Home  /  Specials  /  Good Businesses 2014  / All that matters is organic | SEP 05 , 2014

Photographs by Soumik Kar

Good Businesses 2014

All that matters is organic
An early proponent of organic farming, Ecofarms is making a difference to farmers’ lives in Odisha and Maharashtra

Adit Mathai

"Organic farming has helped farmers cut their input cost by about 30%" — Aanand Mor, managing director

Once there was aridity and despair. Now there is water, money and hope. “Earlier, we used to keep digging and digging and get nowhere. The soil and water table were completely depleted and all we got was dry mud,” rues Sriram Rajajee Tulsapuri, a farmer from the Yavatmal district of the Vidarbha region in Maharashtra. Vidarbha is notorious for its arid soil and depleted water table but Tulsapuri smiles as he surveys his green cotton fields. The story of how Tulsapuri and some 16,000 other farmers in six districts in Maharashtra and Odisha have transformed their lives is a tale written by a little-known but rapidly evolving organic food producer called Ecofarms, which helps restore fertility to the soil by encouraging farmers to take to organic farming. The man behind the movement is Om Prakash Mor.

 A for-profit social enterprise, Ecofarms promotes the growing of crops such as cotton, soyabean, tur dal and wheat, as well as spices such as turmeric, coriander and chilli. It purchases these from its network of 16,000 farmers across 290 villages in two states at slightly above market rates and sells them under its own brand name to other companies, wholesalers and retail outlets of big chains (Aditya Birla, Reliance, Big Bazaar, Shoprite, Le March, Apna Bazaar, Metro Cash & Carry). Unlike many organic food producers, Ecofarms asks farmers to grow a range of crops and buys a majority of their produce. It transports produce from the farm to the market, eliminating logistics costs and the need to find buyers.

That’s not all. Ecofarms evangelises the use of farmers’ inputs and seeds and sells at concessional rates seeds grown at its 40-acre headquarters at Yavatmal. It promotes the use of vermicompost and cow dung compost and encourages farmers to grind neem leaves into pesticide spray. “All these measures have helped cut input costs for farmers by about 30%,” says Aanand, Mor’s son, who joined the company in 2003 as MD.  

Early days

An economics graduate who hails from a family of farmers in Yavatmal, Mor’s interest in organic farming goes back to the early 1990s, long before it became fashionable to eschew chemical fertilisers and genetically modified seeds. On Mor’s invitation, in 1993, the legendary Masanaobu Fukuoka — the Japanese farmer and philosopher whose book One Straw Revolution is considered the bible of organic farming — made a trip to Yavatmal. Around the same time, Mor was also inspired by a demonstration by Shripad A Dabholkar, a professor at Kolhapur University, on organic farming practices such as crop rotation and intercropping. 

Over the next two years, he began organic farming trials on his farm. In 1995, encouraged by the results, Mor set up Ecofarms, putting in ₹20,000 from his savings as equity, to market his produce. For the next four years, though, he had just one customer, a German who helped sell overseas the organic cotton he grew on his 40-acre farm and sourced from other farmers in the region. In 1999, the German client came under financial stress, leaving Ecofarms little choice but to quickly add customers within India and abroad. 

As Ecofarms’ range of produce grew, so did the company’s client list, expanding to include spinning mills in south India and agents for overseas companies. The result: from revenue of ₹26 lakh in its first year of operation, Ecofarms grew to over ₹5 crore by 2003.

That was a momentous year. Ecofarms got a ₹50-lakh working capital loan from a local cooperative bank; it was invited by the district collector of Kalahandi district in western Odisha to start a similar set-up, and Aanand joined the business. In the following seven years, Ecofarms was engaged in these two states — Maharashtra and Odisha — selling cotton, soyabean and maize to spinning mills in north and south India. Turnover grew to ₹10 crore by 2010, while net profit increased from ₹2.7 lakh in 2003 to ₹11.5 lakh over the same period. 

But the real kick-in came in 2010, when IDBI Bank sanctioned a ₹10-crore term and working capital loan to Ecofarms. Until then, the company had been outsourcing its warehousing and processing functions. Now, it was able to set up a processing unit, a 40,000 sq ft godown, an oil mill and a flour-grinding unit. “We reduced sourcing inefficiencies and put in our own infrastructure, instead of outsourcing production like it was done earlier,” explains Mor. 

The term loan came with strict conditions. So, instead of entirely drawing down the loan, the firm’s internal accruals, too, were used to fund the capex, which required ₹10 crore of working capital alone. Still, the impact on Ecofarms’ growth has been electric: turnover in FY13 was ₹28.5 crore, a CAGR of 25% for the previous three years, while profit stood at a little over ₹12 lakh. Committed marketing efforts such as participating in international fairs and conferences on organic farming ensured growth in international orders, while domestic orders come from about 20-odd spinning mills which are its fixed clients. 

