Poverty impact assessment Month 36: Final workshop

2. Financing Plan for Proposed Grant to Be Supported by JFPR

Funding Source Amount ($)

JFPR 3,000,000

Government 60,000 (Including in-kind contribution)

Beneficiaries 645,000 (Including in-kind contribution)

Total 3,705,000

3. Background

1. Until the recent international financial crisis, India had demonstrated strong economic growth, averaging 8.7% per annum since 2004. However, growth of the agriculture sector, which employs about 60% of the country's workforce, has stagnated at about 2% per annum since 2000.14 The rural non-farm sector, which is strongly correlated with the performance of the agriculture sector, has also been slow to grow. This has widened the rural-urban income disparity and contributed to the severe distress of some farmers. Rural per capita household expenditure is estimated to be less than half that of urban households. Of the nearly 120 million farmers in India, roughly 40% are landless and about 28% are classed as marginal, with only 0.01 to 0.04 hectares (ha) of cultivated land. In 2001, the latest year for which figures are available, there were approximately 25.4 million FF&V farmers. The size of about 70% of these farmed plots is less than one ha, or 2.5 acres.15

In light of the situation, the Government of India (GoI) has made inclusive growth the overarching goal in its 11th Five Year Plan (2008-2012). It prioritizes the reduction of regional and rural-urban disparity as well as of chronic poverty through inclusive growth. For the agriculture sector, GoI is emphasizing private-sector led growth, through diversification to higher value crops, increased value addition and improved farmer-market linkages, as an important driver for rural economic growth. Given the large number of small-scale farmers, GoI is highlighting the importance of giving poor farmers adequate bargaining power through group formation. 2. Additionally, the Agricultural Produce Marketing Committee (APMC) Act has been amended to provide farmers with marketing alternatives. Under the APMC Act, farmers were required to sell their products exclusively through government markets called the mandis. This restrictive environment led to collusion between commission agents and brokers, thereby minimizing farmers’ gains and leading to poor market facilities, resulting in excessive waste and loss of product value. To remedy the situation, in 2003 GoI introduced model legislation titled the State Agricultural Produce Marketing (Development and Regulation) Act (hereafter the Model Act), which allowed the emergence of competitive agricultural markets. Maharashtra

14

India Country Profile 2008. Economist Intelligence Unit. 15

Census of Agriculture, Government of India, 2001.

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State Government adopted the Model Act in 2007, while Bihar State government repealed the APMC Act in 2006. This has opened up space for new markets to emerge in both states. 3. Furthermore, the rapid emergence of organized retail (supermarkets, hypermarkets, specialty fresh produce stores) and the growth of the consumer food service, food processing and food export sectors provide opportunities that could significantly increase the incomes of small-scale FF&V farmers. Until 2000, there were very few modern supermarkets in India. Starting in 2001, however, the modern retail sector began growing rapidly. Food and grocery sales through modern retailers totaled only $140 million in 2001. By 2008, this had increased to $5.8 billion, an average growth rate of 74% per year. The overall food processing sector grew at an annual rate of 6.75% and the food service sector by 9.2% from 2001-06. These developments, together with the amendment to the APMC Act, have provided encouraging opportunities for market-led growth for small-scale FF&V farmers, because they create a competitive trade environment for farmers and buyers. 4. However, small-scale FF&V farmers in Bihar and Maharashtra have been largely unable to take advantage of the emerging marketing options. Traditional marketing channels, primarily the corrupt, exploitative mandis, still prevail because few farmers have been able to access alternative marketing channels that provide higher returns. There are three key constraints that are common to both states:

a) Lack of sufficient private sector investment in the development of alternative markets. To develop modern value chains for high value agriculture, such as FF&V, large investments are required in sorting, grading, post-harvest management, and development of cold chains. Such investment in turn requires that new players, including private sector players, are able to set up new marketing channels. Despite ongoing efforts, there is significant room for more private investment.

b) Farmers' inability to provide a consistent supply that meets the requirements

of modern markets. Farmer productivity is generally low and farmers are still gearing their products to the traditional mandis. As a result, product quantity and quality is not suitable for modern markets. Farmers lack the incentive and ability to invest in improved production and post-harvest practices, equipment, and quality inputs, because the traditional markets only offer low returns (because of exploitation at each stage of the value chain) and do not reward high quality goods. 16 Furthermore, lack of access to credit, poor basic infrastructure (roads, electricity, irrigation, storage), insufficient extension services, and the absence of proper post-harvest practices make it difficult to deliver quality products. Farmers are therefore trapped in a vicious cycle whereby they are unable to meet the markets' requirements and hence cannot be integrated into higher value chains. This is exacerbated by the lack of effective farmer groups to make joint decisions in investment, production, and marketing, thereby hampering farmers' ability to improve both the quantity and quality of their products.

c) Farmers' lack of capacity to obtain marketing information and interact with

commercial players. First, not many small-scale farmers know what kind of potential markets exist beyond the traditional ones and therefore tend to accept the traditional marketing system. Second, even if they were aware of other buyers, farmers tend to be wary of dealing with large corporate organizations or more

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Pricing is conducted through visible inspection and only by bulk.

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commercially oriented actors because of distrust and the fear of being exploited. Many are also uncomfortable about shifting from familiar traditional marketing channels to unfamiliar ones. Third, given the lack of effective farmer groups for joint negotiations, corporate buyers cannot deal with individual farmers.

5. To address the first constraint, GoI and ADB have agreed to prepare AIDIP for approval in 2010. AIDIP aims to further increase private sector investment in horticulture value chains and improve physical and institutional links among various stakeholders along the value chains in Bihar and Maharashtra. During AIDIP consultations, it was agreed that a separate JFPR project would be required to strengthen the small farmers' capacity, so that they could be readily integrated into the value chains to be developed under AIDIP. This JFPR project (the Project) will thus focus on addressing the other two key constraints for the small-scale farmers.

6. While the constraints and means to address them are common to both states, there are significant socio-economic differences between Bihar and Maharashtra that will dictate shifts in project emphasis between the two states. For instance, the traditional trader-dominated marketing system prevails in Bihar, where there are few alternative marketing channels for FF&V and farmer groups are almost non-existent. The Project emphasis will therefore be on providing farmers with incentives to improve their production and organize themselves. In Maharashtra, in contrast, there are a number of alternative marketing channels, including a few successful contract growing operations and spot purchases from farmers by organized wholesale and retail buyers, both directly at farm gate and through company-owned rural collection centers. The Project will therefore focus on helping farmer groups develop a sustainable partnership with buyers. See Appendix 1 for details on the two states. 4. Innovation

7. The proposed Project will feature a number of key innovations:

a) A value chain approach: The Project will use a value chain approach17 and focus

on value creation, innovation, product development, and marketing of FF&V. AIDIP will address the infrastructural and institutional gaps along these value chains, to integrate the relevant stakeholders along the value chain such as input suppliers, extension service agents, market intermediaries, and end-buyers. The Project will ensure that the small-scale farmers will be integrated into these new value chains.

b) A market-oriented approach: The Project will adopt a demand- rather than supply-

driven approach. Emphasis will be more on enabling farmers to increase their level of competitiveness to produce for an identified higher value market rather than trying to sell what they have already produced. The Project will help organize and train farmer groups to meet the requirements of these new markets and will help them develop long-term, sustainable linkages to higher value markets, particularly organized wholesalers and retailers, exporters, and processors. The objective will be to structure these linkages in such a way that they are mutually beneficial to both the farmers and the buyers.

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An agricultural value chain encompasses a set of activities required to bring a raw agricultural product to the final consumer through a variety of different phases of production, including physical transformation, input of various producer services, and response to consumer demand. The vertically linked interdependent activities give the products more added value than had the product not gone through the value chain.

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c) A context specific approach: The two Indian states selected for the AIDIP, Bihar and Maharashtra, differ significantly in their economic, agro-climatic, and socio-cultural characteristics. It is therefore likely that suitable models of organizing farmers will differ between these two states. For example, in Bihar, the social division along the caste line is so strong that one farmer organization can only comprise farmers of the same caste. The Project will thus build in flexibility that allows piloting different forms of organization that best suit the local context and farmers' needs.

d) A focus on vulnerable groups: Efforts will be made to ensure that the vulnerable

groups, namely the scheduled castes (SCs), scheduled tribes (STs), and female farmers, benefit to the extent possible. SCs and STs are economically disadvantaged as they have minimal landholdings (on average 1-3 acres), at times in uncultivable areas. Such economic hardship is further compounded by social prejudice, especially in Bihar, that hinders their access to socio-economic opportunities. Women in both states play a key role in all aspects of agriculture, but they do not hold land titles and are not substantively involved in the decision-making process. To reduce the economic vulnerabilities, the Project will ensure that 30% of the beneficiaries are SCs, STs or women where they are already involved in the production of FF&V. Moreover, the Project will put women in charge of managing the revolving funds so as to involve them directly in communal activities.

5. Sustainability

8. Long-term sustainability, as well as replicability, will be gained through the following initiatives.

a) Financial sustainability: A revolving fund will be set up for each farmer group. The Project will provide initial start-up capital for the revolving fund, which will be matched on a 1:1 basis by the member farmers. The implementing NGOs will support the poorest farmers. Additionally, members will be required to contribute a certain percentage of their crop sales. The contributions will be pooled to pay for the operation costs of the farmer groups as well as other investments, such as for technical services, maintenance of demonstration plots, collective production, harvesting, post-harvest facilities, and equipment. A few well-performing farmer groups will be developed into producer companies, which will be run by the sale of shares to the member farmers. The Project ensures the financial sustainability of both farmer groups and the producer companies by making them run primarily on the members' contributions.

b) Technical sustainability: Farmers need ongoing access to effective technical

services to enable them to improve their production, harvest, post-harvest, and marketing practices. Government extension services lack the resources and generally the knowledge to fulfill this role. The Project will introduce two types of sustainable technical services: (i) technical services financed by the farmer groups' revolving fund; and (ii) market-sponsored technical services. The Project will facilitate farmers' linkages to markets and then ensure that the buyers also provide necessary inputs, extension services, and post-harvest infrastructure. This is in the interest of the buyers as well, as they will be able to procure a consistent supply that meets their quality and safety requirements.

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c) Institutional sustainability: The Project has made a conscious decision to let the farmer groups function as informal organizations and not register them under the Societies Registration Act of India unless there is a strong necessity to do so. This is because in India, cooperatives have generally been politicized and proven to be dysfunctional. The few successful examples thus far of organizing FF&V farmers indicate that the most effective approach consists of informal organizations based on group needs. The Project will therefore organize farmer groups according to the following principles: market-oriented, based on farmers' needs, provision of necessary technical and management support, existence of local leadership, and provision of the requisite benefits to the members. As a pilot, a few well-performing farmer groups will be developed into producer companies to strengthen their institutional sustainability. The Project will ensure that both farmer groups and producer companies exist beyond the Project by helping them develop sustainable market linkages with buyers representing higher value markets.

d) Scaling-up and exit strategy: It is expected that the successful models developed

by the Project can be scaled-up using funds from AIDIP. In order to promote replication of the Project, information concerning the successful models will be widely disseminated by the Project through the final workshop. The Project's exit strategy will be to enable the beneficiaries to assume responsibility for development activities from project inception. The Project team will function as a catalyst and motivate the farmers themselves to be the project driver. This can be facilitated by promoting the adoption of a lead farmer out-grower approach, wherein the lead farmer, selected among the small-scale farmers, becomes the primary service provider. The lead farmer will be the primary link between the Project and the beneficiaries and continue to be the focal point of all activities beyond the Project period.

6. Participatory Approach

9. Farmers will be at the heart of the Project. They will participate in project preparation, implementation, and monitoring. The Project will establish women-run revolving funds for each farmer group. This aims to take advantage of women's financial management experience through self-help groups (SHGs), while involving them directly in communal activities. Youths will be trained as village extension agents. This will increase their income generation opportunities and ensure technology transfer to the local people. During project preparation, small-scale farmers will be engaged in participatory rural appraisal to provide further details for the Project design. Separate focus group discussions will be held with the marginalized, especially the female farmers as well as SCs and STs, to identify their needs and tailor the design so that they can also benefit from the Project. 10. The Project also promotes the collaboration and participation of different actors at various levels: state and district level line departments, village government (Gram Panchayat), village and farmer leaders, and organized wholesale and retail buyers. Periodic meetings will be held by the project implementing agency with state and local officials to report progress and problems. Meetings will be held by project personnel with other stakeholders in order to seek advice, guidance and cooperation for project initiatives.

