[The article is co-authored by Sakshi Agrawal from Ramjas College, Delhi University and Shatakshi from NLSIU, Bangalore.]

INTRODUCTION

With the ambitious plan of doubling the farmers’ income by 2022-23, Finance Minister, Nirmala Sitharaman in her budget speech introduced Kisan Rail scheme. In an effort to build a coherent national supply chain for perishable products, Kisan Rail train with frozen containers will be started along with refrigerated coaches being added in Express and Freight trains for the transportation of perishable goods from the producer to the market. This farm to fork model is aimed to be set up via PPP model.

According to the National Public Private Partnership Policy 2011, a Public Private Partnership (PPP) means “an arrangement between the government/statutory entity/government owned entity on one side and a private sector entity on the other, for the provision of public assets and/or public services, through investments being made and/or management being undertaken by the private sector entity, for a specified period of time,where there is well defined allocation of risk between the private sector and the public entity and the private entity receives performance linked payments that conform (or are benchmarked) to specified and pre-determined performance standards, measurable by the public entity or its representative.”

The above definition broadly indicates that it is a limited period arrangement where a private sector entity provides a public asset or a public service which is traditionally provided by the government in return of some performance-based payment. The focus is on a strong element of service delivery aspect and compliance to pre-determined and measurable standards to be specified by the Sponsoring Authority.

The scheme has been welcomed by various stakeholders involved. Presently, the transportation of perishable roads in the agri-industry happens mostly through roads via trucks which are not equipped with the requisite temperature control and warehousing facilities. Substituting this with refrigerated coaches serves two-fold purpose: reduce in time of transportation and decrease in loss of harvest in transit. This essay analyses the exigency of this scheme and throws light on the PPP structure highlighting its problems. The essay concludes on a positive remark with the recommendations to be taken into consideration for the success of Kisan Rail.

  • NEED FOR KISAN RAIL

The production of food grains (244.5 million tonnes) was almost equal to horticulture crops (240.5) in 2010-11. Over the decade, the production of horticulture has shown a 30% rise to 311.5 million tonnes in 2017-18 surpassing the production of food grains which rose to 284.8 million tonnes showing a rise of only 16%. Thus, with the increasing trend of switching to horticulture, Kisan Rail will prove beneficial for the farmers. Out of the 12031 thousand crore worth of output produced by all agricultural crops, one-third (4006 thousand crores) comes from the horticultural crops.

Source: Ministry of Agriculture

Only 4 million of the 104 million tonnes of fresh produce is transported through a cold chain and only 10-11 per cent of the fruits and vegetables produced in India use cold storage. Storage capacity in India needs to be increased by 40 per cent to avoid wastage.[1]

As per the information available as on 31.03.2018, there were 7916 cold storages with a capacity of 36.23 million MT in the country. 95% of cold storages in the country were owned by private sector, 3% by cooperatives and remaining 2% were under Public Sector Undertakings.[2]

               Table1: Production and cold storage capacity of horticulture produce in leading states

STATE PRODUCTION (‘000 MT) NO. OF COLD STOARGE UNITS COLD STORAGE CAPACITY (MT) PERCENTAGE OF COLD STORAGE CAPACITY TO PRODUCTION CAPACITY
Uttar Pradesh 39249.0 2368 14500.773 37%
West Bengal 32472.4 511 5940.511 18.29%
Madhya Pradesh 26530.9 302 1281.411 4.82%
Maharashtra 24855.0 603 979.607 4%
Andhra Pradesh* 24755.4 452 1836.366 7.41%

Source: Ministry of Agriculture

*including Telangana

Uttar Pradesh has emerged as the major producer of horticulture crops followed by West Bengal, Madhya Pradesh, Maharashtra and Andhra Pradesh.  In 2018, Madhya Pradesh and Maharashtra being the third and fourth largest producer of horticulture crops respectively have a capacity to store only 4-5% of their total produce (assuming that cold storages are well-suited for all kinds of crops, and not just potatoes). This implies that 95% of the produce should be sold by the farmer in the market even at lower rates, else it will be lost generating zero revenue.