Now, about 30% of the turnover is accounted for by produce exports to food processing companies, which buy crops from Ecofarms, and textile manufacturers, who buy cotton from the company, in Israel, Germany, Canada and Vietnam; the remaining 70% comes from the domestic market. Cotton continues to be the biggest revenue driver, accounting for 75% of Ecofarms’ earnings. But Mor had to alter the way he sold the produce. “Cotton is a high-value product, where we cannot keep inventory for long. Plus, there is price volatility and fluctuating demand. So, today, we are suppliers to many brands that have their own manufacturing targets. This helps us plan our production much better and mitigates the risk. Secondly, we found that retailers had unreasonable demands. They kept asking us for higher margins and higher rentals and kept delaying payments. So, we decided to focus more on the business-to-business segment,” he explains. 

Win-win alliance

Ecofarms’ functioning is marked by several singular factors. First, it is the only intermediary between the farmer and the market, unlike the prevalent system, which has agents, mandis and the agriculture produce market committee (APMC). It is no secret that the array of intermediaries cuts into the farmer’s profit. Second, the company is linked to so many buyers that it can and does forecast demand for agricultural products and pass this on to farmers. This helps them plan their crop growing.

In cotton, for instance, as part of the supply chain of big brands such as H&M and Marks & Spencer, Ecofarms is privy to their product targets for the next year, which it can use to plan production within its own network. 

Then, the company offers farmers a host of services. To be called organic, a product requires to be certified as such by third parties that inspect the farm and take soil and plant samples to ensure that certification norms are adhered to. Ecofarms helps farmers get their land audited for free ; it holds workshops to educate farmers on not getting swayed by manufacturers and marketing agencies into buying unnecessary inputs, and using the right inputs through live demonstrations at its headquarters. 

This includes measures such as using trap crops (flowers such as marigold and hibiscus to attract pests and divert them from the main crop), promoting the use of superior varieties of cotton and sowing minimum seeds and giving adequate space to crops to grow, in an agricultural practice called Lisa-based farming. Ecofarms also uses a small percentage of its profits for social welfare activities. Ecofarms is also involved with Convergence of Agriculture Intervention, a project funded by the Sir Ratan Tata Trust and the Maharashtra state government, under which it works with two clusters of 20 villages each in Yavatmal district. 

At these locations, Ecofarms is setting up micro-enterprises and self-help and joint liability groups, where women are encouraged to set up poultry, dairy and goat rearing enterprises, for which the company provides technical assistance and also puts the women in touch with banks. Then, most of the farmers in its fold are in remote areas, where there is little to low rain and negligible infrastructure. So, the company encourages water harvesting. It has built ponds for farmers in 50 villages in Maharashtra, with 259 rain ponds and over 100 check dams. 

Ecofarms doesn’t put money into all this. Rather, it relies on and executes government schemes that otherwise lie unimplemented due to lack of awareness on the part of farmers. The company makes them aware of the various programmes under which they are eligible for government assistance, educates them on the benefits of having farms ponds and check dams, and provides guidance in constructing them. At Saki Kher village, Tulsapuri couldn’t be happier. “Today, thanks to the abundance of water and the replenishment of the water table, I can think of growing a second crop apart from cotton and improve my income. For instance, I could grow wheat or gram in October, which will be harvested in January,” he gushes. 

More importantly, organic farming has improved soil fertility. Now, instead of the earlier 3 quintal of cotton and 5 quintal of soyabean per acre — the two major crops of the region — current yields are seven and 10 quintal per acre, respectively. 

The company’s 13 employees, too, have benefited. Says Chanda Subhas Maske, who has worked at Ecofarms’ threshing unit in Yavatmal for the past five years, “My husband was a drunkard. Before I got this job, we had little to no money. But here I get round-the-year employment and wages are paid on a weekly basis, helping me sustain my family.”  

Organic growth

What lies ahead for this green crusader? Mor says he wants the company to become a ₹100-crore organic farm biggie in the next five years by foraying into value-added products such as fruits and vegetables and by adding more clusters in the existing states where it is present. The managing director is cagey about the details but reveals that preliminary talks are on with impact investors for the funding required to achieve such scale. But, cautions Aanand, there are no further expansion plans in other locations. “We have got several proposals from other states in India to set up projects. But that requires the attendant infrastructure and finances to do so. We will definitely look at it as an option as we grow bigger. But, right now, there is enough scope in the states we are present in to grow more.” 

Several stories from the farm front testify that Ecofarms has a bright future, whether it is the 65-year-old farmer in Odisha who had never seen a truck before one came to his doorstep to buy his produce, or that of Tulsapuri, who truly believes that good days are here to stay. Even as growth is on Mor’s radar for his company, it will clearly continue to be an inclusive one.

Here's your chance to read the latest issue of Outlook Business for free! Download the Outlook ​Magazines app now. Available on Play Store and App Store
On Stands Now