ENHANCING LIVELIHOOD SECURITY FOR THE RURAL POOR

IN ANDHRA PRADSH

Vijay Mahajan

and

S. Mahendra Dev

Paper prepared for

Department for International Development (DFID), UK

and
Employment Generation Mission
Government of Andhra Pradesh

June, 2001
2
 Table of Contents

1. Introduction 03
2. Plans and strategies of the Government of Andhra Pradesh 04
3. Programs and Projects Supported by DFID and other Donors 06
3.1. Projects/Programs supported by DFID 07
3.2. New Initiatives by DFID 07
3.3. Programs/Projects supported by the World Bank 08
4. Market Failure and other constraints 09
4.1. Labour market failure 09
4.2. Credit market failure 09
4.3. Commodity/Product market failure 10
4.4. Infrastructure constraints 10
5. Mandal Level Analysis 11
5.1. Livelihood Promotion in Chintur Mandal – Analysis and Strategy 11
5.1.1. Present Livelihood opportunities in Chintur mandal 12
5.1.2. Livelihood promotion strategy for Chintur mandal 13
5.2. Livelihood Promotion in Jukkal Mandal – Analysis and Strategy 14
5.2.1. Present Livelihood opportunities in Jukkal mandal 14
5.2.2. Livelihood promotion strategy for Jukkal mandal 15
6. Subsector Level Analysis 16
6.1. Subsector Profile on Groundnut Cultivation and Processing in AP 16
6.1.1. Strategy and Recommendations for the Groundnut Subsector. 19
6.2. Subsector Profile on Rural Tourism in AP 20
6.2.1. Strategy and Recommendation for Rural Tourism Subsector 23
7. Recommendations for Employment Generation in AP 25
7.1. Twin Strategies 25
7.2. Selected Growth Engines for the un/semi-skilled masses 25
7.3. Selected Growth Engines for the Educated Unemployed 26
7.4. Strategy for Self Employment 26
7.5. Public-private partnership 26
7.6. Agriculture 26
7.7. Diversifying beyond agriculture and allied activities 27
7.8. Credit 28
7.9. Infrastructure and marketing 28
7.10. The AP Employment Generation Challenge Fund 28

8. Annexure 30

3
 List of Abbreviations

APDDCF Andhra Pradesh Dairy Development Co-operative Federation

APERP Andhra Pradesh Economic Restructuring Project
APPSR Andhra Pradesh Power Sector Reforms
APRLP Andhra Pradesh Rural Livelihoods Project
APTDC Andhra Pradesh Tourism Development Corporation
APTRANSCO Andhra Pradesh Transmission Company
APUSP Andhra Pradesh Urban Services Project
CASHE Credit and Savings for Household Enterprises
CD Ratio Credit Deposit Ratio
CIF Community Investment Fund
CIGs Common Interest Groups
CRIDA Central Research Institute for Dryland Agriculture
DDP Desert Development Programs
DFID The British Department for International Development
DPAP Drought Prone Area Program
DPEP District Primary Education Program
DPIP District Poverty Initiative Project
DRDA District Rural Development Agency
EAS Employment Assurance Scheme
EEP Energy Efficiency Program
EGCF Employment Generation Challenge Fund
EGM The Employment Generation Mission
GN Groundnut
GoAP Government of Andhra Pradesh
GOI Government of India
HPS Hand Picked Selection
ICRISAT International Center for Crop Research in Semi Arid Tropics
IWDP Integrated Wasteland Development Program
JFM Joint Forest Management
LPD Liters per day
MCP Milk Chilling Plant
MDO Mandal Development Officer
NABARD National Bank for Agriculture and Rural Development
NRI Non Resident of India
NTFP Non Timber Forest Produce
PMU Project Management Unit
RDC Rural Development Corporation
SDP State Domestic Product
SGSY Swarna Jayanti Gram Swarojgar Yojana
SHG Self Help Group
SNF Solid Non Fat
STPB State Tourism Promotion Board
TASS Technical Assistance and Support Services
UNDP United Nation Development Program

4
 Enhancing Livelihood Security for the Poor
in Andhra Pradesh

Vijay Mahajan and S. Mahendra Dev1

1. Introduction

Andhra Pradesh has earned a reputation as the state at the forefront of many reforms in
India as several fiscal, governance and sectoral reform initiatives are underway to
accelerate economic development and reduce poverty reduction. These and other reforms
have been articulated in a broad vision of economic, political and social development,
known as ‘Andhra Pradesh - Vision 2020’. Government of Andhra Pradesh (GoAP)
constituted several missions with a view to operationalise the objectives envisaged in the
AP Vision 2020 document.

The Employment Generation Mission (EGM) is one of the five missions and it was
constituted in August 2000. The main objective of the EGM is to develop a vision and
strategy for employment generation and to prepare a time bound action plan for
implementation of the same. The vision 2020 document of the GoAP says, “by 2020, every
individual of Andhra Pradesh will be able to lead a comfortable life, filled with opportunities
to learn and develop skills and earn a livelihood”. Regarding employment, around 18-20
million new jobs will have to be created by 2020. The document says that presently around
70 per cent of the workers are dependent on agriculture. By the year 2020, only 35-40
percent of the workers are expected to be dependent on agriculture.

The British Department for International Development (DFID) has been working in
partnership with Governments, civil society and other bilateral and multilateral donor
agencies to reduce the number of poor people living below poverty by half by 2015. The
DFID India country strategy paper finalised in consultation with Government of India seeks
to forge partnerships with selected state governments to tackle poverty more effectively. It
has initiated a partnership dialogue with the GoAP and state strategy paper for Andhra
Pradesh was released in May 2001. Strategic mission has identified five priority areas: (1)
Human Development (2) Employment (Economic well being); (3) Empowerment
particularly of women; (4) Governance (transforming governance) and (5) Environment
(management of natural and physical environment).
1
Vijay Mahajan is Managing Director of BASIX, a rural livelihoods promotion institution. Mahendra Dev is
Director, Centre for Economic and Social Studies, Hyderabad.

The authors would particularly like to acknowledge the assistance provided by Mr L. Kumar, Executive
(Applied Research and Consulting) BASIX, in field and desk research as well as in drafting some parts of
the study. The inputs from Ms CS Ramalakshmi, Chief Executive Officer, Employment Generation
Mission (EGM), GoAP; Shri Janardan Reddy, Addl CEO, EGM, GoAP; Prof T. Navaneetha Rao, Director
Swami Ramananda Tirtha Rural Institute; Mr Sukhwinder Arora, DFID and Mr CS Reddy, CARE-AP were
very useful. We would also like to acknowledge the support provided by GRAM, Nizamabad in the study
of Jukkal Mandal, by OUTREACH, Bhadrachalam, in the study of Chintur mandal and by the BASIX,
teams in Anantapur and Bhadrachalam.

5
 In an earlier study2 prepared for DFID, we have presented a macro level employment
scenario for AP and examined (a) strategic options for shifting the workers from agriculture
to non-agriculture and (b) the employment potential at subsectoral level and identified a few
growth engines where DFID could support the programs.

The purpose of the present study is to present an overview analysis of what is being
done by GoAP, donors, private sector, and make recommendations as to how DFID can
help in further enhancing livelihood security for the poor in AP In this context we have also
examined livelihood opportunities and constraints in two specific mandals (administrative
units of about 30-40 villages) and two specific subsectors.

The paper is organised as follows. Section 2 presents GoAP's initiatives and plans for
improving the livelihoods while Section 3 provides an overview of donors' programs.
Section 4 briefly discusses about market failures and other factors that prevent private
sector from generating significant employment opportunities. Section 5 gives mandal level
and Section 6 gives subsectoral analysis. The last section provides suggested
recommendations for enhancing livelihoods.

2. Plans and Strategies of the Government of Andhra Pradesh

The strategic thinking and plans of the Government of Andhra Pradesh in enhancing
the livelihood security for the poor can be obtained from two documents: (a) The draft
status report of the Cabinet Sub-Committee on Employment Generation and Manpower
Planning and (b) Strategy Paper on Employment Generation for discussion. The latter was
revised based on district and state level consultations.

The GoAP has established a number of Cabinet Sub-Committees to develop

approach papers for the delivery of the various elements of the vision. The Cabinet Sub-
Committee No. 4 was assigned the task of operationalising the objectives envisaged in the
AP Vision 2020 document with regard to employment generation schemes. Manpower
planning has been additionally entrusted later on due to an inherent correlation and
resultant linkages required. The Cabinet Sub-Committee recommended following a mission
approach to coordinate activities of all concerned departments in employment generation
and manpower planning to guide investments across the agriculture, industry and service
sectors of the state. This would ensure generation of opportunities for wage-employment,
self-employment and entrepreneurship development, and enable desired skilled manpower
generation. The broad approach of the Cabinet Sub-Committee is the following:

• Employment generation is viewed with reference to wage employment, self employment

and entrepreneurial development in the Government and Private sector

2
Mahendra Dev, S. and Vijay Mahajan (2000), "Challenges for Generating Pro-poor Employment in AP: An
Options paper", paper prepared for DFID and Employment Mission of GoAP.

