Innovation Title :
Power of Grassroots Procurement - a way for tapping the vast agricultural potential of Assam for a new Green RevolutionInnovation ID :
SAPI160270Relevant Focal Theme:
Innovative Procurement and Contract management solutions for Challenging and Fragile Environments
Proposer Details
Proposer Name:
Siddharth Singh, IASProposer Designation:
State Project Director, ARIAS SocietyProposer Official Address:
Challenge Addressed:
Assam is small state in the North Eastern part of India, where agriculture and allied sectors are the principal occupation of the vast majority of rural population for employment and livelihood. About 90% of state’s population lives in rural areas. Agriculture and allied sectors directly or indirectly support more than 75% of the population, providing employment to about 50% of the workforce. Assam’s farming families are predominantly small and marginal (85%) with an average land holding of only 0.63 hectare. Although Assam has an abundance of rainfall in the monsoon season and the land is fertile, yet farmers are unable to maximize their income from farm-fields because they lack access to water during the long dry winter months. Without access to water in winter season, farmers were unable to increase yields, enhance cropping intensity, or diversify away from growing rice to other crops. This is primarily due to lack the capital with the farmers to invest in Shallow Tube Wells (STWs) to tap into the significantly high and abundant groundwater. Irrigation was the key to enable the farmers to maximize income from their farm fields by increasing cropping intensity. In the year 2005, State Government took up World Bank aided Assam Agricultural Competitiveness Project (AACP), which was managed and coordinated by the Assam Rural Infrastructure and Agricultural Services Society (ARIAS Society), an Autonomous body under the Government. The project was closed on March 2015, after an additional financing tenure of three years. Irrigation through STW was the core intervention of the AACP, amongst others. The Project sought to provide groups of 3-5 small-scale farmers with a 30% grant (later enhanced to 50%) to purchase a shared irrigation pump sets for STW. At first, the project focused on the centralized procurement of these pumps through International Competitive Bidding (ICB) process (as the estimated contract value crossed the National Competitive Bidding threshold), which however, proved to be difficult. Project tried four times to carry out ICB processes (worth about US$5 million each) to procure tranches of 10,000 pumps centrally, but none of them were successful. Few reputed manufacturers submitted bids, resulting in unpopular pump manufacturers kept winning the bids. Due to unfamiliar brands, farmers were slow to acquire the pump sets and the sets that were installed experienced breakdowns and received little after-sales service from the suppliers, resulting in complaints from farmers. Farmers also enquired - why should the project solely decide which brand/model of the pump-set they would acquire when they are required to pay half of the cost. By midterm review, the project could install only about 5000 pump sets (out of the initial target of 60,000) – resulting an overall project expenditure of only 16% of the target. There were even suggestions that the project be closed. This necessitated a new approach, which posed a great challenge before ARIAS Society. The Society, however, addressed the challenge through an Innovating paradigm shift approach called ‘”Community Procurement”, a solution that differed from the conventional practices of public procurement.
Impacts:
The Community Procurement process transformed an apparent failure into significant success and it was instrumental in increasing productivity and diversification of agriculture in Assam. Increased uptake of pumps: The project provided cost-effective STWs to 100,000 farmer groups each, comprising 306,167 farm families (88% were small & marginal). The empowerment of communities accelerated the implementation pace of irrigation. Project achieved a mammoth 105,000 STWs in just 7 years as against 5,000 STWs in the initial 3 years (Refer to the attached chart). Acceptability to the community: As the process empowered community groups, it was widely accepted. The process allowed manufacturers with varying capacities and sizes to apply. Instead of a single supplier selected through ICB, the first process resulted in 15 qualified suppliers with over 25 models for the farmers to choose from. This range of choice and the accompanying autonomy allowed farmers to buy the pump-sets they knew and found reliable – resulting in complete ownership of the asset. Farmers also built relationships with local dealers for efficient after-sales service. Lower costs: The unit cost of pump-sets was reduced by up to 7% below the market price – as suppliers being local, not required to distribute pumps across the state. Local dealers reduced prices due to margin of scale, as they got repeat supply orders from the neighbours of satisfactory farmers. Better after-sales service: As the dealers belonged to towns nearer to the farmer groups, they were able to get prompt after-sales service. Dealers provided service proactively at farmer’s doorstep as a part of marketing strategy. This resulted saving for the farmers as they were relieved from to & fro travel cost that they had to bear for servicing/repairing of their pump sets and loss of working-days. Significant improvements in productivity and cropping intensity: The impact assessment report of the project stated that - Productivity of Bodo Paddy, where STWs are used, risen to 5.5 T/ha from 1.5 ton/ha at pre-project, an increase of 267% over baseline. Similarly, productivity of Mustard, Cabbage and Cauliflower increased to 1.1 T/ha, 10.6 T/ha and 9.8 T/ha from 0.6 T/ha, 7.0 T/ha and 5.6 T/ha at pre-project respectively. Further, Cropping Intensity increased to 200% from 130% at baseline. Marketed Surplus of Boro Paddy, Mustard and Vegetables increased by 45%, 279% and 255% respectively from baseline. Assam had won several national awards for improved productivity and food security. The use of pump-sets inter alia aided farmers to increase productivity. Most of their surplus produces were marketed, apart from increased self consumption, resulting in enhanced income and nutritional intake. Provision of irrigation through STWs through community procurement played a significant role in transforming Assam’s agriculture through diversification into high value agriculture produce (vegetables, spices, fish, dairy, etc.). As per the Implementation Completion Review Report (ICRR), Financial Internal Rate of Return (FIRR) of 22.2% and an Economic Internal Rate of Return (EIRR) of 24.7% at completion, which was a significant achievement as the project was passed through a stagnant phase during the first half of implementation.
