Fostering steady growth of an FPO through a 3-Fold model of Technical, Financial and Market linkage
Updated: Jul 28
Vrutti’s innovative Business Acceleration Unit (BAU) has played a crucial role in providing Chitravathi FPC with ecosystem enabling services such as backward linkages, accounts maintenance and financial linkages. These parameters have helped increase farmers’ incomes almost three-fold and provide important insights into the kind of support necessary to sustain FPOs.
Turning a constraint into an opportunity
Chikkaballapura district in Karnataka, around 60 kms from Bengaluru is a drought-prone area with an average and erratic annual rainfall of 677 mm. Groundnut and maize are two important crops grown on these drylands. Fruits and vegetables have huge potential to improve the lives of the farmers in this cluster if any institutional mechanism could ensure better price realization of the produce for small and marginal farmers. Farmers though have limited access to alternative channels to sell their produce especially when the local market prices are low. The perishable nature of horticulture produce presents an additional challenge, especially without cold-storage facilities. To overcome this problem, farmers were collectivized and mobilized under Chitravathi Farmers’ Producer Company Limited (CFPCL), registered in 2016 at Thimmampalli village, Chikkaballapura district, Karnataka with the funding support of NABARD and Vrutti Livelihood Impact partners as the promoting institution. CFPCL has a geographical spread of 44 villages, 9 panchayats, 68 Joint Liability Groups (JLGs), covering 1503 farmers with a share capital of Rs. 11.2 lakhs. The main objective of CFPCL is to reduce the role of intermediaries in the marketing of agricultural produce while reducing the risk, and cost of cultivation for the farmers.
Creating trust through transparent governance
The FPC is mainly involved in promotion of Good Agricultural Practices (GAP), technical training, capacity building, financial services (facilitating Kisan Credit Cards, enterprise loans), promotion of Agri Allied Enterprises, supply of agricultural inputs and output business - vegetable, Maize marketing (forward and backward integration), and farm gate procurement. The services provided to members by the FPC is part of 3-Fold model which is about building wealthy, resilient and responsible farmers.
Inputs are directly procured from input dealers and sold at relatively low prices to the member farmers thus reducing the transaction cost for them. A significant increase in the revenue (98.2%) of FPC was reported during 2019-20 (Rs 40,000 to Rs, 23 lakhs). The spike in the business revenue can be attributed to its access to three retail outlets and CFPCL’s partnership with major players like Big Basket, Way Cool, Big Bazaar, etc. which has also provided opportunities for expanding its business activities. Transparency in governance of the FPC has built the trust of farmers in the long run. For instance, during board meetings, financial statements – receipts and payment, receivables and payables, profit and loss statement for the period are discussed along with key updates of the FPO. Besides, the team and BOD are part of a Whatsapp group for regular updates such as daily sales in each outlet.
Developing market linkage for perishables
Fresh horticultural produce is highly perishable with some estimates suggesting a post-harvest loss of 30 to 50% in fruits and vegetables. The loss occurs due to poor pre-production and post-harvest management as well as a lack of appropriate processing, storage, and marketing facilities. But CFPCL has its strategy to deal with vegetables throughout the year without any cold storage facilities. CFPCL has made association with seven corporate companies for output business and farmers receive a higher price than the market rate for the quality produce. BAU is established by Vrutti at the district/cluster level to develop a strong ecosystem in the agricultural sector so that farming enterprises in these clusters become sustainable. Mr. Nagaraju, CEO of the FPC is of opinion that the producer's share in consumer rupee has marginally increased through direct marketing and the FPC enjoys better bargaining power. More importantly, the FPC’s intervention saves the farmer time in travelling to the market, as the produce is procured by FPC at the farmgate, and payment is ensured on time.
Activators as rural entrepreneurs key for servicing orders from corporates
Quantity, timely delivery, and quality produce are need of the corporates. To comply with these needs, CFPCL facilitated the training of ‘Activators’. Activators are field level staff who coordinate the activities of FPC with BAU for smooth conduct of the operations. Demand aggregation of produce is done by the activators, and one activator takes the responsibility of five villages. Activators are actively engaged with farmers and provided guidance on crops to be grown, better farming practices, market information and other farming related information at the village level. These activators predict the yield of any crop before 3 days of the harvest and communicate it to the buyers through FPC, then harvested produce is supplied to the buyers. The price for the product is fixed based on open market prices in every indent (always higher than the market price).
Communicating quality parameters to farmers
Maintaining a farmers’ database has helped in the better communication of quality parameters of the produce, market-related and extending timely service to the farmers. Regular field visits by the FPC staff are required for monitoring of standing crops/produce, and there should be minimum of 80% match with the quality parameters as prescribed by the buyers. Mr. Jagadeep, personnel from Vrutti mentioned that the proportion of farmers participating in output business is around 30%. Out of the total produce procured, prescribed quality produce is sent to the buyers and the remaining produce is sold in the local market. Payment is made to farmers regularly and farmers expect higher prices from the company for their produce as they are providing good quality produce.
Figure 4: Ramadevi (Agri Business Advisor), Shashikala (earlier ABA, now Activator), at the CFPCL outlet which supplies inputs in a cluster of 16 surrounding villages
Leveraging greater institutional support
FPC has received good institutional support from Vrutti, NABARD, APEDA, ICAR -IIHR, and KVK. IIHR and KVK Chintamani provided training support to the FPC. Vrutti has supported desilting activities in the villages through CSR fund. NABARD provided a Business Development Assistance (BDA) fund of Rs. 5 lakhs and training related to market and financial linkages. APEDA and Karnataka State Agricultural Produce Processing and Export Corporation Limited (KAPPEC) extended support for Rose onion variety export, which has Geographical Indication (GI) tag from the Chikkaballapura district. CFPCL is aiming to supply more than 1000-1500 tons of Rose onion every year starting from this season.
Future line of business
Procurement and marketing of produce with reduced transaction cost are the major achievements of FPC perceived by the farmers, says Mr. Venkateshappa, Chairman of the FPC. Chitravathi has performed well in marketing their produce, contract farming, and value addition of few commodities. Two acres of land is being purchased by the FPC to expand its business activities including the establishment of Sheep/goat value chain. Value addition of tomato, tamarind processing, and sauce preparation are perceived as employment generating opportunities and as future line of business for the growth and development of the FPC. Chitravathi is confident about sustaining its business even if Vrutti’s support is withdrawn and grow organically over the years with the greater contribution of various stakeholders involved in the growth and development of FPC.
Pallavi GL is an FPRM student at IRMA. She can be reached at firstname.lastname@example.org, Gayatri is associated with MYRADA, Balakrishnan S is the CEO of Vrutti, and Parthasarathy T is the CEO of SkillGreen.