CII - USAID Project Launch Workshopface-cii.in/sites/default/files/Lauch Workshop Report .pdf · CII - USAID Project Launch Workshop Scope for Scalable, Sustainable and Replicable

INDIA

Transforming Eastern India’s Economies through Innovative Rural Business Hubs

CII - USAID Project Launch WorkshopScope for Scalable, Sustainable and Replicable Agribusiness Models

Sharing Experiences and Lessons Learnt

PROCEEDINGS

5 February 2013 : New Delhi

This document was produced by CII FACE under the Global Development Alliance, Co-operative

Agreement No. AID-386-A-13-00001

DISCLAIMER

“This report is made possible by the generous support of the American people through the United

States Agency for International Development (USAID). The contents are the responsibility of

Confederation of Indian Industry Food and Agriculture center of excellence (CII FACE) and do not

necessarily reflect the views of USAID or the United States Government.”

Contents

Introduction 1

1. Purpose of the Workshop 2

2. Key Takeaways from the Experience of Agribusiness Models 3

3. Synthesis of the Experience and Lessons Learnt from Various Agribusiness Models 5

4. Wrap Up 7

5. Background to the Discussion 9

6. Types of Agribusiness Models - Rural Business Hubs (RBHs) 12

7. Procurement-Led Agribusiness Models – Experiences and Lessons Learnt 15

8. Input-Led Agribusiness Models – Experiences and Lessons Learnt 17

9. Farmer Producer Organizations (FPOs) – Emerging models 18

10. ICT Solution-Led Agribusiness Models 20

Workshop Agenda 22

List of Participants 25

INDIA

Introduction

With several private players, farmer producer organizations (FPOs), non-governmental organizations

(NGOs) and other institutions having invested in agriculture and food, several islands of success have

emerged offering interesting lessons to take away. Agribusiness models range over different products

and services delivery options and are accordingly categorized into one-stop-shops, popularly known

as rural business hubs (RBHs), or procurement led or input driven models or ICT (information and

communication technology) or farmer producer organization led agribusiness models. Empirical

evidence shows that while some have been successful in terms of scalability and replicability, others

have had a tough ride and eventually shut shop and there are still others who are new entrants and in

the process of understanding markets and developing strategies to tap it right. It is quite evident that

there is no one idea that determines the success or failure of these agribusiness models and it is a

continuous process of learning and innovation that catalyzes both backward and forward linkages with

the farmers.

— 1 —

1. Purpose of the Workshop

The purpose of the workshop was to step back and synthesize some of these important and interesting

experiences as we go forward and design new interventions in agriculture and understand if there are

lessons that can sufficiently inform the deployment of resources. It was also during a meeting of the

USAID team in India with Ministry of Agriculture and Mr Pravesh Sharma, Managing Director, Small

Farmers’ Agribusiness Consortium (SFAC) that an interest was expressed in conducting a workshop

to synthesize the lessons from the past experiences related to rural business hubs and other

agribusiness models. It was felt that understanding of what worked and what did not will be extremely

useful in designing the new interventions under the CII USAID Global Development Alliance program

on rural business hubs in eastern India.

This workshop has provided useful insights on various Rural Business Hubs business models. The

workshop was useful to recognize the hurdles and identify the way around them and incorporate these

as CII moves forward with the RBH project. As next steps, this report will feed into the project activities

through inputs from our advisory and steering committee members during the course of the project

period.

— 2 —

2. Key Takeaways from the Experience of Agribusiness Models

• Scope of various agribusiness models driven by partnerships: India confronts a unique

situation of 600 million people or 120 million households dependent on agriculture, and therefore

there is no one agribusiness model (whether it is led by the government, private, and/or NGO led)

that can address the challenges. There is scope for partnerships and need for building synergies to

ensure strategic intervention.

• Private sector and value chain lens important: Understanding that agriculture needs to be

looked at through the value chain lens has been more or less embedded in the government

thinking, as also evident from the 12th Fiver Year Plan (FYP) approach to agriculture and food

processing. Looking at the changing structure of market demand, there is a greater acceptance of

the presence and role of the private sector.

• Private-Private Partnerships key to delivering end-to-end solutions: While public private

partnership (PPP) is recognized as an important driver of growth and development, there is need

and scope for private-private partnerships as well. This is more relevant in the context of

agribusiness companies venturing into providing end to end solution and reaching out for scale of

operations. There is need for multiple private players coming together in an open consortia format.

• Commercial viability key to sustainable agribusiness ventures: Successful public private

partnership (PPP) models are based on commercially viable activities with definite links to

profitable markets; and follow a value chain approach to bring in the right interventions.

• Costs and prices key determinants of scale: Addressing the entire value chain is critical for any

agribusiness player to get the solutions in place. Cost and prices are key elements that determine

scale and need to be addressed by working together with farmers.

• Prioritize offering solutions and expanding income opportunities in rural areas: It is

important to understand what rural India needs, and look for possible solutions and not products. It

is important to look at how to expand income in the rural India (either by increasing income or

reducing costs) and not take money out of that place.

• Access to quality inputs to be couples with package of practices and knowhow: Access to

agricultural inputs, extension services and assured buyback options are most critical to

agricultural growth and increase in farmers’ income. There is need for a continuous handholding of

— 3 —

the farmers to create awareness of the best practices, package of knowhow to be able to benefit

from the use of quality inputs.

• Trust and relationship building critical key to sustain farm-firm linkages: success factor.

Among various services provided, timely payments to farmers, honesty and transparency in

dealing with the farmers ensured a repeat base of farmers and willing to engage with the

agribusiness company over several years.

• Co-option and collaboration key to competing with local players as also mainstreaming

small players: The co-option/collaboration with local entrepreneur (at times lead farmer) through

local franchisee model, helped create and establish trust with the farmer community, which

attributed to the success of the agribusiness model. It was also a way to compete with local

players.