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Primary Beneficiaries and Other Affected Groups and Relevant Description

Other Key Stakeholders and Brief Description

Small-scale fruit and vegetable farmers in Bihar and Maharashtra States. About 2,000 farmer families included in the two value chains in each state will be the primary beneficiaries. Two youths per village will also benefit from being trained and working as village extension workers, along with lead farmers in each farmer group and women who will manage the revolving fund for each group. Special emphasis will be given to further incorporate activities that directly benefit women and the SCs and STs. Private sector The private sector, such as input suppliers and buyers, will play an essential role, along with agriculture research centers.

Grant Implementation Units (GIUs) GIUs will be established in each state within the AIDIP Project Management Unit. Local governments GIUs will work closely with the governments, especially at the district and Gram Panchayat levels. State governments The Executing Agencies will be the State Department of Agriculture in Bihar; and the State Department of Cooperation and Agricultural Marketing in Maharashtra.

7. Coordination

11. Project preparation has involved field visits and interviews as well as consultations with the Ministry of Finance, the Ministry of Agriculture, state governments, district governments, private organized retailers and exporters, private banks, the APMC market commission, farmer associations, traders, farmers, the AIDIP consultant team, International Finance Corporation (IFC), International Food Policy Research Institute, the World Bank, and the Embassy of Japan in India. The Embassy of Japan expressed its strong support for the Project, noting that it is timely, and politically and economically important. 8. Detailed Cost Table

12. The total cost of the Project will be $3,705,000 equivalent. ADB will contribute $3,000,000, financed on a grant basis by the JFPR and administered by ADB. The Government will finance $60,000 of local currency costs through in-kind contributions, including office accommodation and facilities, counterpart staff, data, and other information needed for the Project. The farmers will contribute $645,000, mainly to fund the revolving fund and the salaries of the lead farmers, extension agents, and village extension agents, since the Project will fund 100% of their salaries only in the first year of implementation. The summary cost table and detailed cost estimates are in Appendix 3 and the fund flow arrangement is in Appendix 4.

15

C. Link to ADB Strategy and ADB-Financed Operations 1. Link to ADB Strategy

Document Document Number

Date of Last Discussion

Objective(s)

Strategy 2020: The Long-Term Strategic Framework of the ADB 2008-2020

April 2008 Promotion of inclusive growth and poverty reduction is a key priority. The Project supports this key priority by increasing the income of small-scale farmers through improvement of market linkages with a specific focus on private sector partnership, and a participatory approach.

Country Partnership Strategy (CPS) (2009-2012)

March 2009 The CPS identifies inclusive growth as one of the four strategic pillars. Agriculture has also been listed as one of the priority sectors. A substantial improvement in poverty reduction and income increases for small-scale farmers will directly contribute to achieving the CPS priority.

2. Linkage to Specific ADB-Financed Operation

Project Name Agribusiness Infrastructure Development Investment Program (AIDIP)

Project Number TA 7195

Date of Board Approval September 2010 (planned)

Loan Amount ($ million) $170 million (planned)

3. Development Objective of the Associated ADB-Financed Operation

13. AIDIP aims to increase private sector investment in agribusiness and enhance the integration of small farmers, including female farmers, into the agricultural value chains for high value crops (FF&V) by improving physical and institutional linkages between various stakeholders. AIDIP will be implemented in selected areas of Bihar and Maharashtra. It is a multi-tranche financing facility loan, and the first tranche will include the development of four end-to-end value chains for horticultural crops in the two states. 4. Main Components of the Associated ADB-Financed Operation

No. Component Name Brief Description

1 Agribusiness market infrastructure development

AIDIP will address the integration of the agriculture value chain and key constraints to agribusiness development by establishing: (i) on-farm centers in production areas to provide basic infrastructure including mechanical harvesting and post-harvest treatment equipment, storage, grading, sorting, packaging, and primary processing; (ii) agribusiness centers to provide competitive trading facilities; marketing intelligence; storage including pre-cooling and cold store facilities; and sorting, grading and agro-

16

No. Component Name Brief Description

processing facilities; and (iii) perishable cargo centers at airports and railways to promote ―end to end‖ value chain linkage and provide cold chain facilities linked to the value chain.

2 Support infrastructure development

AIDIP will provide basic support infrastructure such as road, power, and water supply that are essential to make the above infrastructure functional and improve physical connectivity throughout the value chain.

3 Market intelligence improvement

This component aims to improve stakeholder knowledge and awareness of factors affecting price determination and price information at different markets.

4 Capacity development and value chain linkages strengthening

This component aims at fostering forward and backward linkages between different stakeholders along the chain, Agriculture Business Centers being the hub in the value chain.

5. Rationale for Grant Funding Versus ADB Lending

14. Although the benefits of organizing small-scale farmers to improve access to more profitable markets is proven around the world, it is a relatively new undertaking for small-scale Indian FF&V farmers. There have been previous efforts to organize farmer cooperatives or associations, but few have been effective as they get politicized and riddled with corruption. The Project will hence need to experiment with various models in each state before settling on the optimum approach to be adopted by the AIDIP. Using a grant is therefore appropriate to pilot various models. The pilot can be replicated under the associated AIDIP once successful models have been identified. D. Implementation of the Proposed Grant

1. Provide the Name of the Implementing Agency

To be determined

15. Project management: The Grant Recipient will be the Government of India. The executing agency (EA) for Bihar is the State Department of Agriculture; for Maharashtra it is the State Department of Co-operation and Agricultural Marketing. To ensure close coordination with AIDIP, a grant implementation unit (GIU) will be established within each AIDIP project management unit in Bihar and Maharashtra. The GIUs will: (i) plan, coordinate, monitor, and manage all project activities; (ii) prepare withdrawal applications; (iii) prepare project progress reports; and (iv) maintain the Project's accounts and complete grant financial records for auditing the Project. The GIU staff will include a unit head, a monitoring and evaluation specialist, and an accountant. Additionally, a full-time project implementation specialist (36 person months) and a part-time training specialist (12 person months) will be hired by ADB to ensure close coordination between the two GIUs and ADB and provide assistance to both the GIUs and implementing agencies (IAs) on key project activities. The Project adopts a demand-driven approach, with the IAs being decided through consultations with the private investors that, under AIDIP, will be developing the FF&V value chains into which the small-scale farmers will be integrated. The IAs could be local NGOs, a group of consultants, the private investors' agents, or a combination of these actors, depending on the investors' needs as well as the local

17

context. Once the private investors are identified, the GIUs will determine the IAs with the investors, following consultation with and approval of ADB. The detailed implementation arrangements are in Appendix 5. 16. Procurement: No major procurement is planned under the Project. However, all procurement under the Project will be conducted in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Contracts for goods estimated to cost less than $500,000, but more than $100,000, shall be procured on the basis of national competitive bidding (NCB) procedures. Contracts for goods estimated to cost $100,000 or less shall be procured using shopping procedures. There is no international competitive bidding envisaged under the Project. Before any procurement starts, ADB and the Grant Recipient will review the Grant Recipient's procurement procedures to ensure consistency with ADB requirements. 17. The GIUs will procure the office equipment and hand them over to the EAs at the conclusion of the Project. A draft outline of the terms of reference for each GIU and for the required experts is in Appendix 7. 18. Consulting services: 48 person months (pm) of individual consultants (national experts in project implementation and training) will be recruited individually by ADB, in accordance with ADB Guidelines on the Use of Consultants. In addition, 30 unallocated pm for a pool of experts or NGOs will be available on a demand basis. Should NGOs be identified as the IAs, they will be selected through quality-based selection to ensure that NGOs with appropriate skills and experience are selected, albeit with higher costs. This is especially important in India, where similar NGOs abound, but few actually possess the capacity to undertake the required tasks. Should additional consultants (both international and national) be deemed necessary, they will be recruited by the GIUs, following consultation with and approval of ADB, and in accordance with ADB Guidelines on the Use of Consultants (2007, as amended from time to time). Their qualifications and terms of reference will be developed by the project implementation specialist, based on the requirements of the private sector investors, and will require prior approval from ADB. 19. Disbursement arrangements: The EAs and GIUs will adopt either of the following disbursement procedures for withdrawal of the proceeds of the Grant in accordance with ADB's Loan Disbursement Handbook (2007, as amended from time to time): (i) a direct payment procedure, where ADB, at the request of the Government, pays a designated beneficiary directly; or (ii) an imprest fund procedure, where ADB makes an advance disbursement from the project account for deposit to an imprest account to be used exclusively for ADB's share of eligible expenditure. In accordance with para. 12 of the JFPR Directional Guidelines 2009, the audit report from the external auditor must be submitted within 6 months following the end of the fiscal year or project closing date (whichever is first). The report should include certified copies of the audited accounts and financial statements and the report of the auditors, including the auditors' opinion on the use of the JFPR Funds, the operation of the imprest account, and the application of the statement of expenditures procedure. The financial management capacity of the EAs (sufficient administrative and accounting capabilities to establish adequate internal control, accounting and auditing procedures) will be assessed under the AIDIP to ensure the efficient use of the imprest account and its operations.

18

2. Risks Affecting Grant Implementation

Type of Risk Brief Description Measure to Mitigate the Risk

Institutional framework

Obstruction or regression in the enabling environment for the development of alternative markets such as the amendment of APMC Act.

ADB will continue to lobby the GoI, together with other stakeholders such as IFC, which is working on improving the investment climate.

Governance

Transparency and accountability of the IAs and EAs may be compromised.

Possible misuse of project funds.

ADB's policies and guidelines on anticorruption, procurement, financial reporting and independent auditing will be strictly adhered to. Capacity development will be given to the EAs and IAs on accountability, transparency, and financial management by the project manager.

Unstable supply and demand for

products

Quantity and quality of produce may be affected due to external factors such as drought, monsoon, and pests.

The Project will facilitate equitable terms of agreement for (contractual) deals between farmers and buyers that safeguard possible force majeure.

Market Linkage Private buyers may be unwilling to enter into purchase agreements with farmers.

The Project will demonstrate to buyers the availability of reliable supplies of good quality FF&V.

3. Incremental ADB Costs

Not Applicable. 4. Monitoring and Evaluation

Key Performance Indicator Reporting Mechanism Plan and Timetable for M&E

20 farmer groups organized and fully functional by the end of the Project.

Progress reports

Final report

Quarterly GIU report

Annual EA report

Year 3

30% increase in productivity by farmer group members by the end of the Project.

Final report Year 3

4 producer companies registered and fully functional by the end of the Project.

Final report

Year 3

At least 50% of the farmer groups in Maharashtra and 20% in Bihar enter into long-term supply agreements with organized wholesale or retail buyers, processors and/or exporters.

Progress reports

Quarterly GIU report

Annual EA report

19

Key Performance Indicator Reporting Mechanism Plan and Timetable for M&E

30% income increases among farmer group member households after the Project.

