Overview
Community Procurement of Pumps
Although Assam has an abundance of rainfall in the monsoon season and the land is fertile, farmers are unable to maximize the income from their fields because they lack access to water during the long dry winter months. This is largely because they lack the capital to invest in shallow tube wells to tap into the region’s high water table and abundant groundwater.
To enable farmers to irrigate their fields in winter, the World Bank-supported Assam Agricultural Competitiveness Project sought to provide groups of 3-5 small and marginal farmers with irrigation pumps for shallow tube wells. At first, the project focused on the centralized procurement of these pumps to ensure that a large number of pumps were quickly delivered to farmers across the state at low costs.
This, however, proved to be difficult. With Assam being a northeastern state, few qualified manufacturers were willing to bid. Moreover, to ensure that the pumps were of good quality, only manufacturers who had the requisite turnover and capacity were allowed to bid, reducing the number of bidders even further. In the end, while the pumps procured were cheap, the farmers were unfamiliar with the brands on offer and the uptake of pumps was slow. The project then devised an innovative process of community procurement that allowed farmer groups to choose the pump sets themselves from a pre-selected databank. The databank was drawn up through a state selection process and listed each pump set on offer with its corresponding rate. With manufacturers of varying capacities being allowed to apply, the pump sets on offer included a choice of 25 models and 13 suppliers. Since suppliers were assured of bulk orders, they were able to offer the low prices typically associated with centralized procurement. An audit process
was also devised to verify that the pumps were delivered and installed with the farmers for whom they were intended.
The community procurement process has led to a significant increase in the uptake of pumps by farmer groups. The cost of the pump sets is not only lower, farmers also receive better after-sales service because the pumps are delivered by local dealers. Based upon the success of this project, the state’s Department of Agriculture has mainstreamed the process of community procurement into their regular operations.
Challenges
Although Assam has an abundance of rainfall and the state’s water table is high, less than one fifth of the state’s farm land has access to irrigation during the long dry season because farmers lack the capital to invest in tube wells to irrigate their fields. Thus, most of the state’s cultivation - including 70 percent of its rice crop - is carried out during the monsoon season when heavy rains lash the state. Without access to water in the dry winter months, farmers are unable to increase their yields, grow additional crops or diversify away from rice cultivation.
To enable Assam’s farmers to irrigate their fields during the dry season, a key element of the World Bank-supported Assam Agricultural Competitiveness Project (AACP), approved in December 2004, focused on providing groups of 3-5 small and marginal farmers with irrigation pumps for shallow tube wells (STW). A project grant covered 50 percent of the total cost of the pumps as well as their installation.
The procurement and distribution of irrigation pumps, however, proved to be a problem since the project began. While the project called for centralized procurement of these pumps through a process of International Competitive Bidding (ICB), as well as through community-based procurement, the initial emphasis was on centralized procurement to enable the quick delivery of a large number of pumps to farmer groups at low costs.
The ICB process, however, encountered a number of challenges. With Assam being a northeastern state, few qualified manufacturers were willing to bid. Moreover, in an effort to ensure that the pump sets were of good quality, the strategy required that only manufacturers with the requisite turnover and capacity be allowed to bid, thereby reducing the number of bidders even further. In addition, the strategy did not take into account the need to deliver the pumps over a large geographical area and the fact that the farmers needed to be familiar with the brands on offer.
As a result, while the pumps procured through the centralized procurement process were cheap, their uptake by farmer groups was very slow because farmers were unfamiliar with the brands. The resulting storage of pumps in warehouses led to quality issues. Even those pumps that got distributed after a significant time lag reported frequent breakdowns. These pumps also received little after-sales service from suppliers and a large number of complaints were received from farmer groups. In addition, since the project authorities controlled the centralized procurement process, suppliers became accountable to the project authorities rather than to farmer groups.
Innovations
To deal with the issue of slow uptake of pumps through centralized procurement and the large number of complaints received, the project devised an innovative process of community procurement by adopting a demand-driven model.