• Need for brand neutral products and services: While several private agribusiness companies

and traders provide a lot of extension, none of this is brand neutral and is driven by the idea of

promoting products and services, which is understandable from a business point of view. However

there is need to create a platform for delivering brand neutral products and services.

• Quality of content and cost of delivering services key to sustainable ICT solutions: For ICT

solution led agribusiness models, it is important to ensure that the content is unbiased, neutral and

actionable. Challenges that exist are how to productize the content for instance through sms,

voice, multimedia tab, etc. Key element of the cost structure is to be able to determine the

incremental cost of adding one additional farmer and distribution reach entails to having a captive

audience.

• Farmer Producer Organization essential for aggregating farmers and demand: The idea of

Farmer Producer Organization (FPO) is being increasingly accepted by the private players,

realizing that it is not possible for them to reach out to each and every farmer and for that matter the

government with limited resources. It offers a platform for aggregating farmers as well as demand

as consumers of agricultural inputs and services.

• Branded Rural Business Hubs face competition from local players operating on low cost:

Perhaps the idea of a branded RBH maybe a non-starter. Also, lack of understanding of existing

competition and high overhead and operational costs are some of the reasons why some of the

branded RBHs have not succeeded as much.

• Future lies in co-branded RBHs driven by partnerships: What seems to have succeeded, is

the franchise model which maybe a default private-private partnership. Mandis are not designed to

be RBHs but serve as a platform for buying and selling. Similarly, primary agricultural cooperative

societies (PACS) are performing that role including providing/facilitating credit facilities (which is

not covered by many RBHs). The future lies in a co-branded public private model where PACS or

mandis or FPOs can be involved wherein such models include the users themselves. In effect,

there could be space for various RBH-type models that offer similar products and services and

scope for co-branding of RBHs.

— 4 —

3. Synthesis of the Experience and Lessons Learnt from Various Agribusiness Models

Competition for RBHs and the Way Around it

Experience with earlier RBHs indicates that the idea of a branded RBH maybe a non-starter. Almost

every RBH faced competition from the small trader working with minimum infrastructure, capital,

almost nil incentives, operating on very thin margins, and poor access to institutional finance, and

inadequate communication skills but enjoyed very high trust in the community and exhibited very good

understanding of the client’s profile. These are some obvious advantages that a local person has

compared to an RBH which is driven by institutional concerns. Another thing that differentiates this little

trader in dealing with agriculture inputs is his forward integration with the user/consumer or client. For

instance, he knows that for the last 3 years, Bt cotton is doing well and therefore 6 months in advance,

he will try to find out who are the distributors of Bt seeds and also find the best supplier and strike a

deal.

Perhaps lack of understanding of the existing competition is one of the reasons why the branded RBHs

have failed. Empirical evidence shows that the private dealers are single largest group which is

offering technical advice to farmers. It also reports that 19% farmers reported that they get advice from

the local input suppliers, 5% get from government extension network and remaining 14% from other

farmers. We need to understand that the branded RBH is competing with a very efficient, low cost,

highly service oriented entity which is working almost invisibly, not limited by any regulation or rules.

What seems to have succeeded, is the franchise model which maybe a default private-private

partnership. Mandis are not designed to be RBHs but serve as a platform for buying and selling.

Primary agricultural cooperative societies (PACS) were meant to be RBHs and many are performing

that role including providing/facilitating credit facilities (which is not covered by many RBHs).

The future lies in a co-branded public private model where PACS or mandis or FPOs can be involved

wherein such models include the users themselves. Maharashtra and Gujarat just in the last kharif

bought almost USD 4 billion of inputs indicating that there is a huge market. Although lot of these

transactions is taking place on cash deals, and lack any audit trails, there exists a demand from the

farmers. There is a challenge in aggregating and capturing this demand and FPOs are not just

aggregators or consolidators of fragmenting base but also of demand that arise from farmers as

consumers of agri inputs. Also, it is important to consider and understand the fact that often the private

and government sectors are competing in retailing out agri products and services. The same products

retailed by RBHs are also being marketed by the government albeit of poor quality, and irregularly.

— 5 —

Regulations on stocking and storing commodities impede expansion of business through RBHs. The

solution may lie in storing and holding stocks at the farmers’ field on his account as they do not come

under their ambit.

Other Challenges

Addressing the entire value chain is critical for any agribusiness player to get the solutions in place.

Cost and prices are key elements that determine scale and need to be addressed by working together

with farmers. Skill plays an important role in transforming agriculture and providing opportunities for

skill development is critical to be able to attract young people in agriculture.

For a company looking forward to procuring vegetables, for instance, there aren’t many sources to tap

on and it is quite clear that the market linkages are missing.

How to address the changing face of agri driven by women and accept the fact that gender plays an

important role. Will all interventions end up helping an institution driven by men; are 24x7 stores safe

for women? Are the farm machineries and equipment designed to be female friendly?

— 6 —

Things in the space of policy dialogue and thinking has definitely changed and that too in the right

direction. A decade and half ago, a free flow interaction between the private players, NGOs, farmer

representatives and the government was not quite thinkable. The change in the mindset and the need

to come together to offer solutions to the concerns and problems confronting India agriculture and the

food sector is an inevitable response to changing markets and demand scenarios in India. There is a

demand to find solutions in a very different environment with various stakeholders leaning towards a

convergence.

It is quite evident that there is a consensus among the various agribusiness leaders that there is no one

model that can provide solutions along the entire value chain and even to be able to deliver a particular

service, it is essential to ensure that the value chain in integrated and other parts are in place. Hence

the need for partnerships and working together in an open consortia approach. There are

technological shortcuts to faster the process of integration.

It is important to respond to gender issues in agriculture – despite the fact that in hills, women account

for a large share of the workforce in agriculture, there are challenges is mainstreaming them into the

agricultural workforce, elsewhere. The other hopeful development is the member based FPOs, which

have 30%-40% women members and are seen as a major stakeholder.