6
• For the year 2005, the amount of additional employment that has to be created is
estimated through considering the sectoral composition of State Domestic Product (SDP) in
the initial (1999-2000) and the target year (2005).
• By taking the sectoral growth rates given by the Vision 2020, consistency is ensured
between the estimated sectoral distribution of employment, and the one necessitated by
the Vision 2020.

According to their estimates, the working population is expected to increase from

47.1 million in 1999-2000 to 56.2 million in 2005 (an increase of 9.2 million) and to 61.5
million in 2020 (an increase of 14.2 million). However, the changes in the employment in
different sectors would depend on policy initiatives. The investments required to achieve
the employment targets is close to that of Vision 2020 i.e. 30,00,000 crores.

As mentioned above, the Cabinet Sub-committee report advocates a mission

approach to coordinate activities of various departments and agencies involved in the
implementation of employment generation schemes. This is required to bring in
convergence among related departments/organisations as well as to facilitate backward
and forward linkages.

The Strategy paper of the Employment Generation Mission (EGM) provides the
strategies and initiatives of the GoAP. The strategy is given below

• The Government will act as a facilitator

• GoAP to identify and prioritize key sectors with employment potential and ensure
successful implementation.
• GoAP to create favourable environment for private sector participation

The paper also lists several initiatives taken for the educated and for other self
employed and wage employed population. The Strategy Paper was discussed at the state
and district levels. The consultations revealed that the EGM tended to give emphasis to the
people with higher education/skilled persons. There is a need to give emphasis for the
employment of unskilled masses. The highlights of the employment generation strategy
emerging from district and state level consultations, in which the authors also gave
substantial inputs, are given below.

• Twin Sub-strategies
• Focus on Selected Growth Engines and Clusters
• Selected Growth Engines for the un/semi-skilled masses
• Selected Growth Engines for the Educated Unemployed
• Selected Growth Engines for Different Regions
• Strategy for Self Employment
• Centres of Excellence to be set up in Selected clusters
• Tourism Clusters
• Public-Private Partnerships

7
Government Programs: In addition to the above plans and strategies given in the
consultative meeting of the strategy paper on employment, GoAP has many direct anti-
poverty programs. Many of them are centrally sponsored schemes. These are : Swarna
Jayanti Gram Swarojgar Yojana (SGSY, outlay in 2000-01, Rs. 90 crores); Employment
Assurance Scheme (EAS, Rs. 252.5 crores); Drought Prone Area Program (DPAP, 57.40
Rs. Crores); Desert Development Programs (DDP, Rs.5.44 Crores); Integrated Wasteland
Development Program (IWDP, Rs. 12.5 Crores)3. In addition, there is the Joint Forest
Management (JFM) program, Participatory Irrigation program with Water Users’
Associations, National Watershed Development Program, PM Gram Sadak Yojana,
NABARD - Rural Infrastructure Development Fund, and the NABARD -Watershed
Program.

All the above programs are expected to create employment directly or indirectly. In
terms of expenditure, They relate to both self and wage employment programs.
Employment assurance scheme (EAS) and watershed development programs are the
largest. These are followed by self-employment programs like DWCRA (now merged with
SGSY).

3. Programs and Projects Supported by DFID and other Donors

In this section we document the programs and projects of DFID and other donors
like the World Bank , UNDP, UNICEF and the Netherlands Government. External
development agencies play a substantial role in AP financial terms. The World Bank is the
largest with annual disbursement of around Rs 12,250 crores in 1999-2000 (inclusive of
disbursements made under its own multi-state programs). DFID is the next largest with
current commitments of around Rs 15,000 crores, spread over three to four years. These
numbers should be compared with the annual state revenue of Rs 16143 crores in 1999-
2000 and total borrowings of Rs 29,771 crores by 1999-2000.

Projects/programs supported by DFID

The DFID released its Strategy Paper in Andhra Pradesh in 2001. This document
provides strategy and work plan of DFID in the next few years for helping the AP
Government in eradication of poverty. DFID is now looking to achieve a greater impact on
poverty and influence on development through adopting a more integrated approach,
backing action with increased resources; and working in areas in which GoAP requests
assistance and where they are in charge of the process. The strategy will guide DFID
assistance to the GoAP and others as they implement the state’s action plans to address
development challenges and poverty reduction over the next three to five years.
Specifically, the strategy sets out how DFID aims to contribute to the achievement of the
international development targets in Andhra Pradesh. It will seek further partnership with
the GoAP; and more effective relationships with civil society, the private sector and other
external support agencies active in the state. The following are the programs/projects of
DFID in Andhra Pradesh.

3
The expenditures relate to either 1998-99 or 1999-2000

8
 Andhra Pradesh Rural Livelihoods Project (APRLP, Rs.280 crores, 6 years starting
from 1999): The APRLP is expected to improve the livelihoods in some sections of the
population in five districts in AP The focus of the project is on livelihoods with emphasis on
watersheds. This approach is likely to improve the employment of landless labourers, small
and marginal farmers, tribals, dryland farmers, women, rural service workers.

Andhra Pradesh Urban Services Project (APUSP – Rs.745 crores, 6 years starting
from 1999): This project is supposed to help the urban in several municipalities in AP It is
known that over time the number of urban poor are increasing. In this context, this project
will be helpful in improving the livelihoods of urban poor.

Credit and Savings for Household Enterprises (CASHE – Rs.50 crores, including
West Bengal and Orissa, 5 years starting from 1999): CASHE is a poverty focussed project
designed to address the fundamental problem of low incomes for poor women and their
limited control over the income. The project is proposed and designed for rural areas. The
design process was carried out jointly by CARE and DFID during March-September, 1998.
The process involved consultations with (a sample of) poor communities and NGOs,
training and capacity building institutions, government apex institutions, donors and several
professionals in the microfinance sector. The goal of CASHE is to increase significantly the
incomes and economic security of poor women and their households.

AP District Primary Education Program (DPEP – Rs.250 crores/2 years): This

project is in collaboration with the World Bank and is expected to improve the primary
education and create employment for teachers and other education services.

AP Energy Efficiency Program (EEP- 280 Crores, 6 years approved in 1996): This
project is supposed to end in 2001 and might have created opportunities for the poor in
energy and time saving and in turn improvements in livelihoods

AP Power Sector Reforms (APPSR approved in 1999): This is a joint project with the
World Bank. The project on power sector reforms will generate limited amount of direct
employment, and may even reduce formal sector jobs. But it will lead to many more
livelihoods if the power situation improves.

9
New Initiatives by DFID

In the next few years, the DFID is going to take new initiatives for improving the rural
and urban livelihoods in A.P4. DFID will work with the World Bank to support a four year
program of structural adjustment for poverty elimination in AP to reinforce reforms in the
state. The budgetary support indicates four main pillars of support: Fiscal reform,
Governance reform, Power sector reform and restructuring, and Rural Development/
Agricultural Reform. It may be note that generally there will be gainers and losers due to
structural adjustment programs. One has to make sure that losers are compensated
adequately. DFID will also assist GoAP develop strategies for policy reform in the health
and education sectors. If needed, additional assistance in the form of strategic investments
will be provided in the health and education sectors in the next few years.

DFID will work with the Employment Generation Mission of GoAP and other
stakeholders to address other areas of livelihood ‘insecurity’ such as, skills, markets and
basic services and removing threats posed by the degradation of the physical and natural
environment of the urban and rural poor. The Department will work with the water
conservation mission of GoAP and develop broader water resource management policies
that can form the basis of sector dialogue. It will also explore opportunities –in collaboration
with both government and the civil society – to enhance the efforts to reduce social
exclusion and empower marginalised and disadvantaged groups.

The Government of Netherlands has various programs in AP, including the APWELL
program under which bore-wells are dug and irrigation provided to groups of small farmers
in dryland districts such as Mehaboobnagar and Kurnool. There is also a joint program on
bio-technology applications.

Programs/ projects supported by the World Bank

World Bank has been the major player among the donors in terms of providing
funds. AP Economic restructuring project (APERP) is a structural adjustment program to
reinforce reform process and eliminate poverty. However, APERP cannot provide effective
coverage of all the poor and vulnerable, especially those in regions dependent on risk-
prone rainfed agriculture or those who lack productive assets or skills through ill health,
disability or illiteracy. To meet the needs of the poor, the World Bank has the following
projects in A.P5.

District Poverty Initiatives Project (DPIP/SERP – Rs.540 crores/5 years): The project
targets the poorest of the poor. The main objective of DPIP is to improve opportunities for
the rural poor to meet priority social and economic needs in the six poorest districts
(Srikakulam, Vizianagaram, Chittor, Ananthapur, Mahboobnagar and Adilabad). To achieve
this, the project would: (a) help create self managed grass-roots institutions; (b) build the
capacity of established local institutions, especially the Gram Sabha/Panchayats and

4
See Strategy Paper on AP by DFID, 2001
5
Apart from these World Bank also has AP District Primary Education Program (APDPEP, 700 crores/ 3-4 years)

10
GoAP’s line departments, to operate in a more inclusive manner in addressing the needs of
the poor; (c) support investment in sub-projects proposed by grass-root institutions of the
poor to accelerate their entry and expand their involvement in social and economic
activities; and (d) improve access to education for girls to reduce the incidence of child
labour among the poor6.