Final report

Year 3

5. Estimated Disbursement Schedule

Fiscal Year (FY) Amount ($)

FY 2010-2011 700,000

FY 2011-2012 1,300,000

FY 2012-2013 1,000,000

Total Disbursements 3,000,000

----------------------------------------------------------------------------- Appendixes

1. State Profiles 2. Design and Monitoring Framework 3. Summary Cost Table and Detailed Cost Estimates 4. Fund Flow Arrangements for JFPR Funds 5. Implementation Arrangements 6. Indicative Procurement Plan 7. Outline Terms of Reference for GIU Staff and Consultants 8. Summary Poverty Reduction and Social Strategy

20 Appendix 1

STATE PROFILES Bihar 1. Bihar suffers from a high rate of persistent poverty, with a social structure fragmented along caste lines and inferior infrastructure stemming from previous corrupt governance. Bihar has the lowest per capita income among the major states of India, standing at Rs.6,610 (approximately $132) as of December 2007, which is less than a quarter of the national average. The agricultural sector accounts for over 80% of the state’s workforce. Its main agricultural products are litchis, cereals, pulses, oilseeds, and cash crops such as sugar cane, jute, tobacco, and spices. Bihar is also the third largest producer of vegetables and the sixth largest producer of fruits in India. Yet the agriculture sector’s contribution to the state’s gross domestic product (GDP) is only 40%. The average size of land holding in Bihar is 0.75 hectare (ha), which is half of the national average of 1.57 ha. Small and marginal farms together constitute 91 % of the total land holdings. This high land fragmentation (average of 18-20 parcels per holding) has made agriculture less viable. The low level of technology and the inability to purchase inputs, such as fertilizers, have resulted in highly volatile agricultural output. This has been exacerbated by the undeveloped rural financial sector. The problem arising from fragmented landholdings and inadequacy of inputs, including credit and technical inputs, has been aggravated by high male out-migration especially from impoverished rural households. 2. In 2006, the government of Bihar repealed the Agricultural Produce Marketing Committee (APMC) Act. However, private sector investment in agriculture has been minimal, with the lack of development primarily caused by poor governance. Consequently, many of the mandi facilities are still being utilized by the traders. Because the traders’ activities are now completely unregulated, non-transparent transactions and price collusions are even more pronounced than they were under the APMC system. Because of the lack of alternative marketing channels, small-scale farmers have no choice but to utilize the current trader-dominated marketing system despite the rampant exploitation. 3. Farmer organization has made little headway in Bihar for a couple of reasons. Although farmers tend to grow the same crops and encounter the same problems, the rigid caste system in the state prevents groups from different castes from being jointly organized. Another barrier to organization is farmers’ reluctance to entrust funds to farmer organizations that do not hold any promise of providing concrete benefits, such as access to more profitable markets, improved technology, or credit. Compared to Maharashtra, Bihar agriculture is at a very preliminary stage of development, where emphasis needs to be placed on organizing farmers for the purpose of improving productivity and product quality, and enabling them to aggregate their products in order to provide volumes that will interest buyers, and to jointly purchase inputs in order to lower prices and obtain better quality. Based on the successful accomplishment of these first steps, opportunities will eventually arise for Bihar farmers to supply some of the more profitable markets outside the traditional trading system. 4. Litchi is arguably the only crop that has had private sector investment in Bihar. Several organized wholesale firms have attempted to buy litchi directly from producers or their association representatives in Bihar and ship it to Delhi and other out-of-state markets. These attempts have thus far failed, because of the poor transport conditions, lack of cold chain facilities, and the short shelf life of the litchi. Establishment of the post-harvest infrastructure planned under the Agribusiness Infrastructure Development Investment Program (AIDIP) should help alleviate the post-harvest constraints, not only for litchi but also for other fresh fruit and vegetables (FF&V). In the case of FF&V, the implementation of the Project should improve (i) the capability of small-scale farmers to offer larger volumes of acceptable quality products to

Appendix 1

21

wholesale buyers, and (ii) commodity shipping and handling logistics to be provided by the AIDIP. Maharashtra

5. Maharashtra benefits from favorable agro-climatic conditions, access to major markets such as Mumbai and Pune, good basic infrastructure, and accelerated economic growth driven primarily by the service sector. It is the third largest state in India with high urbanization (42% urban population). Maharashtra enjoys per capita income of Rs.28,204 (approximately $564), well above the nation’s per capita income of Rs.20,989 ($420). The state boasts an entrepreneurial farming community primarily producing sugarcane, mangoes, grapes and other fruit, and vegetables. About 60% of the population is dependent on agriculture for a living, but the share of agricultural output in state revenue has decreased to 17% in recent years. Despite the overall economic growth, the incidence of poverty in the state has continued to remain close to the national average. Based on official estimates, 25% of people in Maharashtra were below the poverty line in 1999-2000, which is only slightly lower than the national average of 26%. Maharashtra has some of the poorest and most underdeveloped regions in the country. Almost 73% of rural households possess landholdings of less than 2 ha. 6. Maharashtra has adopted the Model Act with some revisions, which allows the establishment of private sector markets. Most farmers, however, continue to sell most of their vegetables as well as some fruit (except for grapes and pomegranates) through the mandis, where they are exposed to the usual exploitation. For example, commission agents1 charge the farmers commissions according to a graduated scale (pomegranate 10%, onions 6%, other vegetables 4-7%). They also charge the farmers for unloading their produce. Both of these charges are illegal under the APMC Act. Farmers continue to utilize the traditional marketing system primarily because they have been unable to link successfully with alternative markets. 7. Ideally, farmers and buyers (organized wholesalers and retailers, exporters, food processors) should be able to develop long-term ―partnership‖ relationships, either on a formal or informal but committed basis. This would provide assured markets for the farmers and a reliable source of the volumes and quality required by the buyer. This has not happened, however. This is partly due to the reluctance of many buyers to enter into such relationships with farmers as well as their lack of experience with such arrangements (although this is gradually changing). It is also partly due to farmers’ lack of knowledge on how to go about initiating such relationships. There is also a great deal of mistrust between the two sides. Farmers in Maharashtra are already to some extent selling to buyers, but most of these are through spot transactions, which do not include any element of farmer-buyer partnership. There are, however, a few instances where buyers have entered into long-term supply agreements with groups of FF&V farmers, either directly or through intermediaries. This appears to be a trend in the making. Several measures are needed to accelerate this trend. One of these measures is the establishment of modern post-harvest facilities, such as commodity collection centers, pack houses, and end-to-end cold chains. The AIDIP will provide these facilities. 8. In order to take advantage of the favorable prospects opened up by the improved supply chain facilities, and to develop long-term links with buyers, farmers need to improve their productivity and become able to supply the needs of buyers. They also need to become more efficient and to develop countervailing marketing power. The only means of accomplishing these

1 There are two categories of market intermediaries functioning in the APMC markets. Commission agents facilitate

the receiving and preparation of produce for auction but do not take ownership of the farmers’ produce; traders actually purchase the produce at the regularly scheduled auctions.

22 Appendix 1

things for small-scale farmers is through organization. Initially, until there are sufficient successful examples of farmer organizations entering into farmer-buyer partnerships that will succeed in encouraging widespread replication, a third-party, ―honest broker‖ will be needed to facilitate farmer organization and market linkages. The Project is designed to fulfill this role. Based on the needs and opportunities in Maharashtra, the Project will focus on fostering farmer organizations, formal or informal, and on enabling these organizations to develop long-term relationships with buyers. For those organizations that are successful, the Project can help them move on to the next stage in which they become producer companies in order to operate more effectively as commercial entities.

Appendix 2

23

DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Targets/Indicators

Data Sources / Reporting

Mechanisms

Assumptions / Risks

Impact

Increased income of the small-scale fresh fruit and vegetable (FF&V) farmers in the target sites of Bihar and Maharashtra.

Three years after Project completion, average farmer household income increases by 10% in the target sites compared to the 2010 baseline level.

State government statistics

Agribusiness Infrastructure Development Investment Program (AIDIP) mid-term review and evaluation reports.

Evaluation and research reports from other relevant aid agencies (e.g., World Bank and DFID)

Assumptions

Organized wholesale/retail, processing and export sectors continue to grow.

The enabling environment [e.g., amendments to Agricultural Produce Marketing Committee (APMC) Acts] remains in place.

Risks

External factors (e.g., climate, unfavorable economic conditions etc.) affect rural growth.

Outcome

Enhanced integration of small-scale FF&V farmers into high-value horticulture value chains in the target sites of Bihar and Maharashtra.

Average 35% increase in the number of target farmers selling their products to value chain buyers by the end of the Project, compared to 2010 baseline level.

30% increase in the amount of target farmers' products sold through value chains by the end of the Project, compared to 2010 baseline level.

10% increase in the value of the crop sales of target farmers by the end of the Project, compared to 2010 baseline level.

Japan Fund for Poverty Reduction (JFPR) Project poverty impact evaluation report.

JFPR Project monitoring reports

Minutes of Asian Development Bank (ADB) review missions issued by the Government.

ADB Aide-Mémoires and Back-to-Office Reports (BTOR)

Assumptions

Organized wholesale/retail, processing and export sectors continue to grow.

Buyers are willing to enter into long-term purchase agreements with small-scale farmers.

The enabling environment (e.g., amendments to APMC Acts) remains in place.

Risks

External factors (e.g., climate, unfavorable economic conditions etc.) affect rural growth.

Outputs

1. Enhanced ability of target

farmers to provide consistent FF&V supply that meets the requirements of modern markets.

20 farmer groups comprising 2,000 members (100 members per group) are established for 1 value chain each in Bihar and Maharashtra.

30% of the farmer group members are scheduled

JFPR Project monitoring reports

Minutes of ADB review missions issued by the Government

ADB Aide-Mémoires and BTORs

Assumptions

Marginalized people are willing to organize themselves into farmer groups.

Risks

Resistance or obstruction from

24 Appendix 2

Design Summary



Mechanisms

Assumptions / Risks

2. Improved linkage between

target farmers and the market.

3. Project management system established.

castes, scheduled tribes, or women.

At least 10% increase in Grade A crops produced by target farmers.

At least 10% increase in the quantity produced by target farmers.

Revolving funds are functional in all 20 farmer groups, with at least 30% of them managed by women members.

A total of 4 (3 in Maharashtra, 1 in Bihar) well-performing farmer groups are turned into producer companies.

In Maharashtra, at least 50% of the farmer groups enter into long-term, mutually beneficial agreements with buyers.

In Bihar, at least 20% of the farmer groups enter into long-term, mutually beneficial agreements with buyers.

Target sites selected.

Grant Implementation Units (GIUs) established and trained.

Appropriate implementation agencies (IAs) selected.

Project manuals prepared and fully operated.

Baseline survey and poverty impact assessment accomplished and sex-disaggregated information and data collected for effective monitoring of the social and gender impact.

traditional middlemen.

External factors (e.g., climate, unfavorable economic conditions etc.) affect production.

Activities with Milestones

1. Project management activities

1.1 Establish a GIU in each state. (By Q2 2010) 1.2 Based on consultations with the AIDIP project preparatory technical assistance team,

develop project site selection criteria and identify the most suitable two value chains (1 in Bihar, 1 in Maharashtra) out of four to be developed under the AIDIP. (By Q3 2010)

1.3 Identify and select suitable IAs in coordination with the Government and private investors. (By Q2 2010)

1.4 Design and conduct a baseline survey in collaboration with the IAs. (By Q4 2010). 1.5 Design and conduct a poverty impact assessment and prepare a comprehensive report. (By

Q2 2013)

2. Formation of farmer groups & producer companies

2.1 Conduct FF&V demand and marketing analyses to assist in the design of specific Project

Inputs ADB

$3,000,000 JFPR

National consultants: 48 pm

Unallocated: 30pm Government

$60,000 including contribution for office space, counterpart staff

Appendix 2

25

Design Summary



Mechanisms

Assumptions / Risks

interventions. (By Q4 2010) 2.2 Interview organized FF&V buyers to determine their interest, needs, and requirements as a

guide to farmer organization and capacity development. 2.3 Based on the above findings, formulate an overall strategy, a work plan, and implementation

guidelines for the Project. (By Q4 2010) 2.4 Once the 20 production clusters are identified, conduct participatory meetings in each

production cluster and identify suitable groups of farmers for the Project. (By Q4 2010) 2.5 Establish farmer selection criteria, have follow-on discussions with farmers that are

interested and capable of participating in the Project. (By Q4 2010) 2.6 Select approximately 100 farmers within each production cluster to form farmer groups.

Each farmer group will then be divided into four sub-groups of 25 farmers, and each sub-group will elect a lead farmer who will assist in training and mentoring the sub-group. Should it be deemed necessary, women's sub-groups will be established within each farmer group.(By Q4 2010)

2.7 Conduct a detailed field survey including a socio-economic baseline study, a basic gender assessment, a participatory needs assessment, and focus group discussions with various stakeholder groups within each farmer group to collect baseline data for a poverty impact evaluation and to identify people's existing situation, needs, and expectations. (By Q4 2010).

