How public-private partnerships can hit a sweet spot

A project to grow sugarcane sustainably in India demonstrates how public-private partnerships can successfully meet profit and sustainability goals.

Public-Private Partnerships (PPPs) bring together government bodies or development agencies with the private sector — and when implemented well they can be game-changers for developing communities.

In 2013, global agri-business firm Olam approached the International Finance Corporation (IFC) with a proposal aimed at increasing sustainable sugar production in India’s Madhya Pradesh province. The IFC suggested bringing on board Solidaridad, an international network organisation recognised for its technical know how in sustainability – and the “Madhu Shree” PPP was born.

Madhu Shree was a response to the enormous demand for sugar driven by India’s “sweet tooth”.

The country is the world’s largest consumer of sugar and the second largest producer after Brazil. However, as with other crops, growing sugarcane demands water; with water scarcity becoming a global issue, ensuring its efficient use across agriculture is vital to the creation of long term sustainable supply chains.

The potential advantage of any PPP is that it allows parties committed to real, positive change to tackle issues jointly and effectively on a much wider scale than might otherwise be possible. Common objectives are agreed at the outset and the duplication of effort is avoided.

It was the recognition of mutual stakeholder benefit for IFC, Solidaridad and Olam that created the virtuous circle of success underpinning the US$2 million Madhu Shree project. The common goal was that each partner could do well and do good by increasing sustainable sugar production.

To date, the project has improved the livelihood of more than 15,000 sugarcane farmers while allowing all the partners involved in the PPP to achieve business and development objectives.

Olam first initiated its efforts to improve water-use efficiency for farmers supplying its Barwani sugar mill in Madhya Pradesh in 2008. In 2013, it approached the IFC to scale up these plans at its Hemarus mill in Maharashtra.

The IFC was supportive to the cause but wanted to ensure a focus on efficient and sustainable practices, including usage of water for sugarcane cultivation – hence its suggestion of Solidaridad’s co-sponsorship of the project and support for implementation on the ground. We shared financing and technical support for the project to keep costs down while leveraging our pooled resources in an efficient manner.

Growing sugarcane demands water; with water scarcity becoming a global issue, ensuring its efficient use across agriculture is vital to the creation of long term sustainable supply chains.

The partnership faced heavy scrutiny given its scale and ambition. Stakeholders in the IFC and Solidaridad had to be certain their support and engagement would generate long-term benefits for the sugarcane farmers and the community surrounding the two mills. Olam had to balance its own sustainability goals with commercial imperatives. We were also conscious that local farmers might be reluctant to change their practices and that significant time and resources would be required to build awareness and capacity.

It was agreed that the IFC-Solidaridad-Olam programme would be implemented at the two Olam mills. The three-year Madhu Shree initiative was conceptualised and designed with three core objectives:

  • Enhancing farm productivity by adopting a sustainable package of best agronomy practices: We train farmers to build capacity, improve yields and reduce environmental impact, helping them to cultivate sugarcane ecologically and providing educational material to improve their skills and knowledge.
  • Promoting water-use efficiency in sugarcane cultivation: We help farmers adopt less water-intensive drip irrigation systems; the water saved can be used for intercropping, the growing of accompanying short duration crops, with no increase in the overall call on water resources.
  • Promoting the rural economy: This is done through developing micro or rural enterprises and entrepreneurs to provide farmers with access to mechanisation services. The project builds the capacity of these entrepreneurs, helps them improve financial literacy and links them up with financial institutions and business advisers.

Our partnership also aims to develop the market for sustainable sugarcane, to train and support the mills and producers for certification for the Bonsucro standard – the first global metric standard for sugarcane. This transition is aided by the fact that Bonsucro standards are in line with the Olam Sustainability Standard already practised at the two factories.

There is still work to be done, but this PPP is starting to pay dividends across the stakeholder landscape.

Through intensive implementation of the farmer support programme, over the year 2012-2013, we improved yields by 10-15%, convinced more farmers to practise intercropping which improves soil health and their earnings, and saved over 10 billion litres of irrigation water. As a result, our farmers are making more. The average income of a sugarcane grower supplying the Barwani mill is US$2,148 per hectare, compared with US$1,488 per hectare in Madhya Pradesh generally. This has led to greater interest in growing sugarcane and sugar crush volumes have increased fourfold for Olam over the last few years.

One of our beneficiaries is 64-year-old Mr Radheshyam Patidar, who made an extra US$2,600 last year from learning to plant chickpeas as a companion crop to sugarcane. Ever inquisitive, he is intercropping garlic this year after learning that it acts as as a natural pesticide against the dreaded sugarcane borer.

With the positive progress, the IFC adds another proof point to its goal of alleviating poverty - creating shared prosperity while working with the private sector, and Solidaridad aligns its involvement to its vision of creating sustainable supply chains in emerging markets. Olam is on track to become a trendsetter as more sugar industry players in India embrace sustainable procurement and sourcing, with the Barwani sugar mill likely to be Bonsucro-certified within a year. To further emphasise the focus on improving water-use efficiency, IFC and Solidaridad have brought on the Hindustan Unilever Foundation as another partner.

Our mutual hope is that through our partnership, India moves closer to a future where sugar production is more sustainable for the land, the farmers and all stakeholders. We also hope this says to others that with the right will, expertise and partner relationships, PPPs are a worthy investment. That would be the sweetest result of all.

Harsh Vivek is the Operations Officer of Advisory Services at The International Finance Corporation. Dr Shatadru Chattopadhayay is the Managing Director of Solidaridad South and Southeast Asia. Roshan Tamak is the Business Head for sugar at Olam Agro India.

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