Common interest groups (CIGs) would be the project’s key instrument for identifying
priority needs at the habitation/village level. The project would allow CIGs to submit
proposals to District Project Management Units from funds allocated to the district from the
community investment fund (CIF) either on their own or together with other local
organisations, including Gram Panchayats. The CIF is not available for micro enterprises.
For this, the poor have to get funds from the banks, which is difficult. Even if they get funds,
to make micro enterprises viable for the poorest of the poor requires a whole lot of other
support , particularly for training and market linkages.

4. Market Failure and Other Constraints

Market failure and other constraints prevent active private sector participation in
promising subsectors. This in turn has a negative impact on employment. The direct
control of and access to natural resources such as land, water and forests, as well on
infrastructure such as power and roads, by the Government has restricted action by private
sector and civil society institutions. Knowing the benefits of collaborating with private and
civil society institutions, the DFID has been trying to promote it. Some examples of market
failure and other constraints are given below.

• Labour Market Failure: A large amount of seasonal unemployment in Rayalseema

and Telangana areas co-exists with shortage of agricultural labour in the coastal region
and in urban manual activities. The “shortage” of labour has led many construction
contractors to go in for mechanical equipment for digging, earthwork, road laying, and
so on. The problem is even more severe when one moves up slightly the skill ladder,
such as for carpenters, masons, plumbers and electricians. Unemployment for the
powerloom and handloom weavers, for example in Sircilla co-exists with a shortage of
garment workers at the new Apparel Park of Gundla Pochampally, just 150 kms away.
Promoters there complain that not enough persons are available even to undertake skill
training.

There is an absence of mechanisms for moving workers out of subsectors where

demand is declining, such as handloom and powerloom, into those subsectors where
demand is increasing, such as apparel and construction. This failure in the labour
market can partly be explained by the lack of information, inadequate rural-urban
transportation linkages (although considerably eased by the recent introduction and
popularity of seven seater tempos”) and inadequate difference in wage rates to
compensate for the risk of migration.

6
Project apprisal document

11
 • Credit Market Failure: There is a huge unmet demand for credit. As per the State
focus Paper of NABARD, the total potential demand for rural credit is Rs 11,899 crores
in 20001-02 whereas the expected supply is Rs 9650 crores, leaving a gap of Rs 2248
crores. At the same time, there is a surplus of funds with the people, as is obvious from
the CD ratio of the state at 68 percent in March 1999. There is a huge network of
banks, even in rural areas, with 2322 rural and 467 semi-urban branches. There are
even targets and priority sector lending obligations.

Yet, the availability of credit, both for fixed asset purchases and for working capital,
has been a problem area both in terms of access and transaction costs. Due to the
inadequacy of loan amount, time delay and excessive paper work in getting a loan from
formal institutions, a majority of the producers rely on informal channels, such as traders
for working capital. The SHG movement in the state testifies the extent to which the
poor face credit constraints and the extent to which they are willing to invest their time in
having access to flexible and friendly credit sources. The reasons for the failure of the
credit market include government ownership of banks, interest rate controls on smaller
loans and schemes to subsidise credit for the poor, such as SGSY.

Apart from credit market failure, the newer rural subsectors fail to attract private
investment as the private sector seeks opportunities with an assured return
considerably higher than the bank interest rates. If the return is higher but perceived
risk is also higher, then private sector hesitates from investing. Thus an attempt needs
to be made to reduce risk perception through information sharing and appropriate
regulatory frameworks. For example, investments in the forestry sector will not come as
long as restrictions on felling and transport of timber are not rationalised.

• Commodity/Product Market Failure: Lack of information about new market

opportunities has restricted the participation of the private sector or constrained micro-
entrepreneurs to continue catering to declining market segments. For example, in
groundnut, while there is a competitive squeeze in the edible oil market due to cheap
palm oil imports, the market for whole nuts for confectionery and other purposes is
growing. Yet very few units have responded to this, while oil mills are closing down.
This is due to lack of information on new market segments.

Generally the role of middlemen in marketing is criticized as they siphon off a major
share of the value added. However, the positive role of “middlemen” has to be
recognised in marketing products which are produced by the unorganised sector. It
includes their role in identifying the market demand pattern, transportation and taking
risk of the product damage and price changes in between transporting it from the
producer to market. In several cases, members of SHGs find it difficult to market their
products. They could actually benefit by dealing with competitive middlemen. Indeed,
where they can, many SHGs have themselves become "middlewomen", marketing
products on behalf of Hindustan Levers and Philips.

 Infrastructure Constraints: Lack of power in rural areas seems to be an important

constraint for agriculture as well as some of the rural non-farm subsectors, such as

12
powerloom. Even handloom weavers want power so that they can weave late in the night
using electric light. Power is in general available for 8 to 9 hours in rural areas. The
farmers are willing to pay more provided they get assured power supply and voltage, but
APTRANSCO cannot assure that so it is unwilling to supply more power to rural areas
since it loses over Rs 2 for every unit it supplies! Water problem is also acute in some
areas but the GoAP has not yet privatised rural water supply. Road network is important to
improve the business environment in rural areas. There has been some improvement in
rural roads. There has been significant improvement in telecommunications but in some
areas network is poor.

The lack of training and infrastructure was lamented by all concerned. Yet we found
that the provision for up to 20 percent expenditure on infrastructure and 10 percent on
training of borrowers (all as a grant) under SGSY was not being used by most DRDAs.
The MDOs were not even aware of these. The main reason for this "market failure" is
the long chain of decision making from the GoI to RDC to the DRDA to the MDO,
resulting in unrealistic norms and non-implementation.

In the next section, livelihood opportunities for two mandal are analyzed by looking
at the present livelihood opportunities, sector-wise and problems at each sector.
Suitable strategy is also suggested based on the existing situation to enhance livelihood
opportunity further.

5. Mandal Level Analysis

5.1 Livelihood Promotion In Chintur Mandal – Analysis And Strategy

Chintur is a part of Khammam district of AP, located in the eastern part, bordering
Orissa and Madhya Pradesh. The total geographical area is 21850 hectares. The
climate is characterized by a hot summer and good seasonal rainfall. The average
rainfall is about 1200 mm. Maximum rain is received during southwest monsoon - June
to September. Heavy rains caused soil erosion in some areas, where the landscape is
undulating in nature. The total cultivable area is 8700 hectares, of which only 2.4
percent is irrigated area. Good forest coverage also exists in Chintur mandal. The
mandal has 88 villages, of which 77 villages are inhabited and the rest are uninhabited.
In thirty-four villages, less than 200 inhabitants were observed in 1991. Only one village
has more than 2000 inhabitants.

The total population in 1991 was 29,089. The percent of male population was 49.6 and
that of female was 50.4 percent. Interestingly the sex ratio at 1015 was higher than
Khammam district ratio of 961. About 85 percent of the total population is scheduled
tribes and 5 percent scheduled caste. The scheduled tribes present in Chintur include
Koya, Konda Reddys, Gowd, Raja, Rashakoya, Lingadhari, Gugali, Lambadi and
Verukula.

13
The literacy level was 18 percent in 1991. It was less than the district literacy rate of
33.48 percent. As expected, male literacy rate (23%) was greater than female literacy
rate (13%). There are 55 primary schools, four middle schools and two
matriculation/high schools (1991 data). The total work force in 1991 was 18466 (male
workers: 10050, female workers: 8416). This includes main workers (16640) and
marginal workers (1826). The occupation of the main workers in 1991: agriculture - 86
percent, services - 10.7 percent, manufacturing - 2.3 percent and livestock and forestry
- 1 percent.

Present Livelihood Opportunities in Chintur Mandal:

Agriculture is the main occupation. It engages about 86 percent of the total population.
Rain-fed cultivation is practiced mostly. Irrigated area is less than 3 percent of the total
cultivable lands. Single crop is alone possible. Jowar, red gram and chilies are the
major crops grown. Paddy cultivation is restricted to irrigation area. The major constraint
in agriculture is the lack of irrigation facility. Intensive agriculture is possible during the
rainy season only. In other months, there is little cultivation and hence no work
opportunity. There is limited application of the modern technology and improved crop
inputs resulting in low productivity and hence farmers earned less income. The main
reasons for the non-applicability are lack of adequate capital and unawareness among
the farmers.

Big and some marginal farmers uses wage labourers, while most others use their family
labour for agricultural activity. Some farmers provide “vippa sara” the local liquor instead
of money as wages. Agricultural produce is marketed through local shandies. The
Girijan Co-operative Corporation purchases these produces in bulk from the shandies.
Generally, the traders in local shandies fix the price. Outreach, an NGO working in the
area has organised the farmers into a Mutually Aided Cooperative Society for collective
marketing of agricultural produce. This has enabled them to get better prices and this
year, they have gone a step ahead by getting the pulses processed before marketing,
thus capturing more of a surplus in the value chain.

