The poor performance of India’s agriculture can partly be attributed to lack of private investments in the sector. Recognizing this, the government geared the country’s Eleventh Five-Year Plan toward (i) establishing a modern, efficient marketing structure, (ii) creating backward links between markets and production areas, and (iii) developing coordination along the value chains. Under the plan, it proposed the promotion of private sector investment through public–private partnerships (PPPs) and the provision of public sector capital grants to private sector investors wanting to establish agribusiness infrastructure. To help implement the government plan, the Asian Development Bank (ADB) designed and approved a $212.2 million multitranche financing facility (MFF) for the Agribusiness Infrastructure Development Investment Program in September 2010.
The investment program was to use an integrated value chain (IVC) approach to create physical and institutional links along the horticulture agri-industry. It was to be implemented in selected regions of Bihar and Maharashtra states that had adopted different agri-marketing policies. Its envisaged impact was higher value of horticulture products captured by the participants in the IVCs. Its expected outcome was at least 8 horticultural high-value crop IVCs, inclusive of small farmers, contracted to private sector concessionaires. Three outputs intended to deliver these higher-level results: (i) IVC infrastructure set up and functional, (ii) IVC stakeholders effectively participating in and properly managing the IVCs, and (iii) state governments efficiently performing their regulatory and oversight functions over the IVCs and the PPP contracts.
However, of the 4 tranches initially planned, only 2 were processed, 1 of which was later cancelled. Tranche 1, approved in September 2010 for a $67.6 million loan to support the establishment of two IVCs in Bihar’s Muzaffarpur and Patna–Nalanda regions, was intended to be completed in June 2018 but was cancelled in August 2016. Tranche 2, approved for a $24.3 million loan in December 2011 and completed in June 2015, aimed to expand the agricultural value chains and integrate smallholder farmers into two IVCs in Maharashtra’s regions of Nashik and Aurangabad–Amravati. But due to the program’s rigid design for the PPC arrangements as well as some implementation problems, no IVC or other key output was delivered under the two tranches.
The Bihar state government sought amendments to the implementation arrangements. Although ADB approved these amendments prior to the signing of tranche 1, the private sector’s concerns about high commercial risks were not ameliorated, and no concessionaire was identified. In Maharashtra, despite two rounds of bidding, there was little private sector interest, and no bid was responsive to the bid evaluation criteria. Expressing a preference to focus on strengthening their existing businesses in specialized parts of the value chains, processors and other private were reluctant to invest in the project IVCs that were to be set up on preselected government lands because of perceived high investment risk, complex land lease arrangements, and high rentals. The two tranches were consequently unsuccessful in meeting the program’s intended outcome and impact.
In July 2017, the executing agency showed interest in proposing a third tranche for $85 million, with a change in focus from PPPs to an investment promotion scheme that will concentrate on post-harvest infrastructure. However, given the limited time remaining in the program to meet the 10-year maximum implementation period for MFFs, the state government and ADB jointly agreed that no further tranche will be processed beyond tranche 2.
The program had two state-level executing agencies: the Bihar Department of Agriculture (DOA) and the Maharashtra Department of Co-operation, Marketing and Textiles. Bihar’s DOA also served as implementing agency (IA), while in Maharashtra, the IA was the State Agricultural Marketing Board.
