A new approach for the development of India’s small & marginal farmers
Although India is rapidly transforming itself into an open, more efficient and rapidly developing market-driven economy, in rural areas such transition has been lacking or progressing painfully slow for most farmers. Marginalized and small farmers in particular are unable to escape the powerful grip and dependence on middlemen, informal lenders and other intermediaries. Although there have been several attempts to assist farmers in escaping from their poverty trap, the results have been disappointing.
Loan and grant schemes, if at all they reach the individual farmers, do not have the desired effect as these schemes do not tackle the core problems of dependence of the farmers, which brought them in poverty in the first place. As a result, most loan and grant schemes are in effect only patching solutions rather than a structural solution.
Aim of the new approach
The aim of the new approach is to create a profitable partnership between investors and farmer groups, by setting up joint agro-processing enterprises, based on solid feasibility studies and business plans. The new agro-businesses are to become sufficiently profitable and economically independent from further external support. The value-addition created is used, among others, to repay the investment to the investor and, at the same time, transfer the economic ownership to the farmer groups. To avoid that the management of the agro-business is driven by the short-term benefits for the farmers (main draw-back of the cooperative model), the majority of the board members (who appoint and oversee the daily management) is to remain with professionals, rather than farmer representatives only. The economic ownership of the companies however, can be fully transferred to the farmer groups. By doing so, the long-term success and profitability of the company prevails in running the business.
As most of the investment is to be repaid and will be re-invested in new farmer businesses, the model becomes self-perpetuating. In addition, the model creates no market distortion or unfair competition. Instead, farmers become equal an fair business partners, boosting their pride & confidence as well as commitment to fulfill their financial obligation to its supporting business partner/investor.
Mission of the project & its companies
Since 2007, this project aims to empower apple growing small farmers in India and to
increase their income level substantially, by providing them opportunities of:
- creating formal farmer organizations that will jointly handle and sell their apples;
- provide these farmer organizations with appropriate financial & technical means and
equipment to allow them to collect, sort, pack, pre-cool and handle the apples in a
professional manner, which allows them to directly market their premium produce to
main markets, trading companies or retailers;
- generating profits through the legally registered entities of the farmers, for premium
distribution and repayment of investment, to transfer ownership of the companies in
due course of time.
Vision of the project
The aim is to set into motion a self-perpetuating model that can be applied throughout
India, for the benefit of small scale farmers. Important aspect of this model is that the cost
of the technical assistance, the bridging funds and equipment provided under the project
is to be recovered from the additional income that farmers’ companies are able to
generate, along side regular Government subsidies for commercial companies.
This approach is fully in line with the model and methodology of promoting, farmer-owned
socio-economic ventures adding value at the various levels of the processing chain of
their produce.
Core businesses
Under the first phase of the project (2007), apple growing farmers in six (6) locations
were assisted in setting up joint collection points for sorting, grading, packing, pre-cooling
and marketing of their apples. Under the second phase (2008) two additional collection
points in Uttaranchal have been set up and organized. The primary collection, sorting and
grading centers have demonstrated their capability in running the business through three
business cycles in 2008, 2009 and 2010 seasons.
In 2011, the businesses that have been formed thus far, in the form of Joint Venture
Companies with FFT, are expected to operate as full business ventures, with limited
external support.
In 2010, preparations have been made for the next phase of the project, by moving up
the value-addition chain. This will be done through:
- the construction of long-term storage facilities to enable the farmers to sell their apples off-season and
- establishment of juice processing facilities (incl. other local agricultural produce like
rhododendron flowers and apricot fruits).
Organization
Primary processing
The main beneficiaries of the project, the small and marginal farmers, have meanwhile
grouped in well fuctioning farmer trusts. For all functional collection points, one farmer
trust has been formed for the primary processing of apples upon harvest. The farmers
sell part of their yield to the collection point against a transparent price, for which a
commonly agreed formula has been determined. The apples are bought by the primary
producing company, a joint company of FFT India and the farmer trust concerned. This
company is engaged in the collection, procurement, sorting, grading, packing, possibly
pre-cooling and reselling of the apples. Thus far, the project has set-up four (4) of such
farmer trusts and four joint companies for this primary processing:
Farmer trusts for primary processing (apple collection):
- Syuri: Syuri-Nagaoan seb uttpadak Krishak sngrahan evm vipnan kalian Trust
- Dhari: Dhari-Kafnol seb uttpadak Krishak sngrahan evm vipnan kalian Trust
- Tyuni: Bawar-Silgaon seb uttpadak Krishak sngrahan evm vipnan kalian Trust
- Purola: Purola-Naitwar seb uttpadak Krishak sngrahan evm vipnan kalian Trust
Joint companies for primary processing:
- Syuri: Syuri Nogaon Fruits Collection Private Ltd.
- Dhari: Dhari Kafnol Farmers Agor Pocessing and Marketing Private Ltd.
- Tyuni: Bavar-Silgaon Farmer Agro Processing and Marketing Private Ltd.
- Purola: Purola Naitwar Farm Collectives Private Ltd.
In addition, there are two farmer associations in Mandhol and Sari, which have not
formed a joint company yet with FFT, due to disappointing performance thus far.
Secondary processing
Also for the new economic ventures foreseen in 2011, the project foresees a similar setup.
For the long-term storage facility of fruit, a farmer trust and joint company has already
been set-up. I.e. the Himalaya Farmer Development Trust and FFT Himalayan Fresh
Produce Private Ltd.
For the juice making facility, which is part of this Year Plan 2011, a similar set-up will
need to be realized this year.
In terms of operations under the project, the farmer trusts and joint companies are taking
care of all the business activities which are undertaken under the project, supported bySJS where needed.
Implementation strategy/The eight steps identified by FFT in business operations are as follows:
1. Selection
2. Feasibility
3. Funding
4. Organizing and structuring
5. Engineering and technology
6. Construction
7. Operation
8. Transfer
Accordingly, the process will include the above stages with synergies created by different partners identified in the Social Venturing Fund.
Roles of different partners in the eight-stage process
|
| Organizer | Investor/ promoter | Business partner | Mentor/ facilitator | Social Venture Fund, Banks, Foundations, Govt agencies (Financiers)
|
| Selection | X |
|
| X |
|
| Feasibility | X | X | X |
|
|
| Funding |
| X |
|
| X |
| Organising & structuring | X |
|
| X |
|
| Engineering & Technology |
|
| X |
|
|
| Construction |
|
| X |
| X |
| Operation (governance) | X | X | X | X | X |
| Transfer | X | X | X | X | X |
