While countless dairy cooperatives across India are facing problems after demonetisation, Chennai-based Hatsun Agro's 3.1 lakh farmers have received their due payments against milk supplies on time through bank transfers.
Amidst the crisis in the milk economy created due to a cash-starved logistics chain in a post-demonetisation India, a Chennai-based dairy company has managed to ensure that all its 3.10 lakh farmers receive their payments against milk supplies without any issues and on time.
Hatsun Agro, which procures 28 lakh litres milk daily and disburses Rs 73 crore every ten days to farmers, has been making 99.65 % of it payments through banks accounts for the past one and a half years. This has helped it sail smoothly through the recent demonetisation.
When the Prime Minister announced the demonetisation on November 8th, R G Chandramogan (MD of Hatsun Agro) was not perturbed at all. As the company had gone cashless long ago, he knew that the move would have no more than a nominal effect on the company’s functioning. What would also hold Hatsun Agro in good stead was the fact that the company had been actively encouraging direct transfer of payments to the farmers’ accounts for over a year now.
Hatsun Agro (the owners of popular brands such as Arun Icecreams, Arokya Milk and Hatsun Curd) has over 9,800 centres from where the milk is collected, with every farmer supplying around 9 litres of milk on a daily basis. The company make payments to its farmers thrice a month – on the 1st, 12th, and 22nd respectively. Salary is credited into farmer’s bank accounts against the daily invoices received.
There were two things that prompted Hatsun Agro to chooses this cashless course for its financial transactions. One, the volume of its daily transactions with its huge client base and stakeholders was enormous. Two, the physical movement of huge quantity of cash daily was a logistical and security nightmare for the company.
Though the move did encounter initial resistance from farmers, the company was able convince them take up the banking channel of payment. Thanks this cashless way of functioning, despite the demonetisation, it was business as usual for Hatsun Agro – its farmers were given their full due payment on November 12, as per their regular schedule.
There was no effect on sales either. The company sells its milk, curd, ice-cream and other products through its 2,500-odd ‘Hatsun Daily’ retail-cum-distribution points which credits the sales collections to the company’s bank account on a daily basis. Even payments to transporters and employees are made via bank transfers.
In an interview to the Economic Times, Chandramogan says,
“We have made no cash transfers, except for few old people who are unable to go to bank. Initially there was resistance from farmers but we wanted to get them away from the clutches of money lenders.”
On the other hand, for the country’s largest dairy cooperative Gujarat Cooperative Milk Marketing Federation (GCMMF), which sells milk under the Amul brand, demonetisation came as a challenge. The cooperative giant works with over 3.6 millon farmers who are affiliated to over 18,000 village cooperative societies who together handle around 17 million litres of milk per day.
Amul’s weekly payments of around Rs 450 crores is transferred to the bank accounts of 18,500 primary village cooperative societies, who then pay the farmers in cash.
With demonetisation imposing a limitation on bank withdrawals, these societies have been unable to pay all farmers on time. As a result, Amul is now setting up a mechanism that allows online cash transfers to farmers’ bank account, similar to the model Hatsun Agro has already implemented successfully. Even the Karnataka Milk federation, which procures 70 lakh litres milk from 9 lakh farmers across 14,000 societies daily, plans to now start disbursing payments to farmers through bank accounts instead of cash.
Hatsun Agro is the first dairy in India to channelise their entire payment system through bank accounts. Other than showing the way to a hassle-free transition through the recent currency changes, Hatsun Agro’s cashless functioning also makes it evident that demonetisation is a great opportunity to give direct bank transfers to farmers a push.
With direct transfers to bank accounts, farmers will be able to develop a credit profile that will help them to access bank finance. It will also make them less dependent on traders and commission agents for credit. This de-linkage is essential for farmers to get the right remuneration for their produce – as long as they borrow from traders, they will be compelled to sell to them at lower than market prices. Hence, it is to be hoped that the boost demonetisation has given to cashless banking transactions leads to efficient and effective financial inclusion of India’s farmers.
Contact Info: HATSUN AGRO PRODUCT LTD
Domaine, Door No: 1/20A, Rajiv Gandhi Salai (OMR), Karapakkam,
Chennai – 600 097. India.
Telephone Number: 044-24501622
Mail ID: email@example.com