Food crisis an opportunity to make agriculture viable

"This is the time to take initiatives and convert agriculture into a viable business for farmers," he told Business Standard, adding that this opportunity could be realised only if the private sector played a larger role.

Though short-term measures initiated by the government to contain the price rise has affected the revenues of ABD, the second largest contributor to the revenues of ITC, Sivakumar said such measures had to be accepted in the larger interest of the country.

"ITC is a citizen first. Hence, the opportunity loss caused by government initiatives in times of food crisis should be accepted," he pointed out.

Sivakumar, however, cautioned that policy makers should ensure that the current opportunity for raising farm incomes should not get hampered while managing the short-term food crisis. "If not we will fall into a vicious cycle of this crisis repeating in future."

He attributed the current foodgrains crisis to the increase in demand partly due to rising incomes, decline in production partly because of change in climatic conditions and the demand for cultivable land from new sectors like bio-fuels.

In this context, he said, the government should encourage the role of the private sector in connecting consumers demand system to production and supply chains.

Governments schemes should be complemented with reforms in areas like agricultural produce marketing laws, taxation and futures trading. "Government alone doing everything is more suited for shortage economy," he emphasised.

With the government banning export of non-basmati rice, ABD registered just a 5 per cent growth in its revenue in the first three quarters of 2007-08, as against a growth of 37 per cent recorded in the previous year.

For the 9-month ended December 2007, ABD's revenues stood at Rs 2,790.33 crore as against Rs 2,659.79 crore posted in the corresponding period previous year. Its revenues in 2006-07 increased to Rs 3,691.36 crore from Rs 2,678.44 crore in 2005-06. Around 40 per cent of the ABD's revenues comes from exports and non-basmati rice accounts for 15 per cent of its export revenues.

Following government restrictions on the exports, ABD has embarked upon a four-pronged strategy of laying more focus on the domestic market, reorganising its product portfolio, leveraging its e-Chaupal model for agri extension and agri business and partnering with various state governments, particularly in Madhya Pradesh and to a lesser degree in Maharashtra and Uttar Pradesh.

"We are stepping up our whole agri services portfolio, which we think will be beneficial in the long run," Sivakumar said, adding that ABD was now selling comparatively more quantity of soyabean, coffee, fruit and vegetables in the domestic market.