Forestry: More than 30 percent of the land is under forest. The Konda Reddy tribals live
in the hills, depending on the minor forest produce for their livelihoods. For others, minor
forest produce provides income-earning opportunity during agricultural off-season.
Minor forest produce includes gum, beedi leave, bamboo, tamarind and honey. Gum is
collected widely. About 2 to 3 kgs of gum is collected every week from a tree and sold in
the local market. Its price varies from Rs. 60 to 120 per kg depending upon the quality.
Similarly beedi leaves, tamarind and honey are collected, processed and marketed
locally. Most of the bamboos are sold without value addition.

Animal Husbandry is not intensive. Dairy, goat, bullock and backyard poultry activities
are restricted to local needs. Bullocks are used for cultivation and transportation
purpose. Dairy is restricted due to poor road connections and absence of chilling center

14
in the nearby area. Non-farm activity is limited to a few bamboo furniture, basket
making units, tamarind processing and beedi leaf processing units at the village level.
Few dhabas, snack bars and motor repair shops are present along the state highway.
Agri-based industries are not well developed in this area.

Credit flow for income generating activity is limited, especially from the banking sector.
For instance, the 20 year old branch of the Nagarjuna Grameen Bank at Chintur has
deposits of Rs 90 million but loan outstanding of only Rs 13 million. Of this, more than
Rs 9 millions are overdue for the past three years. Of the remaining portfolio, Rs 3
million were personal loans to government employees. The poor credit deposit ratio
indicates that the bank is simply not able to offer appropriate credit products to the local
population. The bad experience with repayment has now become an excuse not to do
more lending, making it into a vicious circle. However, in the same are, Outreach has
organised numerous SHGs and made loans out of their own savings to the tune of over
Rs 1 crore, with nearly 100 percent repayment rate.

Livelihood Promotion Strategy for Chintur Mandal:

• The strategy should focus on the development of agricultural activity, as 86 percent
of the total workforce is dependent on it. Currently, the lack of adequate irrigation
facility, improved agricultural inputs and modern technology, have restricted the crop
productivity and hence income earning of the farmers.

• Chintur receives good rainfall of 1200mm annually spread over 120 days. But the
inadequacy of infrastructure to harvest and store rainwater has restricted the
agricultural activity to six months (June to Jan), and cultivation of single crop is alone
possible. Hence the work opportunity in agriculture is also limited. Construction of
farm pond, rock fill dam, check dam, diversion drain, etc., could be initiated,
wherever it is possible to harvest and use rainwater during non-rainy season. This
would enable farmers to raise more than one crop and hence would double the work
opportunity. Improved agricultural inputs with extension services are necessary to
increase the productivity of the crops.

• Development of dairy is possible in plain areas, with the introduction of hybrid animal
and increase of veterinary services, where pucca road facility is available. However
establishment of a chilling center in the nearby area is necessary.

• Sustainable usage of the minor forest produces is necessary to ensure livelihood

opportunity of the tribal for a long period. Value addition of the minor forest produce
such as bamboo furniture and basket making, honey and gum processing and
tamarind sweet making should be introduced to ensure increased income earning.
This would also promote the flourishing of cottage industries, where more work
opportunity could be created. Collection and processing of herbal plants would
provide number of employment opportunity. However, a detailed study is needed to
assess the potential.

15
• Service sector: More jobs could be created in agriculture related service sector like
in agri-input marketing, trading of produce, repair of agri implements and transport
vehicles, etc. Employment opportunities for the skilled/semi skilled workers could be
generated in service sector like health (23 percent served in 1991), veterinary care,
education and communications.

• Timely credit is an important factor in promoting livelihood opportunity. Since,

Regional Rural Banks (RRB) are the major financial providers in Chintur, they should
be geared up to meet the credit needs of the local community. To overcome the
present problem of poor recovery, RRB should channelise credit through SHGs and
build up good rapport with the local NGOs.

5.2 Livelihood Promotion In Jukkal Mandal – Analysis And Strategy

Jukkal is a part of Nizamabad district of AP, located in the northern part, bordering
Maharastra and Karnataka states. The climate is generally dry and is characterised by a
hot summer except during the southwest monsoon seasons (June to September). The
average rainfall in Jukkal is about 1000 mm per annum. During the monsoon, heavy
rains are received, which cause soil erosion in the undulated barren lands. The total
geographical area is 23780 hectares. The total cultivable lands are 18300 hectares, 77
percent of the total land. The total irrigated land is about 4000 hectares, or 22 percent of
the total cultivable land.

There are 35 villages in Jukkal mandal, of which 34 villages are inhabited. Only three
villages have population more than 2000, while six villages have less than 500
population. The total population in Jukkal was 37142 in 1991. The female to male ratio
964 for Jukkal is less than Nizamabad district's 1017. The SC and ST population is
26%. The common scheduled tribes in Jukkal are Sugali, Lambadi, Yerukala, Gond,
Naik pod and Rajgond.

Literacy rate in Jukkal was 22 percent (1991), which was lower than average literacy
rate in rural area of Nizamabad district (28%). The female literacy rate (10%) was much
lower than the male literacy rate (33 %). There were 37 primary schools, 5 middle
schools and 2 high schools. Total workforce in 1991 was 18751 (male workers: 10629;
female workers: 8122). This included main workers (17240) and marginal workers
(1511). The occupation of the main workers in 1991: agriculture - 84 percent, services -
9 percent, manufacturing - 3 percent and livestock and forestry - 4 percent. Agriculture
is the main occupation in which 84 percent of the workforce was engaged in 1991.
Agricultural labourers alone accounted for 53 percent.

Predominantly rain-fed cultivation is practiced. Irrigated land is restricted to 22 percent

of gross cultivable area. Jowar, cotton and pulses are the major crops. Other crops like
groundnut, safflower and sunflowers are grown in certain pockets. Paddy is restricted to
irrigated areas. With limited agricultural extension services from the agriculture
department, farmers have low crop productivity and hence less income generation. In
the undulated barren lands, severe soil erosion occurs during heavy rains. Forest cover

16
is 24 percent of total area. Forests are degraded though steps were taken to regenerate
forests under JFM.

Animal Husbandry: Local cattle breed, Decanni sheep and backyard poultry are kept.
Buffaloes are preferred than cows for dairy, which has not emerged as a main activity.
The reasons are the non-availability of marketing facilities, and limited veterinary care
services. The chilling center being faraway from Jukkal, restricts the development of
dairy activity, as the cost of transportation of milk is high.

Non-Farm Activity is limited in general. Agriculture based industry is limited to a ginning

mill and a rice mills. A large number of beedi rolling units including unregistered ‘vardi’
units exists. Services are limited to few kirana and petty shops. Agriculture based
industries are not developed due to poor power supply, pucca roads, and lack of
communication facilities. At present, available pulses are sent to neighboring Digloor in
Maharastra for processing due to better power supply.

Credit flow for income generation activity is limited from the banks and other formal
financial institutions due to poor repayment. For instance, Srirama Grameen Bank in
Jukkal advanced Rs 15 million mostly to agricultural activity (crop loans Rs. 6.9 million,
agri-term loans, Rs. 2.4 millions). However, their repayment rate is only 30 percent and
hence this bank is not able to provide further advances. The main reason cited for low
repayment rate as crop failure. In case of crop loans, credit is restricted to cotton and
virtually no loans are provided to other crops.

Livelihood Promotion Strategy for Jukkal Mandal:

Agriculture: Good land and rainfall can be the basis for rebuilding the livelihood base of
the Jukkal mandal. Already, the Koulas Nala project has transformed over 4000 acres of
land from single dry crop to two paddy crops, although it would have been better to use
the water to grow vegetables. Watershed development is needed in a much bigger
way, as many areas are restricted with dry crop cultivation due to lack of irrigation
facility. To increase the potential of the existing tanks irrigation, the process of
desiltation (which is currently done under Neeru Meeru program) and increase of water
channels should be accelerated with the participation of the local community.

Access to timely credit is needed for farmers. This would enable farmers to purchase
better crop inputs and increase their crop productivity. Besides timely credit would also
help the farmers to sell their agricultural produce directly in the market at higher price
than to local agent, as done currently in many villages. Increase of agricultural
extension services is necessary for farmers to increase further their crop productivity
and their income. For instance, Koulas Nala project has enabled many farmers to
cultivate paddy instead of dry crops. However, as paddy cultivation is new, the farmers
required proper guidance and other extension services. GRAM an NGO has a strong
presence in the area, and has established four federations of self-help groups and
mutually aided thrift and credit societies in the area. These can be linked with banks.

17
Development of horticulture crops like mango, tamarind, guava, sapota, etc is possible
in the undulated barren lands. This would not only generate income but also prevent soil
erosion.

