On the farm trail
With corporate India in the grip of a recession, no CEO can afford to take a break in the countryside. For, there he faces the last frontier for big business: the food chain. The hurdles are big—poor consumers, spread over 6 lakh badly-connected villages, often without electricity, government policies that discourage companies from engaging with farmers, and fickle weather gods. Millions of marginal and small farmers operating in less than two hectares each, all vulnerable to production and price shocks. In conjunction with the emergence of retail chain, the situation then becomes what Ashok Gulati, Director (Asia), International Food Policy Research Institute (IFPRI), calls the “consolidating top and the fragmenting bottom” of Indian agriculture.
Yet, rural India is bursting with potential. Less than 1 per cent of the food produced is processed against about half in the US and one-fourths of the fruits and vegetables harvest rots before it reaches the table. There has been an unprecedented rise in rural prosperity over the past two decades and new technologies have come in to partly offset poor infrastructure. Changing food consumption patterns have created new demand, which is supplemented by export demand.
Small and marginal farmers need help to access inputs, credit and insurance. Rural business hubs that integrate these services are good options for small farmers, as ITC pioneered with its e-Choupal. For those wanting to pick agri-produce, interestingly, the advice from YES Bank’s head of agri-business, Kalyan Chakravarthy, is the same—think small.
The farm sector needs policy fixes. Yet, inadvertently, Indian companies addressing different pieces of the “farm-to-fork” chain are creating conditions conducive for change. Gulati points out that in Gujarat, agriculture is growing at 12 per cent per annum. One possible factor: dedicated power for agriculture.
The who’s who of corporate India have ventured and ventured big into rural India. BT revisited four such ventures—they aren’t the only ones who have achieved some success, but they have the presence and experience to share.
DCM Shriram Consolidated
Lots in Store for Farmer
Plans: More stores in more states and also more services. One related area that sounds intuitive would be back-end integration of fresh fruit and vegetable supplies for the retailers, but the company finds it a mixed experience. “As of now, we are not interested in becoming backend partners. There are many more interesting things to do on our own,” says Ajay Shriram, Chairman and Senior Managing Director, DCM Shriram Consolidated. However, Hariyali has been procuring select items at its centres from the farmers.
In future, it plans to take up the milk collection business to consolidate the produce for milk processors. In its attempt to become a full-scale service provider to the rural areas, the company is also exploring medical and educational offerings. “We are also talking to microfinance institutions to figure out what business models can work,” says Shriram.
Learnings: Start small, grow steadily in the areas that you know well. HKB started by operating in the catchment area of its core business. Agronomists at HKB help farmers make the right choices when they visit HKB stores, which reinforces the relationship. 
Back-end Integrator
Approach: Backward integration was the mantra for Tata Chemicals in the ’90s when it shifted the focus of its fertiliser business from the product to the customer. It relaunched its outlets as rural agri-retail outlet offering an entire range of services in 2004. Known as Tata Kisan Sansars, it was planned that the business dependence on fertilisers for these shops would be reduced. In 2007-08, over 575 TKS, spread across 88 districts in seven states, turned in combined revenues of Rs 356.45 crore. Spotting value in integrating the farm-to-fork supply chain, recently, the company formed an equal joint venture—Khet Se Agriproduce—with the UK’s Total Produce Plc, a fresh produce operator. It has set up four banana ripening chambers and four cold storages at the sourcing and distribution centre at Malerkotla in Punjab. Khet Se is already supplying to local retailers around Ludhiana and transacts 30 tonnes of fresh produce daily.
Learnings: Start in areas adjacent to core competencies. Examples: TKS outlets and customised fertilisers. For the complex back-end supply chain requirements of acquiring fresh fruits and vegetables, harness long-term relationships. And for technology, get a partner.
Riding a Trickle
Approach: From being traders in agri-products and then manufacturers of papain and plastic pipes, in 1989, the promoters of Jain Irrigation moved into water management through micro irrigation. In 1994, the company branched out into the food processing business for dehydration of onion, vegetable and production of fruit purees, concentrates and pulp. In the intervening years, it has become one of the largest drip irrigation companies in the world, aided by a conducive policy framework. But as Anil Jain, Managing Director, Jain Irrigation, says: “Right now, water, power and fertilisers all are subsidised. Sure, drip irrigation gets a capital subsidy, but it reduces consumption subsidy.”
Learnings: Sometimes, concept-selling works when there is an obvious need for a technology in a sector lacking in technological inputs. And there is merit in working in one sector diversifying both backward and forward. The Indian farmer needs hand-holding while adopting a new technology and proof of concept. Then, he will run with it.
Biotech Vigour
Approach: The US-based agrichemicals company branched into biotech some years ago. Monsanto introduced its patented “Bollgard” technology to make cotton resisitant to the widespread and one of the most damaging pests—the bollworms—in India in 2002. Introduced through the joint venture of Mahyco Monsanto Biotech, the technology was subsequently licensed to 23 seed companies, which ensured that the “Bollgard” technology was available to the farmer in the hybrids of his choice. The result: in the ensuing six years, India’s cotton production has seen a dramatic turnaround, making the country a net exporter. And India has the fourth-largest acreage in the world under biotech crops (7.6 million hectares) courtesy Bt Cotton.
Learnings: Collaboration (with seed companies and with other stakeholders) is crucial for success in India’s farms dominated by small holdings. Technology, which makes a perceptible change to farmers’ lives through higher yields, lower pesticides sprays and better incomes, gets adopted no matter what the moral and ethical issues associated with it are.