Lessons Learned:
1. Adaption of regulations where needed is essential to bring efficiency: New procedures can sometimes stall, due to regulations designed for a previous system. It is important to anticipate and prevent regulatory hitches, and respond quickly if they arise. For example, delays arose during implementation owing to limited number of officials allowed to certify the depth of STWs used in conjunction with the pump-sets. This obstacle was eliminated by opening up the certification of boreholes to a wider number of officials. As a result farmers no longer had to wait, as village-level project officials and NGO’s staff were empowered to certify the depth of boreholes for wells. 2. Change management is essential for all innovative processes: Community Procurement model being new to everyone, the process went through an initial gestation period involving hiccups and difficulties. These included resistance to change among field-level functionaries and NGOs, and shortages in supply of pump- sets. As the process is demand-driven, no one knew which model/brand the farmers would choose. Some local dealers ran out of stock due to sudden spurts of orders by farmers. This resulted in delivery delays. These difficulties were overcome through perseverance. With experience, supply of pump sets got stabilized as dealers became aware of farmer’s choices. Farmers of a particular village generally go for the same brand/model, influenced by seeing similar pump sets in -use locally. This gave local dealers an insight into inventory management. Bi-Annual workshops with the manufacturers in rate-bank and the farmers ensured that the process transitioned without any hiccup. 3. Decentralized payment is essential to expedite process flow: After initial payment delays, due to centralized payment system, payments to local dealers had to be decentralized to district level to streamline payment process, so that suppliers do not have to wait to get paid to restock. Decentralized payment with checklists facilitated sustained replenishment of stock by the suppliers. 4. Diversification to high value commodities (vegetables, spices, fish, dairy, etc.) facilitated by STWs through community procurement opened up significant opportunities to farmers, along with associated challenges for this transformation. This necessitated reorientation of policies and institutions to support the shift to high value and higher productivity of crops through technology, better post-harvest management and value addition. To achieve this, State has taken steps inter alia to promote greater infusion of technology, superior supply chain practices and market intelligence to enhance efficiency. The State has taken up another World Bank financed project namely ‘Assam Agribusiness and Rural Transformation Project’ (APART), which aims to increase value-added and improve resilience of selected agriculture value chains, focusing on smallholder farmers and agro-entrepreneurs in targeted districts of Assam. APART will continue with the successful experience of community based procurement but with another innovative mobile based application support for providing appropriate market and item details to community groups. Level of Innovation Community Procurement is a transformational and radical innovation, because the change in the procurement process did not rely on an existing process that relies on the old way of doing things. The
Level of Innovation:
Community Procurement is a transformational and radical innovation, because the change in the procurement process did not rely on an existing process that relies on the old way of doing things. The project analyzed the situation of poor uptake of pump-sets from the farmers’ viewpoint that would address their needs and preferences. The objective was to develop a procurement system that would allow the farmer groups to procure pump sets of their choice by themselves from a pre-selected databank at their own preferred time. Salient features of the Community Procurement model - 1) Project prepared a list, called the ‘Rate-Bank’, consisting of the names of manufacturers with their local dealers, brands/models of pump sets with corresponding prices, through a transparent competitive process and the farmers would select and procure the pump sets themselves from the manufacturer’s local dealers. The competitive selection process guaranteed cost-effectiveness and quality. 2) The Rate-Bank was given wide publicity. Information dissemination campaigns at village level were organized through NGOs and application forms were distributed. Workshop with manufacturers, project engineers, NGOs and social coordinators were held to enlighten them about the new procurement model. 3) Terms of Reference of the Chartered Accountancy firm engaged for Financial Audit were amended to conduct 2% random check of the pump sets installed. Another independent consultant was engaged to verify 10% of every 4000 pumps procured. To ensure that pump-sets of acceptable standards were procured, technical standards were defined by the project. Pump-set manufacturers were invited to submit offers through a widely-published open competitive process, called ‘FOE’ i.e. ‘Floating of Enquiry’. The FOE sought manufacturers’ willingness to sell pump-sets of laid-down technical specifications to the farmers’ groups directly at predetermined prices, and provide with after-sales service. After evaluation, the Rate-bank of qualified manufacturers, their brands, models, prices and names & address of local dealers was given wide publicity. Farmers’ groups were allowed to procure pump-sets of their choice from this Rate-bank, at their own preferred time, from the manufacturer’s local authorized dealer. To maximize their autonomy and to ensure that their needs are met, farmers were also allowed to procure pump-sets from other manufacturers (not in the Rate-Bank), provided they receive prior approval from the Agriculture department for technical clearance and the cost of the alternative pump- set is not more than 10% of the average price of the models in the Rate-Bank. (Very few farmers have chosen this option.) Once a farmers’ group was declared to be qualified against an objective selection criteria with the pump-set of their choice, the group starts boring works at their own costs under technical supervision of project engineers and install pipes etc. and after completion informs the local NGO to bring in any one of the notified boring certification official. Farmer group deposited 50% of total costs to the manufacturer’s local dealer, less the boring costs including materials as per an approved standard estimate. The balance 50% of the cost was paid by the project to the concerned dealer against the bill with necessary
