“Public-private partnership in Veterinary domain is a joint approach in which the public and private sectors agree responsibilities and share resources and risks to achieve common objectives within the domain, sustainably delivering benefits”

– The World Organization for Animal Health (OIE)

The background of Public-Private Partnership promotion in Assam

With an area of 78,438 km² and 36 million people (projected for the year 2020 ), Assam is the gateway state of the strategically important North Eastern Region of India. A review of statistics indicates a wide and glaring socio-economic divide between Assam and India. The government of Assam has declared a policy on Public-Private Partnership (PPP) in infrastructure development vide a gazette notification dated 16^th February 2008. The initiative received support from the Asian Development Bank under the project “Mainstreaming Public-Private Partnerships in India.” A dedicated PPP cell is functioning under the Transformation and Development Department of the Government of Assam. The achievement under the policy is mixed. The Government of Assam, under the World Bank-supported the ‘Assam Public Financial Management Strengthening Project,’ has conducted a  review during 2017 -2018 to strengthen the existing policy, regulatory and institutional framework for PPP.

The Assam Livestock and Poultry Corporation Ltd (ALPCo) and its mandate related to PPP

Pashudhan Bhawan: Office of Assam Livestock and Poultry Corporation Ltd. (Courtesy: ALPCo publications)

The Assam Livestock and Poultry Corporation (ALPCo) is a Public Sector Undertaking of the Government of Assam, India. The organization incorporated as a Company under the Indian Companies Act, 1956 (Registration No.2135 of 1983-84, date of incorporation 6th February 1984), has its headquarters at Khanapara, Guwahati, Assam. The total authorized and paid-up capital of the corporation as on time is 100 million and 21.9 million, respectively. Both Government of Assam (3%) and the Government of India (97%) contributed to the paid-up capital. During the formative period itself, the organization received administrative approval to utilize select land and other assets of the Department of Animal Husbandry and Veterinary, Government of Assam, across the state to carry out its operations. It receives regular Government of Assam’s budgetary support under the heading 1165- Grants in aid Assam Poultry Corporation Ltd ( Under Grant No 52, Animal Husbandry ). The budget allocation ( as actual ) to ALPCo improved from 0.609 million in 2016-17 to 21.5 million in the financial year  17-18. The budget estimate for Financial year 20-21 is 23.75 million. A board of directors constituted by the Government of Assam is currently overseeing the corporation’s activities, and the Governor of Assam appoints the Chairman. As per the most recent (2013) Memorandum of Understanding (MoU) of ALPCo with the Department of Animal Husbandry and Veterinary, Government of Assam, the primary corporate mission of the organization is to develop core competency in infrastructure development for the entire value chain ( supply, processing, and marketing ) of livestock and poultry products. The objectives of ALPCo, which can facilitate Public-Private Partnership (PPP) are as follows:

1. To undertake the development of Livestock and Poultry in the state of Assam through individual entrepreneurs and primary cooperative societies etc.
2. To undertake procurement of livestock, poultry, and their products from the individual entrepreneur and primary cooperative societies and make arrangements for their transport, storage, preservation, processing, and to carry out marketing of such products to ensure a fair price to their products.

The MoU of the year 2013 between ALPCo and the Department of Animal Husbandry and Veterinary mentioned above was promoted at the behest of the Department of Public Enterprises (DPE), Government of Assam. One of the functions of DPE is to monitor the performance of Public Enterprises. The said MoU mentioned the ‘Development of marketing network through Public-Private Partnership mode’ as the only performance criteria related to Public-Private Partnership with a weightage of 5% only.

The discussion

Since its inception, ALPCo channelized public funding (both from central and state government) to develop various infrastructures using government land and other available assets once administered directly under the aegis of the Department of Animal Husbandry and Veterinary. These infrastructures are related to the livestock value chain’s critical areas, e.g., Feed production, Hatching, meat processing, etc. The original idea of ALPCo was to manage the critical value chain operations profitably using the developed infrastructures so that entrepreneurs and cooperatives can be provided with quality farm inputs. However, due to various reasons, the ALPCo could not start /sustain many of these major operations, and the organization had to incur losses. Interestingly, ALPCo earned a profit of Rs 26.54 lakh (2.65 million) during the financial year 2018-19 after a gap of 25 years.

