There is a pressing need to look for sustainable ways to accelerate the production, dissemination, and adoption of new rice varieties to meet future demand and prevent cultivar depreciation from the continuous use of farm-saved seeds.
Sustained increases in agricultural production and productivity require the continuous development of new rice varieties to meet the production challenges in various agro-climatic regions and encourage adoption by farmers. The majority of the rice areas in India are still planted with second-generation Green Revolution varieties such as Pooja, Swarna, Samba Mahsuri, MTU1010, and others.
There is a pressing need to look for sustainable ways to accelerate the production, dissemination, and adoption of new rice varieties to meet future demand and prevent cultivar depreciation from the continuous use of farm-saved seeds. Overcoming the inefficiencies in the seed value chain could be critical to achieving this.
India’s rice seed system
The Indian rice seed system is unique and complex. The organized seed supply system is broadly composed of public and private players in seed production, certification, and distribution of improved and hybrid rice varieties at the state, regional, and national levels. The roles of these institutions are intertwined, leading to several discrepancies at each level of the value chain. As a result, several problems, such as the poor functioning of institutions, delay in introducing new varieties to the seed provisioning system, slow varietal turnover, mixing of different varieties, deterioration of seed quality, and unavailability of seeds, plague the seed supply system.
To tackle these problems, there is an urgent need to look at the different levels of the seed supply chain and gain a better understanding of the realities at the ground level. As a first step, the International Rice Research Institute (IRRI) initiated a study in the state of Telangana, the seed bowl of India, to quantify and solve some of the problems affecting the production and distribution levels of the value chain.
Understanding the seed supply system
Seed producers are the most important part of the seed supply chain. High quality, adequate supply, and timely availability are largely dependent on the production process. It is therefore highly relevant to understand the institutional arrangements within the seed production system, for example, the formal and informal seed production contracts between seed growers and producing companies and institutions.
Each form of the contract comes with its own benefits and pitfalls. In developing countries, the nature of contracts is mainly verbal and informal based on trust and networks, often lacking legality. Interestingly, these informal agreements are commonly followed and, in some cases, are more efficient than legal contracts. The preference for legal versus verbal contracts could be dependent on the transaction, enforcement, or legal costs involved. On the other hand, informal contracts can lead to the exploitation of the vulnerable party involved. The distortions in an existing contract design and the enforcement mechanisms can have varied impacts on different aspects of the seed production and supply chain.
We conducted focus group discussions in a few villages in Telangana where large-scale seed production is carried out in Karimnagar, Warangal, Nizamabad, and Kurnool districts. Telangana, unlike other parts of the country, has a large presence of local, national, and multinational private seed production companies, particularly producing hybrid rice. These include Bayer BioScience, Syngenta, Pioneer, Dhaanya Seeds, Ganga Kaveri Seeds, Nath Seeds, and Nirmal Seeds. For inbred varieties, a few cooperatives, along with the private companies, are also engaged in seed production.
The seed production story
The discussions revealed that, in general, the private seed production sector is composed of companies and institutions, seed organizers, and seed growers. The companies and institutions provide the parental lines or foundation seeds as well as technical guidance to seed growers (seed farmers) through seed organizers.
Seed Organizers. Seed organizers are individuals who facilitate the entire seed production process on behalf of the companies. They identify seed growers, provide them with adequate technical guidance, and facilitate seed production. These seed organizers are expected to deliver the specified quantity of quality seeds to the companies each season.
Each season, companies identify seed organizers who are willing to facilitate seed production for them. Typically, there is a written agreement between the company and its seed organizers, but this agreement does not have any legal implications. More importantly, the agreements are usually written in English and the organizers may or may not fully understand the conditions specified within the agreement. Seed organizers may not necessarily have copies of the document.
Some of the terms commonly agreed upon by the organizers and companies that were identified during the focus group discussions are as follows
- Quantity of seed to be produced in the season
- Minimum and maximum expected yield of the parental lines supplied by the company
- Service charges or commission per kilogram (kg) of seed produced
- 100% procurement from the farm gate
- Advance payment before the start of the season
Organizers are expected to ensure that the growers do not sell the seeds elsewhere. The service charge or commission per kg of seed ranges from USD 0.04 per kg to USD 0.09 per kg, depending on the company, variety, and yield. The companies usually provide advance payment to the organizers to cover the initial costs, ranging from USD 116 to USD 155 per hectare (ha). This is deducted from the final payment.
Once the target quantity is specified by the company, the seed organizers identify farmers who meet the basic requirements and facilitate the contracts. In some cases, the organizers also undertake production of seeds. Depending on the target quantity for the season, each organizer could supervise 150 to 300 farmers who have undertaken seed production on 80 to 200 ha of land across different villages. The seed organizer is expected to have no association with other companies involved in seed production of the same crop, facilitates all aspects of production, and delivers good-quality seeds to the company. Thus, trust is a crucial factor in selecting a seed organizer.
Seed organizers are primarily responsible for providing timely technical guidance to farmers and ensuring the quality of the seeds produced. For hybrid seed production, each seed organizer appoints one field assistant for every 24 ha under his or her area. These field assistants regularly visit the field at least twice a week and provide necessary guidance. The organizers also facilitate inputs such as fertilizer, materials required for supplementary pollination, and machinery for harvesting. In some cases, the organizers pay an initial advance or facilitate loans to farmers who have financial difficulties at the beginning of the season. In the event of late payment from the companies, the organizers are liable to pay at least 50% of the total payment to the farmers.