This workshop has been a major step towards understanding how RBHs will work in the future,

drawing important lessons from the success and failure of past models. To reiterate - integrating value

chains and backward linking these with farmers and providing the latter greater access to markets is

critical for higher and inclusive growth of agriculture; and there is need to mainstream existing players

in the traditional outfit be it the commission agents or small traders (they can’t be wished away);

Technology, and governance need to be improved particularly in the case of agricultural marketing and

extension services.

As new models, e-mandi can be an added spot platform to be brought in by law and regulation. SFAC

has developed an integrated database of 500,000 farmers across 250 FPOs to make a match of

demand and supply for inputs to start with. e-RBH can be workable and FPOs with collective demand

can be brought on to this platform.

— 7 —

4. Wrap Up

FPO concept is gaining a lot of ground and there is a lot of merit in it. In another name or format, FPOs

have always existed. FPO is in one way an intermediary through which a corporate reaches a large

number of farmers, whether it is sugarcane, seed or tomato, and there are many such examples.

Wherever commercial sense existed, these organizations made sense (for example commission

agents, Self Help Groups, etc) and hence FPOs will emerge and with support from government can be

more successful. FPO as a concept is here to stay and will certainly grow. Should RBH be subsidized

by the government on lines of a Viability Gap Funding (VGF)? Maybe not, simply because the moment

one gets into subsidies, malpractices and vested interests come in. Hence the government should not

subsidize the private sector directly to run RBH but bring in a mechanism whereby the subsidy benefits

reach the farmers directly (the Public-Private Partnership for Integrated Agricultural Development

(PPP-IAD) program can be very useful in this regard).

— 8 —

Given that there is a legacy of agri business interventions, the outcome of which has been a mixed bag,

it is worthwhile to discuss and deliberate what worked and what did not in the various procurement,

input led intervention models in agriculture. Learning what went wrong would be a great start to begin

similar initiatives to make great success.

India confronts a unique situation of 600 million people or 120 million households dependent on

agriculture, and therefore there is no one model whether it is government, private, and/or NGO led that

can work. There are multiple models that are on ground and of significant scale together with models

that lack scale. However there is no reason for them to be stamped out or wished away. There would be

a number of large and mid-sized initiatives rolling out over a decade or so.

Every decade in the last three decades has at least one big idea in agriculture, notably:

• 1950s witnessed the abolition of zamindari states and feudal system of agriculture and led to

peasant driven agriculture. However it hit a technology and production barrier.

• 1960s and 1970s were the two decades of technology led big ideas which helped overcome a

number of institutional constraints and India managed to cross the productivity hump from 50

million tonnes of food grains in 1950s to 250.14 million tonnes in 2011-12. Today, there is a

problem of managing overflowing food grain stocks.

• 1980s again saw a productivity slump or plateau and more importantly saw a decline in the value

that people derived out of agriculture that were manifested in most unfortunate farmers’ suicides

and migration of people out of agriculture without having adequate non-farm employment

opportunities. In terms of conventional technology, the sector has hit the frontier and other

advanced technology, notably biotechnology is still in the horizon and not quite there yet for food

and other crops.

Hence there is a need for an institutional breakthrough and fortunately the government recognizes it.

The 12th Five Year Plan chapter on agriculture clearly portrays the importance of working with the

private sector and understanding the market. Hence, it talks of value chain which is relatively new term

for the government think-tanks. Understanding that agriculture needs to be looked at through the value

— 9 —

15. Background to the Discussion

1Sections V-X are based on minutes from the workshop.

chain lens have been more or less embedded in the government thinking. So there is a greater

acceptance of the presence and role of the private sector.

Agriculture is the biggest private sector activity in India unlike industry where the public sector has a

significant presence. There aren’t government owned farms or lands that are farmed in agriculture. It is

primarily run by individual farmers who are private enterprises and hence it is makes sense to create a

policy environment where private companies, processors, exporters, input suppliers, technology

providers can work in a seamless manner with farmers.

Small Farmers’ Agribusiness Consortium (SFAC) has been trying to reduce the 120 million

households into manageable numbers represented through institutions. The idea of Farmer Producer

Organization (FPO) is being increasingly accepted by the private players, realizing that it is not

possible for them to reach out to each and every farmer and for that matter the government with limited

resources. However there is a role for both private and public players which should be synergistic and

compatible. Currently, the government is more overbearing and perhaps there is a need to redefine its

role.

Feed the Future Initiative of USAID – A Brief

US through its Global Hunger and Food Security initiative, which is called Feed the Future is engaging

with the private sector broadly around the world in a meaningful and comprehensive way to meet the

global food security challenge. The US government together with the robust Indian private sector

shares the same commitment to food security both in India and worldwide. Global partnerships with

the private sector are one of the most efficient and sustainable ways to implement game changing

innovative solutions to address food security challenges. Institutional changes are important and play

a critical role. USAID has consistently supported private sector projects that aim at increasing small

farmer incomes, for example PIKA with Mahindra & Mahindra, Tasty Bite, & ITC. Successful public

private partnership (PPP) models share two common characteristics i) partnerships are based on

commercially viable activities with definite links to profitable markets; ii) value chain approach is

followed to bring in the right interventions. Private sector offers tremendous growth opportunities in

agriculture and agribusiness. Developing linkages between industry and farmers will not only improve

access to markets but also help improve productivity through input led interventions. It will be critical to

identify models that are both scalable and sustainable and will necessitate a focus on the private

sector as part of the PPP.

Lessons from Africa

Markets can and should serve the poor. Empirical studies confirm the smallholder farmer aggregating

business models in Africa have resulted in 50% to 100% increase in farmer incomes. The buyer led

models exists across the range of spectrum as also the open market system (which is most prevalent

in Africa) as also in India. Parastatal as a model exists in Africa wherein the government gets into

organizing chains for cash crops like the Ghana Cocoa Board or Kenya Tea Development Agencies –

these being the most integrated models. Contract farming is more applicable to niche fruits and

vegetables and deep procurement and is similar to those observed in India. Scalable and profitable

— 10 —

models: Savannah farmer marketing company in Ghana dealing in Soyabean and Afrocai in Uganda.