The formation of ALPCo 36 years ago can be justified considering the need at that time for boosting the commercialization of livestock operations within the state of Assam. The need was also to fill the gap of the inadequate number of value chain critical enterprises, e.g., Modern feed mill, Hatchery, Breeding farm, Vaccine production unit, etc. The Department of Animal Husbandry and Veterinary at that time was finding difficulty in sourcing farm inputs to manage their development programs related to the distribution of livestock assets to poor farmers and budding entrepreneurs.

In recent years, ALPCo changed its policy and allowed the private entities to manage operations of the created infrastructures under its regular monitoring. ALPCo shortlisted a few private entities through a competitive bidding process. The select private entities signed mostly five-year agreements (extendable) with ALPCo and are currently managing existing and few newly revamped infrastructures such as hatchery, feed mill, slaughterhouse cum processing units on an agreed lease rental basis. Besides maintaining all right over the infrastructures, the lease agreements between ALPCo and the select private entities is clear on the following common terms:

1. The lessee must deposit a security amount at the rate of 10% of the project asset value.
2. The lessee must pay a sum equivalent to at least 5% of the land, building, and assets handed over to the lessee after valuation as lease rent every financial year in advance within 30 (Thirty) days of each calendar year. Arrears of Lease rentals payable by the lessee shall carry interest of 18% per annum, on a compounding basis with monthly rates, from the due date specified in the schedule of payment to the date of actual payment.
3. It will be the sole responsibility of the private entity (lessee) to procure raw materials, processing, marketing, and realization of payments of salaries, power, and utilities, etc., regularly and not cause any liability to the ALPCo (Lessor). The payments of lease rentals will not be affected due to any under-capacity utilization by the lessee.
4. The lessee has to use ALPCo’s name and Trademark on every item of finished products for which royalty has to be paid by the lessee at an agreed rate on the actual sale proceed to be assessed mutually by the Lessor & Lessee after scrutiny of accounts kept for the purpose. Such payment will be paid on a monthly basis.
5. The lessee will pay all insurance premiums and renew the insurance policies from time to time.
6. ALPCO will have a representation in the operational management of the unit with respect to the concerned infrastructure.
7. In the case of the beneficiaries under ALPCO’s (lessor), the lessee will provide a certain portion of the products (not more than 20% of the gross output) at minimum profit/ less than the market price based on mutual discussion.

The Department of Animal Husbandry and Veterinary maintains many livestock farms primarily for breeding, asset supply, and technology demonstration purpose procure farm inputs under the ALPCo brand as a preferential case. This decision helps improve the capacity utilization of plants and thus benefits the private entities running the operations.

It is important to note that ALPCo slaughterhouses (existing and planned) are currently being promoted as municipal slaughterhouses too. In association with the Department of Animal Husbandry and Veterinary as a public health regulator, the local municipal authorities are trying to ensure that all slaughters should take place in the designated slaughterhouse only. The arrangement is financially beneficial for the private entity that is managing the slaughterhouse on behalf of ALPCo. It is important to note that as an independent corporation aimed to promote and take part in commercial production/processing, a regulatory mandate for ALPCo can lead to a conflict of interest. This is important because many perceived ALPCo as a  regulator for its proactive role in various interactions in recent years organized under municipal authorities’ aegis to convince small-time meat sellers of Guwahati city to use its authorized slaughterhouse at ALPCo. Recently, Guwahati Municipal Authority directed the transfer of the city’s prominent physical goat market inside the ALPCo campus at Khanapara. This will reduce the required transportation cost of goats (paid by private users of the slaughterhouse) from the market to the slaughterhouse. The arrangement is beneficial for ALPCo, considering the rent income from the land to be used for the market. This is likely to facilitate the work of the Department of Animal Husbandry and Veterinary to ensure required bio-security provision and ethical practices. It is not clear if ALPCo will engage any private player to support the market operation. However, the usual practice is the appointment of a private market lessee by the municipal corporation following a transparent bid process.

In recent years ALPCo unsuccessfully attempted intervention in the trading of livestock products. As per the MoU with the Department of Animal Husbandry and Veterinary signed during the financial year 2006-07, ALPCo suggested the Department of Animal Husbandry and Veterinary consider further exemption of entry tax along with the agricultural cess on the items imported (Eggs, Livestock, etc.) by the corporation. To have a quality check on inter-state imported eggs, ALPCo wanted the government to permit import only under its arrangements. However, such arrangements would have been complicated for ALPCo, considering the market dynamics and involvement of a large number of traders in the inter-state import business. Moreover, monopolistic trade by a profit-oriented government enterprise may not be justified too.

