The Central government’s recent announcement about introducing long-standing reforms in the agriculture sector has definitely created a buzz.
In an earlier article on agriculture reforms, we highlighted some of the key reform measures—like lifting restrictions like the Essential Commodities Act and enhancing private sector involvement in practices like contract farming—that could completely overhaul this long-suffering sector.
In this article, we look at three private players and how they exemplify the possibilities of what they can do for our long-suffering farmers from getting them better prices, access to credit, markets and encourage better practices.
Incorporated in 2018, this Bengaluru-based firm currently works with nearly 30 Farmer Producer Organisations (FPOs), which in turn represent almost 40,000 farmers, and 15 large private agri-enterprises like Britannia, Reliance and ITC, amongst others.
What does it do?
In the words of Rohan Patnaik, the co-founder, Kamatan stands for “Krishak Agri Marketing And Technology Applications; Nested.”
What does that mean? Let’s break it down.
“Krishak is a Sanskrit word meaning ‘cultivator,’ and it covers the essence of our business, and establishes the fact that all our work in the present and the future will be focussed on upgrading the lives of farmers in India and ensuring they obtain higher returns on their produce than what the current supply chain offers,” notes Rohan Patnaik.
Why do FPOs become part of Kamatan’s supply chain if they are talking to farmers?
In India, land holdings are fairly fragmented. As per a recent agriculture census, the average farm size is a measly 1.08 hectares (nearly 2.7 acres). In the United States, for example, where the average farm size is about 443 acres when a farmer harvests even a part of their land, they can fill more than an entire truck with produce. If it can fill in more than a truckload, as a cultivator they can have direct distribution linkages to their customers and ship trucks.
In India, even if a farmer decides to harvest his entire landholding, it’ll be difficult for them to even fill one truck. Thus, for major private players in the formal sector to reach out to an individual farmer directly, makes little business sense.
“This is why you need farmers to come together, and they are doing so formally through the FPO set up. The moment we talk to an FPO made up of say 1,000-1500 farmers, we get access to 3,000-5,000 acres of cultivable land, which completely changes the picture. Working with FPOs addresses the individual farmer’s interests, allows operations to scale up, and increases business viability and profit margins. All this would not be possible for private players if they dealt directly with a single farmer,” notes Rohan.
Agri Marketing: Working with FPOs, Kamatan is involved in all the activities, agencies and policies involved in the procurement of farm inputs by the farmers and the movement of agriculture products from the farmer to consumers. The agricultural marketing system is the essential link between the farm and the non-farm sectors.
“Our core business deals with the output that the farmers produce. We take raw produce through FPOs and help sell them to the big agri enterprises. But that only covers the output aspect. We are creating another vertical under agri marketing called the ‘Rural Business Hub’ through which we plan to make inputs, working capital and advisory services available to farmers through different partners,” he says.
For working capital, for example, Kamatan will partner up with Samunnati Financial Intermediation & Services Private Ltd, a Tamil Nadu-based firm dedicated to the agriculture sector. With regards to seeds and fertilisers, it’s working with large domestic manufacturers of the same.
Finally, Kamatan offers access to critical advisory services for farmers.
“Many farmers don’t know what government schemes apply to them, and a lot of them are geography dependent. What may be available to one farmer in Madhya Pradesh may not be available to another farmer in Karnataka. Through our app, which farmers can install, we curate all the information objectively on all these schemes that the farmer can act upon. Today, the farmer cannot go through a three-page government policy announcement and make sense of it. Somebody needs to curate all the information and give it to them,” he adds.
The agri-marketing system is essentially a link between farm and the non-farm sectors (big agri enterprises, advisory services). How do these non-farm sectors reach the core consumer here, i.e. the farmer? Kamatan is what bridges them.
Technology Applications: This to some extent covers “How” Kamatan plan to build their inclusive agri-supply chain along with FPOs at the core and the fact that technology will play an all-important role in all aspects of their business.
How do they connect farmer output to agri-enterprises?
“So, if we talk about taking produce from FPOs to agri-enterprises, the latter need to know ahead of the sowing season how much output we have access to through the relationship we have built with FPOs. Once, through technology, if we get to know real-time sowing and harvesting schedules of farmers, we will be able to relay that to agri-enterprises and give them transparency surrounding what access to produce we have,” notes Rohan.
