Building financial stability through taking cautious risks: A Co-Op in Telangana shows the way
Over the last 9 years, Sri Venkata Sai Raithu Seva Sahaya Sahakara Credit and Thrift Society has been working single-mindedly to remove the hardships of farmers in Pembi village, Mandal, Telangana state. Society attributes its relative success to the patient process of enabling collective ownership through informed decision-making activities.
A modest beginning
The Pembi Mandal in the Nirmal district of Telangana consists of 6 villages, including Pembi village. The main occupation is agriculture and a wide variety of crops are grown such as maize, turmeric, cotton, paddy, and pulses. Infestation of diseases such as Rhizome rot of turmeric, mosaic of maize etc. was causing poor and low-quality of produce, and at the same time better-paying markets like Nizamabad and Metpally were inaccessible to small farmers. Farmers predominantly depended on local intermediaries to facilitate the sale of their produce and thus achieved minimal monetary output, despite their hard work.
Determined to find a solution, in 2009, Pembi farmers approached Rameshwar Reddy. Rameshwar, the former President of Mandal Parisad with a passion for agriculture and village development, mobilized farmers. Through sustained efforts, on 10th Nov 2010, Sri Venkata Sai Raithu Seva Sahaya Sahakara Credit and Thrift Society was registered under the AP Mutually Aided Coop Societies (MACS) Act 1995.
The society had a modest beginning with 57 farmers, each putting together around Rs 5,000. Society's mission was to improve the quality of produce through access to quality inputs and aggregate their scattered yield to find better markets.
Initial hiccups in collectivisation
The social and economic design of rural areas is quite complex, any change or intervention has repercussions and resistance. Alternatives are usually perceived with suspicion due to a lack of trust. The relationship between farmers and mandi intermediaries has been in existence for a long time and goes beyond the sales transaction. However, far from being egalitarian, the traders have always had an upper hand in the relationship, often trapping the farmers in cycles of debt. Farmers moving apart irked some people and they tried various means to break the society. In local markets apart from the resistance of market players, lack of market information and sales skills was also a problem.
Building up the business
In 2012, the Society opened an Input shop for seeds, fertilizers and pesticides. Its goal was twofold, firstly, to provide good quality fertilizers and disease-resistant seeds at a cheaper price to the members, and secondly, to create a sustainable income flow for society. Subsequently, it went ahead to get direct dealerships with several national seed and fertilizer companies to have better margins in hand.
Society’s executives slowly began to learn business skills, spending more time at the mandi to learn trends of price movement; seasonal price movements, and how traders gather their information and decide prices. They also started accessing commodity-specific mandis such as Turmeric in Nizamabad, Maize in Metpally & Nizamabad and Cotton in Adilabad. These practices improved sales and started generating profits.
Keeping the Cooperation Intact
The success of such a movement in the rural environment attracted the attention of certain sections and they tried to influence decision-making and work. Similarly, as the group became heterogeneous or attempted to diversify its members, conflicts and politics crept in. Because of its establishing principle as MACS, political or government intervention in decision-making was almost nil. On the membership side, Mr. Rameshwar narrates,
“We are successful due to our process of granting membership. Many other village farmers approached to be part of the society but before giving membership, society executive board evaluates the credibility of the farmer and his/her intention toward society's mission. Common intentions of members led us to smoothly manage the society for such a long period"
The deliberative process of accepting new members reflects in the membership count of the society. In the last 10 years, it has added a very minimal number of farmers, and that too only from the Mandal villages, The current membership stands at 227 and The Society boasts having 70 women farmers as their members as well.
Venturing into newer marketing platforms
Although the trading business was now stable, executives of the Society have always been looking for avenues where they can get better, reliable information about the market and prices. The conventional market place hasn’t been able to fully cater to this need and its associated risks.
NCDEX through its outreach programmes conducts awareness workshops for FPOs. In one of such workshops, the society came into connection with Kamareddy FPC, promoted by Reliance Foundation. The experience shared by Kamareddy FPC on price risk management through NCDEX platform, encouraged the Society to seek out details and a subsequent training programme was arranged by NCDEX officials.
NCDEX market provides price risk management tools (Futures and Options contracts) to the participants who want to hedge. Farmers/FPOs can know about the prices of the future and sell their produce even when the crop is not in hand and when they hedge and lock into a specific price, they receive the same price even if there are price fluctuations in spot market. Price discovery is transparent and the information about prices is readily available.
Sensing opportunities and potential fulfillment of mitigating price risk, the Society registered itself as a client on the Exchange platform in April 2022.
“Registration process is with NCDEX members and is free of cost. It was hassle-free as we had all the KYC documents‘’
In the same month, it sold 10 MT of turmeric for May Futures, and within 2 months it sold around 220 MT of turmeric on the exchange platform. The anticipation for better business opportunities is evident in Rameshwar’s comments,
“After entering NCDEX, we think we are in a good place to sell our produce and hedge our risks, also we are learning about price movements to make future decisions. We got good price from our first delivery transaction and earned around Rs 1,100 /qtl more than the market price. We will also get benefit from the subsidy scheme for FPOs. We plan to hedge around 500 mt turmeric in next season subject to price movements”
Stepping into a brave new world
The Society is looking forward to strengthening its input business in the future through negotiations on better margins. Their output business will focus on entering newer markets. The executive board members are keen to learn more about price movements and markets so they can make more informed decisions and guide the farmers.
Sri Venkata Sai Raithu Seva Sahaya Sahakara Credit and Thrift Society's net worth now stands at Rs 1.69 Cr. Its strong governance and clear mission to help members is a testament to the possibility of creating profitable and stable farmers' organizations.
Aleen Mukherjee is the COO at NCDEX Institute of Commodity Markets and Research (NICR). He can be contacted at firstname.lastname@example.org