The community procurement process was based on the following principles:
First, farmer groups should be able to choose the pumps themselves from a pre-selected item/rate databank drawn up through a state selection process.
Second, the bulk purchase of pumps should lead to economies of scale whereby suppliers offer the low prices that are typically associated with centralized procurement.
Third, with large numbers of orders, suppliers should commit to provide better after-sales service for their pumps.
Fourth, an audit process to verify that pumps are delivered and installed with intended farmer groups should be introduced.
Process
To help farmer groups ensure that the pump sets met acceptable standards and were procured at reasonable prices, the project carried out the following exercise as a facilitation service to the community:
Technical Standards
Technical Standards for the pumps were set by the the state. Manufacturers and suppliers were then invited to submit the prices of their models that met these standards through an open competitive process.
Floating of Enquiry
The Department of Agriculture published a Floating of Enquiry that sought the willingness of a range of manufacturers to sell the pumps to farmer communities at pre-determined competitive prices against laid-down technical specifications and aftersales service. After the offers were evaluated, the Director of Agriculture, Government of Assam, published a shortlist of brands and models.
Communities Choose Pumps
Communities could then procure the pumps of their choice from this list at a time of their own choosing.They could either procure the pumps from the manufacturer’s local outlets or from the authorized dealers.
Communities were also allowed to select pumps from other manufacturers outside the short list, provided they received prior concurrence from the Department of Agriculture with respect to technical specifications and quality. In such cases, approval from the Department of Agriculture would only be needed if the cost of the alternative pumps was more than 10 percent higher than the average price of the shortlisted models.
Communities contributed 50 percent of the full cost of the pumps as well as their installation costs. These included the cost of the pump, the cost of the boring the shallow tube well, as well as the cost of the materials used for boring. Communities paid their share in cash to the manufacturer’s authorized dealer.
Costs
The project bore the remaining 50 percent of the cost. The project’s share was released to the supplier by the Department of Agriculture. This was done once the bill was submitted along with the necessary endorsements by the concerned Assistant Executive Engineer (Agri) / Assistant Engineer (Agri) / Junior Engineer (Agri) and the leader of the farmers’ group.
Monitoring
The project also developed a robust system to monitor the targeting and utilization of pumps. Ten percent of every batch of 4000 pumps distributed was reviewed through third-party institutional contracts. The review typically resulted in:
Comments and observations on the records, systems and controls that were examined during the course of verification;
Identification of deficiencies and areas of weakness in systems and controls, with recommendations for their improvement;
Reporting of the degree of compliance with each of the procurement covenants, with comments, if any, provided on the internal and external matters that affected such compliance;
Communication to the project authorities of any other matters that emerged during the verification process which might have a significant impact on the implementation of the project.
Impacts
The community procurement process resulted in:
Acceptability to the community
The community procurement process allowed manufacturers with varying capacities and sizes to apply. Thus, instead of a single supplier being selected through the ICB method, this process of selection resulted in an item/rate data bank that included 13 suppliers and 25 models for the farmer groups to choose from. This change led to a significant increase in the uptake of pumps by farmer groups.
Lower costs
In most cases, the unit cost of pump sets showed a reduction of up to 7 percent, probably as suppliers no longer had the responsibility for their transportation and distribution across the state.
Better after-sales service
Since the pumps were delivered by the suppliers’ local dealers, communities were able to ensure that they received better after-sales service.
Increase in agricultural production
The increased off -take of the shallow tube well pumps is helping farmers to increase crop production. Most of their produce is now being marketed, resulting in significant increases in farmer incomes.
Spreading the Innovation
Building upon the success and experience gained from this project, the Government of Assam (GoA) has mainstreamed the process of community procurement for the procurement of irrigation pumps as well as for other farm machinery and equipment such as tractors and power tillers.
The state’s Department of Agriculture has incorporated this process in their regular operations covering centrally sponsored schemes such as the Rashtriya Krishi Vikas Yojana and the National Food Security Mission.