2.8 Through consultations with the members of farmer groups, develop operational guidelines that lay out key milestones for the farmer groups with the time frame, scope, functions, responsibilities, activities, scale, structure, membership, governance, and penalties. (By Q1 2011)

2.9 Introduce a revolving fund for each farmer group, and organize women members to manage the fund. (By Q2 2011)

2.10 Select four well-performing farmer groups (3 in Maharashtra, 1 in Bihar) to turn into producer companies. (By Q2 2012)

3. Training of farmer groups & producer companies

3.1 For each farmer group, conduct a training needs assessment. (By Q3 2011) 3.2 Based on the training needs assessment as well as market requirements, develop a training

curriculum and modules for each farmer group. Training should cover, among others: (i) business skills such as business plan development and book-keeping, financial management, marketing, contract negotiations; (ii) technical skills that cover a simple, generally low cost package of improved production and post-harvest practices; and (iii) organizational management skills such as participatory approaches, dispute resolution, gender awareness. Especially for women, training will be held at times and venues convenient for them. Use of mobile vans will be considered. (By Q4 2011)

3.3 Based on the training curriculum, identify resource persons that the IAs can tap into. They should include line departments, research institutes, universities, NGOs, and the private sector. (By Q4 2011)

3.4 Recruit one professional extension agent and two village extension sub-agents (local youths) per each farmer group. The professional agent will provide training-of-trainers to the sub-agents and the lead farmers on production and post-harvest practices. (By Q4 2011)

3.5 Establish demonstration plots on each lead farmer’s farm, together with the extension agents and lead farmers. (By Q1 2012)

3.6 Organize exposure visits for farmer groups. (By Q2 2013) 3.7 Provide refresher training along with lead farmers every 6 months. (By Q3 2012 and Q1, Q3

2012) 3.8 Once four producer companies are formed, provide management and marketing training for

the management teams. (By Q3 2012)

4. Facilitation of farmer-buyer linkages

4.1 Assist farmer groups in identifying potential buyers that are eligible and willing to enter into purchase agreements with farmer groups. (Until Q2 2013)

4.2 Help lead farmers set up meetings with potential buyers and provide guidance. (Until Q2 2013)

4.3 Monitor the transactions and assist the lead farmers in addressing any problems. (Until Q2 2013)

Farmers

$645,000 for the revolving fund and the salaries of the extension agents and lead farmers

26 Appendix 2

Design Summary



Mechanisms

Assumptions / Risks

4.4 Help identify qualified organizations or individuals that could act as intermediaries for future marketing efforts. (Until Q2 2013)

4.5 Assist the four producer companies in identifying buyers, negotiating, and developing long-term agreements with buyers.

ADB = Asian Development Bank; AIDIP = Agribusiness Infrastructure Development Investment Program; APMC = Agricultural Produce Marketing Committee, BTOR = Back-to-Office Report, FF&V = fresh fruit and vegetables, GIU = grant implementation unit, IA = implementing agency, JFPR = Japan Fund for Poverty Reduction. PM = person-months. Source: Asian Development Bank estimates.

App

end

ix 3

27

SUMMARY COST TABLE

Component A

Formation of Farmer

Groups and Producer

Companies

Component B

Capacity Development

Component C

Facilitation of Farmer-

Buyers Linkages

Component D

Grant Management,

Monitoring and Audit

Total

(Input)percent

1. Civil Works: 120,000 120,000 4.0%

2. Equipment and Supplies 98,000 98,000 3.3%

3. Training, workshops, seminars, public campaigns: 68,000 846,000 76,000 25,000 1,015,000 33.8%

4. Consulting Services: 72,000 72,000 36,000 78,000 258,000 8.6%

5. Grant Management: 126,000 102,000 82,000 392,000 702,000 23.4%

6. Other Inputs: 408,000 198,000 95,000 45,000 746,000 24.9%

7. Contingencies (0-10% of total estimated grant fund):

Use of Contingencies requires prior approval from ADB.15,000 15,000 10,000 21,000 61,000 2.0%

Subtotal JFPR grant financed 689,000 1,353,000 299,000 659,000 3,000,000 100.0%

Government contribution 14,000 31,000 0 15,000 60,000 1.6%

Community's Contributions: 414,000 216,000 15,000 0 645,000 17.4%

Total Estimated Costs 1,117,000 1,600,000 314,000 674,000 3,705,000

Inputs / Expenditure category

Grant Components

28 A

ppend

ix 3

DETAILED COST ESTIMATES

Code Supplies and Services Rendered Unit Quantity Cost TOTAL

Units Per Unit $

Amount

Method of

Procure-

ment

Component A. Formation of Farmer Groups and Producer Companies Subtotal: 1,102,000 674,000 14,000 0 414,000

1.3 Training, workshops, seminars

1.3.1 Farmer workshops participants 2,000 20 40,000 32,000 6,000 2,000

1.3.2 Farmers meetings participants 2,000 12 24,000 18,000 4,000 2,000

1.3.3 Focus group discussions and PRA meetings participants 2,000 12 24,000 18,000 4,000 2,000

1.4 Consulting Services

1.4.1 Project implementation specialist person-month 6 4,000 24,000 24,000 Individual

1.4.2 Training specialist person-month 6 2,000 12,000 12,000 Individual

1.4.3 Unallocated pm for pool of consultants person-month 6 3,000 18,000 18,000 Individual

1.4.4 NGO engagement person-month 6 3,000 18,000 18,000 Quality based

1.5 Management and Coordination of this Component

1.5.1 Component 1 - Head person-month 16 4,000 64,000 64,000

Monitoring and evaluation specialist person-month 16 2,000 32,000 32,000

1.5.2 Travel and per diem lump sum 30,000 30,000

1.6 Other Project Inputs

1.6.1 Revolving fund lump sum 600,000 300,000 300,000

1.6.2 Lead farmers person-month 2880 75 216,000 108,000 108,000

Component B. Capacity Development Subtotal: 1,585,000 1,338,000 31,000 0 216,000

2.1 Civil Works

2.1.1 Demonstration Plots acres 80 1,600 128,000 120,000 1,000 7,000


2.3.1 Technical skills training trainee 2,000 50 100,000 94,000 5,000 1,000

2.3.2 Business skills training trainee 2000 50 100,000 94,000 5,000 1,000

2.3.3 Group management skills training trainee 1600 60 96,000 90,000 5,000 1,000

2.3.4 Producer companies special training trainee 100 250 25,000 19,000 5,000 1,000

2.3.5 Refresher trainings trainee 2000 40 80,000 74,000 5,000 1,000

2.3.6 special training for targeted groups trainee 600 60 36,000 30,000 5,000 1,000

2.3.7 Training needs assessment lump sum 50,000 50,000

2.3.8 Exposure visits, production of videos for experiences sharing, etc participants 200 2,000 400,000 395,000 5,000


2.4.1 Project implementation specialist person-month 6 4,000 24,000 24,000 Individual

2.4.2 Training specialist person-month 6 2,000 12,000 12,000 Individual

2.4.3 Unallocated person-month for pool of consultants person-month 6 3,000 18,000 18,000 Individual

2.4.4 NGO engagement person-month 6 3,000 18,000 18,000 Quality based




Travel and per diem lump sum 30,000 30,000


2.6.1 Extension agents person-month 720 250 180,000 90,000 90,000

2.6.2 Village extension agents person-month 1440 150 216,000 108,000 108,000

COSTS CONTRIBUTIONS

CommunitiesGovernment Other DonorsJFPR

App

end

ix 3

29

Code Supplies and Services Rendered Unit Quantity Cost TOTAL

Units Per Unit $

Amount

Method of

Procure-

ment

Subtotal: 304,000 289,000 0 0 15,000


3.3.1 Marketing training trainee 200 175 35,000 30,000 5,000

3.3.2 Special seminars for farmers–buyer linkages participants 150 220 33,000 30,000 3,000

3.3.3 Marketing support for producer companies producer companies 4 4,500 18,000 16,000 2,000


3.4.1 Project implementation specialist person-month 4.5 4,000 18,000 18,000 Individual

3.4.2 Unallocated person-month for pool of consultants person-month 6 3,000 18,000 18,000 Individual






3.6.1 Support to Farmers–buyer negotiations (logistical, organizational, etc) negotiations 40 2,000 80,000 76,000 4,000

3.6.2 Support to establishment of farmers–buyer agreements 10 2,000 20,000 19,000 1,000

Subtotal: 653,000 638,000 15,000 0 0

4.1 Equipment and Supplies

4.1.1 Office supplies lump sum 20,000 20,000 Shopping

41.3 Office equipment lump sum 10,000 10,000 Shopping

4.1.4 Motor bikes extension agentsa unit 40 1,000 40,000 40,000 Shopping

4.1.5 Mobile phones unit 100 100 10,000 10,000 Shopping

4.1.15 Car rental days 600 30 18,000 18,000


4.2.1 Final workshop attendees 1000 40 40,000 25,000 15,000


4.4.1 Project implementation specialist person-month 19.5 4,000 78,000 78,000 Individual




Accountant person-month 72 1,500 108,000 108,000


4.4.3 Operational costs lump sum 10,000 10,000


4.5.1 Baseline survey lump sum 20,000 20,000

4.5.2 Poverty impact assessment lump sum 25,000 25,000

Components A to D = Subtotal Subtotal: 3,644,000 2,939,000 60,000 0 645,000

Contingency (Maximum 10% of total JFPR Contribution) 61,000 61,000

TOTAL Grant Costs Total: 3,705,000 3,000,000 60,000 0 645,000a

Source: Asian Development Bank estimates.

COSTS CONTRIBUTIONS

JFPR Government Other Donors Communities

Component D- Grant Management, Monitoring and Audit

Movements from farmers groups to farmers groups by the extension agents is key for training activities, technology transfer and linkages with the buyers.

Component C - Facilitation of Farmer-Buyer Linkages

30 Appendix 4

FUND FLOW ARRANGEMENTS FOR JAPAN FUND POVERTY REDUCTION FUNDS

1. The Asian Development Bank will channel the Japan Fund for Poverty Reduction (JFPR) funds directly to a JFPR imprest account, which will be opened and maintained by the Grant Implementation Unit (GIU) in Patna and in Pune, at a bank endorsed by the executing agency and acceptable to ADB, to facilitate day-to-day local expenditures of the JFPR Project. The executing agency and the Ministry of Finance will be kept informed by the GIU about all transactions, and receive copies of all financial statements and audit reports. The JFPR imprest account will be managed by the GIU on the principles of co-signatory arrangement with the implementing agencies, initially based on the first 6 month activity plan and related budget, and afterwards based on the approved annual work plan and budget. 2. ADB will initially channel $100,000 to the imprest account as advance for day-to-day project implementation during the inception period, and will replenish funds every 3–6 months to the imprest account, based on the replenishment requests from the GIU through the executing agency and in accordance with ADB’s statement of expenditures procedure. The statement of expenditures procedure will apply for all payments and transactions under $10,000 to ensure speedy project implementation. Detailed implementation arrangements, such as the flow, replenishment, and administrative procedures will be detailed in the Grant Implementation Memorandum, and be established between ADB and the government through the JFPR letter of agreement. The schematic fund flow for the JFPR project is shown in Figure A4.1.

Figure A4.1: Fund Flow Arrangements for the Japan Fund for Poverty Reduction Project

$222,000

$620,000

$1,284,000 $535,000

$253,000 $25,000

$61,000

Source: Asian Development Bank estimates.

Contingencies

Overall Management, Coordination

and Monitoring.