A report by Niti Aayog, points at major causes of post-harvest loss in Uttar Pradesh and Bihar.[3]A similar set of reasoning can be applied to India. Transportation loss (Unsuitable transport containers; Overloading of mixed fruits and vegetables; Irresponsible driving; Rough roads; Heat accumulation or very poor ventilation within the transport vehicles; Virtual absence of refrigerated and insulated trucks) form a major component and with the introduction of Kisan Rail, these problems are expected to be solved. Cold storage units in trains would ensure that the harvest isn’t lost and public ownership of these rails will ensure reasonable prices. The role of private players will come into play with the cold storage units required at the pick-up and drop off centres in the cities connected by these rails. This will also prove be an additional profitable business for private and cooperatives. Another factor pointed out by the report is the absence of a proper linkage between demand and supply of horticulture produce. In some states, production is taking place irrespective of its demand in the market. As a result, price-crash has become a usual phenomenon in these areas. Whereas the states that do not produce as much on their own are hit hard by inflating prices.  Therefore, mismatch between production and supply should be abolished.

With the introduction of Kisan Rail, the government has made efforts to export surplus produce and provide managerial, technical and financial assistance to farmers or farmers’ cooperatives.

  • LEARNING FROM PREVIOUS MISTAKES

It isn’t for the first time that a proposal for transportation of perishable products by railways has been devised by the government. In the past, there was an attempt by the railways to run refrigerated rake sin the eastern region. The project was a failure due to lack of background research on the demand of rakes in these regions. What Kisan Rail proposes is on a bigger scale with demanders being spread across the nation. This scheme when accompanied by Kisan Udaan (a scheme launched to transport agri-produce via air to international as well as national markets) will prove to be efficient. Intra nation commotion can be undertaken by railways proving to be an inexpensive solution. The harvest from mega hubs can them be sent to overseas market through air.

Once again, in 2007-08, Railways proposed offer around 4,800 hectares of land to retailers and logistics companies (Reliance Retail, ITC, Future Group, the Tatas, GE Logistics) to set up retail outlets, agri-retail infrastructure and warehouses. These companies were about to enter a joint venture with the Railways wherein the IR would provide land as an equity and the private players would pool in about Rs20,000 crore to Rs 30,000 crore for setting up infrastructure. However, nothing happened, as retailers preferred roadways as a more cost effective means to rail.[4] This might be a major problem with the Kisan Rail scheme too. Thus it is a very important factor that the government will have to take into consideration to ensure that the high costs don’t force the privates to opt out of the scheme.

A year later, in 2009, the then Railway Minister, Mamata Banerjee proposed to introduce special trains to carry perishable products like fruits and vegetables, fish from identified production clusters to consumer centres.[5] The scheme instituted the railways to encourage creation of facilities for setting up cold storage and temperature controlled perishable cargo centres through the public-private partnership mode. However, the scheme resulted to be a mere bleak promise and failed to take off. The next analyses the progress made by Kisan Rail so far which provides a silver lining for its success.

  • PROGRESS MADE SO FAR

As reported by major media and publishing houses on March 4th, 2020, the following initiatives have already been taken[6]:

  • Refrigerated Parcel Vans: New designs of Refrigerated Parcel Vans has been framed to transport highly perishable parcel traffic. These Parcel Vans were procured through Indian Railways’ Rail Coach Factory in Kapurthala. Currently, the national transporter has a fleet of nine Refrigerated Parcel Vans available, which can be booked on a round-trip basis. They are charged at 1.5 times the freight of normal VP as per the train’s category.
  • Reefer (Ventilated Insulated) Rail Containers: For the movement of vegetables and fruits to different parts of the country, as many as 98 Ventilated Insulated Containers have been procured, through CONCOR. Each container has a carrying capacity of 12 Tonnes and the rake composition is of 80 containers.
  • Cold Storage Facilities for Perishables: Under Kisan Vision Project by CONCOR under CSR initiative, ‘Temperature controlled perishable cargo centres’ have been commissioned as a pilot project at New Azadpur in Adarsh Nagar, Delhi, Ghazipur Ghat and Raja ka Talab in Uttar Pradesh. Another similar project is under development at Lasalgaon, Nasik in Maharashtra. Also, to develop temperature controlled storages at Mancheswar and Fatuha, approval has been granted to Central Railside Warehousing Corporation (CRWC).
  • A facility of cold storage has been developed at Dadri as well. Moreover, Fresh and Healthy Enterprise Limited has been redeveloped as Agriculture Logistic Center at Rai in Sonepat. This facility is 100 per cent subsidiary of CONCOR, developed in an area of 16.40 acres of land.