Another concern is source identification. Although an entire shipment goes to agri-enterprises, Kamatan can trace it back to the individual farmer, which helps them understand which farmers are or not adopting smart practices. Following this step, the Bengaluru-based firm can understand what the more productive farmers are doing to increase their yield. They can then relay the information to the less productive farmers and help them increase their yield.
“On the advisory side of things, we can give curated weather information and curate government schemes to farmers that can help them act upon it. We have already developed full-fledged and homegrown ERP (enterprise resource planning) software, which we believe is the most robust of its kind available today in comparison to SAP (Systems Applications and Products in Data Processing, a market leader in ERP software). See, in SAP, the nuances of Indian agriculture are not built into their platform. We are cutting a piece of this ERP and plan to deploy this in FPOs so that they are more aware of their business through technology on issues like what margins are being made, where are the wastages happening, who their debtors and creditors are, and all the rest,” argues Rohan.
Nested: This means “placed or stored one inside the other.” Nested followed by the semicolon combines the “Who” (Cultivators), “What” (Agri Marketing Services) and “How” (through technology) of their business and it elucidates what Kamatan stands for in the agriculture ecosystem. “We are bringing all these facets alive together. We are not only working on technological solutions but also addressing farmers and building the supply chain out,” he adds.
Samunnati Financial Intermediation & Services Private Ltd
Samunnati is a Tamil Nadu-based B2B2C (Business to Business to Consumer) entity which is building “a value-chain finance approach to agriculture,” and has termed it AMLA (Aggregation, Market Linkage and Advisory Services).
“Our fundamental belief is when you work with entities in agriculture, who have aggregated members like farmer collectives or FPOs on the supply side, or agri-enterprises on the demand side, the benefits of aggregation will accrue if market linkages happen. For market linkages to be meaningful, you need to have customised financial solutions, especially for working capital, which is what we provide on both sides. Once aggregation and market linkages are in place, you can also look at advisory services at an institutional and productivity level,” says Anilkumar SG, Founder and CEO of Samunnati.
Working with 500 farmer producer organisations (FPOs) on the supply side of the value chain, which in turn represents about 4 million smallholder farmers and 400 private agri-enterprises either involved in food processing or organised retail chains on the demand side, Samunnati represents aggregators on either side.
The mission of Samunnati is two-pronged:
– On the supply side, they want to make markets work for smallholder farmers.
-On the demand side of the value chain, they work with players in the value chain to ensure that these value chains operate at a higher equilibrium and help in increasing the throughput (turnover).
To increase the throughput in the value chain for agri-enterprises, customised working capital solutions are required because the seller wants the money immediately, while the buyer more often than not wants to pay later. When buying and selling happen without any constraints in working capital, the volume of trade increases. And when this happens, the agri-enterprises look at newer supply lines.
That is when Samunnati proposes to bring the FPOs they work with on the supply side and establish market linkages with the buyer, which is what the AMLA approach is all about.
“All of our products are completely customised to take care of the cash flow associated with both value chains. Our loans range from one day to five years, and quantum ranges from Rs 5,000 to an individual farmer to Rs 15 crores to an agri enterprise. This is where we bring in customised products and solutions for our partners,” informs Anilkumar.
The primary reason why an organisation like Samunnati exists is to essentially make markets work for smallholder farmers.
“The way we make it work for smallholder farmers is working with farmer collectives or FPOs and FPCs. These entities are either very mature but are few in number or numerous in number but nascent in terms of institutional capacity. That’s where we bring in our advisory services, in which we envisage to build the institutional capacity of FPOs and make them grow with us. We are all about-collective growth and prosperity,” he says.
As an entity, Samunnati has three core activities–financial services, provide market linkages for both the FPOs and market enterprises, and institutional building for FPOs.
“We offer advisory services to FPOs not as part of a CSR activity. We do it as a risk mitigation and growth strategy. A lender is as strong as their borrowers. If the borrower is strong and they can use the money for the purpose they had borrowed it for, then they would be able to earn the delta in terms of their margins and pay it back to us. Our institutional building is more integral to our risk mitigation rather than a CSR activity, and we have teams dedicated for this service. In terms of scale, we are operational in 19 states working in 54 agricultural value chains. We have disbursed about Rs 4,000 crores across both market linkages and lending,” he notes.