Component B: Capacity

Development

Component C: Facilitation of

Farmer–Buyer LinkagesPoverty Impact Assessment

Individual consultants

Grant Imprest Account held

at Grant Implementation Unit

Component A: Formation of

Farmer Groups and Producer

Companies

Asian Development

Bank

$3

,00

0,0

00

Appendix 5

31

IMPLEMENTATION ARRANGEMENTS 1. The detailed grant implementation memorandum will be prepared by the Japan Fund for Poverty Reduction (JFPR) Project Units [Grant Implementation Units (GIUs)] with the help of a project implementation specialist. This person, who will be hired by the Asian Development Bank, will be endorsed by the Bihar State Department of Agriculture and the Maharashtra State Department of Co-operation & Agricultural Marketing before Project inception. The grant implementation memorandum will give details of the implementation and procurement arrangements. A. Grant Organization and Management

1. Executing Agencies

2. The executing agencies (EAs) will be the State Department of Agriculture in Bihar and the State Department of Co-operation and Agricultural Marketing in Maharashtra. The EAs will provide overall supervision of the GIUs' activities, outputs and performance. At the end of the Project, the EAs, together with the GIUs and the team for the associated loan [Agribusiness Infrastructure Development Investment Program (AIDIP)], will evaluate the Project and explore whether and how to replicate the Project under AIDIP should it be deemed successful.

2. Grant Implementation Units (GIU) 3. Each EA will establish a project management office for AIDIP. To ensure close coordination between AIDIP and the Project, a GIU will be established within each project management office. The GIUs will: (i) plan, coordinate, monitor, and manage all project activities; (ii) prepare withdrawal applications; (iii) prepare project progress reports; and (iv) maintain the Project's accounts and complete grant financial records for auditing the Project. The GIU Heads, who will be acceptable to ADB and have adequate experience in project management, will be responsible for the overall project management. Below is the indicative list of GIU personnel for each state.

List of GIU Staff in each State

Position No. Duration Terms of Reference

GIU Head 1 Full time 36 months Overall management

Monitoring & Evaluation Officer

1 Full time 36 months Design and conduct the baseline survey, regular monitoring, and poverty impact assessment. Analyze the data and compile reports.

Accountant 1 Full time 36 months Financial control and financial reporting

3. Project Implementation Consultants

4. Two national consultants, the project implementation specialist (full-time) and the training specialist (part-time), will be hired by ADB to work with the GIUs. The project implementation specialist will ensure good coordination between ADB and the two GIUs. S/he will also assist the GIU Heads in planning and implementing the Project. The training specialist will assist the implementing agencies (IAs) in conducting a farmer needs assessment, developing a training curriculum and modules, and planning and implementing training programs. Thirty unallocated person months will be available on a demand basis for a pool of

32 Appendix 5

experts or nongovernment organizations (NGOs). Their qualifications and terms of reference will be developed by the project implementation specialist based on the demand from the private sector investors and will require prior approval from ADB.

4. Service Providers (SPs)

5. The GIUs will contract service providers (SPs), such as NGOs or consultants, to implement specific project activities. The Project adopts a demand-driven approach, with the SPs being decided by GIUs and the private sector investors that, under AIDIP, will be developing the fresh fruit and vegetable (FF&V) value chains into which the small-scale farmers will be integrated. The SPs could be local NGOs, a group of consultants, the private investors' agents (such as lead farmers), or a combination of these actors, depending on the investors' needs as well as the local context. Once the private investors have been identified, the GIUs will determine the SPs with the investors, following consultation with and approval of ADB. Should NGOs be identified as potential SPs, they will be selected through quality-based selection. Should consultants be identified as the potential SPs, they will be selected based on the terms of reference and qualifications to be developed by the respective GIU upon consultation with the private investors and prior approval by ADB. They will be selected individually, to ensure flexibility and cost-effectiveness. 6. Funds will be provided to the GIUs to finance specific tasks that SPs will undertake. Should additional consultants (both international and national) be deemed necessary, they will be recruited by the GIUs following consultation with and approval of ADB, and in accordance with ADB Guidelines on the Use of Consultants. Details of the tasks will also be based on the investors' needs and the local context, following consultation with and approval of ADB, although they are likely to involve most, if not all, of the activities outlined in the project components. SPs will be accountable to the GIUs, which, under the overall supervision of the EAs, will also monitor the SPs' performance. Consultants will be accountable to the GIUs. Indicative consultants include: marketing specialist, agriculturalist, monitoring & evaluation specialist, social development specialist, extension agents, and others as necessary. The criteria and indicative tasks for qualifying national NGOs, as well as the indicative tasks and qualifications of consultants are in Appendix 7.

5. Coordination with Government and Other Donors 7. The GIUs will work in close collaboration with the EAs in each of the states. Regular liaison will also be maintained with local government bodies, NGOs, relevant agriculture and agribusiness associations, universities and research institutions, public and private sector market management and participants, and others with interest and involvement in the Project. Project monitoring and evaluation will be carried out by specific units within each GIU, subject to oversight by the executing agencies and ADB. 8. A project advisory committee (PAC), chaired by the GIU Head, will be established in each state. The PAC will provide overall guidance for smooth implementation of the Project. Members of the PAC will include: the AIDIP Project Director, NGO representatives from both states, EA representatives, and any other members as deemed necessary. 9. The Gates Foundation will initiate a project that aims to improve the horticulture sector as a means of rural poverty alleviation in Bihar beginning in late 2010. The contractor for the Gates Foundation program has been informed of the ADB project for purposes of coordination. The International Finance Corporation (IFC) is currently sponsoring a public private partnership

Appendix 5

33

program in Bihar, entitled the Agribusiness Competitiveness Partnership. One of the initiatives under consideration is the formation of a horticulture task force, composed of state government and private sector representatives, for the purpose of jointly addressing policy and other constraints to the further development of the horticulture sector in the state. ADB and the Project team will ensure that a regular coordination meeting is held with Gates Foundation, IFC, and any other stakeholders that may be involved in the similar area to inform each other of each agency's project progress. B. Farmer Group Formation and Member Selection 10. The structure of farmer groups will be determined based on consultations with relevant stakeholders and an in-depth analysis of the local context. It is likely that groups will start off as informal groups coordinated by the elected lead farmers. Once the members and lead farmers are identified, members will elect a few women members, who will be entrusted to manage the revolving fund. The SPs, in consultation with the GIUs, will develop the by-laws and regulations of the farmer group. These will include: (i) the roles and functions of the farmer group; (ii) the membership fee; (iii) the annual contribution; (iv) the selection method and serving period of the lead farmers and trust fund managers; (v) the template of the agreements to be signed by all farmer group members; (vi) the punishment of members who violate the agreements; and (vii) the dispute resolution mechanism between members and lead farmers, members and buyers, or among members. The structure of the farmer group can take the form of a cooperative, an association, a contract (written or verbal) between lead farmers and member farmers, or other types of structure that are deemed suitable. 11. The following indicative selection criteria will be applied to select farmers for farmer groups:

(i) For Maharashtra:

Located in a natural vegetable or fruit producing area suitable for clustering;

Vegetable farmer, cultivation of five acres or less of farm land suitable for vegetable production;

Fruit farmer, cultivation of five acres or more suitable for fruit production;

History of commercial fruit and/or vegetable production;

Availability of electric power services;

Access to well-maintained farm to market road or highway;

Access to irrigation (not necessarily using irrigation at present);

Capable and willing to adopt improved production and post-harvest practices;

Interested in being a member of a farmer organization; and

Acceptable to other farmers in the area as a member of a farmer group (reputation in village).

(ii) For Bihar:

Located in a natural vegetable or fruit producing area suitable for clustering;

Vegetable farmer, cultivation of less than five acres of farm land suitable for vegetable production;

Fruit farmer, cultivation of three acres or more suitable for fruit production;

History of commercial fruit and/or vegetable production;

Availability of electric power services;

Capable and willing to adopt improved production and post-harvest practices;

Interested in being a member of a farmer organization;

34 Appendix 5

Acceptable to other farmers in the area as a member of a farmer group (reputation in village).

C. Baseline Survey & Needs Assessment 12. Poverty impact assessment (with-without and before-after) at the household level will be conducted at the end of the Project. To measure the impact of the Project, the levels of average annual household income before and after the Project will be measured among randomly selected farmers within the same production clusters. For the with-without comparison, the income levels of a 10% sample of randomly selected farmers that have joined the farmer group (treatment group) and those that did not (control group) will be measured. Baseline data will be collected at the outset of the Project, and a second poverty impact assessment will be undertaken at the end of the Project. Both baseline and evaluation surveys will be designed by GIUs, in collaboration with the project implementation specialist and the IAs. 13. The following are a suggested, but not exhaustive, list of indicators to be covered under the baseline survey and the poverty impact assessment:

Area of cultivated land

Land ownership—whether the land is owned, rented or share-cropped

Cropping history

Average yields and off-take for the various crops grown

Area devoted to each crop

Production inputs used and their source

Average annual expenses used to purchase production inputs

Irrigation availability

Size and make-up of farm family

Extent and type of labor inputs (family, hired)

Proportion of fruit and/or vegetables used at home and marketed commercially

Proportion of FF&V crops sold to traditional markets vs. buyers

Annual average FF&V crop sales value

Number of farmers that sell their FF&V products to buyers (such as organized retailers or wholesalers)

Identification of current markets, mode of sales, and buyers

Average annual family income from farming and from non-farm activities

Gender analysis—roles of women in farming, issues, needs

Types of training received and their sources

Other pertinent information 14. The following are a suggested, but not exhaustive, list of indicators to be covered under the training needs survey:

Level of farmers' technical knowledge and skills (production and post-harvest)

Farmers' knowledge of traditional and customary laws and practices that affect women's ability to access and manage land and natural resources

Current production and post-harvest practices

Any on-farm value addition

Access to technical information regarding production and post-harvest practices including source

Experience in marketing negotiations

Experience in group activities—types of group, membership, and functions

Appendix 5

35

Any serious farming problems concerning production, post-harvest practices, marketing, and group activities

Access to and source of market information

Access to and source of credit

Other pertinent information D. Training 15. In order for small-scale FF&V farmers to be integrated into the value chains, they need to improve their capacity to supply the quality and quantity of fruit and vegetables required by the buyers at the downstream end of those value chains. In order to accomplish this, farmers must be persuaded to adopt improved production and post-harvest practices. This is a two-step process. Farmers must first be convinced of the benefits to be gained from adopting new practices; then they must be shown how to do this. The IAs, in collaboration with the GIUs and the training specialist, will conduct a farmer needs assessment and develop a training curriculum and modules for technical, business, and group management skills. The detailed training delivery mechanism will also be discussed. Proposed technical training includes, but is not limited to, the following:

Soil and water testing;

Use of tray nurseries, formation of planting beds, use of plastic mulch, use of shade netting, proper staking of vining plants, proper soil preparation, pruning of plants, and application of a simple tool for getting the right spacing and depth of seedling plantings;

Installation, operation, and maintenance of drip irrigation and fertigation systems;

Proper harvesting techniques including farmer grading of produce;

Proper packing of produce for shipping; and

Proper produce handling techniques. 16. In addition, farmers need to be trained in business and group management skills. The training could also include classes for farm women in basic skills such as literacy, numeracy, financial management; and in the formation and management of self-help groups (SHGs). The Project will also provide more specialized marketing and management skill straining for the four producer companies to be developed. Proposed business and management skills include the following:

Negotiation skills Marketing skills (including branding) Financial management skills

Business strategy development skills Business management skills

Leadership skills Participatory development skills Dispute resolution skills

Gender awareness 17. A training needs assessment and curriculum/module development will be gender segregated so as to best meet the needs of both male and female farmer group members. Training will also be provided at times and venues convenient for both male and women members.

36 Appendix 5

E. Compliance Safeguards 18. The Project will not trigger any social or environmental safeguards. Both Involuntary Resettlement and Environmental Categorization have been classified as Category C under the ADB's categorization systems. However, as the Project is expected to have some positive impact on the scheduled castes (SCs) and scheduled tribes (STs), Indigenous Peoples Categorization has been classified as Category B. To ensure that appropriate benefits accrue to the SCs and STs, certain favorable actions (such as ensuring that 30% of the beneficiaries are SCs or STs) have been incorporated into in the project components.