Amidst the concerns arising due to spread of Covid-19 and suspension of transportation services all-round the nation, the inception of Kisan Rail in near future seems bleak. Nonetheless, the progress made so far in the limited time is commendable. Taking these efforts into consideration and assuming the pace of work to be same, Kisan Rail would be a delayed success but not an unaccomplished one.

  • PROBLEMS WITH PPP STRUCTURE:

Although Kisan Rail seems to be an achievable dream, we cannot neglect the many intrinsic complexities that comes with the PPP model.

The partner selection for many of the PPPs including the rail connectivity projects has been more contextually (strategically?) based than through open competitive bidding. There are pros and cons in this. While a ‘strategic’ partner is expected to bring in more than just financial stake holding (like ports and user industries in the case of port connectivity projects, tourism development corporations in case of luxury trains), they may not be interested in developing a professional expertise in rail based special purpose vehicle. The example of the Deccan Odyssey, where the strategic partner was Maharashtra State Tourism Development Corporation (MSTDC), did not do as well as when Thomas Cook came into the picture as a subcontractor to the MSTDC, and even changing the itinerary to a more acceptable one for attracting clientele. Also, ‘strategic’ partners may never be comfortable with contracts and seek favourable amendments, since there was no competitive element in studying the contractual implications and the risks thereof. One of the most discussed problems related to PPPs is the lack of transparency.Though a lot of effort has been made to increase transparency during the bidding process and award of contracts, people in general seem to nurse this grouse of non-transparency in PPPs which is certainly not without reason[7].

  • PPP projects have suffered from delays, with more than acceptable time lags between conceptualization and project execution. The most important reason for such delays has been in evolving workable Request for Quotation (RFQ), Request for Proposal (RFP) and contractual agreements, and in taking along a variety of stakeholders, driven by changing stances of the government. Many a times due to improper and wrong estimations, the project gets delayed causing cost and time overrun. Usually the tasks related to land acquisition and other mandatory clearances lie with the government. This is because the government due to its authority and position is able to accomplish these things better. On the other hand, the technical and operational part of the project is handled by the private sector. For instance, in the case of New Delhi railway station, the bid was scrapped twice, first due to the issue of cross ownership among bidders and the second time due to denial of permissions from other stakeholders including New Delhi Municipal Corporation, Municipal Corporation of Delhi, Delhi Development Authority and Delhi Traffic police. The lack of responsive and flexible approach to project scoping is affecting stakeholders.[8]
  • Another off shoot of the financing problem is related to the asset liability mismatch.This means that long duration infrastructure loans need to be financed by short duration deposits. The infra loans have maturity and repayment schedules ranging up to even 15 years where as the deposits and borrowings of banks which are used to finance the same have much shorter maturities. This hiatus between the two creates an asset liability mismatch which if left unattended can result in liquidity problems.The above problems related to financing and funding will manifest themselves in the coming years and a fear is expressed that we may not be able to maintain the same pace of growth in PPP as we have achieved till now.[9]
  • Given the current internal structure and orientation (strong cadre culture, hierarchy orientation and top management structure) of the government, it would be very daunting for private players to develop PPPs with the government. Apart from the spectre of dealing with a large ‘machinery’ like government, the popular perception is that there are issues of one sided contracts, interpretations of unclear implications going in favour of the railways and the conflict of interest due to government playing the role of licensor, operator and regulator. On a positive note, there has been reinforcement at the political level on the issue of PPPs. However, the IR would need to develop a more flexible approach based on not just a political language of PPP, but creating an organization that listens to, learns from and is responsive to a variety of stakeholders including customers, other affected and involved entities, and partners in PPPs.
  • RECOMMENDATIONS TO ENSURE SCHEME’S SUCCESS:

The most important dimension that needs to be addressed for a smooth way forward is to have a shared vision as to why IR need PPPs. The logic for this should be more than just resource mobilization. It needs to focus on the complementing need of entrepreneurial and managerial energies that private parties can bring in to make rail based transport value adding for the end user. Once this is clear, then the attributes of the commercialization that is required for PPPs to succeed would fall into place.

