As in the case of many developing nations, smallholder farmers play a key role in the Indian agriculture sector. About 80% of the land holdings in the country are estimated to have an average size of 1.5 hectares, and they serve as the primary source of income and livelihood for millions of smallholder farmers. A consequential change in the lives of marginalised farmers can thus be effectuated by empowering them with the right information, tools, and services that could increase their farm productivity and incomes. The Department of Agriculture and Cooperation (DAC) under the Indian Ministry of Agriculture sought to collectivise small and marginal farmers into Farmer Producer Organisations (FPOs). The FPO model has since become an effective channel to address diverse challenges in agriculture, particularly those relating to improved access to investments, inputs, technology, and markets. The FPOs leveraged the collective production and marketing strengths of the farmers to help improve their income. Nearly a decade ago, the DAC tied up with the state governments to launch the first 250 FPOs with an average of 1,000 farmers in each. Presently, the Government in the Union Budget 2019-20 has announced the establishment of 10,000 new FPOs in the next five years to ensure economies of scale for the producers.
In Conversation With
SRIDHAR EASWARAN
Sridhar Easwaran is a career banker with over 35 remarkable years of experience in Banking Operations, Project Management, and Risk Management. He started his professional journey at PricewaterhouseCoopers (PwC) and later moved on to HDFC Bank, where he, along with his team, played a key role in launching Retail Banking Operations. He was the COO of Societe Generale before taking up his current role in Samunnati as one of its founding team members and the Senior Vice President for the FPO division. For Sridhar, his current role at Samunnati makes it possible to pursue both his career as a banker and his desire to contribute to the agriculture sector by designing customised and most effective solutions, products, services for the different players in the agri value chain. Started in 2014, Samunnati is steered by a unified vision ‘to make the market work for the smallholder farmers’ by making the value chains operate at a higher equilibrium. Samunnati has taken a value chain-based approach for all its agriculture solutions and has its presence in 19 states across the country.
Your extensive experience across diverse operations in the banking industry must have given you the opportunity to witness a remarkable transformation over time. What has been the role of technology in this transformation, particularly in the last five years?
Sridhar Easwaran: Technology has indeed played a tremendous role in agriculture. To quote a few cases, the use of a digital platform facilitates FPOs to maintain a record of crop cycles for all its member farmers. This serves as an alternate agri-data that makes the appraisal process hassle-free for the loan officer. The reports and analytics on what crops have been sown and what inputs were used also increase operational transparency, thereby enabling the FPOs to sell to the mainstream markets at a better price. Likewise, with the advent of technology, farmers now have access to good agronomy solutions from pre-sowing to harvest, through their mobile phones. In case of a pest infestation, a farmer can get a timely response by tech players like CropIn just by sending a picture of the infected plant to the support center. The farmers can also benefit from the digital marketplace to know that day’s commodity price in the market and identify the right buyers for their commodity. It is in such varied ways that technology ensures all information is available to the farmers at their fingertips.
Could you tell us a little more about your role in the capacity development of FPOs at Samunnati?
Sridhar Easwaran: When Samunnati initially started working with the FPOs, we observed that many of FPOs’ operations are at different maturity levels, and they lacked in governance as well as legal compliance. Moreover, information dissemination from the top level to the farming community was not sufficient. Consequently, the member farmers were not availing any of the services that FPOs offered and continued to farm as they normally would. Hence, it was crucial to build the capacity of these organisations and extend our services to more number of farmers. Samunnati’s capacity-building includes providing training to the FPO’s board of directors with respect to bringing in governance and efficiency within the FPO to enable their self-sustainability in another two or three years. Samunnati provides technical training to the member farmers to encourage their continuous engagement with the FPO to increase the turnover and profit margins. This engagement also ensures that the member farmers benefit from the input and output services made available at a subsidised price, along with the advisories that FPOs will provide throughout the crop cycle. As a result, the cost of cultivation comes down, and farmers realise a better price for their harvest.
What is the AMLA framework and what are its advantages for the FPO?
Sridhar Easwaran: Samunnati, as part of the institutional capacity building program, developed and deployed a growth-oriented approach known as the AMLA [Aggregation, Market Linkages, and Advisory services] to empower the agricultural community by helping them build better market linkages and using relevant technology and skills for growth. Through the Aggregation model, we are able to aggregate the demands of all the member farmers to improve the bargaining power for the FPO. This facilitates good discounts from the input suppliers for the inputs the FPO purchases, which automatically scales down the cost of cultivation. Similarly, on the output side, the FPO ties up with institutional buyers and sells the aggregate output of the farmers for a value higher than what an individual farmer typically sells for. Speaking of Market linkages, Samunnati is working in 19 states as of today, which makes it possible for us to connect many of these FPOs for their commodities to different markets. When it comes to Advisory, many farmers are not even aware that there are good climate-smart technologies or that more potent crop protection solutions are now available. So, Samunnati collaborates with diverse ecosystem players, including technology enablers like CropIn, to take POP and agronomy services to the farmers through the system of FPOs.
Samunnati works with over 500+ FPOs and 330+ Agri Enterprises in 19 states across the country, which in turn benefits over 4 million farmers. Having had that kind of an impact, what makes an NBFC an essential element in the progress of smallholder farmers in India, provided that numerous banks also provide agri-credit to them?
