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Photographs by Sandipan Chatterjee/ Outlook

Good Businesses 2013

Fertile gains
Farms and Farmers is helping Bihar’s small farmers improve their crops and income

Vikas Kumar

There is a huge gap in agriculture — and not just in marketing and distribution of produce" — Shashank Kumar, co-founder

When Shashank Kumar graduated from Indian Institute of Technology, Delhi, in 2008, and joined management consulting firm Beacon Advisory Services in Gurgaon, started by two of his IIT seniors, he was already breaking from tradition. “I had the opportunity to go into investment banking but chose to join a startup. I was the first employee, doing everything from pitching for a project to deliveries,” he says. For the young man from Chhapra, Bihar, this was closer to his eventual dream.

Shashank’s job at Beacon had him working on projects in the supply chain business, on clients such as Nestlé, Unilever, Britannia, PepsiCo and Mother Dairy. He saw many of these companies trying to get into contract farming and eliminate middlemen by reaching out directly to farmers. This set him thinking about connecting such buyers directly with small farmers, circumventing the village baniya and mandi traders. “There is a huge gap in agriculture — and not just in marketing and distribution of produce — that’s completely unexplored,” says Shashank. 

The idea came about in September 2009 and he roped in former JEE study mate Manish Kumar who was in his final year at IIT Kharagpur and had just landed a job with IBM. The duo began scouting around Jharkhand, Bihar and UP to learn more about the extent of the problem. “We knew buyers had some issues with procurement. If they could be directly linked with farmers, there was a market,” says Manish. “Basically, we went about understanding agriculture.”

Over the next one year, they met up with 1,500 farmers between them. “We observed that most farmers had small land holdings, their produce was insignificant and cost of cultivation was high,” says Shashank. According to India’s agriculture census estimates, the national average land holding per farmer is 1.16 hectare. “We estimated that there are 5.5 million farmers in Bihar with total farming land of around 5.8 million hectare,” he points out. Approximately 80% of them hold less than 1 hectare of land which is fragmented and spread over several small parcels.

The local baniya was usually the one-stop shop for buying seeds, and how much they got for their produce was decided by him or the nearest mandi. Changing long-held practices wasn’t going to be easy, they figured. “Small farmers make low profits but cannot risk giving up what they’ve been doing for years,” says Shashank. Winning their credibility and trust meant supporting them at every stage — from inputs to marketing. And that’s where Farms and Farmers (FnF) comes in.

Showing the way

Amar Kumar, 30, doesn’t look like a farmer. Dressed in a vest and a tight pair of denims rolled up at the bottom, Kumar greets us smilingly in his field. With eight bigha, or 7.5 acres, of land, he’s into large-scale farming of cauliflower seeds, which are far more profitable than the vegetable itself. While the fully grown cauliflower yields 2.5-3 quintal per katha (roughly 30 kathas make up an acre) and sells for ₹1,500 a quintal, the seeds are more expensive to grow, with 20 kathas yielding 1 quintal that he sells for ₹40-50,000. Sowing the crop around August-September, Kumar harvested the seeds up to January, and sold these to small firms operating in the vicinity.

Between March and September, after the cauliflower seedlings were harvested, Kumar’s land usually sat idle. “Last year in October, FnF advised me to grow moong, which gives me ₹5,000 per quintal and also provides more nitrogen to the soil, and mentha (mint), which sells for at least ₹8,500 per quintal,” Kumar points out. The advice paid off. The first mentha harvest in July yielded 36 kg of mentha oil, fetching him nearly ₹15,000 in
additional profits.

FnF has encouraged farmers to cultivate a high yield variety of mentha, used for extracting oil and making crystals that find use in many consumer products. It also helps farmers integrate allied activities such as vermi composting and bee keeping, for which it has tied up with 150 bee keepers in the horticultural belts of Vaishali and Muzaffarpur. Bee pollination helps increase yields of litchi and mustard, and results in additional income from sale of honey. 

But the cornerstone of FnF’s plan has been to convince farmers to switch from a single crop to multiple crops during the year. “The weather pattern has been unpredictable in past few years. Hence single-cropping is not appropriate from a risk point of view. 80% of net sown area in Bihar is under single-cropping pattern,” says Manish. Growing different crops would have the additional effect of helping retain soil fertility, while raising the farmers’ incomes. The first pilot was done in Manish’s village Chakdariya in Vaishali district in October 2010.

The 14 participating farmers who switched from paddy to rajma saw a 50% increase on average in their realisations. But Shashank and Manish had a long way to go from here. They had no office yet, and both spent nights in the ITI nearby sleeping on classroom desks, and getting out before the students poured in, every morning. An arrangement with the security guard ensured they got good, home-cooked meals, at least. Every day they would set out on their motorbikes to nearby villages convincing farmers about their idea. 

The success of the Chakdariya project led to a few others, and soon FnF was in business. The first office opened at Kharauna Gate in Vaishali. Already, institutions such as the state agricultural universities and the Krishi Vigyan Kendras (KVK) in every district, in addition to scores of NGOs, had been working on farm-related aspects. But there were gaps.

For instance, farmers found it difficult to visit the KVKs, usually located in the district headquarters. “We estimated that the farmer loses income worth ₹200-250 a day to travel to the KVKs. Add his travel costs of ₹100, and even then he’s not sure if he’ll find the right person or the answer to his problems,” says Shashank. It was an opportunity waiting to be tapped. But a bigger challenge was to earn the trust of farmers, while working along with these established organisations. “First, the farmers test you, and experiment with only 10-15% of their land. Then, as they begin to see results, they slowly increase their investment,” says Manish. 