To minimize the scope of misinterpretation, there is a need to develop well written contracts that act as a precise policy and regulatory framework between the government and private parties.

Currently there is no PPP regulation in India. Since the whole concept of public

private partnership is quite new in our country, enough thought has probably not been given to this aspect. However, the National PPP Policy 2011 draft has been put up for further suggestions and comments. The above problem of non-standardization of PPP contracts canto some extent be taken care of by creating an independent regulatory PPP body. This may lead to a better and more robust participation by the private sector and also attract more international funding.

Three such model documents for container train operation, redevelopment of railway station, and procurement-cum-maintenance of locomotives have been prepared in the recent past by the Planning Commission. Also, the contracts should be ready well before making any legal commitment with private parties. Along the same lines, the private partners cannot be viewed as ‘agents’ but as ‘dynamic organizations’ who would like to grow. This is precisely what the government should want from the PPPs to make this a success.

Establishing Infrastructure dispute redressal tribunals (The Public Contracts Bill, 2015 and The Public Utilities Dispute Resolution Bill, 2016, were introduced after this recommendation by the committee).

  • According to the draft Bills, a Tribunal is to be set up to settle disputes, those plague government contracts, including vital infrastructure projects. However, the world’s best practices are to be imparted, whose methods are correct for the risk allocation process.
  • Dispute redressal mechanisms for mediation and negotiation, like Delhi mediation centres, for every state, with expert adjudication have to be imparted

A good initiativewould be in top management restructuring. The Vision 2020 document states the following on organizational restructuring:

“Organizational restructuring is, of course, fraught with challenges of its own and needs to be carefully attempted. One possible approach to address this issue could be to reconfigure the organization by separating infrastructure from operations and reorganization on business lines i.e. passenger, freight and parcel and other auxiliary services so that each service could be managed and measured on a profit-centre basis. Areas, other than core operations, where appropriate, could be corporatized to impart business focus and managerial autonomy for such tasks.”

While one would agree with this, it is important to begin immediately with a separation in government’s roles of licensor, operator and regulator. The separation of infrastructure and operations can then follow.

In parallel with this, what anyway is proposed eventually, the Railway Board Members’ roles should be redefined towards strategizing for key market segments rather than as the current cadre based functional supremo. Corporatization (for business focus and managerial autonomy) need not be limited to non-core operations. In fact, the very essence of PPPs (corporatized through Special purpose vehicle s) in core activities is to bring in the business focus and managerial autonomy.[10]

  • CONCLUSION

While agriculture contributes about 15 per cent to the country’s GDP, it also sustains more than 600 million Indians or half the population of the country. This is an important aspect in the present scenario as the agri-sector will also be expected to play a crucial role in the revival of the Indian economy from its current despondent state.

Globally, enhanced food production has changed the market dynamics leading to pressure on prices of our produce. Input costs are constantly on the rise, severely impacting farmers’ incomes, debt repayment capacity and their livelihood. What makes matters worse is that all the risks in the farm-to-market cycle are borne by the farmer — these include, among others, production, storage, and transport risks, outbreak of pests, and price uncertainty. Traders, aggregators and processors do not have to undertake these risks. Farmers are “implicitly taxed’ through restrictive marketing and trade policies even though agricultural income is not taxed in India.

One which is post-harvest losses especially in the horticulture sector  . Horticulture is considered as a better alternative farming option for farmers in many areas due to several advantages. Besides the fact that it is more remunerative, horticulture saves water which is critical. Moreover, it can be done on dry and hilly land and has lower risks of failure. Farmers who shift to horticulture, however, do not have a safety net of selling at a minimum price in case of unforeseen problems and the case in point where farmers moved back to field crops.Hence, there is a need for the government to focus separately on horticulture and balance the incentives between field crops and horticulture. We produce several export-feasible horticulture products like medicinal herbs, fruits and flowers which are perishable items to deliver rich dividends to farmers and the country alike.