ALPCo has recently initiated an activity to set up a chain of exclusive retail outlets involving a greater number of private entrepreneurs interested in the meat and meat products retail business. The private sector partner who manages the operation of the ALPCo slaughterhouse cum processing unit at Khanapara, Guwahati, is assisting in the initiative.  Some of the retail outlets, thus promoted under the banner of ALPCo, are also selling other livestock products as procured from local private enterprises and milk cooperatives. A possibility of a tie-up between ALPCo and other public sector undertakings like the North Eastern Regional Agricultural Marketing Corporation (NERAMAC) is likely to increase the product basket in these outlets. The initiative is helping ALPCo and, as such, the government to gain public trust in urban areas by ensuring the availability of meat cuts, processed meat products for consumers besides locally produced other livestock products.

An authorized Sale Point of ALPCo on the PPP mode ( Photo credit: Social Media )

The large public investment in infrastructures like Feed mills and hatchery and management of the same under government patronage (including procurement by the government) can potentially discourage the investment on the part of the private sector within the state. It may also force the existing small number of local private enterprises in a similar business to face the competition (e.g., the threat of imperfect competition).

The justification of public investment in the case of Assam, however, can be judged from the point that Assam is a risk-prone state, and significant private capital investment is difficult to achieve. Modern infrastructure is needed to produce quality farm inputs required to augment the growth of small to medium farms. Similarly, advanced infrastructure support is necessary to increase value addition, which in other ways is limited within the state even after 73 years of India’s independence.

As mentioned earlier, private entities managing the operations of ALPCo infrastructures are not allowed to market finished products in their brand. The private partners are rather required to pay loyalty to ALPCo for the mandatory use of its brand. Being promoted by the government, a large section of consumers is likely to perceive the ALPCo brand as safe. The use of the ALPCo brand may be profitable for private partners in the short run, but they are not likely to gain the experience of building a brand. The private partners neither have a guaranty of the continuance of the contract nor do they own the brand of the product they are producing. It will remain a challenge for ALPCo to get the required commitment from its private partners to maintain the brand name in terms of quality and customer service.

ALPCo promoted retail units mentioned above are growing with private entrepreneurs. While this is ensuring availability for ALPCo branded products, the entrepreneurs are benefited mostly by the brand image of ALPCo and the fact that they will be able to get regulatory clearance relatively quickly.

The facilitation of marketing of products produced by smallholders is the goal of ALPCo, and the branded retail units may be considered a step to achieve it. However, the Department of Animal Husbandry and Veterinary needs to work in partnership with ALPCo for holistic support to ensure better price realization and income generation by farmers. Similarly, the collaboration between the Department of Animal Husbandry and Veterinary and ALPCo can happen to create infrastructure across the state for small slaughterhouses that can be used by private players in local markets, thus restricting the current practice of unhygienic and unscientific slaughter in various markets.

There is a need for programs that support aggregation, grading, local branding, generic promotion of local produce, and development of by-product industries, etc. In most of these areas, the private sector can help. Government interference to control the market and in fixation of the price should, however, be discouraged. The public investment can go into real-time monitoring of the demand, standards, cost of production, and marketing practices. Regular monitoring of practices supports the implementation of the law to ensure healthy competition and to protect the interest of all within the value chain. It is also helpful to declare and publicize a realistic minimum price of livestock products and farm inputs specific to geographical location and product standards for the empowerment of farmers.

The augmentation of private investment in various value chain critical operations is important, and the government should ensure a level playing field for private entrepreneurs. ALPCo should continuously take steps so that its action should not lead to imperfect market competition. It will be prudent for ALPCo to partner with the private sector in a transparent way, with mutual respect right from the beginning of any project intended to be managed on the Public-Private Partnership model.

Promotion of the meat processing sector in Assam requires a generic campaign for public awareness on the hygiene of processed products and to discourage the growth of wet roadside markets. ALPCo has made a beginning and recently launched a campaign highlighting the fact that scientific processing steps following slaughter help in the conversion of muscle to meat.

PPP implementing doorstep delivery of fresh meat ( Credit: Promotion post from Social Media )

ALPCo can help local industry associations and farmer collectives with careful production planning to prevent surplus that leads to a fall in price. It can also take the lead in seeking the competition commission’s intervention where necessary for the prevention of unethical market behaviors, e.g., the formation of a cartel.

Assam, though, has a high percentage of the non-vegetarian population; people have many options and preferences, including fish as an alternative to meat. The state does not have a credible system to capture the demand for locally produced livestock products. Small farmers need government handholding to form producer groups to bring scale in operation and augment market-led production, collective actions, e.g., joint procurement of feed, etc.  ALPCo can channelize public funds and work effectively with farmer collectives to help them face the increasing competition and fluctuation in farm inputs prices, etc.

