Small farmers continue to face problems with regard to production and marketing their produce in a better way. Producer Companies (PCs) could help in their decision making in production and marketing. In other words, farmers need to be more market-oriented and trained in managing a variety of risks. Evidences from developing countries prove this.

Consider such a PC in Rajasthan which might typify a model of backward and forward integration between smallholders and markets.

Producer interest

Ajaymeru Kishan Samrudddhi Producer Company Limited (AKSPC) was an outcome of a pilot project in 2011-12 conducted by a development arm of BASIX known Indian Grameen Services. The PC started functioning in early 2013 under the aegis of Small Farmers’ Agribusiness Consortium (SFAC).

Among the five PCs (two in Nagar and three in Ajmer) promoted by IGS, four PCs were merged with AKSPC on account of operation and management problem. Some 2,500 farmers have become members of AKSPC and contributed ₹13 lakh as share capital. Some 142 Farmer Interest Groups (FIGs) paid ₹1,000 each to make the PC operational.

Market linkage

The Chief Executive of AKSPC says that the PC has a formal contract with input providers (similar to Primary Agricultural Co-operative Societies), viz. seed, fertilisers and chemicals.

For example, backward linkage encompasses several manufacturers/input suppliers, namely National and State Seed Corporations, Chambal Fertilisers and Chemicals, Indian Potash, Syngenta, Gardha, Pravardhan Seed Co., among others. It has helped the PC supply inputs to its members at a subsidised rate and created business portfolio of ₹60 lakh in 2013-14.

The PC, in addition to input supply, recommends the package of practices for cotton, cumin/jeera, wheat, mustard and various variants of gram in consultation with the State Agricultural Department and the Agricultural University.

Forward integration is indeed worthy to mention here. The organisation after its registration procured around 12 lakh tonnes of black gram at the minimum support price. In 2014-15, AKSPC procurement increased with an average price of ₹32.50-33 paid to members.

Through software-enabled trading environment, AKSPC has sold the entire quantity to the SFAC and earned 1 per cent commission of ₹12 crore. In summer, the PC is planning to procure green gram (moong) either from APMC market yard or farmers’ field/alternative channels.

Apart from farmer produce sales, AKSPC has supplied ₹1.40 crore of inputs to the member-producer.

And, AKSPC purchases pesticides and micronutrients from recognised manufacturers and retails to the members from its counter/point-of-sales.

The PC has become an institutional member of NCDEX in derivative trading and the organisation expects to receive some training from the exchange on aggregation, trading mechanics and delivery.

While outcome of the intervention might bring some fortune to small farmers, AKSPC needs to look up to its financial health and management.

Only one or 2 in-house staff may not be sufficient for scale-up or IGS support to capacity building will be short-term.

Issues and Policy concern

In addition, bank credit is essential to expanding business operation of the PC.

However, AKSPC needs to step in hiring warehouse for storing the member-produce and concentrate on a scale and economic viability.

Incidence of taxes, license of APMC for mandi procurement, and alignment of interests of resource institution and PC coupled with governance issues should receive the attention of the Ministry of Agriculture and the Ministry of Corporate Affairs.

Nabard could be a vital resource institution to AKSPC as the nodal refinance agency for rural credit plays a role in selection/identification of FIGs drawn from a group of progressive farmers of notified villages in the district.

Then, Farmers’ Club (FC) is formed and eventually, is linked to PC. Thus, PC has a federal structure in that FC and FIG form the middle and the bottom-tier, respectively.

Nabard includes this activity as imperative in its district development programme. For example, 6 FIGs have formed one FC drawn from notified villages of Ajmer.

Nabard, in association with not-for-profit organisation, such as BASIX – IGS conducts farmer meeting in a periodic interval where farmers get an opportunity to meet the experts in agriculture and allied sectors.

The writer is Post-Doctoral Fellow of the Centre for Management in Agriculture, IIM-Ahmedabad. Om Niwas Sharma of BASIX assisted him in the field visit. Views are personal.

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