Procurement and transportation from the farm gate are organized and coordinated by the seed organizers. The organizers are held responsible if the company rejects the seed because of poor quality.
In inbred seed production, the role of organizers is relatively limited. Because the cultivation techniques used for seed production are largely the same as for grain production, the farmers do not require technical guidance. The main difference between grain and seed production is the removal of off-types according to the farmers. This is done several times by the farmers as well as organizers to ensure quality.
The organizers facilitate credit for farmers in need of financial assistance at the beginning of the season.
Seed farmers. Farmers are identified based on certain key characteristics, including land size, soil type, location, and availability of irrigation. In general, organizers will engage small farmers with an irrigation facility because irrigation is critical for hybrid seed production. The location of the field is another important factor as isolated areas have lower chances of pollen contamination, which determines the quality of the seed produced.
The financial capability of the farmer is also a factor considered in choosing seed growers because hybrid seed production involves upfront costs and several risks. Previous experience in seed production is not a limiting factor and inexperienced farmers who are willing to undertake hybrid seed production may also be selected.
Once the farmers are identified, the seed organizer communicates the terms and conditions and facilitates agreements. In some cases, there may be written or verbal agreements for the production of both hybrid and inbred varieties between the company and the farmers. Informal verbal agreements through the organizers are generally used by national and local companies while written informal agreements are usually employed by multinational companies. Farmers, in general, do not have a clear picture of the specifications in the agreement because it is usually written in English. As in the case of organizers, farmers do not have copies of the document.
There is usually no direct interaction between the company and the farmer. Any written agreement between the company and the farmer is usually facilitated by the organizers. This is true for the seed production of both hybrid and inbred varieties. The farmers are completely dependent on the organizer; thus, trust is a crucial factor. The farmers choose to produce for a particular company based on the seed organizer.
In hybrid seed production, companies supply the parental lines or foundation seeds and offer a procurement price based on the expected yield from the variety. For hybrid varieties, the procurement price per 100 kg and the expected yield per hectare from the parental lines supplied by the company at the beginning of the season are usually provided by the seed organizers. If the yield turns out to be lower than indicated by the company, some companies pay a higher price than originally offered to compensate for the loss.
In rabi 2016, one company offered each farmer compensation of USD 78 per ha if 70% of the total cropped area in the village under the company was affected because of poor-quality parental lines.
The procurement price is usually paid within 45 to 90 days. Few companies pay the farmers directly. This is generally preferred by the seed organizers as well as the farmers. Transportation costs from the farm gate are also shouldered by the companies.
Further, companies appoint representatives at several levels to provide farmers with technical guidance and supervision. Interestingly, most of the farmers are well experienced and technically sound and are often better than the company field staff, who are mostly inexperienced.
For inbred varieties, companies provide farmers with the foundation seeds. Several farmers have expressed concern about the quality of the foundation seeds provided by the companies. They believe that the companies give them seeds produced in the previous season for multiplication in the next season. This can have a serious impact on the quality of the seeds produced. The farmers are usually offered USD 0.008 per kg—more than the minimum support price declared by the government. Companies generally do not offer any compensation for yield loss for high-yielding varieties. The risk involved in inbred seed production is much lower.
Refining the seed pipeline
The insights from the focus group discussions give us a good understanding of the seed production scenario. This also raises several concerns about the efficiency of the production process. Although the farmers can choose among the companies, do they have any bargaining power when it comes to the price?
There appears to be no visible discontent among the hybrid rice farmers. Is this because the contract and enforcement designs are efficient or because the current situation is better than the existing alternative? Could it also be because the farmers are not aware of the distortion within the current contract design and the potential benefits they could gain from an improved design? Could transparency in price determination further improve the existing design and increase the profits of the farmers?
The presence of organizers seems to improve the seed production process. Are they rewarded adequately for the risks involved, particularly in hybrid seed production? On the other hand, the degree of trust placed in the organizers by the companies and farmers is extremely high. However, is there enough transparency in the activities undertaken by the organizers?
Are they making too much profit at the expense of the farmers? For example, a seed organizer could make large profits by falsely reporting a yield loss for a variety to obtain the compensation provided by a company. Alternatively, both farmers and organizers could manipulate the production process, causing low yield in order to make profits from the compensation offered.
Further, seed quality is an important concern. Hybridization enables companies to recoup their investments and provide incentives to maintain quality and meet market demand. However, the private companies involved in inbred seed production have little or no incentive to invest in maintaining quality and large-scale production. There is an urgent need to look into the concerns raised by the farmers regarding the quality of the foundation seeds provided by the companies. Low seed quality can reduce productivity, increase the cost of cultivation, and decrease adoption, among others. Improving the seed value chain is important given that India continues to face a considerable amount of quality seed deficit, which negatively affects rice yield and productivity.
In general, there is a lack of quality incentives provided to farmers. Although farmers can always decline such arrangements, the percentage of rejection appears very low. The effects of introducing quality incentives in the existing contract design are worth examining. Through this study, we hope to delve deeper into the different aspects of contract design and enforcement mechanisms and find answers to these questions.
Ms. Johny and Dr. Veetil are assistant scientist and scientist, respectively, in IRRI India’s Agri-Food Policy Unit. Dr. Janaiah is an economist and consultant at IRRI India.