Sridhar Easwaran: For a farmer, one of the challenges in securing a loan is the need to furnish collateral or security, which many smallholder farmers are unable to. The lack of reliable data thus raises the concern around whether the farmer will be able to repay on time. Samunnati, on the other hand, does not offer a one-size-fits-all solution. Instead, we align the loan repayment with the harvest period to make it convenient for him to repay when there is assured cash flow. Apart from solutions being agnostic to the tenure, there are other benefits to our solutions. Firstly, our loan value ranges from as small as INR 5,000 to up to INR 5 crore for players higher up in the value chain. Secondly, the solutions are customised and are aligned with the crop cycle. We offer a 90-day solution to a tomato farmer and a solution that spans the entire year for a banana farmer. In both cases, the farmers can repay the amount after the sale of the produce. This has been our model, and it has proven to be successful for us.
Close to 70% of the Indian population depends on agriculture for a livelihood, and a significant number of farmers live in remote areas. How do you think the government and lending institutions can ensure these farmers have better access to credit and other services that can help improve their agricultural productivity?
Sridhar Easwaran: Several microfinance institutions provide remarkable financial support for various agricultural activities. However, with FPOs and dairy cooperatives getting prominence, it is vital to institutionalise these organisations and improve their governance. Capacity-building efforts, such as those of Samunnati’s, provide the necessary training for the farming community and actively engage with organisations to avail the benefits and improve their income. All this put together ensures that the FPO generates profit for consecutive crop cycles and can demonstrate that they are able to self-sustain. As a result, the local credit banks are more confident about lending to FPOs and cooperatives. Apart from engaging with the organisations, we need to also educate farmers to transact more through banks, be it for purchase of input, the sale of produce, or withdrawals for any other purpose. The record of these digital transactions will help guarantee the creditworthiness of the farmer and enable the banker to grant credit to the farmer based on his banking trends.
Today, the use of technology for agricultural activities is enabling producers around the world to enhance farm operations, reduce crop loss, and ensure high-quality produce. Have you witnessed a major transformation in the way smallholder farmers approach agriculture after adopting digital farming solutions?
Sridhar Easwaran: I would say that it is too early to comment; however, the mobile banking revolution has highly benefited the farmers. It is now the responsibility of the ecosystem players to continue educating them on the use of digital technologies. To give an example, farmers may not be interested in technology unless there are enough pilot projects, or even hesitate to participate in pilots as their small farmlands are their only source of income. This is where FPOs play a critical role in providing them with all the necessary services. To ensure the adoption of a technology solution, farmers need to be handheld for the first few crop cycles, rather than just demonstrating and not following it up. Even if it is a one-time training, tech-providers need to be in constant touch with the farmers through the FPO until they start seeing the benefits. Once they observe a significant impact on the income, word-of-mouth will ensure the participation of more number of farmers. It is then up to the FPO or the cooperative society to continue disseminating the information.
What do you believe are three important factors that ensure the growth and sustainability of FPOs?
Sridhar Easwaran: First and foremost is the governance of FPOs, as I have mentioned previously. Second, financial capabilities, in terms of how the FPOs business plan is aligned and how they will work towards achieving it, and also maintenance of their books of record and other legal compliance aspects. The third would be their market capabilities. FPOs that struggle to find the right markets need to employ a buyer-driven strategy that focuses on understanding consumer demands and managing the supply of produce accordingly. Supposing a small portion of the harvest is not sold, they can still find buyers in the local market. But the focus should always be on the consumer, and then they can align all their activities downstream.
In your opinion, how does technology strengthen the value chain for stakeholders in the agri-food ecosystem?
Sridhar Easwaran: If you look at the agri-food value chain from a consumer’s perspective, food safety is paramount to them. They are increasingly aware of what they consume, where it comes from, and the quality and hygiene of the product they buy, to the point of some opting for only certified organic products. Hence, end-to-end traceability plays a significant role in the consumer’s buying decisions, and this is made possible today by simply scanning a QR code. The traceability solution helps maintain an audit trail of all activities from the point of crop production to its movement along the value chain until it reaches the end consumer as a packaged product. If each player in the value chain maintains a clear record of the activities at their level and continues adding to that traceability chain, it makes it easier towards the end to certify the product accordingly by only looking at the history of the finished product.
On a closing note, do you have any advice for the agroecosystem, particularly for the younger generation?
Sridhar Easwaran: For many of us, the grass is always greener on the other side. People in rural farming communities may be attracted by the buzz of city life, which may contribute significantly to their migrating to cities in hopes of better job opportunities. This brings me back to the point that a lot of work needs to be done to make all the farming communities self-sustained. Government entities and NGOs need to provide the current generation of farmers with adequate value-added services to help generate a good income and to prevent them from migrating. The biggest challenge for the farming community here is the availability of sufficient labour. The aged population does not have the strength to continue farming, and their younger generation is seeking more profitable job opportunities. Also, there are other challenges unique to agriculture that impact productivity and profitability — climate issues, weather-related risk, pest infestations, and the like. The need of the hour, thus, is to encourage them to take up farming by providing them with the best of technology and ensuring that they make a decent income. Besides, a wide range of farm equipment and mechanisation is available to reduce the need for manual labour. Hence, ‘smart’ work will reduce the cost of cultivation and also improve the quality of produce, which will together improve the profit margin. If this can be achieved, then we will not see people migrating from villages to cities.
