Innovative biz models can tame inflation: KPMG

Food inflation, which remains remarkably high at over 12%, could be tamed through innovative agriculture business models, a KPMG report said.

The report -- Taming Food Inflation Through Innovative Agri-business Models -- highlighted that reduction in farm investment, lack of infrastructure, lower productivity, sub-optimal technology usage and failed policy focus are some of the key factors contributing to food inflation.

"Despite a good monsoon and increased production in FY10-11, food inflation in India remains remarkably high. Inflation in food products has been either a direct or an indirect consequence of various factors on both the demand and supply side," the report noted.

However, a few companies have converted the supply-demand challenges impacting food prices into an opportunity through the innovation path, it said, adding that their business models have helped address bottlenecks to some extent.

"It may be useful to apply learnings from such case studies to the broader market context leading to an effective and efficient food value chain," said the report, which was released at the ninth Knowledge Millennium Summit here today.

Citing some of the innovative business-models, the report said that in the absence of growth in public investment in agriculture and allied sectors, Coimbatore-based Suguna Poultry Farms solved the problem of funding in poultry sector by introducing 15,000 rural entrepreneurs across 10 states.

Whereas Bangalore-based Snowman Frozen Foods Limited, a pioneer in storage and transportation of perishables in the country, is addressing growing complexity in the cold storage management through technology interventions, it said.

"The consistent deficiency in investments has led to infrastructure bottlenecks and inefficiencies across the food value chain. The lack of processing, absence of storage facilities lead to wastage of approximately 35 of fruits and vegetables," the report observed.

To address the low productivity of land resources, as many as "19 Indian agricultural companies have gone international in their search for land to create ultra-large scale farms", the report said.

Whereas Jalgaon-based Jain Irrigation is promoting an affordable small scale irrigation system with high efficiency of water usage to address the issue of scarcity of water and irrigation facilities in the country, it said.

Gujarat-based N-Mart is attempting to solve the fragmented supply chain leading to price build up through network based sales, the report added.

Agri-business is a $450 billion opportunity in India, the report said, adding that a developed sector can be a strong link between the farm sector and consumers.