Replicability:
Each individual pump-set acquired by the farmer groups through the community procurement process is helping unleash of an agricultural revolution in Assam and it has become a testament to the strategy’s success. Community procurement is reliable and is an easily replicable model, as it has an inherent factor of transparency, economy and efficiency and above all it creates a sense of ownership of the assets amongst community. Considering the huge popularity, the project leveraged the community procurement process for other community initiatives of the project like mechanization (Tractors and Power Tillers), Low Lift Pumps, etc. Building on the success of this model, the Government of Assam’s Agriculture Department has already mainstreamed this community procurement process for procurement of all farm equipments and machinery. The World Bank and the Ministry of Finance, Government of India (GoI) has recognized this model as one of the ‘good practices’ and jointly published the community procurement model in a document captioned “Innovation in Development” (Attached). The GoI had also circulated this document to all the States of India for adoption as appropriate. The community procurement model has been sustaining in Assam in various development initiatives and hence become easier to replicate. The innovative Community Procurement model will sustain by itself as it does not require any separate monetary or otherwise support .The Community Procurement model is a process of implementing community development schemes more efficiently by involving the community. No separate resources are necessary for implementing the community procurement model. All programs of community oriented development can use the innovative Community Procurement process. The process is replicable and sustainable for all developmental schemes. Community procurement is a replicable demand-driven process for farmers- by farmers and is transparent, economical and efficient. First- farmers choose and procure themselves. Second- purchase by farmers leads to economies of scale. Third- dealers provide proactive after-sales service. Fourth, an audit process verifies even last mile delivery and use. Fifth- ownership and consumer surplus. The State Government considering its replicability has included Community Procurement in the draft Assam Public Procurement Bill which is likely to be approved within this financial year.
Other Background:
The proposal is submitted considering the following background and the need to popularize the Community Procurement process for all community oriented development endeavours, with appropriate adaption as appropriate: (A) The Implementation Completion and Results Report of AACP the World Bank (URL - http://documents.worldbank.org/curated/en/207981468180231455/pdf/ICR3454-P084792- Box393264B-OUO- 9.pdf) mentioned that - The project has pioneered a highly innovative community-procurement system with unique procurement process that not only enhanced community’s role in procurement decision making, but also brought in the economies of scale that enabled beneficiary farmers to buy pumps at rates cheaper than the market rates without compromising on the quality. The innovative farmer friendly community procurement model for irrigation, mechanization and fisheries sub-component, gives authority of procurement decisions to the farmer groups. The most important institutional innovation was the enhanced role assumed by communities in decision making concerning procurement. The GoA has mainstreamed this process in their programs. The World Bank and the Government of India recognized this model as one of the ‘good practices’. The GoI circulated this document to all the states for adoption. The pioneering community procurement model has been a great success and brought a paradigm shift in managing community based programs of the project. Supporting Document of ICRR is attached. (B) The Independent Evaluation Group (IEG), of the World Bank Group, which evaluates the work of the Bank and find what works, what doesn't, and why, has mentioned in their report (available at IEG’s website) that - the community procurement system established a new model for procurement in rural development projects. The introduction of community procurement greatly improved procurement processes. This process considerably expedited procurement compared with standard competitive bidding, and gave farmers greater flexibility to choose equipment suiting their specific needs. Community procurement was recognized as effective by both the Bank and Government and published as good practice in a document captioned “Innovation in Development” (available at World Bank’s website ). Community Procurement can be an effective way of expediting procurement and reducing costs. The innovative community procurement system enabled purchases by farmer groups of good quality farm equipment at competitive prices, gave farmers choice of supplier type and quality of equipment, and was much faster than conventional bidding. (C) The Community Procurement model was recognized by the “Procurement Innovation Challenge” platform of the World Bank in the Open Contracting Global Meeting held at Johannesburg, South Africa in 2012. The paper submitted for the event may be seen at ...[URl- https://issuu.com/ngarza/docs/procurement_innovation_challenge_publication (at page 16-17)] . (D) The Community Procurement model was selected by the 'Saansad Adarsh Gram Yojana division' of the Ministry of Rural Development, Government of India after intense field verification by the Tata Institute of Social Sciences (TISS) for presentation during the National Level Workshop on 'Good Practices' held in September, 2015 at Bhopal, Madhya Pradesh and it won an award in the event.
If the submission requires an official authorization, attach details of the same:
Email -SPD's approval for proposal submission.pdf
Submission Place:
Guwahati , Assam, India
Submission Date:
31 Dec, 2016
Submission By:
Siddharth Singh
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