Another interesting model is that of the Agro dealer buy sell model driven by donor funds whereby the

dealers are branded and they sell inputs to the farmers and buy back the final produce.

Of the 40 agribusiness models that were studied, at least 3 of these models were at scale although

margins were thin and volatile but the impact on farmer incomes was significant upto 40% in

aggregator model and over 100% in some of the contract farming initiatives. Five specific businesses

studied that offered a range of services to farmers, right from premium pricing, payment on delivery, at

times credit, and storage/transportation facilities showed that services had a significant impact on

farmer income. However there was no correlation between services offered and profitability of these

ventures.

What is required to scale and how much time it takes? – Such questions are of particular relevance in

trying to ascertain what the future agri business models will look like.

For instance, Amul took nearly four decades to scale given the time and cost involved in the multi

cooperative structure; success of Aravind’s Eyecare lies in an inclusive end to end seven years and

over time built a large multi-state presence; SKS microfinance broke even in six years – micro finance

is commercially viable and attracting billions of dollars from mainstream players. Despite problems, it

serves as a source of inspiration for people trying to reach the poor. However the time to scale has

shortened as observed from Grameen Bank that took 17 years to scale, SKS took 6 years and Equitas

took 1 year only. It is quite evident that once the learnings are capitalized the route to profitability and

scale is considerably shortened.

RBHs can be considered in the context of the business models that already exist. Looking at creating

markets that work end to end and where gaps exist, RBHs can fit in well without having to create

additional infrastructure. End to end solutions have been the key to create a business eco system and

there are learnings from Amul that created both cooperatives and infrastructure that created chillers

and storage at district and local levels. To be cost effective, Aravind Eyecare built lens manufacturing

capabilities. The analogy here is looking at specific value chains and reviewing end to end solutions

wherein RBH can play an enabling role.

Focus - this is contrary to our hypothesis around shared channels. Platforms that scaled, eg: Amul,

Aravind Eyecare or SKS in the micro finance sector started out as highly specialized enterprises rather

than serving a bunch of products and services. While creating end to end eco system, it becomes

quite complex to do it across multiple products and services.

Looking at these specific examples, collaboration has been often the key to success, for example,

Amul leveraged government programs to build cooperatives and collection infrastructure at village

levels. First generation micro finance institutions (MFIs) started as NGOs. Collaboration between

private donor and public will include the role of soft funding to begin with. It is true that building and

reaching scale is often tough and definitely time consuming and costly. We are at an inflexion point and

standing on a platform looking at a higher growth trajectory. Key to success remains a viable business

model which is adapted to particular geographies and value chains.The relevance of African experience for the Indian agribusiness landscape needs to be weighed in

terms of the position of the respective government in terms of their strategy and outlook. In the context

of agriculture and food sectors, the government has a significant presence and is quite efficient in

some states eg: Tamil Nadu, Kerala, Chattisgarh, among others.

— 11 —

Majority of the rural business hub (and types of it) initiatives directed towards providing agri input and

services and other consumption goods to the rural population have not been quite successful.

Hariyali Kisan Bazaar (HKB)

HKB - a DSCL rural business hub venture shut shop after recurring huge annual losses (Rs 105.22 2

crore in FY 2012) which is huge for any organization . While the jury is still out as to what went wrong

that it was not possible to sustain the business model, some of the reasons cited were:

• Overheads associated with the business ventures were too high.

• Infrastructure was inadequate to cater to all the needs of the farmers

• In contrast to the above observation, many cited that HKB over-invested in infrastructure and

should have gone through franchise model rather than opening own stores

• On the other hand, franchise models would have never worked in rural areas because standards

are not often maintained

HKB model didn’t work and so didn’t several other similar agribusiness models. Are we saying that this

is a lost idea? We have been talking about RBH over the past few years and there is need to articulate

clearly what we expect out of these models. Is it a platform for giving inputs to farmers, or buyback of

produce, or providing extension services and technology or a combination of any of these three?

Access to agricultural inputs, extension services and assured buyback options are most critical to

agricultural growth and development.

• Current trade of input supplies is by and large working well. Input availability is adequate in terms of

pricing and timing except for some aberrations. While farmers have access to inputs (fertilizers,

seeds, and pesticides), competition has ensured that quality is maintained and prices are

competitive. There is a lot of pressure to keep prices low and ensure that quality is delivered.

Nevertheless, there are fly by night operators, the solution to which lies in better enforcement of

law.

• Currently, the biggest gap lies in agriculture extension services. While several private agribusiness

companies and traders provide a lot of extension, none of this is brand neutral and is driven by the

2PBIT Consolidated. For details, see http://www.dscl.com/images/downloads/overview/DSCL-AR-Lowres.pdf

6. Types of Agribusiness Models - Rural Business Hubs (RBHs)

— 12 —

idea of promoting products and services, which is understandable from a business point of view. As

a result, the farmer is bombarded with different companies selling inputs and technology and is

faced with multiple choices and not in a position to make an informed decision. This is an area that

needs to be addressed.

• Government regulated market yards or mandis have been in operation for a very long time - can’t

the mandis serve the purpose of RBHs? Considering the viability issue, if a private sector led

model does not work, perhaps one could look at these mandis as RBHs. The huge physical

infrastructure that is available could be used in a better and productive way. The inefficiencies that

have crept in the functioning of these mandis over time need to be addressed through better

management and inducing greater transparency.

RBH can certainly fill these gaps and be one of the various models that aim to reach out to the last

farmer with inputs, extension services and buyback guarantee. RBH cannot substitute a mandi or the

trader but work alongside. There is little merit in wising away mandis, as private investments in

creating such infrastructure may not come in and if at all with time. Mandis run by private sectors, or

NGOs or SHGs could be solution but needs to be piloted. RBH could be redesigned to serve as a

model mandi or model infrastructure and create competition for existing mandis.