There is a need to evaluate the pros and cons of ALPCo promoting contract farming in the livestock sector in Assam. The government of India has already enacted a new bill -The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020, that aims to augment contract farming.

In the context of Assam, there is also a need to support cottage milk processing, the production of traditional meat products, and local economic use of by-products. Assam is well known for cattle and swamp buffalo herds maintained in riverine areas that follow a unique management system (Khutis).   Public-Private Partnerships can be a tool in Assam to develop infrastructure near the riverine interior regions to produce and market value-added organic products from producer organizations active under such a farming system.

Conclusion

ALPCo can be a potential vehicle for the Department of Animal Husbandry and Veterinary, Government of Assam to augment Public-Private Partnership in Animal Husbandry and Veterinary domain in the future. There is an urgent need to build the internal capacity of ALPCo to lead and participate in such initiatives. Capacity-building should include decisions related to organizational restructuring and transparent well thought documented organizational policy based on the appropriate evaluation of initiatives. It should also work towards bringing in the much-needed attitudinal transformation amongst its employees and position itself as a profitable organization with a social cause. The Department of Animal Husbandry and Veterinary has already declared a policy for private investment promotion in the livestock sector. The policy is open to promoting public-private partnerships in setting up milk and meat processing unit. The government also intends to periodically list the government facilities ready for revamp and operationalization under the Public-Private Partnership model.

As per the OIE, the Public-Private Partnership must focus on achieving the common objectives, and it must sustainably deliver benefits. Both public and private partners must agree on responsibilities and share resources as well as risks. Trust building between the public and private sector, intricate planning, and transparent engagement with all stakeholders are a few essential elements for any Public-Private Partnership’s success. The Public-Private Partnership observed in the case of ALPCo is mostly on the use or operationalization of existing infrastructures funded long back by the government. The organization also needs to focus on partnerships with private parties to develop new infrastructures or implement various joint service delivery projects within the veterinary and livestock farming domain.

Note: Prepared based on a review conducted during the year 2020. 

Citation: Barbaruah Miftahul, A discussion on Public-Private Partnerships and Assam Livestock and Poultry Corporation Ltd, The Vet Helpline E-magazine, Category: Livestock Policy, Planning, and Projects, Vol X (2022) ISSN 2454-9282 

References:

1. The OIE PPP Handbook: Guidelines for Public-Private Partnership in the veterinary domain, World Organization for Animal Health (2019)
2. The Assam Government gazette notification of Public-Private Partnership for infrastructure development available at http://assamppp.gov.in/policy-on-ppp-assam-gazette.pdf
3. Booklet on Policy on Public-Private Partnership, Published by Planning and Development Department, Government of Assam.
4. “Draft Report on Policy Reforms” (2017) for the Project ‘Policy and Institutional Reform for Strengthening PPP Framework and enabling Environment for the Government of Assam’. Available at https://transdev.assam.gov.in
5. Terms of Reference of tender: Consultancy for Policy and Institutional Reform for Strengthening PPP Framework and enabling Environment for the Government of Assam. Available at: https://transdev.assam.gov.in
6. ADB project page: Mainstreaming Public-Private Partnerships in India as accessed from https://www.adb.org/countries/india/public-private-partnerships
7. Grant No.52 for Animal Husbandry, Government of Assam for the Financial year 2018-19 and 2019-20.
8. Statistical Report on State Level Public Enterprises in Assam, Public Enterprises Department, Government of Assam ( 2009-10 t0 2011-12 )
9. Memorandum of Understanding between Assam Livestock and Poultry Corporation and Department of Animal Husbandry and Veterinary, Government of Assam ( 2006 -2007 ).
10. Memorandum of Understanding between Assam Livestock and Poultry Corporation and Department of Animal Husbandry and Veterinary, Government of Assam ( 2013 -2014 ).
11. Report of the Comptroller and Auditor General of India on Public sector undertakings for the year ending 31^st March 2016.
12. Copy of model deed of agreement for the operational management of ALPCo infrastructure involving private entities.
13. Policy on Private investment Promotion in the Livestock Sector in Assam, Animal Husbandry and Veterinary Department & Dairy Development Department, Government of Assam, January 2020
14. Various Social Media posting and Newspaper reports on activities of Assam Livestock and Poultry Corporation