Agriculture has always been an important sector of India’s economy. In 2009, it contributed 16% of the country’s gross domestic product, and in 2010, employed 53% of its workforce. Over a decade before project appraisal in 2010, however, sector performance had been below government targets due to lack of infrastructure, weak backward-forward linkages, and inadequate production capital.
Against this backdrop, India’s Eleventh Five-Year Plan, 2007–2012 targeted the development of (i) a modern, efficient marketing structure, (ii) backward links between markets and production areas to give producers higher prices, and (iii) coordination along the value chains. The plan also promoted private sector participation in agribusiness infrastructure development through public–private partnerships (PPPs) and the provision of upfront public sector capital grants.
To help implement the plan, the Asian Development Bank (ADB) approved in September 2010 a $170 million multitranche financing facility (MFF) for the Agribusiness Infrastructure Development Investment Program. Using an integrated value chain (IVC) approach, the program aimed to invest in physical and institutional links along horticultural value chains, specifically supporting site development and agribusiness infrastructure, linking infrastructure, backward links to production, and capacity building. Tranche 1 of the MFF meant to support the establishment of two IVCs in Bihar state but was cancelled in August 2016. Tranche 2, approved in December 2011 for a loan of $24.3 million, covered this project in Maharashtra.
Overall, the tranche 2 project sought to increase private sector investment in IVC infrastructure and producer returns from high-value crops in Maharashtra. Its intended outcome was expanded agricultural value chains and better integration of small-scale farmers into IVCs in two regions. Its planned outputs were (i) IVC infrastructure in Nashik and Aurangabad–Amravati regions, (ii) stakeholder capacity development, and (iii) project management support. IVCs were to be established through PPP contracts that leverage private sector investment and management into agribusiness and market infrastructure. IVC infrastructure, including pre-cooling, storage, grading, cold storage, and warehousing facilities; ripening rooms; and supporting information technology systems and business services, would be built in 15 locations on leased public lands.
After two bidding rounds, no PPP contract was awarded. The investment required for each IVC was beyond the financial and managerial capacity of small value chain investors, which specialized in their own trade within the value chain. Potential concessionaires indicated their preference to (i) bid for individual locations and not for the whole value chain, and (ii) use private land instead of government land in establishing business facilities. As no concessionaires were contracted, no stakeholder capacity-building output was undertaken.
A project management unit (PMU), supported by two consultants providing transaction advisory and management support services, was established. PMU officials were trained in PPP bidding processes and the preparation of detailed project reports.
ADB’s South Asia Department rated the project unsuccessful. Only $0.53 million of the ADB loan was utilized, and the rest was cancelled. The Maharashtra Department of Cooperation, Marketing and Textiles was the executing agency, and the Maharashtra State Agricultural Marketing Board, the implementing agency.