Anticorruption 19. The Government of India (GoI) was advised of ADB’s Anticorruption Policy (1998, as amended to date) and the policy relating to the Combating of Money Laundering and the Financing of Terrorism (2003). Consistent with its commitment to good governance, accountability, and transparency, ADB will require GoI to institute, maintain, and comply with internal procedures and controls following international best practice standards for the purpose of preventing corruption, money laundering activities, and the financing of terrorism. GoI will be required to comply with a covenant with ADB to refrain from engaging in such activities. The project documentation between ADB and the GoI will further allow ADB to investigate any violation or potential violation of these undertakings. F. Implementation Schedule 20. The Project will be carried out over 36 months.

G. Procurement 1. Equipment 21. All procurement shall be in accordance with ADB's Procurement Guidelines (2007, as amended from time to time). Procurement envisaged under the Project consists of minor civil works packages, vehicles, and office equipment. Contracts for goods estimated to cost less than $0.5 million but more than $100,000 shall be procured on the basis of national competitive bidding (NCB) procedures, subject to modifications agreed with ADB. 1 Contracts for goods estimated to cost $100,000 or less shall be procured using shopping procedures. For NCB, the first draft English language version of the procurement documents should be submitted for ADB review and approval regardless of the estimated contract amount. The ADB-approved procurement documents should then be used as a model for all NCB procurement financed by ADB for the Project, and need not be subjected to further review. ADB will review the bid evaluation report and award of contract on a post-review basis. For shopping, ADB will review the award of contract on a post-review basis. An indicative procurement plan is in Appendix 6.

1 For NCB procurement of works and goods, ADB’s standard bidding document without pre-qualification for large works will be used. The general conditions of contract follow the Fédération Internationale des Ingénieurs-Conseils (FIDIC) in its most recent version.

Appendix 5

37

2. Consulting Services 22. Local NGOs will be recruited through quality-based selection in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time) to provide implementation, management, and progress monitoring services for the Project. The draft outline terms of reference for consulting services are in Appendix 7. H. Disbursement Arrangements 1. Disbursement Procedures 23. The EA and IA will adopt either of the following disbursement procedures for withdrawal of the proceeds of the grant in accordance with ADB’s Loan Disbursement Handbook (2007, as amended from time to time): (i) a direct payment procedure, where ADB, at the request of the Government, pays a designated beneficiary directly; or (ii) an imprest fund procedure, where ADB makes an advance disbursement from the grant account for deposit to an imprest account at a commercial bank acceptable to ADB, to be used exclusively for ADB’s share of eligible expenditures. The total advances at any time are not to exceed estimated expenditure for the next 6 months or 10% of the JFPR grant amount, whichever is lower.

2. Reallocation of Funds by Expenditure Categories or Components 24. Reallocation of grant funds would be carried out as follows:

(i) For reallocations in approved expenditure categories equal to 30% or less of the budgeted amount, the EA must seek advice from ADB.

(ii) For reallocations to new eligible expenditure categories totaling up to 10% of the grant amount, a request must be submitted to ADB for approval.

(iii) For reallocations that exceed 30% of budgeted amounts in approved expenditure categories, or for adding a new expenditure category that exceeds 10% of the grant amount, a request must be sent to ADB for submission to the Government of Japan. The Government of Japan will provide its approval or rejection within 4 weeks from its receipt of the request from ADB. The amendment should be endorsed by ADB.

3. Changes in Scope of Grant 25. Where a change is needed in the grant component, ADB should be consulted if any amendments/clearances are required as described below:

(i) For small changes in the activities supported by the grant (e.g., a change of up to 30% of the amount for a component, as budgeted in the background information, is considered to be small), the EA should consult ADB if an amendment is required.

(ii) For significant changes in the grant components, the request must be approved by ADB. Significant changes are defined as: (a) a change of more than 30% in the amount of a component, or (b) adding a new component. For significant changes in the Grant Development Objectives, the request must be sent to ADB, which will determine if approval by the Government of Japan is required. The Government of Japan will provide its approval or rejection within 4 weeks from its receipt of a request from ADB. The amendment should be cleared and approved

38 Appendix 5

by ADB.

G. Reporting Requirements

1. Bi-Monthly Progress Report by E-mail

26. The IAs will prepare brief bi-monthly progress reports addressing project implementation progress, problems, and concerns. The reports should be concise, and kept to a maximum of five pages. Reports should be circulated by e-mail to the EAs, Ministry of Finance, and ADB. 2. JFPR Status Report to ADB 27. ADB requires that a semiannual JFPR Status Report be submitted to ADB. 3. Audited Grant Accounts

28. The IAs will maintain separate accounts for all project components financed by JFPR and the GoI. These accounts must be audited by an independent auditor that has adequate knowledge and experience of international accounting practices and is acceptable to ADB. The audited project accounts and the auditor’s reports will be furnished to ADB within 6 months after the end of each financial year. The GoI has been informed of ADB’s requirement regarding the timely submission of audited project accounts and financial statements, including the suspension of disbursements in case of noncompliance. The audit report should include a separate opinion on the use of the imprest account. ADB will also finance, through the Project, annual audits through an independent audit company acceptable to ADB. 4. Implementation Completion Memorandum

29. The project implementation completion memorandum should be prepared by the EA within 6 months after the grant closing date. H. Grant Monitoring and Evaluation 1. Contract Awards/Commitments and Disbursement Projections 30. Consistent with the project schedule, the disbursement of the JFPR fund is spread over the implementation period, with the corresponding disbursement amount for each year to be detailed in the inception report. 2. Grant Reviews 31. To determine the efficiency and effectiveness of the use of the grant, grant reviews will be conducted by the EAs and ADB through semiannual project review missions. Such reviews will ensure that the grant is used prudently in each stage of project implementation. 3. Monitoring Indicators 32. The monitoring indicators will be composed of component output indicators, and project benefit indicators (key performance indicators). These indicators must be referenced in all required reports, except the monthly progress reports. Where necessary, the project manager

Appendix 5

39

will collect and confirm baseline values for the indicators at the beginning of project implementation. 4. Midterm Review 33. ADB and the Government will carry out a midterm review of project implementation in Year 2. The midterm review will focus on project impacts, particularly those relating to (i) institutional, administrative, organizational, and technical aspects; and (ii) social aspects and poverty reduction. It will also:

(i) review the original project scope, design, implementation arrangements, and other relevant issues in light of the GoI’s development strategies and policy framework, and the strategic concerns of ADB, including any modifications, if needed;

(ii) examine progress toward achieving the measurable objectives of the Project and agree on minor changes in the project design and implementation;

(iii) assess compliance with the JFPR Agreement; (iv) identify problems and constraints; (v) formulate appropriate recommendations for corrective actions; and (vi) develop a revised project implementation schedule for effective implementation of the

Project.

IMPLEMENTATION MECHANISM FOR EACH STATE

Coordination Direct oversight

Private Sector

Executing Agency

ADB

PMO (for AIDIP)

Grant Implementation

Unit

- Project Implementation

Specialist - Training Specialist

Service Providers - Local NGOs - Consultants

- Extension Agents .

40 Appendix 6

INDICATIVE PROCUREMENT PLAN

Project Information The grant will be used for (i) minor civil works packages, vehicles, and office equipment and (ii) consulting services for design and implementation supervision.

Country India

Name of Grantee Government of India

Project Name Improving Small Farmers' Access to Market in Bihar and Maharashtra

Grant Reference Grant 43105-01

Date of Effectiveness TBD

Amount $: $3,000,000

Of which Committed, $ $3,000,000

Executing Agency Bihar: State Department of Agriculture Maharashtra: State Department of Co-operation & Agricultural Marketing

Approval Date of Original Procurement Plan

None

Approval of most recent Procurement Plan

None

Publication for Local Advertisements a Procurement notices in local newspapers

Period Covered by this Plan 12 months from grant effectiveness a General procurement notice and invitations to bid.

Table A6.1: Procurement Thresholds, Goods and Related Services

Procurement Method Estimated Contract Value ($)

NCB Goods (turnkey) < 500,000 Shopping Goods Direct Purchase Goods

< 100,000 < 10,000

NCB = national competitive bidding. Source: Asian Development Bank estimates.

Table A6.2: List of Consulting Services

No.

Contract Description

Estimated Cost ($)

Procurement Method

Expected Date of

Advertisement

Prior Review

Y/N

Comments

1 Consulting Services

36,000 NGOs, QBS April 2010 Y Engaged by GIU

2 Consulting Services

222,000 INDV April 2010 Y Engaged by ADB and GIU

ADB = Asian Development Bank, GIU = grant implementation unit, INDV = individual, NGO = nongovernment organization, QBS = Quality-Based Selection. Source: Asian Development Bank estimates.

Appendix 7 41

OUTLINE TERMS OF REFERENCE FOR GIU STAFF AND CONSULTANTS

1. The grant assistance will be implemented in consultation with the stakeholders concerned—local farmers, national and local governments, private buyers, and other developmental agencies. The Implementing Agencies (IAs) must review evaluation reports of similar projects funded by the Asian Development Bank (ADB) and other agencies, especially with regard to the lessons learned and factors that influence sustainability. A. Qualifications and Scope of Work for GIU Staff

1. Grant Implementation Unit (GIU) Head (36 person-months)

Qualifications: (i) At least 10 years’ experience in agriculture and/or agribusiness development including

integrating small-scale, marginal, and disadvantaged farmers into commercial supply chains (preferably dealing with horticulture crops); including management level experience with government and/or donor-funded agricultural development projects, preferably the latter.

(ii) At least 5 years’ experience at management level in a private sector agribusiness firm dealing with small-scale farmers, preferably in the horticulture field.

(iii) Fluency in English and excellent writing and basic computer skills. (iv) University degree or above in agriculture, agribusiness, management or related field.

Tasks: The specialist will

(i) Implement and manage the overall grant project and other project personnel. (ii) Coordinate project activities with other donor and government development initiatives. (iii) Supervise establishment of baseline data (farmer surveys). (iv) Develop selection criteria and detailed terms of reference (TORs) for the IAs once the

scope of work is determined with the private sector investors of the AIDIP value chain. (v) In consultation with other team members, develop a detailed work plan,

implementation guidelines, and monitoring & evaluation plans, and supervise their implementation.

(vi) In consultation with ADB, recruit necessary team members and consultants. (vii) Establish a database of project accounts and procedures that meet ADB's financial

management requirements. (viii) Manage and monitor all project accounts and activities. (ix) Prepare a project marketing brochure and other informational and promotional

materials as needed. (x) Prepare all required reports. (xi) Have regular coordination meetings with the executing agencies (EAs) and other

relevant stakeholders. (xii) Organize the final workshop together with the EAs.

2. Monitoring & Evaluation (M&E) Specialist (36 person-months)

Qualifications:

(i) At least 3 years’ experience in monitoring and evaluation, especially in socio-economic analysis.

(ii) In-depth knowledge of survey instrument design, database construction and management, data collection, data analysis, and report compilation.

(iii) Fluency in English and excellent writing and computer skills. (iv) University degree in economics, social sciences, or a related subject.

42 Appendix 7


(i) Together with the GIU Head and Deputy GIU Head, develop an overall M&E framework for the Project, including the baseline, regular monitoring, a complaints handling mechanism, a mid-term review, and a final poverty impact assessment.

(ii) Design the baseline survey, field test, then finalize. (iii) Hire and train relevant enumerators to conduct the baseline survey. Supervise these

enumerators and conduct spot checks to ensure the quality of the baseline survey. (iv) Design and construct a database and register all the baseline survey data. (v) Design a complaints handling mechanism, and a system to keep track of the types of

complaints and how they were handled. Regular reports must be developed regarding the handling of complaints.

(vi) Develop regular monitoring reports, collect the data, and compile into regular reports. All the results should be recorded in the database.

(vii) Develop poverty impact assessment tools, field test, then finalize. (viii) Hire and train relevant enumerators to conduct the poverty impact assessment.

Supervise these enumerators and conduct spot checks to ensure the quality of the survey data.

(ix) Register the data in the database. (x) Compile necessary reports.

3. Accountant (36 person-months)

Qualifications:

(i) Minimum 5 years of relevant professional experience in financial management or accounts administration.