The FnF centres, which are the central point for delivery of services, were branded as DeHaats. Each DeHaat caters to around 500 farmers living in a 10-12 km radius, and offers services such as soil analysis, crop selection and technical support during season and marketing of produce. This includes seed distribution, collection of harvested crops and redistribution to buyers. DeHaats are also used for conducting farmer meets and training workshops, and store data such as land holdings, cropping patterns and output and soil analysis reports. Farmers are required to enrol as members for an annual fee of ₹200, which includes soil testing and analysis (₹50-60) and supply of seeds. “Membership is mandatory to have serious farmers with us. Then it becomes easier for us to forecast the input requirement according to data,” says Shashank.

FnF’s nine DeHaat centres currently have nearly 4,000 members. DeHaats operate on a franchisee model, with initial investment of ₹15-20,000 for a basic office and a smartphone. The micro-entrepreneur, who is also the centre coordinator, undergoes three months of training by FnF. Profits are shared, with roughly 75% going to the franchisee. A major source of income is from resale of produce to large buyers — FMCG companies, food processing companies, exporters and retail chains — at the end of each season. Here, gross margins range from 2-4% in foodgrains to 12-20% in perishable crops (fruits and vegetables). FnF’s commercial arm, Green Agrevolution, was set up in February 2012 for marketing and processing of farm output. 

FnF sources seeds directly from manufacturers such as DuPont, Nunhems, Sungro or agricultural universities such as Rajendra Agricultural University (RAU) Pusa and Pantnagar at better rates than the farmers would, individually. “This way the cost of cultivation is lower and quality is also ensured,” says Manish. It works with Nabard Kisan Clubs to collectively impart new techniques and monitor results. 

Kutrum Kolhua village in Saraiya block in Muzaffarpur district adjoining Vaishali has a population of under 2,805. Brij Lal Rai, 65, the village Kisan Club coordinator, owns 1.5 acres of land and is happy to have switched to the Rajendra Bhagwati variety of paddy on FnF’s suggestion. “These people give us ₹1,300 a quintal. The baniya here gives only ₹1,050,” he says. Developed at the RAU Pusa in Bihar’s Samastipur district, Rajendra Bhagwati is a better quality, high yield variety of wheat that needs less water compared with conventional varieties. Unlike the local baniya or the mandi, FnF makes upfront payment to farmers when they deposit their harvested crop at the centres because it knows the price institutional buyers are paying. The model also allows for meeting the unique needs of buyers. For instance, when Metro Cash & Carry asked for some leaves to be left intact on the litchis they were buying (so that end-consumers got a sense they were fresh), FnF was able to do so.  

Bearing fruit

The “hybrid model” — with FnF on the support and inputs side and Agrevolution on the sales, mar- keting and processing side — has found many takers in companies such as Godrej Agrovet, NCDEX, Spencer’s, and Metro Cash & Carry. In a sector marked by uncertainty in delivery and inconsistent quality, FnF’s approach has earned praise from clients. “FnF works directly with farmers, which helps us get good quality produce right from the fields. They impart knowledge to farmers on improved cultivars [specially grown varieties], which have greater market demand,” says Kuldeep Goyal, vice-president, foods & fresh, Spencer’s Retail, which sources litchi and other seasonal fruits from FnF. “Going forward, we plan to source more products from them,” he adds. 

Mahadev Agriventure, a ₹1,200-crore agricultural trading company based in Ludhiana, Singapore and Kuala Lumpur, is a bulk buyer with large clients such as Nestlé and Cargill, overseas. “We’ve been working with them for the past one year, and they’ve been very professional,” says managing partner Manish Kumar. The company has done field trials with FnF for a low-sugar variety of potato called Chipsona, used for potato chips, and potato powder for making french fries. “This is a very sensitive variety and has to be handled at specific temperatures,” says Kumar, adding that he’s placing a formal order of 2,500-3000 MT for the first year and will subsequently move to larger volumes. In addition, Kumar plans to source fresh vegetables from FnF for export to the UK market.

FnF has also entered into long-term contracts for certain crops. One of them is with IPCA Laboratories, the largest anti-malarial drug manufacturer in India, for Artemisia Annua, a medicinal herb that yields artemisinin, a compound used widely in the treatment of malaria.

In its first commercial year, i.e., FY13, revenues were ₹75 lakh, and the target for FY14 is 10 times that at ₹7.5 crore. “We’ve already crossed the ₹1 crore mark this year, and we are breaking even,” says Shashank. “This year we did 40 MT of litchi and are expecting 5,000 MT of maize and 20 MT of mentha oil.”  

In the next phase of expansion, the company is setting up a cold storage unit of 225 MT capacity in Hajipur, 12 km from Patna. With one pre-cooling chamber, four multi-chambers plus one for ripening, as well as washing, drying and sorting facilities, it will help increase the shelf life of fresh fruits and vegetables such as litchi, mango, parwal, cauliflower, green chilly, baby corn and sweet corn. “This will maximise our impact,” says Shashank. “We can take farmers’ produce to more distant markets and fetch better prices.” It has also tied up with a leading cold chain logistics company in Bengaluru for transporting fruits and vegetables in refrigerated trucks from the Hajipur facility to markets across the country.

FnF is targeting 30 DeHaats by end of this financial year with pilot trials already on in UP and Odisha, but the focus will be on Bihar for the next three years. “We’ll be looking to dilute some of our equity by the end of this year, add people and ramp up technology,” says Shashank, who was recently nominated as an Ashoka Fellow. After winning over farmers and buyers, convincing hard-nosed investors shouldn’t be a hardship for Bihar’s farm angels. 

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