Harvesting Farmer Network
Entrepreneur Ruchit Garg’s company Harvesting India Private Limited runs a farmers-only app called Harvesting Farmer Network (HFN), a virtual support group advising on crops and agricultural practices. They reach 10 lakh farmers across 22 states via an app, SMS, toll-free number and WhatsApp as well.
However, during the Coronavirus-induced lockdown, HFN has proven to be a lifeline for thousands of small farmers devastated by the collapse of the agriculture supply chain by helping them directly connect with consumers in the cities.
“In nearly four weeks, we managed to transport nearly 20 lakh kgs of fresh fruits and vegetables from small farmers directly to consumers from across India. We leveraged tools such as WhatsApp and Twitter. Farmers would message us on these platforms seeking buyers, and we relayed these requests on our Twitter, Facebook and other social media pages, and this helped farmers, in some cases overnight, sell all their stock. We also facilitated the transportation of their produce thanks to assistance from the Indian Railways and so on. We did a lot of this work pro-bono because of the pandemic,” informs Ruchit, speaking to The Better India.
Their goal with HFN is to build a technology-driven platform which is farmer-friendly, which would allow farmers to deliver their produce to consumers in the easiest way possible.
Fresh avocados getting harvested this morning – to be delivered in Bengaluru tomorrow!
— Harvesting Farmer Network (HFN) (@HarvestingFN) May 30, 2020
So far most farmers habitually go to the local mandi and sell their produce directly at cheap prices. Also, they get just about 15% of the eventual price end consumers would pay for their vegetables or fruits.
Since the conventional mandi got dysfunctional thanks to the epidemic and transportation services shut, they realised that many individual farmers do not understand precisely how to take their produce to the consumers directly. All they knew was transporting 1,000 kg of their produce and dumping it in the market and then expecting somebody to buy it at whatever price. But selling directly to consumers goes beyond that.
“Our farmers need a better marketing plan, payment collection system, and a better way to understand how to price their produce for consumers, etc. Through our free platform for farmers at HFN, they can cite any product they want, enter their name, phone numbers and other key details. Once they submit details, it gets broadcasted to all our social media platforms and buyers directly contact them. In some cases, we also hand-hold certain farmers–by providing transportation, marketing facilities and a ready-made consumer base,” says Ruchit.
Fresh avocados getting harvested this morning – to be delivered in Bengaluru tomorrow!
— Harvesting Farmer Network (HFN) (@HarvestingFN) May 30, 2020
More importantly, they seek to increase transactions between consumers, who buy directly from local farmers. If you go onto their website and sign in, it will show the closest farmer’s farm.
This means you don’t have to buy the same produce 1,000 km away if a local farmer is growing the same thing. This is beneficial for the environment, local micro-economy, and they believe that is the only sustainable way forward.
“Besides facilitating greater direct sales for farmers, we will also be establishing a review system for buyers and farmers. When you do that, over time buyers would know which farmers (delivers produce late, for example) or buyers do certain things wrong (who probably makes a bunch of calls, promises to buy but never does). So, hopefully, we weed out bad elements on either side. The crowd-sourced platform we are building, I believe, will tremendously help and be stronger than having any law on contract farming,” adds Ruchit.
Name : Dhananjay
Mobile : 9353063320
Crop : Jackfruit (tender and matured)
Quantity : 35 tons (Approximately)
District : Hassan, State : Karnataka, pic.twitter.com/74e4RpAg8T
— Harvesting Farmer Network (HFN) (@HarvestingFN) June 4, 2020
With reviews and testimonials for buyers and sellers, they are looking to build trust on either side. It’s like buying a product on Amazon. For example, this farmer may deliver quality produce but after much delays, which allows private buyers to gauge whether they want to buy.
We have already discussed how removing barriers to inter-state trade in farm produce and opening up of agriculture markets to the private sector can boost farmers income, reduce price volatility and offer quality products for consumers.
With the services they provide, the above private entities mentioned represent some of the possibilities that one couldn’t consider even ten years back for both farmers and consumers, and have also managed to deliver under restrictive and outdated regulations. Imagine what they can do for farmers once the shackles are truly off.
(Edited by Gayatri Mishra)