(ii) University degree or above in Business Administration, Finances, or Accounting. (iii) Experience in working with international organizations preferable. (iv) Knowledge of ADB’s financial procedures, including procurement and contracting

preferable. (v) Good communication and social skills. (vi) Fluency in English and excellent writing and computer skills.

Tasks: The accountant will

(i) Develop and maintain the accounting system for the Project in accordance with the Operational Manual and ADB guidelines.

(ii) Provide information necessary for the preparation of quarterly, annual, and other financial statements as necessary.

(iii) Be responsible for the implementation of accounting registration and control procedures.

(iv) Maintain proper control of the imprest account. This includes, but is not limited to, the preparation of payments, adequate bank statements, documentary proof for all disbursements, and relevant documents to apply for the imprest account replenishment.

(v) In consultation with the GIU Head, prepare the draft annual budget. (vi) Prepare requests for withdrawal of funds and all necessary documentation. (vii) Prepare on the basis of information transmitted by the different specialists, all

contracts between the Project and contractors. Verify the accuracy of all financial data with the standard norms and record all transactions in the appropriate file.

(viii) Review and verify all requests for payments for sub-projects or other contractors’ expense statements and prepare payments to the creditors of the PCU (cheques, transfers).

Appendix 7 43

(ix) Register the administrative and sub-projects’ expenditures in the accounting system. (x) Reconcile monthly the bank accounts with the bank statements.

B. Qualification and Scope of Work for Consultants

1. Project Implementation Specialist (National, 36 person-months) Qualifications:

(i) At least 10 years’ experience in agriculture and/or agribusiness development including integrating small-scale, marginal, and disadvantaged farmers into commercial supply chains (preferably dealing with horticulture crops);

(ii) At least 5 years of planning, implementing and managing donor-funded agriculture projects, some of which must be ADB projects;

(iii) Familiarity with ADB's project administration and implementation procedures (essential);

(iv) At least 5 years of experience in working with government agencies; (v) Fluency in English and excellent writing and basic computer skills; and (vi) University degree or above in agriculture, agribusiness, management or related field.


(i) Ensure that the selection and engagement of IAs, and all procurement and disbursement fully comply with ADB's guidelines and regulations.

(ii) Assist GIUs and the executing agencies (EAs) in smoothly implementing the project, and help address any major concerns raised by the EAs, GIUs and/or ADB.

(iii) Coordinate the activities of GIUs in the two states with ADB. (iv) Help GIUs coordinate with other government agencies, NGOs, and civil society

organizations. (v) Assist the GIUs in producing quarterly progress reports, the midterm review report, the

benefit monitoring and evaluation (BME) report, project completion reports, and other reports as necessary. Ensure that the reports are acceptable to ADB in terms of rigorousness, format, and timeliness.

(vi) Assist GIUs for ADB's review missions. (vii) Monitor and follow up government actions deemed necessary through implementation

monitoring and ADB review missions. (viii) Monitor the day-to-day operations of GIU staff and give advice and on-the-job training

as needed.

2. Training Specialist (National, 12 person-months)

Qualifications: (i) At least 5 years’ experience in planning, implementing, and managing farmer training

or related programs. (ii) Experience with training for government, nongovernment organizations (NGOs) or

donor-funded agricultural development projects. (iii) Fluency in English and excellent writing and basic computer skills. (iv) University degree or above.


(i) Help the IAs to design and conduct a farmer training needs assessment, for both men and women farmers.

(ii) Based on the findings, help the IAs to develop a new or tailor an existing training curriculum and modules.

44 Appendix 7

(iii) Help the IAs to plan, schedule, and supervise all farmer training activities, including in-field training, workshops, farmer field days and farmer visits. The activities should be tailored for men and women, as necessary.

(iv) In coordination with the GIUs, help the IAs to prepare, test, and validate suitable lead farmer and farmer training materials that cater to both men and women farmers.

(v) Help the IAs to train selected women farmer members in organization and management of the revolving funds.

(vi) Help the IAs to plan, develop, and conduct training programs for producer company management.

(vii) Monitor and evaluate training project programs and provide inputs to GIU Head for required reports.

3. Pool of Experts/NGOs (Unallocated 30 person-months)

The staffing, inputs, qualifications, and tasks of the Service Providers (SPs) will be identified as needed by the private sector investors of the AIDIP value chains, in consultation with the GIUs and with prior approval of ADB. SPs could be a local NGO, a group of consultants, or a combination of the two. An indicative list of consultants includes: Marketing Specialist, Agriculturalist, Monitoring and Evaluation Specialist, Social Development Specialist, extension agents, and others as necessary. Provisional qualifications and tasks are shown below.

4. Local NGO

Qualifications: (i) Is legally registered (at least 10 years) as an NGO at the national level. (ii) Demonstrates institutional capacity (including sufficient qualified human resources

and technical know-how) to successfully implement the project activities. (iii) Demonstrates results in linking small-scale farmers to commercial markets and turning

farmer groups into self-sustaining producer companies specializing in horticulture. (iv) Focuses on working with small-scale farmers, women cultivators, and scheduled

caste and scheduled tribe farmers. (v) Possesses relevant working experience in either one of the two target states. (vi) Possesses existing field offices in either one of the two target states. (vii) Has externally audited accounts with current certified financial statements. (viii) Has no political identity and operates in a transparent and democratic manner. (ix) Satisfies specific criteria related to required expertise to be spelled out as terms of

reference for national NGOs. Tasks: The NGO will

(i) Implement project activities under the general supervision of GIU according to the memorandum of agreement signed with the EAs, and the approved project administration manual and work plan.

(ii) Help GIU design and conduct a baseline survey in the Project area. (iii) In consultation with the GIU, conduct fresh fruit and vegetable (FF&V) demand and

marketing analyses to assist in designing specific project interventions. (iv) Interview organized FF&V buyers to determine their interest, needs, and requirements

as a guide to farmer organization and capacity development. (v) Based on the above findings, formulate the overall strategy, work plan, and

implementation guidelines for the project. (vi) In consultation with the GIU, conduct participatory meetings in each production cluster

and identify suitable groups of farmers for the Project, based on the detailed selection criteria.

Appendix 7 45

(vii) Undertake awareness raising campaigns and social mobilization programs for the project beneficiaries and form new farmer groups or strengthen the existing groups.

(viii) Through consultations with the members, develop operational guidelines and bylaws for the farmer groups.

(ix) Introduce a revolving fund in each farmer group and train the fund managers. (x) Conduct a farmer training needs assessment, gender segregated as necessary,

develop the training curriculum, and provide training. This includes training of lead farmers and extension agents, and establishment of demonstration plots.

(xi) Select four well-performing farmer groups (3 in Maharashtra, 1 in Bihar) to turn into producer companies.

(xii) Assist farmer groups in identifying and facilitating long-term agreements with buyers. (xiii) Monitor and evaluate project activities, and update the baseline data and information

on a regular basis. (xiv) Organize exposure visits for farmer groups. (xv) Organize a final workshop in collaboration with the GIU. (xvi) Submit to GIU project progress and financial reports on a quarterly basis and as

required.

5. Marketing Specialist Qualifications:

(i) At least 5 years’ management level experience in commercial procurement and marketing of horticulture commodities, preferable with an organized food wholesale or retail firm.

(ii) In-depth knowledge of and numerous contacts with management personnel of organized wholesale and retail food firms engaged in procurement of fruits and vegetables.

(iii) Fluency in English and excellent writing and basic computer skills. (iv) University degree in agribusiness, marketing or a related subject.


(i) Plan and supervise the project market linkage programs and activities. (ii) Develop and conduct marketing training courses for lead farmers and producer

company management personnel. (iii) Train and assist lead farmers and producer company management personnel in the

identification of potential buyers in more profitable value chains (firms engaged in organized wholesale/retail, exporters, food processors, food services).

(iv) Accompany lead farmers and producer company management personnel in marketing visits to potential buyers.

(v) Advise lead farmers and producer company management personnel in negotiating sales to potential buyers.

(vi) Monitor marketing program progress and provide inputs to GIU Head for required reports.

6. Agriculturalist

Qualifications:

(i) At least 8 years’ relevant experience in agricultural and rural development, especially in fresh fruit and vegetables.

(ii) Experience of agricultural research and training programs in India. (iii) Experience of the FF&V industry and the role of smallholders in the supply chain. (iv) Fluency in English and excellent writing and basic computer skills.

46 Appendix 7

(v) University degree or above in agriculture or a related subject. Tasks: The specialist will

(i) Plan and supervise the FF&V production programs and activities. (ii) Help the formation of farmer groups. (iii) Develop and conduct technical skills training courses for lead farmers, extension

agents, and farmers. (iv) Help conduct a market analysis of FF&V. (v) Identify potential input providers and research institutions with which the farmer

groups could partner. (vi) Provide refresher training during the project. (vii) Provide monitoring and evaluation on production programs and activities. (viii) Provide inputs to GIU Head for required reports.

7. Monitoring & Evaluation Specialist

Qualifications: (i) At least 5 years’ experience in monitoring and evaluation, especially in socio-

economic analysis. (ii) In-depth knowledge of survey instrument design, database construction and

management, data collection, data analysis, and report compilation. (iii) Fluency in English and excellent writing and computer skills. (iv) University degree in economics, social sciences, or a related subject.


(i) Together with the GIU, develop an overall M&E framework for the Project, including the baseline, regular monitoring, a complaints handling mechanism, a mid-term review, and final poverty impact assessment.

(ii) Help GIU design the baseline survey, field test, then finalizes. (iii) Help GIU hire and train relevant enumerators to conduct the baseline survey.

Supervise these enumerators and conduct spot checks to ensure the quality of the baseline survey.

(iv) Help GIU design and construct a database and register all the baseline survey data. (v) Help GIU design a complaints handling mechanism, and a system to keep track of the

types of complaints and how they were handled. Regular reports must be developed regarding the handling of complaints.

(vi) Help GIU develop regular monitoring reports, collect the data, and compile into regular reports. All the results should be recorded in the database.

(vii) Help GIU develop poverty impact assessment tools, filed test, then finalize. (viii) Help GIU hire and train relevant enumerators to conduct the poverty impact

assessment. Supervise these enumerators and conduct spot checks to ensure the quality of the survey data.

(ix) Help GIU record the data in the database. (x) Help GIU compile necessary reports.

8. Social Development Specialist

Qualifications:

(i) At least 5 years of experience in socio-economic analysis, including gender analysis, community mobilization, social development, local institutional development, and capacity building.

(ii) Proven analytical capacity.

Appendix 7 47

(iii) In-depth knowledge of the socio-economic situations of the project area (preferable). (iv) Experience in the interpretation and application of ADB safeguard policies,

particularly on Indigenous Peoples (desirable). (v) Fluency in English and excellent writing and computer skills. (vi) University degree or above in social development or relevant subject. (vii) Excellent interpersonal skills and willingness to travel frequently to remote rural

areas. Tasks: The specialist will

(i) Provide inputs to the GIU to finalize the baseline survey. (ii) Conduct participatory rural appraisal and focus group discussions to gain a better

understanding of the overall socio-economic situation in the area along with a gender assessment. Socio-economic indicators identified in the baseline survey should also be collected.

(iii) Analyze the data and provide inputs for the project design. (iv) Examine ways to most effectively organize farmers to allow them to take advantage

of economies of scale. In so doing, consideration should be given to the creation of female farmer only groups or caste-specific groups within the socio-cultural context.

(v) Recommend how the Project can address small farmers' needs, with a special emphasis on the integration of female farmers and scheduled caste and scheduled tribe farmers into the value chains.

(vi) Monitor and evaluate project activities, especially from a social perspective, i.e., participation and empowerment of the vulnerable people.

(vii) Provide inputs to GIU Head for the required reports.

9. Extension Agents

Qualifications: (i) At least 5 years’ experience working at field level with small-scale fruit and/or

vegetable farmers. (ii) Proven ability to effectively transfer improved production and post-harvest practices to

farmers. (iii) Extensive knowledge and understanding of all aspects of vegetable and/or fruit

cultivation and post-harvest handling. (iv) University degree in agriculture or related subject.


(i) Provide in-field training of lead farmers and farmers in improved vegetable and/or fruit production and post-harvest practices.