Tata Kisan Sansar (TKS)

The vision to connect with the farmers and contribute effectively towards improving the income levels,

led to the concept of Tata Kisan Sansar (TKS) – Tata Farmers’ World and resulted in Tata Chemicals

moving on from being a product-centric company to a consumer- centric Company. TKS serves as a

“one-stop agri-solution shop’ aiming at i) direct linkages with farmers and providing services on right

farm practices and products; ii) enable rural entrepreneurship among the rural local community; and iii)

serve as a trusted source for products, information and farm solutions.

The TKS network is a typical hub and spoke model – wherein the hub is a distribution cum resource

centre equipped with soil testing facility and technical training centre. Each TKS outlet is a franchised

retail outlet that caters to the surrounding villages. Retailing of products is backed by agro advisory

services wherein a farm advisor visits key farmers and offers customized solutions to them. At present,

750 TKS reach out to 16000 and more villages with a direct link with nearly 1.2 million farmers across 7

states. TKS retails agri inputs under Tata Paras (crop nutrition) and TKS (crop protection) and is also a

trusted retail point for global brands like Rallis, PI, DuPont among others. Multi brand product offerings

have helped TKS to reach out to a large number of farmers giving them a wider choice of products. The

focus has been to ensure that farmers have access to quality products that help boost productivity.

Over time, TKS has been successful in promoting rural entrepreneurship through its franchise model

enabling the franchisees to use their local knowledge and farmer relationship to carry forward the

objective of TKS – ie to be able to connect with the farmer, win their trust and create a win-win situation

by offering quality products and services that have a direct positive impact on productivity and

incomes.

— 13 —

To nurture the relation with the farmers, TKS provides a host of value added services:

o Tata Kisan Parivar Membership Program (TKPM) – A Familial Bond is aimed at the progressive

farmer, who serves as the most important influence factor for the brand of products and services.

This has helped TKS stand out in the agri retail space and retain a base of loyal farmers.

o TKS Franchisee and Farm Advisors – Each TKS franchisee is supported with front-end cadre of

farm advisors who work in the catchment area of the outlet.

o Soil Testing Services – TKS also provides soil testing services to help farmers take an informed

decision about nutrient application.

o Smart Krishi – A registered farmer can avail services at a package for the target crop and is

provided end to end solutions covering land preparations, crop nutrition and protection and

harvesting operations.

o Hello Krishi – is a mobile based agri information service that is made available to the member

farmers covering all kinds of relevant information (weather forecast, market prices, agricultural

practices, etc).

— 14 —

ITC e-Choupal and Choupal Saagar

Areas critical for the success of e-Choupal were clearly identified as having an understanding of what

rural India needs, and look for possible solutions and not products. A single company cannot provide

solutions and there is a need for an assembler of benefits, be it agriculture incomes, healthcare,

employability, etc.

To make the model work, a well-designed eco system is needed that looks at the demand and cost

drivers. Trust is important and hence ITC banked on the sanchalak (i.e. progressive farmer) who had

the trust of the community and harnessed it by empowering him with ICT. This helped build a platform

that was then used to transfer the trust nurtured to all other partners. It is important to look at how to

expand income in the rural India (either by increasing income or reducing costs) and not take money

out of that place.

Any agribusiness model that aims at connecting with the farmers and doing business with them has to

be inclusive in nature. Ensuring interdependability among various players is key, and how will the

moderation take place needs to be considered carefully. Given that the agricultural markets are highly

fragmented, the cost to engage is very high.

Choupal Saagar is ITC’s branded RBH model of which e-Choupal is a part. Long time to break even

was a problem for Choupal Saagar but it is now profitable. Over time co-option was a way out to

compete with the local players. The brand provides quality assurance and hence helps market

products. Anchor business being procurement, it became the base for connecting with the farmers

(primarily soyabean and wheat).

The significant contribution of e-Choupal was that it helped improve the efficiency of mandis around it

in Madhya Pradesh, although unintended, the outcome was very welcome.

Field Fresh Foods Private Limited

Field Fresh Foods Private Limited (FFFPL) was one of the first global outsourcing opportunities that

emerged in India primarily to export fresh produce. It is a relatively small model introducing modern

farm practices to the farmers in Punjab, Maharashtra and Andhra Pradesh and catering primarily to the

UK market for sweet corn, baby corn, chilies and fresh herbs.

7. Procurement-Led Agribusiness Models – Experiences and Lessons Learnt

— 15 —

FFFPL has been doing business with 4000 farmers and exported 265 tons of babycorn in 2009 which

can now be done over 2.5 months. Over 8 years, lots of lessons have been learnt - experimented with

various procurement and logistics models, broke several myths and faced hard truths. The model to

begin with focused on picking produce from mandis and export to global market. Over time, it became

inevitable to look at the fields before the produce was harvested, then moved on to identifying

geographies, and farmers, and conducting risk assessments. The company realized that end to end

solutions are the key and more so for serving the global markets that have stringent quality norms that

need to be adhered to (certifications need to be conducted on the partner farmer fields).

Price and pick up guarantee were critical and competed with crops that were supported by Minimum

Support Price (MSP). What really worked? – Timely payments to farmers, honesty and transparency

in dealing with the farmers (for instance; farmers come to the lab, check the process and take their

payment). Payment guarantee ensured that the farmers came back to FFPL repeatedly. In addition to

this, being able to provide agri inputs, advisory services, and exposure trips ensure that nearly 50%-

60% farmers were repeated.

While it is commonly perceived that cold chain is a problem for transporting F&V, for FFFPL it is not the

same but for the airports (Mumbai and Delhi) where the chain breaks. Efforts made by the global

aggregators for supplies to Tesco and Asda in bringing the knowledge to FF to grow and develop have

been very useful. FFFPL is working in collaboration with Syngenta Foundation and local NGOs in

Maharashtra focusing on chillies and okras for export. Although it was a challenge, commercial

production being the mandate and it being achieved was key to sustaining the project.