Perishable goods are sent by trucks that are not fitted with any sort of temperature control. So the commodity dries up by the time it reaches its destination and the farmers do not get good value for their produce. With the arrival of this scheme this will change. This scheme aims to effectively connect them to domestic and global markets, thus helping them realise the true value of the produce. It will also help boost farmer’s income and increase their competitiveness in the market because their sell their produce in the international market for better prices in the event of excess domestic produce. This scheme is expected to reduce post-harvest losses for the state’s farmers by helping in effective export of residual produce to other parts of the state.

[1]JayantaMallick, ‘India needs to expand cold storage facilities’ @businessline (2018), https://www.thehindubusinessline.com/economy/agri-business/india-needs-to-expand-cold-storage-facilities/article20923044.ece1#! (last visited Apr 20, 2020).

[2] 2018.HORTICULTURAL STATISTICS AT  A GLANCE 2018 <http://agricoop.nic.in/sites/default/files/Horticulture%20Statistics%20at%20a%20Glance-2018.pdf[Accesssed on 20 April 2020]

[3] Estimation Loss of Horticulture Produce due to Non-availability of Post Harvest& Food Processing Facilities in   Bihar&UP<https://niti.gov.in/planningcommission.gov.in/docs/reports/sereport/ser/stdy_esthorti.pdf>[accseesd on Apr 20, 2020].

[4]RajatGuha&Gunjan Pradhan Sinha, Reliance, Tata eye railways’ land for retail venture The Economic Times (2008), https://economictimes.indiatimes.com/industry/services/retail/reliance-tata-eye-railways-land-for-retail-venture/articleshow/3034742.cms?from=mdr [accessed on Apr 20, 2020].

[5] 2009. Speech OfKumariMamata Banerjee Introducing The Railway Budget 2009-2010. [ebook] Available at: <http://www.indianrailways.gov.in/railwayboard/uploads/directorate/finance_budget/Previous%20Budget%20Speeches/2009-10_main.pdf> [Accessed 16 April 2020].

[6] Nag, D., 2020. Indian Railways Aims To Help Double Farmers’ Income With The Launch Of Kisan Rail; Details.

The Financial Express. Available at: <https://www.financialexpress.com/infrastructure/railways/indian-railways-aims-to-help-double-farmers-income-with-the-launch-of-kisan-rail-details/1888551> [Accessed 20 April 2020].

[7]M  Shivalingegowda 2001. CHALLENGES FOR PUBLIC PRIVATE PARTNERSHIP IN INDIA. file:///C:/Users/Shatakshi/AppData/Local/Packages/microsoft.windowscommunicationsapps_8wekyb3d8bbwe/LocalState/Files/S0/18949/Attachments/CHALLENGESFORPUBLICPRIVATEPARTNERSHIPININDIAfinal[26627].pdf>[accessed on 19 April202}

[8]KutumbaleVishakha. 2018 . PUBLIC PRIVATE PARTNERSHIPS IN INDIA (An Overview of Current Scenario)< file:///C:/Users/Shatakshi/AppData/Local/Packages/microsoft.windowscommunicationsapps_8wekyb3d8bbwe/LocalState/Files/S0/18949/Attachments/PublishedPPPpaper[26626].pdf>[accessded on 19 April 202}

[9] Srivastava Rajesh.2020. Making agriculture more rewarding for farmers< https://www.thehindubusinessline.com/opinion/making-agriculture-more-rewarding-for-farmers/article31160944.ece#>{Accessed on 19 April2020]

[10] Reddy Rahul.2016. Revitalizing Public Private Partnership (PPP) Model in India< file:///C:/Users/Shatakshi/AppData/Local/Packages/microsoft.windowscommunicationsapps_8wekyb3d8bbwe/LocalState/Files/S0/18949/Attachments/Revitalizing_Public_Private_Partnership[26628].pdf>[Accessed on 19 April2020}

Sakshi Agrawal
+ posts

Sakshi is Knowledge Centre Head at FIS Ramjas.