Animal Husbandry: Promotion of dairy activity could be achieved through increase in

supply of hybrid livestock, extension of veterinary care services and establishment of
chilling center. A proposal to establish a chilling center in Bichkonda, about 30 Km away
from Jukkal has already been sanctioned. However, its process is rather slow which
needs to be accelerated. Improvement of power supply is necessary to promote animal
based industries including chilling center, wool processing unit and supply of artificial
insemination, etc.

Non-Farm Activity: Promotion of agriculture-based industries is mainly depended upon

improvement of power supply. Further, the enhancement of the agricultural activity
would increase job opportunities in agricultural input marketing, trading of produce,
repair of agricultural implements and transport vehicles, etc. Bus connections to Jukkal
need to be increased for increased trading and this would also lead to more scope for
dhabas, tea stalls and other petty shops. Activities like sand quarrying from the Manjira
river bed, and stone based work should be encouraged through providing incentives to
pioneer units. It not only creates employment opportunities for many workers but also
reduces the pressure on agriculture. Potential to generate more employment
opportunity exists in other service sectors particularly health and education, for which
government initiative for development of basic infrastructure is necessary.

In section 6, similar analysis is done on livelihood opportunities for two sub-sectors, one
commodity subsector (groundnut) and other service sub sector (rural tourism). The
major problems faced at each slate were identified and the suitable strategy for each
slate is described for both sub-sectors.

6. Subsector Level Analysis

6.1 Subsector Profile on Groundnut Cultivation and Processing in AP

Overview of the Subsector: Groundnut (GN) is one of the major oil seed crops in India.
It accounts for nearly 45 percent of the total area and 55 percent of the total oil seed
production. Currently, GN is cultivated in nearly eight million hectares in India. The
average productivity is about 993 kgs per hectare (kg/ha). The major GN producing
states are Andhra Pradesh (AP), Tamil Nadu, Maharastra, Karnataka and Gujarat. AP
is the largest producer of GN, accounting for 28 percent of the GN production of the
country. It is cultivated in nearly 22 lakh hectares. The average productivity is about 925
kg/ha. In AP, Anantapur district alone accounts for 70 percent of the GN production.
The value of GN crop production in AP is estimated to be in the range of Rs 1500 crores
per annum. A total turn over of Rs. 3000 crores is possible when the value addition at
various stages is considered. However, a large part of this value addition does not place

18
in the state for various reasons. As a result, a large number of potential livelihoods are
not generated.

The total estimated employment in GN subsector in AP is as follows: In GN cultivation,

over seven lakh farmers are engaged for about half the year. A large majority of them
do not grow any second crop. In addition, approximately three lakh agricultural workers
are employed for between 20 to 30 days each year in pre-sowing operations, sowing,
weeding and harvesting. About 50,000 workers are employed for about one month in
sorting, grading and transporting GN seedpods to market yards, decorticating factories
and oil extraction mills. Less than 1000 workers are employed in the various oil
extraction mills, a large number of, which are concentrated in Adoni, district Kurnool.

Demand conditions: Extraction of oil is the single most important end use for GN. In the
recent years, the GN subsector is facing a severe competitive threat due to palm
oil import at considerably lower prices. The retail price of palm oil was about Rs
22 per kg, in spite of an import duty of 85 percent. As against this GN oil was
retailing for Rs 34 to 36 per kg. In addition, because refined, bleached and
deodorised (RBD) palm oil is colourless and odourless, it is an ideal adulterant
and the loose GN oil sold in the market is allegedly mixed with as much as 60
percent palm oil. About 10 to 15 percent of GN pods are used as seed for the
next crop. In selected pockets, a majority of the crop can be reserved for this
purpose, based on the varieties grown and the quality of the produce.

Another promising and growing end use is for “confectionery” purpose. The use of GN
for confectionery purposes is increasing. This includes products such as handpicked
and selected (HPS) GNs, which are eaten as savouries, GN sweets mixed with jaggery,
peanut butter and GN protein. Enquiries with the trade in Anantapur indicated that a
certain amount of GN is being exported through Chennai to Malaysia for confectionery
products. However, due to aflatoxin contamination, end users from the confectionery
sector are reluctant to buy AP GN.
Factor Conditions: Well-drained red soils in southern AP are quite suitable for GN
production. The rainfall for GN cultivation should be at least 600 mm per annum.
The rainfall in Anantapur is slightly below this. Since farmers practices rain fed
cultivation, the delay in onset or failure of monsoon badly affects the GN
productivity. A solution for managing in such situations is timely sowing and
watershed management. We found for example during the field work that in
certain watersheds where soil and water conservation work has been
undertaken, the yield had gone up from six to eleven quintals per hectare. In
terms of capital investment, between Rs 3000 to Rs 5000 per hectare is needed
for comprehensive soil and water conservation. The pay back for this investment
is only two to three years.

Capital: Long years of mono cropping have depleted the soil fertility. This can be
restored through application of farmyard manure. In selected cases, inorganic micro-
nutrient supplements are needed. In all cases, use of improved seed varieties is
necessary. Wherever possible, protective irrigation is required, particularly during dry

19
spells to ensure normal yields. Application of suitable plant protection chemicals is also
required in some cases. Finally, capital is needed for post harvest storage to enable the
farmers to get a better price. All these items together require an capital investment in
the range of Rs 5000 per hectare and working capital in the range of Rs 6 to 8000 per
hectare. Credit flow from banks is limited. According to the NABARD Potential Linked
Plan for Anantapur district, the supply of credit was Rs. 187 Crores in 1998-99 for GN
cultivation as against the demand of Rs. 910 Crores. This is based on the unit cost of
Rs 13000 per hectare. Further, if 10 percent of the seven lakhs hectares under GN in
Anantapur has to be treated properly for conserving soil and water, an investment of Rs
3.5 Crores would be needed. However the bank loan for this purpose was only Rs 0.06
Crores in 1999/00 for the entire district. No strategy for productivity enhancement will
work unless adequate capital for short and long term investments is made available.

Industry Structure: The GN subsector is characterised by a fragmented industry

structure, both across stages of value addition as well as at each stage. There is
no single actor in the value chain thinks about maximising the over all benefit
from the GN subsector. The attempt of the National Dairy Development Board
was an exception to this scenario. It established the AP Oil Seeds Growers
Cooperative Federation (AP-OilFed), with a three tier structure. The oilseeds
growers’ cooperatives at the village level supply the oil seeds to the Regional
Union at a good price, which processes GN in its plants at Anantapur,
Mahaboobnagar and Chittoor districts. The GN oil and de-oiled cake produced in
these plants are pooled together and marketed by the AP-OilFed. The oilseed
growers share the profits eventually at each stage. This system, however, does
not work effectively, as the growers are tempted to sell their produce to the
traders and millers who offer better prices. As a result, the plants have never run
at full capacity. Sometimes the Regional Union tries to make up by buying from
the market, which further reduces the effectiveness in procuring from its
cooperative. The ownership and management of AP-OilFed and its Regional
Unions is in the hands of the government and as a result a commercial
organisation needing very quick decision making, is run on bureaucratic lines.
The net effect has been that AP-OilFed has not delivered on its promise of being
an integrated, producer owned GN enterprise.

Related and Supporting Services: The most wanted supporting services for this
subsector are agricultural research and extension and suitable marketing strategy to sell
the byproducts. Andhra Pradesh hosts the major International Centre for Crop Research
in Semi Arid Tropics (ICRISAT), for which GN is one the five mandate crops. The
Central Research Institute for Dryland Agriculture (CRIDA) and the Directorate for Oil
Seed Research are also located in Hyderabad. There are many improved varieties
released by these research centres. ICRISAT has also evolved a full agronomic
package of practices, specifically for Anantpur. Our field survey showed that farmers
are aware of many of these but reluctant to adapt them. This indicates that some of the
recommendations do not seem to take into account either the constraints the farmers
face or ignore the subjective perception of risk to return ratio. To reduce the risk
perception of farmers towards new varieties, the standard method adapted has been

20
subsidised demonstration kits but these do not seem to have made much of a dent. It
would also be necessary to provide - training in soil and water conservation methods to
reduce the possibility of crop loss and water conserving equipment like micro sprinklers
and farm ponds.

Policies and Institutions: The important policy that effect the subsector are related to the
minimum support price for GN, the import duty on substitute edible oil such as
palm oil, excise duty and sales tax on local GN oil millers, as well as regulations
related to storage control to prevent hoarding and packaging to prevent
adulteration and underweighment. Because of an active trade lobby, the
Government constantly reviews the regulatory framework. However, it has to
balance contradictory interests. For example, edible oil is an important cost
component in the budget of lower income households. Hence the Government is
keen to keep cooking oil price low. This is the reason that over 4 million tons of
palm oil is imported every year. In the previous years, the duty on palm oil was
lower at about 40 percent and due to pressure from farmers this has been
increased to 85 percent now. However, Malaysia, which is a surplus producer of
palm oil, has consistently reduced the sale price to ensure that palm oil retails in
India at about Rs 20-24 per kg irrespective of custom duty. Thus there is no
possibility of price competition. While attempts can be made to significantly
increase the productivity of Indian GN farmers, thereby making GN oil more
competitive, its price can never be brought down to the level of palm oil.