Bharti Walmart

It is well understood that there aren’t enough firm farm linkages to support the retail development in the

country. Over the last 5 years, Bharti Walmart has been engaged in Direct Farm Program working with

9,400 farmers, present in 9 states, operating through 10 collections centres. The venture is also

engaged in conducting training programs as also funding various NGOs to develop capabilities of the

farmers. Now sourcing about 10% directly from the mandis, eventually, retailers want to get out of

mandis. Depending on investment needs, the approach will be to go to farms, set up collection centres

where farmers bring produce and is typical driven by lead farmers. Every retailer is a small company

today and while they have huge strategic plans and here to grow, progress over the next couple of will

be small.

Typically, a company is engaged in procuring 5 to 10 tons from 10 collection centres given that the

stores are few but there are other companies doing similar volumes. Hence there is scope for

leveraging the available scale to provide greater market access to smallholder farmers. Extension

service providers, insurance and credit service providers and others along the value chain can

collaborate together. While the intentions are good, there is need to have clear cut customization plans

to build each centre and piloting many of these ventures will be critical before one can draw any

meaningful conclusions.

— 16 —

Syngenta India

Syngenta’s business vision has shifted from single product, single problem to end to end solution. The

strategy now is to provide a basket of brands backed with agronomy, irrigation, etc rather than just

selling inputs and brands and in the process move onto a cost per acre concept rather than cost per

bottle concept. It is critical to look at productivity, and net income generated for the farmer.

Since farm solution is not the only solution, and needs to be backed by effective resource management

(soil, water) and community development, Syngenta business set up a food security group which has a

long term mandate focusing on small farmers. A 24x7 presence at the grass-root is important backed

by knowledge, presence of people who valued farming and were educated, and who could use the ICT

solutions. To support this endeavor, a centre of excellence was created that is not restricted to

Syngenta but offers a platform for different players to come together. Entrepreneurial profitability is a

key concern so that they can be motivated to develop the capacity of large number of farmers. There is

great need and demand for coming up with gender sensitive solutions. Syngenta Foundation is also

working with producer companies in MP.

Bayer Material Science Pvt. Ltd.

Bayer looked at developing low cost innovative cold stores. Their business vision is to look at profit,

people and planet as part of the social development initiative. The first generation cold storage was

very high on electricity consumption. A farmer room could be turned into a cold store. Energy is cost

sensitive. Technical service provider not only aggregates farmers to access these services but also

connects them to market. It is observed that continued hand holding of FPO is key and the local NGO

play an important role. Rural and urban connect is important to create shared values.

8. Input-Led Agribusiness Models – Experiences and Lessons Learnt

— 17 —

Action for Social Advancement (ASA)

ASA – an FPO has been working in Madhya Pradesh and Bihar focusing on farm sector livelihoods

with tribal, SC and women farmers. The FPO consists of about 150 professionals and 250 para

professionals managing about Rs 25 crore worth of annual budget. Smallholder farming issues such

as low productivity, poor seeds, low yielding varieties, poor extension services, inadequate farming

practices are known.

The 3 pillars of production system are being focused upon at ASA are as follows: i) Good Agri Practices

ii) Environmental sustainability iii) Socially responsible practices (no gender discrimination, child

labor) with an opportunity to link to the markets.

Private players can play an important role in reaching out to the farmers and deliver services to them.

There is less merit in using the existing public extension system to deliver benefits to the farmers. The

new approach could include a multi-stakeholder platform that can develop standards, get them

reviewed by experts, start piloting for production standards, establish certificate trading platform,

establish chain of custody system for the physical procurement, establish accreditation agency and

take off.

This has been done over the last four years in ASA with 20, 000 cotton and soyabean farmers, certified

under Better Cotton and Responsible Soya Certification System but there another 60,000 farmers who

are doing it on rice, wheat, maize, pulses that are not yet market linked. The effort is to develop the

domestic market since there is hardly any global market for these crops. Developing domestic

markets will be very important, With the FPOs at the centre and being able to provide a platform to

aggregate inputs, demand and market linkage, developing domestic markets will be very important to

create a win-win situation. ASA generates Rs 3.5 to Rs 4 crore as premium from the western market

through the certification trade which goes to the farmers and has been to cover 35%-40% of the

extension cost. Within next few years, the certification process will be revenue generating.

Amalsad Vibhag Vividh Karyakari Sahakari Mandali Ltd.

Cooperative is an important institution to aggregate farmers and link them to market. Mango and

Chickoo are being marketed since 1955 with a turnover of Rs 20 crore and profits are being shared

with farmers. The cooperative has a canning unit, and exports Rs 15 crore worth of mango pulp

9. Farmer Producer Organizations (FPOs) – Emerging models

— 18 —

directly. It serves 39,000 people spread over 17 village. Nearly 10,000 box of chikoos are sold daily in

Delhi. The cooperative also have a Rs 20 crore turnover for providing services to farmers and

husbandry, and Rs 26 crore deposits from farmers.

DevBhumi Natural Products Producers Co. Ltd.

Dev Bhumi is based out of Uttarakhand working in 5 districts with 4,300 farmers dealing with

sericulture, certified organic honey, and organic spices. Small and fragmented land holdings in the hills

offer limited source of livelihood for the people. Dev Bhumi tried to promote economically viable

options and hence resulted in the creation of the FPO. The USP of the FPO was to certify and brand the

products under the brand - Dev Bhumi. The challenges confronted were; increasing productivity and

diversifying into high value products, introducing cost effective and adaptable technology, containing

increasing cost of manual labor and production, and developing markets and ensuring credit services

to the member farmers.