(ii) Maintain ongoing contact with production group farmers to identify and assist in solving production and post-harvest problems.

(iii) In coordination with the deputy manager of the project implementation unit and short-term technical consultants, plan and conduct farmer field days.

(iv) Plan and supervise establishment and maintenance of lead farmer demonstration plots. (v) Train village extension agents. (vi) Monitor and supervise village extension agents and lead farmer activities. (vii) Monitor and evaluate farmers’ progress and results in applying training and provide

inputs to the project implementation unit manager for the required reports.

48 Appendix 8

SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

Country/Project Title: India/Improving Small Farmers’ Access to Market in Bihar and Maharashtra

Lending/Financing Modality:

Japan Fund for Poverty Reduction (JFPR)

Department/ Division:

SARD/SANS

I. POVERTY ANALYSIS AND STRATEGY

A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy

Until the recent international financial crisis, India had demonstrated strong economic growth, averaging 8.7% per annum

since 2004. However, growth of the agriculture sector, which employs about 60% of the country's workforce, has stagnated at about 2% per annum since 2000.

1 The rural non-farm sector, which is strongly correlated with the performance of the

agriculture sector, has also been slow to grow. This is primarily because the present marketing and processing systems are

riddled with long and fragmented supply chains, high wastage, poor infrastructure, and excessive market regulations. These factors have contributed to the slow agribusiness development, limiting off-farm employment generation and thus contributing

to the widening rural-urban income disparity. Rural per capita household expenditure is estimated to be less than half that of

urban households. Of the nearly 120 million farmers in India, roughly 40% are landless and about 28% are classed as marginal, with only 0.01 to 0.04 hectares of cultivated land.

Against this backdrop, the Government of India (GoI) has made inclusive growth its overarching goal in its 11th Five Year Plan

(2008-2012). It prioritizes the reduction of regional and rural-urban disparity and of chronic poverty through inclusive growth. GoI highlights private sector-led agricultural growth, through greater crop diversification, higher value addition, and improved farmer-market linkages, as an important driver for poverty reduction and rural economic growth. Given the large number of small-scale farmers, GoI highlights the importance of giving the poor farmers adequate bargaining power through group formation. ADB's Country Partnership Strategy (CPS) (2009-2012) emphasizes the alignment of ADB's policy with GoI's 11

th

Five Year Plan. It highlights ADB's continued support for GoI's efforts to promote inclusive growth, with a special focus on India's relatively poor and weak-capacity states. Agriculture is listed as one of the priority sectors in the CPS.

B. Poverty Analysis Targeting Classification: GI_

1. Key Issues

Bihar is one of the poorest states in the country; its per capita gross domestic product (GDP) was Rs.6,610 (about $132) as of December 2007, which is less than a quarter of the national average. Bihar also lags behind in terms of physical infrastructure and connectivity. Only 57% of the villages in Bihar are connected through roads as compared to the national average of 62%. The agriculture sector’s contribution to the state’s GDP is 40%. Agriculture is dominated by small landholders, with about 96% of farm households having less than 2 ha of land and marginal farmers constituting about 90% of total farm households. These farmers have lagged behind since they do not have resources for acquisition of modern agricultural technology, access to quality inputs, technical knowledge, or production infrastructure. Compounding the problem is the lack of organized marketing arrangements for agricultural produce. More than 90% of the farmers sell their produce in villages to traders at less than 80% of prevailing market prices. Vegetable growers do not get even 50% of the retail price. About 96% of marginal farmers are indebted to informal moneylenders, paying an exorbitant annual interest rate of 30-60%. In Bihar, only 4.5% of farmers are covered under the crop insurance scheme and 57% of farmers are unaware of the scheme and hence remain unprotected. Maharashtra enjoys per capita income of Rs.28,204 (about $564), well above the nation’s per capita income of Rs.20,989 ($420). About 60% of the population is dependent on agriculture for a living, but the share of agricultural output in state revenue has decreased to 17% in recent years. The average annual gross state domestic product growth of agriculture and related activities was around 2.7%, which is less than the national growth of 3.7% achieved in the 9th Five Year Plan. Despite the overall economic growth, incidence of poverty in the state has continued to remain close to the national average. Based on official estimates, 25% of people in Maharashtra were below the poverty line in 1999-2000, which is only slightly lower than the national average of 26%. Maharashtra has some of the poorest and most underdeveloped regions in the country. Almost 73% of rural households possess landholdings of less than 2 ha.

Design Features.

The Project aims to enhance integration of small-scale fresh fruit and vegetable (FF&V) farmers in Bihar and Maharashtra into modern value chains. It does so by: (i) organizing farmers into farmer groups; (ii) building their capacities; and (iii) facilitating market linkages. It is anticipated that the Project will contribute to improved livelihoods of the rural poor through provision of on-farm and off-farm income generation opportunities in the target sites. By organizing them into farmer groups, the Project

1 India Country Profile 2008. Economist Intelligence Unit.

Appendix 8 49

will provide a platform to access resources and market information. The Project will also provide much needed extension services and link them to alternative markets so that farmers can realize higher returns. These activities will be run by the farmers themselves so as to ensure empowerment and sustainability. The Project will train local extension agents and help develop sustainable partnerships between farmer groups and the market. There will be a special focus on women cultivators as they are actively involved in all activities related to cultivation, especially in Bihar.

II. SOCIAL ANALYSIS AND STRATEGY

A. Findings of the Social Analysis

A socio-economic study was carried out in both states in Muzaffarpur district (Bihar) and Nasik district (Maharashtra). The aim was to ascertain the socio-economic profile and identify key production and marketing constraints that the small-scale FF&V farmers (with a landholding of 1-5 acres) faced. The needs and constraints identified were common in both states. These include: (i) lack of access to credit; (ii) lack of basic infrastructure; (iii) lack of quality inputs; (iv) lack of access to extension services; and (v) lack of market information. First, small-scale farmers face extreme difficulty in taking out loans from commercial banks because of the small size of their landholding that does not satisfy as collateral. Unavailability of timely and appropriate credit has also made it difficult for them to invest in their cultivable land. Second, lack of basic infrastructure such as power, water, roads, means of transportation and storage facilities is a serious bottleneck in accessing markets. Power supply was erratic in both locations and that obstructed the use of bore wells for irrigation. Third, unavailability of quality inputs such as seeds and fertilizers hampers farmers' productivity. It makes their crops prone to pests and diseases, further increasing the financial burden of the small-scale farmers. Fourth, farmers did not have sufficient extension services. They rarely possess technical know-how on production and post-harvest practices. Their main source of information was the radio, newspapers, or word of mouth from farmers in neighboring villages. Finally, farmers also lacked access to market information, especially about the nature and extent of demand, and prevailing prices. This has forced farmers to become the "price-takers" rather than "price-makers". The Project hopes to address these issues by organizing farmers into farmer groups and strengthen their market leverage; provide extension services; and link them to buyers that will provide inputs and technical support. There are special circumstances that need to be taken into account when establishing the farmer groups, namely gender and caste structure issues. For gender issues, see Section C-1. Because of the strength of the caste system in Bihar, it may be necessary to organize farm groups there along caste lines. This is important so as to avoid any conflicts within the group or possible dominance of the upper castes, who may control access to information or resources.

B. Consultation and Participation

1. Provide a summary of the consultation and participation process during the project preparation. To ensure proper community participation, various stakeholders were consulted during project preparation. These included farmers with representatives from vulnerable groups such as women and Scheduled Caste (SC) and Scheduled Tribe (ST) farmers, local leaders, Gram Panchayat (village government) members, farmers’ associations, government departments, and

district agriculture officers. These consultations played a vital role in understanding the local needs and problems of the small-scale FF&V farmers in both states, identifying the sample villages for the study, raising the level of awareness among the people, gaining local support, and enabled the community to voice their opinions and suggestions on the Project design and implementation. Consideration was given to ensure that the poor and women have been carefully considered in conducting participatory activities. 2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring?

Information sharing Consultation Collaborative decision making Empowerment

The Project will also be implemented in a participatory manner. For each farmer group, it will establish women-run revolving funds consisting of each farmer's contribution. This aims to: (i) nurture members' ownership; (ii) take advantage of women's financial management experience through Self-Help Groups (SHGs); and (iii) directly involve women in communal activities. Youths will be trained as village extension agents. This will increase their income generation opportunities and ensure technology transfer to the local people while retaining the technical know-how among the farmers. Efforts will be given to ensure adequate participation of SC/ST farmers, and if necessary, SC/ST specific sub-groups will be formed under the overall farmer group. 3. Was a C&P plan prepared? Yes No Maximizing the social impacts requires the full cooperation of the beneficiaries. Given that (i) farmers' participation is the means and end for the Project, (ii) IAs are likely to involve local NGOs, and (iii) there are no negative safeguard issues or any other negative social impacts arising from the Project, there is no need to set up a C&P plan. The participatory approach will be mainstreamed in every aspect of the Project activities.

50 Appendix 8

C. Gender and Development

1. Key Issues.

Women in both states were seen to be actively involved in household affairs, including the number of children in the family and their education, household expenditure, and livelihood options that need to be taken. They also generally play a key role in all aspects of agriculture from sowing to selling of the produce. In India, women are not title holders but are involved in all processes related to agriculture. Some work in their own fields while others work as agricultural laborers. The women in the sample villages had family land holdings from 1.5-5 acres. Most of them grew vegetables and occasionally engaged in fruit cultivation. Some who were engaged as agricultural laborers worked in other farmers' orchards during the harvest season. With the onset of the SHGs, women are the ones who take out loans from the SHGs to invest in agriculture and other related activities for the household. Thus, they play a pivotal role in the agricultural sector. However, women are not substantively involved in the decision-making process, such as which crops to grow or when or where to sell. Surprisingly, this trend was stronger in Nashik district in Maharashtra than in Muzaffapur district in Bihar, which is a more conservative state as a whole. One of the important reasons for the difference is market proximity. Women in Muzaffapur lived within a 10km radius of a major regional market, and hence were fully engaged in selling their agricultural produce. Close proximity of markets provides women with opportunities for involvement in market transactions, and this in turn strengthens their role in the whole process of production and marketing. 2. Key Actions. Measures included in the design to promote gender equality and women’s empowerment—access to and

use of relevant services, resources, assets, or opportunities and participation in the decision-making process: Gender plan Other actions/measures No action/measure

In order to strengthen their role, the Project will take two measures. First, women members will be put in charge of managing the revolving fund in each farmer group. This will not only help to involve them directly in communal activities, but also strengthen their role in the communal decision-making process. Second, the Project will help organize women cultivators into groups or strengthen existing women SHGs under the farmer groups and provide capacity development support, so as to strengthen their leverage vis-à-vis men and possibly the market.

III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS

Issue Significant/Limited/ No Impact

Strategy to Address Issue

Plan or Other Measures Included in Design

No Impact N/A Full Plan Short Plan Resettlement Framework No Action

Indigenous Peoples

Limited The Project will ensure that the SCs/STs receive the benefits of the Project, in particular improved economic opportunities.

Plan Other Action Indigenous Peoples

Framework No Action

Labor

Employment opportunities Labor retrenchment Core labor standards

Significant The Project will increase employment opportunities for the small FF&V farmers by improving their links to markets. Links to alternative markets can open up opportunities for off-farm employment such as sorting and packaging.

Plan Other Action No Action

Affordability

No impact In order to sustain the operations and maintenance of the farmer groups, the Project will introduce a revolving fund. The amount of the compulsory contribution will be set at an affordable rate, however, so as not to burden the member

Action No Action

http://www.adb.org/IndigenousPeoples/IP-Screening-Categorization/default.asp

Appendix 8 51

farmers.

Other Risks and/or Vulnerabilities

HIV/AIDS Human trafficking Others(conflict, political

instability, etc), please specify

N/A N/A Plan Other Action No Action

IV. MONITORING AND EVALUATION

Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes □ No

CPS = Country Partnership Strategy, FF&V = fresh fruit and vegetable, GDP = gross domestic product, GoI =

Government of India, SC = Scheduled Caste, SHG = Self-Help Groups, ST = Scheduled Tribe

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