There is a lot of internal dissention among industry players in the milling sector. The
small millers are known to avoid sales tax and are also accused of adulteration. As a
result, the larger players would like the Government to enforce sales tax regulations.
The branded players would in addition like the government to disallow loose sales. This
would of course, give the larger players and the branded players an advantage over the
small millers and traders. The Government is reluctant to enforce this, thinking that this
would lead the lower income consumers to pay more for edible oil. However, recent
trends show that packaging is likely to be made mandatory sooner or later, to prevent
adulteration and under-weight sales.

Strategy and Recommendations for the Groundnut Subsector:

Productivity Enhancement: Most GN farmers practice rain-fed cultivation, and delay in

onset or failure of monsoon badly affects the GN cultivation. A solution for managing in
such situations is timely sowing and, soil and water conservation using the watershed
approach. Supply of good quality seed is critical. Training on farming techniques is
needed for many farmers. A coordinated approach between the watershed mission and
the agriculture department of GoAP is required. The former should first take up soil and
water conservation in GN growing areas in an intensive manner. The latter can than
bring in packages of practices suitably vetted by ICRISAT and CRIDA and also attract
seed companies to supply good quality seed.

21
Credit: All these steps require substantial capital. Unless adequate and timely credit is
provided, no improvement can be achieved. The major source for credit provision is the
financial institutions like Regional Rural Banks and other Banks, which are not
adequately meeting the farmers demand. Appropriate steps should be taken so that the
farmers get the necessary credit at the needed time.

Market Development: Ideally the market for GN should be split into about 10 to 15
percent for seedpod, 30 to 45 percent for confectionery and no more than 40 to 60
percent for oil extraction. The major portion of the GN end use goes as GN oil. But due
to import of palm oil at cheaper price, selling GN oil at the current price is difficult.
Though the price of ground oil could be reduced if any break through in enhancing the
productivity is achieved, it is unlikely to ever compete with cheaper palm oil. However,
as the demand for edible oil is constantly increasing, the demand for GN oil can be at
least be maintained with a suitable marketing strategy. It may be worthwhile to
reposition GN oil as a premium cooking oil and target it at higher income households,
building on existing consumer preference and concerns about health effects of palm oil.

The market for confectionery segment can be increased by switching to bold varieties
which are attractive as table nuts and reducing aflatoxin content by proper post-harvest
drying. The GoAP can attract value-added enterprises such as branded seed production
companies, decortication and HPS units, peanut butter and GN protein manufacturers
to the state. Tapping opportunities in non-oil use of GN such as branded seed, HPS
nuts, deoiled whole nuts, peanut butter, GN protein and so on, all require technology,
capital investment and market linkages. Companies such as Mahyco Seeds and Pepsi
Foods can be invited to set up processing plants and given incentives as "pioneer units"
in the sub-sector.

Policy Attention: A coordinated and focused approach with high level attention from the
State and Central Governments can turn the tide for this subsector. The GoAP needs to
set up a Mission Directorate on Groundnut with a mandate to increase the productivity
and value addition for this crop in the state. The APOilFed and the Directorate of
Oilseeds can be brought under this Mission, after suitable revitalisation. The task is
worthy of the attention of the Chief Minister since it can lead to the protection and
promotion of close to eight lakh livelihoods in AP

6.2 Subsector Profile on Rural Tourism in AP

Overview of the subsector: The services sector is one of the most important sources of
new employment as the economy makes a transition from an agrarian to a modern
diversified structure. Tourism is a composite services subsector, which needs a
combination of infrastructure and related services, starting from publicity to generate
tourist demand, transportation services, hotels and restaurants, entertainment services,
guides and travel agencies, telecom services, handicraft and curio marketing, shopping
facilities and so on.

22
Rural tourism is a sub-set of tourism, where the destination is rural or small towns. This
includes religious places, historical sites, hilly and scenic resorts, wildlife sanctuaries
and adventure spots. In Andhra Pradesh (AP), for example, Bhadrachalam, Srisailam,
Basar, Yadgirigutta and Lepakshi are important religious places in rural settings, while
Arraku Valley, Nagarjuna Sagar and Horsley Hills are scenic places. AP also has
beaches at Rishikonda and Bhimli near Vishakahapatanam and at Chirala. There are
possibilities of developing lesser known locations as "destinations" for weekend travel
by big city dwellers who seek to get away from the crowd and pollution. Rural tourism
can become a major source of kick-starting local economies in remote places with
otherwise no significant basis for employment in the services sector.

Demand Conditions: In 1996, the state accounted for nearly 24 percent of domestic
tourist arrival in India, but only 3 percent of India’s foreign tourists. Domestic tourists are
predominant in AP. The traffic of domestic tourist in 1996 was estimated to be around
33.4 million, whereas the arrival of foreign tourists in 1996 was only 60,000. The annual
growth rates of domestic and international tourist arrivals from 1991 to 1996 period were
10 and 8 percent respectively. The great bulk of domestic tourists arrive for religious
purpose to only a few religious spots. More than 50 percent of the tourists visit Tirupati
and Puttaparti alone.

Rural tourism is mostly seasonal. For example, in Bhadrachalam, more than 25 percent
of the tourists (more than 1.5 lakhs a year) visit during Rama Navami alone. A large
number of tourist from rural areas are attracted during melas and functions. Several of
these, provides much needed recreation to the rural folks. Craft persons, rural
performers like magicians, snake charmers, sellers of sweetmeats, small restaurants,
flower sellers, and sellers of toys and utility items all make a living out of these festivals.
A study showed that more than 50 percent is spent on processed foods and
manufactured goods during Melas.

The market for rural tourism can be segmented into three:

• The lower income domestic tourists or pilgrims who go to religious places in large
numbers,
• the middle to higher income domestic tourists who go to both religious as well scenic
places
• the foreign tourist including NRIs

Factor Conditions: Most tourist locations in AP have good road facilities. Bus services
connect all tourist spots though train services are not as convenient. The railway
network is short of many destinations such as Bhadrachalam (nearest railhead is 40
kms away on a branbch line), Puttaparti (recently connected to Bangalore but not yet to
Hyderabad), or circuitous as in Mantralyam (via Wadi and Raichur). Air services are
limited to Hyderabad, Vizag, Tirupati and Puttaparti. In many locations, tourists are not
adequately attracted due to poor connectivity. For instance, in Horsley Hills, a hilly
resort located in Chittoor, tourists are limited to below 200 per day due to poor,

23
connectivity and frequency of bus services. In many locations, power problems exist. It
is acute during peak season. Similarly water supply is a constraint in some places.

Infrastructure development is a major investment required for developing any tourism

destination. It is virtually impossible for an individual to invest in this. In case of hotels
and restaurants, high capital investment is needed for infrastructure development.
Given the general bias of banks and financial institutions against services sector
enterprises, particularly those which are seen as "wasteful", such as luxury hotels and
amusement parks, these ventures find it difficult to attract loans. Though, Tourism
Finance Corporation of India and AP State Finance Corporation extend long-term credit
but the collateral requirement and the procedures are very complex. Small players of
rural tourism - dhabas, travel agency, tea stall, etc., find it difficult to get loans from
banks due to insistence on collateral.

Industry Structure: Rural tourism is an integrated subsector, covering a range of

services: transport, hotels, restaurants, tourist guides, handicraft sales, performers, etc.
All these factors make rural tourism unique and efficient as a subsector, requiring well-
coordinated and sustained investment patterns on a substantial scale. It is not a feasible
proposition for any single entrepreneur or government body to develop the entire circuit
or even a destination. In AP, the development of rural tourism destinations is still at an
early stage as could be seen in Bhadrachalam, Mantralayam, Horsley Hills, Lepakshi
and Araku Valley. All these destinations have a lot of potential but the paucity of
publicity and infrastructure attracts few tourists and puts off those who still manage to
come. In Araku Valley, for example, there is no restaurant of any standard and even
high-income group tourists who could afford to spend more have to eat in roadside
hotels. In Lepakshi, there is a decrepit Inspection Bungalow and Hindupur nearby has
no good hotels. Horsley Hills has been converted into an exclusive resort for
government officials and it is difficult for someone without connections to stay there.

Competition is high in the sector because of its clustered structure and seasonal nature.
Too many sellers are concentrated in a cluster to cater to a limited set of buyers. For
example in a location like the Bhadrachalam, the same set of priests, hotel owners and
shops try and cater to tourists. Following the peak tourist season, much of them do not
get enough business, resulting in each trying to grab the other’s share of business. The
entry barrier in this some segments of the subsector is high but rather low in others.
One reason is the high capital requirement for creating the basic infrastructure. The
presence of monopolies in several sections like transport, land allotment, etc also make
it difficult for ordinary person to enter.
Related and Supporting Services: Tourism development requires a lot of investment in
publicity and that requires rigorous market research. To develop a tourism product, one
needs to consider its main attractions, based on the kind of market it is likely to cater for
including the preference of the buyers. The Department of Tourism has a good
database of arrivals of domestic and foreign tourists. However, market research
capability in the sector is poor. Information concerning the preference of customers
about various destinations, demand for services and acceptable pricing has not been
systematically researched.