— 19 —

Srei Sahaj e-Village Ltd

Srei-Sahaj is the largest ICT platform in PPP with DIT executing the National e governance plan by

setting common service platform across the country. The target is to cover about 28,000 village level

entrepreneurs reaching out to Srei-Sahaj for technology solutions and developing product and

services tools to serve the rural communities. It was set up to offer services related to issuing

government certificates, which did not really taken off due to the poor quality of the government

digitization process and therefore had to bring in other services to make the partnership viable. Srei-

Sahaj is present in 6 states- parts of Uttar Pradesh, Bihar, West Bengal, Assam, Orissa and a small

pocket in Tamil Nadu. The organization has been able to successfully leverage existing technology

and where it was possible to differentiate, did so and added value. In terms of services offered, Srei-

Sahaj is involved from low to big ticket items across low to high engagement verticals and includes

electricity, phone bills, insurance, e retailing, banking services, direct cash transfer, e learning, etc.

Present in 107 districts, has already covered 24,000 village level entrepreneurs, 85% of who are class

12 and above educated and also 90% of them have been in the village and 70% of them are in the age

group 26-31 years with higher risk taking ability.

Agribusiness and dairy are high potential areas that Srei-Sahaj has been exploring. Experiments

were done in the past, but were not quite successful. Going forward, agriculture will be the key. Dairy

value chain, financial services (direct cash transfer), data collection are new verticals. Agro advisory

and farm machinery referral through email are other potential areas. Mobile technology in local

language is most preferred. There is a great demand for such services and can be monetized.

Reuters Market Light (RML)

Extension service is a combination of content, product, cost structure and distribution-reach. Content

includes everything that impacts the livelihoods of the farmers (for example; on farm animal

husbandry, irrigation timing, subsidy flow, etc).

Content should be unbiased, neutral and actionable. It is important to determine how to productize the

content like sms, voice, multimedia tab, etc (the best needs to be determined). Key element of the cost

structure is to be able to determine the incremental cost of adding one additional farmer and

distribution reach entails to having a captive audience. Extensive analysis was done to understand

where RML and others fit in. Content and world class quality of services are the strengths of RML but

10. ICT Solution-Led Agribusiness Models

— 20 —

not distribution reach. The analysis shows that the government is the top player and the gaps can be

filled in through a PPP approach. It is important to conduct a comparative analysis of the strengths and

weakness and built a consortium of service providers and herein institutions like FACE and SFAC can

play the role of key facilitators.

— 21 —

Scope for Scalable, Sustainable and Replicable Business Models in Agriculture:

Sharing Experiences and Lessons Learnt

Workshop Agenda

05 February 2013: 10.00 – 13.15 hrs : 2nd Floor Meeting Room: CII Central Office: Mantosh

Sondhi Centre, 23 Institutional Area, Lodi Road, New Delhi-110003

1000 – 1005 hrs Welcome Remarks

Ms Meetu Kapur

Executive Director, CII-FACE

1005 – 1010 hrs Key Remarks by the Chairperson

Mr Pravesh Sharma

MD, Small Farmers’ Agribusiness Consortium (SFAC)

1010 – 1015 hrs Special Remarks: Launch of CII-USAID Program

Mr William Hammink

Mission Director, USAID

1015 – 1100 hrs - Session I: Rural Business Hubs – Experiences & Lessons Learnt

Rural Business Hub (RBH) are structured as one-stop-shops that offer various agricultural inputs and

services (quality seeds, fertilizers, pesticides, price and weather information, farm advisory and crop

management, etc) to farmers with add on buyback arrangements in some cases. Most of these hubs

have emerged out of the experience of the agribusiness companies that there is a need to strengthen

backward linkages to address the challenges of high risk and uncertainty related to production, price

and marketing that the farmers face. Addressing these issues has the potential for generating gains for

the private retailers/ processors and other stakeholders in terms of greater value addition and higher

sectoral growth.

Key Speakers: Mr Arjun Uppal

Vice President, Corporate Affairs

DSCL, DCM Shriram Consolidated Ltd.

Mr Harshdeep Singh

Asst. Vice President-Commercial

Tata Chemicals Ltd.

Mr Anshul Goswami

Senior Manager, Monitor Group

Followed by Open Discussion

— 22 —

1100 – 1200 hrs - Session II: Procurement & Input Led Agribusiness Models – Experiences &

Lessons Learnt

Procurement led models like contract farming and other buyback arrangements have come a long way

in creating incentives for the farmers to diversify and produce specific commodities. The scalability

and sustainability of many of these models across value chains and geographies are being debated.

Policy reforms in the area of marketing that promote direct firm-farm linkages will play an important role

in scaling up and replicating some of these models. Input led interventions marked the success of the

1st Green Revolution in India and efforts have escalated as observed in the case of hybrid seeds, drip

and sprinkler irrigation system, and mechanization. The challenge has been to render these

technologies and innovations accessible and affordable to the small farmers. There is scope for

strengthening these interventions and deliver the inputs and services in an increasingly partnership

mode.

Key Speakers: Mr Sailesh Narayan Naik

General Manager – Channel echoupal

ITC India Ltd.

Mr Uday Gosain

Senior Manager

FieldFresh Foods Private Limited

Ms Aruna Bhinge

Head Food Security Agenda

Syngenta India

Mr Mukul Varshney

Vice President – Corporate Affairs

John Deere India

Mr Issac Emanuel

Head-Business Development & Social Business

Initiatives, Bayer Material Science Pvt. Ltd.

Followed by Open Discussion

— 23 —

1200 – 1300 hrs - Session III: Farmer Producer Organizations and Emerging ICT Models

Famer Producer Organization (FPO) will play an important role in overcoming the challenge of

aggregating farmers and consolidating the highly fragmented base. The FPO model aims at

integrating farmers and thereby facilitating greater access to inputs particularly credit, land, and

access to markets. This also creates a platform for the buyers to take advantage of economies of

scale. Information & Communication Technology solutions are evolving in various capacities and their

impacts are diverse. Outreach to the farmers and the associated costs are some of the key challenges

that need to be looked into to ensure farmers benefit from these models.

Key Speakers: Mr Ashis Mondal

Director and Managing Trustee

Action for Social Advancement (ASA), Bhopal

Mr Hemantbhai Naik

Amalsad Vibhag Vividh Karyakari Sahakari Mandali Ltd.