24
Publicity is mainly through the print media like brochures, pamphlets and recently
Internet. The Department of Tourism has recently appointed an advertising agency in
Hyderabad (FCB-ULKA), which has prepared a number of quality brochures. However,
no out-of-state advertising is undertaken and the key need remains to get AP ‘in the
frame’ for Indian holiday decision-makers.

Suppliers to this sector include crafts persons, entertainers, tour operators, etc. In fact,
tourist stays longer if more suppliers and entertainers are present. Presence of such
entertainers in major tourist centers makes the tourist stay longer. However in rural
locations, not much entertainment is available and hence the tourists do not stay longer.
For example, the lack of entertainment in Araku Valley, Lepakshi and Horsley Hills has
almost restricted the tourist to spend not more than a few hours in these destinations.

Policies and Institutions: Regulatory functions in this sector include registration of hotels
and restaurants and their inspection, allotment of lands and other facilities, taxation and
issue of permits to vehicles and tourists. The registration of hotels and restaurants is
done with the Department of Tourism and Culture, which along with the AP Tourism
Development Corporation is responsible for promotion of tourism. Currently, its roles
are: policy formulation, planning, research and evaluation of projects, publicity of
various activities, district profile of tourism and financial position and outlays of projects,
running of tourist offices in the districts and other states, entertainment facilities for the
tourists through cultural programs, dances and film shows, leasing of government land
and building for the promotion of tourism, construction of tourist lodges and coordinate
with related agencies. Many of the commercial functions such as running of tours and
hotels and restaurants is a legacy of the past and the APTDC is about to shed these.

GoAP has set up the State Tourism Promotion Board (STPB), an apex decision-making
authority with the Chief Minister as Chairman. It expedites the decision-making process
concerning tourism projects. Further State Tourism Promotion Committee has been set
up with Chief Secretary as the Chairman to monitor development of tourism, progress of
implementation of projects and work as a single window for clearances of tourism
projects. A Project Management Unit (PMU) has been set up with the Secretary,
Tourism as the chief, to identify and implement tourism projects privatisation. However,
the Perspective Plan for Tourism in AP does not lay adequate emphasis on developing
rural tourism circuits.

Strategy and Recommendations for Rural Tourism Subsector:

Market Analysis and Destination/Circuit Development for Rural Tourism:

Attention in AP to rural tourism destinations is still low. A different strategy is needed for
the three market segments, as stated earlier:

25
• The lower income domestic tourists or pilgrims who go to religious places in large
numbers,
• the middle to higher income domestic tourists who go to both religious as well scenic
places
• the foreign tourist including NRIs

The first market segment is characterised by large numbers (80 to 120 lakhs per year)
but low spend per person-trip (below Rs. 200 for persons traveling within 100 Kms).
Here the strategy should be to develop a larger number of lower priced places to stay,
such as the choultries in Srisailam and Mantralyam. The GoAP can facilitate this by
developing "rural tourism estates", with internal roads, power supply, water and
sanitation services and common areas for eating places and entertainment. Plots can
then be auctioned to individuals to develop hotels and restaurants.

The simultaneous increase of low cost transport facilities such as APSRTC is essential
and this has been done quite well already. To ensure slightly longer stay and higher
spend per tourist, entertainment facilities (such as Hari Kathas) appropriate to the
religious nature of these places can be encouraged. To encourage local shopping while
providing a market outlet for local artisans and craftsmen and women's SHGs, it may be
worthwhile to construct Ryathu Bazars/DWCRA Bazars type of facilities. As a first step,
GoAP should consider building these facilities in Bhadrachalam, Basar, Srisailam, and
Mantralayam.

The second market segment requires upgradation of facilities for transport, stay, eating,
shopping and entertainment. An example of this can be given in Bhadrachalam. More
overnight luxury buses need to be run from Hyderabad, Vijaywada and
Vishakhapatnam. The rail line from Kothagudem should be extended to Bhadrachalam
so that tourists can arrive by train. More hotels (2 or 3 star) can be encouraged through
APSFC / bank loans. For increasing the tourists stay, add on trips such as river rafting
or steamer ride in the Godavari can be established with the help of some adventure tour
company. A daytime drive up to Chintur through the thick forest area, with a boat ride
and a dip in the Sabari-Godavari confluence can be developed.

The third market segment is the foreign tourists including the large number of NRIs from
AP. They come for a brief while and are demanding about quality. They can be
attracted mainly to locations where they can reach by air and perhaps two-three hours
of car ride. One such location could be the Araku Valley, to which a circuit can be
developed from Vishakhapatnam, which has an airport. The package can start with a
breath taking view on the train ride up to the Burra Caves, where a bus can pick up the
tourists and drive them to Araku through the coffee estates. A few 3-star hotels can
come up in Araku, keeping foreign/NRI tourists engaged for a day or two with visits to
the local botanical park and "museum of man" and nearby tribal villages. A
Shilparamam type of complex can be established to provide shopping facilities for the
tourists and marketing facilities for the local producers. Such a three day circuit is may
appeal to the up-market segment.

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Diversification of demand, and smoothening the seasonality of tourist arrivals is
necessary as entrepreneurs particularly hotels suffer with a loss due to low occupancy
rate during off-season. To ensure that each destination gets adequate business, it is
important to create facilities for both the budget tourist as well as the luxury tourist. Yet,
the layout of the areas should be such as avoid a sense of crowding and ensure some
separation among the different market segments. To ensure there is a spread of arrivals
round the year, different events can be created, such as "Ugadi Specials", "Summer
Camps", "Dussehra Breaks" and "Winter Vacations". Promotion and publicity for these
can be done by APTDC.

Regulatory and Promotional Steps for Rural Tourism:

As suggested above, rural tourism estates can be developed by GoAP /APTDC on a

"sites and services" basis but ensuring that individual hotels, restaurants and other
facilities are run by private entrepreneurs and not by APTDC. The role of GoAP is in
destination development and circuit development, some illustrations for which were
given above. The role does not require making the capital investment as much as
leading with the idea and providing a facilitative environment for private capital.

AP has a very good network of rural roads and state highways, a large area under
forest cover and a large number of medium to small irrigation dams. These "assets"
can be developed as the basis for local rural tourism. For example, a "travelers
complex" can be built every 50 kms on state and national highways, comprising petrol
pumps, auto repair shops, dhabas, restaurants, STD booths, convenience and curio
shops and small amusement parks. Shops can be allotted to DWCRA groups also.
Similar complexes can be built around existing forest rest houses, and irrigation
inspection bungalows, most of which are located at scenic places. Once again, it sold
be clear that we are not recommending that GoAP runs these places, but rather
auctions the rights on "build/takeover, own, operate" basis to qualified private parties.

To conclude, systematic attention by the GoAP is needed for developing the rural
tourism sector, which has a very substantial potential for rural employment and kick-
starting the local economy. The role of the GoAP should be identification and
development of existing and newer destinations and inviting private participation
through the "build, own, operate" model. The GoAP should also spend on publicity for
developing awareness of AP's tourism destinations beyond just Hyderbad's Charminar
and Golconda, Tirupati and Puttaparti. The success of Kerala in making it into one of
the top 10 destinations in the world from being Goa's poor cousin just a few years ago
needs to be emulated by AP.

7. Recommendations for Employment Generation in AP

Twin Sub-strategies: Given the problem of unemployment for educated and unemployment
and underemployment for the masses, there is a need to have twin strategies for improving
the livelihoods. The first sub-strategy should aim at rural and urban masses who are
illiterate/semi-literate, unskilled, semi-literate/skilled. About 10 lakhs persons per year are

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being added to the workforce due to population growth, land pressure etc. The second sub-
strategy is to address the approximately 31 lakhs educated unemployed, registered in
employment exchanges. The policy goal should be to improve economic growth in rural
areas with emphasis on employment for the poor, and shift workers from agriculture to non-
agriculture activities, particularly services in rural areas. To achieve this goal, it is
necessary to focus on selected growth engines and clusters: In order to have a focussed
intervention, the Vision 2020 had suggested 18 "growth engines" for vertical (e.g. leaf to
cloth) subsectoral interventions. However, our analysis shows that these may not be
adequate to generate near full employment and that the number of growth engines may
have to be increased to between 30 to 40 for that purpose. Further, nearly 200 poorest
mandals can be selected for focus. The EGM can then identify which of the above growth
engines can be promoted in each mandal.

Selected Growth Engines for the un/semi-skilled masses:

Primary activities: (a) Agro-processing and agro-services (spraying, tractor operation,

repairs); (b) vegetable growing, trading and processing; (c) Horticulture and floriculture; (d)
sericulture and silk handlooms; (e) Forest produce processing

Secondary Activities : (a)Handlooms and handicrafts; (b) apparel parks - tailors, cutters; (c)
leather tanning and goods; (d) stoneware and ceramics; (e) cement and construction
materials

Tertiary Activities: (a) construction - workers, masons, barbers, carpenters, painters etc. (b)
paramedicals and paravets; (c) transport of goods and passenger (d) housekeeping
services; (e) Child care and pediatric services.

Selected Growth Engines for the Educated Unemployed : The selected growth engines
are:

Agricultural services - extension, input supply, repairs, produce marketing; Utility retailing -
electricity, water, sanitary and telecom services; IT and IT enabled services - data entry,
medical transcription and financial back-office services, CAD/CAM, low-end programming;
Apparel/fashion design; construction - draftsmen, site supervisors; Tourism - catering, hotel
management, guides; Educational services- English teaching; Health care services -
including administrative and support jobs in hospitals and clinics; Business services -
accounts, sales etc.; Financial services - capacity building of SHGs, housing and consumer
loan retailing, insurance retailing etc.

Strategy for Self Employment

• Training of educated unemployed to become self-employed service professionals in

travel, transport, tourism, education, health, financial and IT enabled services
• Self employment in petty trading, hotels, transport, repairs, miscellaneous services
• Retraining of self employed in response to changing market demand

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Public-private Partnership: There is a need to have public and private partnership to
improve the livelihoods. Government can only be a facilitator for enhancing private
investment. There are some private industry initiatives with Government acting as facilitator
e.g. Apparel Park at G.Pochampally, Philips - sale of energy efficient fluorescent lamps in
rural areas, linkage of SHGs with Hindustan Lever Limited for retailing of consumer
products, and linkage of SHGs to supply items to Food World outlets. The partnership of
BASIX with APDDCF in revitalising milk chilling plants is another example. Private Training
Institutions (Engineering, IT, polytechnics) have come up in response to market demand
while the government has confined itself to ensuring standards. In general, as the GoAP
faces fiscal constraints and the need for investments goes up manifold, it may be
necessary to think of establishing new infrastructure on the “build, own, operate” model.

Agriculture: Experience from all over India, and indeed from other developing countries,
shows that the greatest stimulant for the growth of the non-agricultural economy in rural
areas is dynamic agricultural growth. The linkages between agriculture and non-agriculture
are well known. Unfortunately, the growth rate of agricultural and allied activities has been
less than 2 per cent in AP in the 1990s. Enhancing agricultural productivity requires as a
first step, soil and water conservation measures, using the watershed management
approach in undulating and dryland areas, and tank rehabilitation in all areas. Water users
associations formed under canal areas should be activated also in the tankfed areas and in
small lift irrigation fed areas.

Only after these steps are taken should farmers be encouraged to use improved varieties
of seeds, fertilisers including a judicious mix of organic manure, and integrated pest
management techniques. As the mandal studies of Jukkal and Chintur and the subsector
analysis for groundnut show, there is no point in pushing the old style HYV-chemical
fertiliser-pesticide package to farmers in poorer areas without first addressing soil and
water conservation. Programs like the APRLP and the CIF of the DPIP should be used for
this. Three issues that need policy attention with respect to irrigation water are:

 Control over indiscriminate use of ground water in dryland areas, to grow

paddy, for example.
 Ensuring higher quality and more number of hours of power to irrigation
pumpsets but at the same time enforcing metering and steadily increasing the
tariff charged to farmers.
 A mechanism to extend benefit of irrigation to landless labourers, through a
combination of land allotment and extending common borewells/lift irrigation
schemes

After agriculture, the next important livelihood is animal husbandry, particularly dairy. The
already considerable network and infrastructure of the APDDCF and the Animal Husbandry
department needs to be revitalised, as has been done in certain milk chilling plants in
Mahaboobnagar district (see Appendix on Wanaparthy). The delicensing of milk processing
up to 10,000 litres has created opportunities for private plants to come to smaller places.
During the study, we found a few such plants in Khammam and Kurnool districts, which are
doing well. This should be encouraged by offering incentives to "pioneer" dairy plants in

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backward mandals like Jukkal. Animal husbandry support activities which can be
encouraged is breed upgradation and veterinary services, as is being done by the APDDCF
and BAIF through Livestock Breeders Associations and the "Gopal Mitra" scheme of private
para-veterinarians. Among animals other than cattle, sheep rearing is one potential
activity, particulalrly as forest cover is beginning to be restored in the state and there is
increasing possibility of pastures. The Deccani variety needs to be upgraded for wool and
wool carding and spinning units can than come in various dryland mandals. In the
tank/canal irrigated areas particularly, north coastal districts and "agency" areas, fishery is
an important possibility. The experience of fishery development in Koleru lake can be
replicated elsewhere in the state.

Diversifying beyond agriculture and allied activities: The structural transformation of the
rural economy of AP will not happen merely by targeting agriculture and other primary
sectors: animal husbandry, fishery. Non-farm sectors, particularly forestry, mining, and
quarrying, processing, manufacturing, construction, utilities, trade, warehousing, transport,
services - health, education, business, financial and other services also require progressive
policies for their promotion. As we showed in the Chintur mandal profile, the scope for
forest based livelihoods is large, whether it bamboo work or tamarind processing or
medicinal plants. As the JFM schemes successfully increase the usufructs, time has come
to build NTFP based livelihood strategies. The experience of Girijan Development
Corporation and NGOs such as Outreach can be used as a basis for this. In the rural
tourism subsector profile, we have shown the scope for promoting this composite services
subsector in numerous locations across the state.

Credit emerged as a constraint across all the categories we studied. Though a large
network of banks exists in the state, and nearly Rs 8,000 crores is disbursed as credit
every year to rural AP, the supply is well below demand. The following steps can be taken:

 To ensure timeliness of bank credit, which is particularly crucial for crop loans, the Kisan
Credit Card scheme should be universalised in the state.
 Strict monitoring of the CD ratios of banks at the sub-district level to ensure that in
locations such as Chintur and Jukkal
 Building on the successful experience of bank-SHG linkage model, ensuring high
coverage in poorer 200 mandals. Programs like DPIP should be used for this.
 To encourage a large number of microfinance institutions to come up to provide rural
finance on a commercial basis.
 To provide term loans and start up finance for establishing small to medium sized units
for commercialised primary activities (cash crops, hortiulcture, forestry, medicinal plants,
dairy, fishery) and agro-processing in backward mandals.

Infrastructure and marketing: Power, water, roads, communications should be improved to

improve the business environment. There is also a need to develop counselling and
enterprise escort services. There is a need to have more market facilities as market is
considered one of the important constraints in rural areas. Marketing channels for the
masses e.g. Rythu Bazars, DWCRA Bazars and ten percent of SHGs to serve as market

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agents for other SHGs, have to be increased. Infrastructure development can be done
without using the limited resources of the GoAP,

 By relying on the "build, own, operate" model for infrastructure development.

 By using NABARD's Rural Infrastructure Development Fund loans
 By making full use of the allocations under SGSY for infrastructure
development
 By reviving, with limited investments, existing infrastructure such as defunct
lift irrigation schemes and milk chilling plants
 The network of Training and Technology Development Centres in each
district which can improve some of the technologies in rural areas.
 By establishing Ryathu and DWCRA bazars for marketing of rural products.

The AP Employment Generation Challenge Fund (EGCF) The EGCF would be a financial
facility designed to encourage private sector to take up activities, which are pioneering for
any area or subsector and which have a developmental benefit. This would be patterned on
the lines of the Challenge Funds set up by the DFID: for increasing the access of the poor
to financial services (in East Africa) and for establishing business linkages (in South Africa).
The private sector actors are expected to partner with an NGO so that the poverty reach of
their work can be enhanced. The EGCF would be a flexible mechanism to attract a wide
range of interventions to combat market failure and other constraints through
entrepreneurial action by private firms.

The EGCF could be used to attract “pioneer units” in poorer mandals to establish new
activities based on local resources, such as pulses processing in Jukkal or medicinal plants
cultivation in Chintur. The EGCF could also be used to attract pioneer units in established
subsectors which require to address new market segments, such as peanut butter
manufacturing in case of groundnut. The EGCF could also be used to create pilot projects
which would enable utilities and infrastructure to be privatised or at least run as a public
private partnership.

In conclusion, we can say that the task of generating pro-poor livelihoods in AP is an urgent
one and needs a range of concerted actions from the government, donors, banks, the
private sector and from civil society institutions. Further, it requires high level policy
thinking of the kind that was done for Vision 2020, coupled at the same time, with
grassroots action with the community, of the kind triggered by NGOs such as GRAM,
Nizamabad and Outreach, Bhadrachalam. Mechanism are needed to be put in place to
multiply the work of development oriented private sector entities such as BASIX, to work in
partnership with agencies such as APDDCF to utilise existing infrastructure or create it a
new. Many examples have been shown, the need now is to scale up.

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