Gujarat

Mr Shailesh Panwar

General Manager

DevBhumi Natural Products Producers Co. Ltd.,

Uttarkhand

Mr Harsh Patnaik

Senior Vice President - BD & Emerging Businesses

Srei Sahaj e-Village Ltd.

Mr Rantej Singh

Head – Strategy

Reuters Market Light

Followed by Open Discussion

1300 – 1310 hrs Concluding Remarks

Mr Pravesh Sharma

1310 – 1315 hrs Vote of Thanks

Ms Meetu Kapur

Lunch

— 24 —

1. Mr. Pravesh SharmaManaging DirectorSmall Farmers Agribusiness Consortium (SFAC)

2 Ms. Rama MishraProgramme Officer, Agribusiness Unit (ABU)Small Farmers Agribusiness Consortium (SFAC)

3 Ms. Saloni TanejaField Officer, ABUSmall Farmers Agribusiness Consortium (SFAC)

4 Dr. Kalpana PokhriyalManagement Support GroupSmall Farmers Agribusiness Consortium (SFAC)

5 Ms. Anshul GoswamiSenior Manager Monitor Group

6 Mr. Arjun UppalVice President, Corporate Affairs DSCL DCM Shriram Consolidated Ltd.

7 Mr. Harshdeep SinghAsst. Vice President - CommercialTata Chemicals Ltd.

8 Mr. Shailesh Narayan NaikGeneral Manager – Channel echoupalITC Limited India

9 Mr. Uday GosainSenior Manager FieldFresh Foods Private Limited

10 Mr. Ashwani KachrooDGM - External RelationsFieldFresh Foods Private Limited

11 Mr. Mukesh MadhukarIndia - Head - Direct Farm ProgramBharti Walmart

12 Mr. Vishal MahajanGeneral Manager – StrategyJubilant Enpro Private Ltd

13 Ms. Aruna BhingeHead - Food Security AgendaSyngenta India

14 Mr. Isaac EmmanuelHead - Business Development &Social Business initiativesBayer Material Science Pvt Ltd

15 Mr. Mukul VarshneyVice President - Corporate AffairsJohn Deere India

16 Mr. Harsh PatnaikSr.Vice President - BD & Emerging Businesses Srei Sahaj e-Village Ltd.

17 Mr. Rantej SinghHead-StrategyReuters Market Light

18 Mr. Amrish KhuranaGM MarketingDevbhumi Producer Company, Uttarakhand

19 Mr. Shailesh PanwarGM-AdminDevbhumi Producer Company, Uttarakhand

20 Mr. Asish MondalDirector and Founder TrusteeASA - NGO, Madhya Pradesh

21 Mr. Hemant NaikRepresentativeAmalsad Vibhag Vividh Karyakari SahakariMandali LTD, Gujarat

22 Mr. William HamminkMission DirectorUSAID

23 Dr. Bahiru DugumaOffice Director - Food Security OfficeUSAID

24 Dr. Sheila DesaiDeputy office Director, Food Security OfficeUSAID

25 Dr. Sang LeeAgriculture Development Officer,Food Security OfficeUSAID

LIST OF PARTICIPANTS AT THE WORKSHOP

— 25 —

26 Dr. Srivalli KrishnanProject Management SpecialistUSAID

27 Ms. Meetu KapurExecutive DirectorCII FACE

28 Ms. Tarun TandonDirector-Grant ManagementCII FACE

29 Mr. R. VaidyanathanDirectorCII FACE

30 Ms. Nisha LapersonneDeputy DirectorCII FACE

31 Ms. Anuradha KapurCounsellorCII FACE

32 Ms. Kavery GangulyDeputy DirectorCII FACE

— 26 —

CII - Jubilant Bhartia Food and Agriculture Centre of Excellence (CII - FACE)

The Centre endeavours to build capacity while leveraging technology and innovation to improve productivity and the environmental footprint of agriculture. It focuses on introducing efficiencies across the supply chain, right from the farm gate to the end consumer.

Guided by an Expert Group on Food Safety and Quality consisting of technical experts from the Indian Industry, CII commenced Food Safety and Quality (FSQ)-related services to the Indian Industry since 2003. It has been a preferred partner for information and knowledge dissemination, carrying out Awareness programs, trainings, Workshops, Consultancy, Gap assessments, skill and capacity building services, Seminars and Award Process, on various subjects relating to Food Safety, Quality Management, Manufacturing Excellence, Business Excellence, Total Productive Maintenance and Quality tools and techniques, for providing a platform to share information and best practices.

CII-Jubilant Bharita Food & Agriculture Centre of Excellence.India Habitat Centre, Ground Floor

Core 4A, Lodi Road, New Delhi - 110 003Tel.: 011- 011-43007490/46344609 Fax: 011- 463444602

Email : [email protected] / [email protected]: www.face-cii.in

The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil society, through advisory and consultative processes.

CII is a non-government, not-for-profit, industry led and industry managed organization, playing a proactive role in India's development process. Founded over 118 years ago, India's premier business association has over 7100 member organizations, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 companies from around 257 national and regional sectoral associations.

CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a range of specialised services and global linkages. It also provides a platform for consensus-building and networking on diverse issues.

Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship programmes. Partnerships with over 120 NGOs across the country carry forward our initiatives for integrated and inclusive development, in affirmative action, healthcare, education, livelihood, diversity management, skill development, empowerment of women, and water, to name a few.

The CII Theme for 2013-14 is Accelerating Economic Growth through Innovation, Transformation, Inclusion and Governance. Towards this, CII advocacy will accord top priority to stepping up the growth trajectory of the nation, while retaining a strong focus on accountability, transparency and measurement in both the corporate and social eco-system, building a knowledge economy, and broad-basing development to help deliver the fruits of progress to many.

With 63 offices including 10 Centres of Excellence in India, and 7 overseas offices in Australia, China, France, Singapore, South Africa, UK, and USA, as well as institutional partnerships with 224 counterpart organizations in 90 countries, CII serves as a reference point for Indian industry and the international business community.