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Modern retail offers wide choice, farmers want to exercise it all

Modern retail offers wide choice, farmers want to exercise it all
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First Published: Mon, Feb 11 2008. 11 59 PM IST

In season: Retailers have helped farmers choose who they want the buyer to be. Some, however, still prefer to go with the open auction system of the agricultural produce marketing committees. (Photo:
In season: Retailers have helped farmers choose who they want the buyer to be. Some, however, still prefer to go with the open auction system of the agricultural produce marketing committees. (Photo:
Updated: Mon, Feb 11 2008. 11 59 PM IST
Pune: When he has a ready crop, Dnyaneshwar Nikam’s day would often start with a phone call, typically to the local wholesale agricultural produce marketing committee (APMC) market, which has for decades been the only wholesale buyer of his produce.
These days, his phone list is a lot longer. It includes officials of Godrej Agrovet Ltd, Aditya Birla Retail Ltd and Reliance Retail Ltd and he carefully compares prices before promising delivery of his ripe but unharvested crop that day.
Nikam, who has a 10-acre farm in Pune’s Ranjani village, has heard Subhiksha Trading Services Ltd may also start buying from around here and is excited because, he says, “The more companies there are, the better it is for us because we can choose where we will get better rates and want to sell our produce.”
In season: Retailers have helped farmers choose who they want the buyer to be. Some, however, still prefer to go with the open auction system of the agricultural produce marketing committees. (Photo: Harikrishna Katragadda/ Mint)
The next day, when the Godrej officials land up at his farm, Nikam makes sure he lets them know that Birla offered Rs7 for a kg of cucumber and ITC offered him Rs8 for it, while Godrej offered just Rs6 the previous day. The key to selling to modern retail is to ensure that he sells to more than one retailer, he says. But also letting them know that.
Nikam grows tomatoes, watermelons, onions, brinjals, capsicum and chillies on his farm, apart from oranges and chickoos. He sold several of these vegetables to Godrej the previous day.
Driving past the procurement offices that dot that landscape around rural Pune’s vegetable farming strip, it is clear that change is in the air.
For the first time in India’s history, modern retailers are offering farmers a choice of a buyer other than the traders at government-controlled APMC markets. But some farmers also say this may be something of a limiting choice because they could end up selling to the only buyer who comes to them rather than selling through the APMC’s open auction system that ensures several buyers bid.
As Indians prepare for the army of retailers, who are drawing up plans to open stores in all sizes and price-ranges for them to buy from, the nascent industry is offering selling choices for farmers as well—from cooperatives to big retail firms to higher rates from APMC traders and even farmer-owned stores.
And the way they choose to sell is changing rapidly.
One recent winter day, Godrej Agrovet’s eight gourmet food and grocery stores, Nature’s Basket, paid less than the rate in Mumbai’s wholesale market for beetroots, peas and cabbage; matched rates for brinjals and tomatoes; and paid higher rates for cauliflower and cucumber.
Except, while Agrovet picks up the produce from the farmers, the cultivators themselves usually spend Re1 a kg to transport vegetables to the APMC market and Rs2 per 10kg for loading and unloading it, which has to be factored into the cost when selling to the wholesale market.
Godrej has fixed higher rates for cauliflower for the next three days because they expect some shortage of supply.
“There are immense benefits from direct sourcing and price is probably the least of them,” says Balram Yadav, executive director of Godrej Agrovet, which has been buying in the area for four years. “There is a substantial benefit in being able to get good quality stuff that we can get all year round, which we don’t have to grade a lot.”
But not all farmers see choice as good.
Ramchandra Khokale, who is carefully tending to his patch of french bean and broad bean saplings near Pune district’s Narayangaon, says he will only sell produce at the local APMC market.
Khokale, who has a 4-acre farm, gives precise directions to get to the Birla and Reliance offices around here. But he will not sell to them because “the companies give around the same rate as the APMC. They factor in the fact that we will save on transportation costs and fix rates accordingly. Also, while rates at the APMC could vary and get higher during a day or week, company rates are fixed at least for the day.”
In fact, most fruit and vegetables in India still reach homes through APMC markets, set up more than four decades ago. According to the APMC Act, all fruit and vegetables in a city had to come through APMC markets, where traders sold farmers’ produce to the highest bidding retailer in the auction. But at least a dozen states have amended the Act to allow retailers to procure directly from farmers.
While retailers sourcing directly from farmers cuts out layers of middlemen and has sometimes helped get better rates for farmers, experts say it may not always work.
“Modern retail offers a good possibility for farmers, but it will not automatically benefit farmers,” says S. Sivakumar, chief of ITC Ltd’s agribusiness, which also buys vegetables in this area for its Choupal Fresh stores. “The natural instinct of a retailer is to squeeze a farmer. We need a business model that will be a win-win situation for all, which is a precondition for farmers to benefit.”
He has created a model, linking each of his stores to a cluster of farmers who supply to it. They get inputs on how to improve productivity and market requirements and the stores get a steady supply of quality produce.
Godrej’s Yadav, too, says, “The key to make direct sourcing work well is to ensure that you don’t just buy A grade stuff and leave the rest because the farmer will take it back to the traders. Instead, you need to work with the farmers to improve quality and then buy everything.”
Farmers say while having just one retailer buy at the farmgate can squeeze them on price, they also incur transportation and loading costs in selling to the APMC and are sometimes cheated by traders there. So, farmers are also themselves trying several models, apart from selling directly to retailers or APMCs to benefit from modern retail.
In Pune, the Confederation of Indian Horticulture, which includes fruit and vegetable growers, has decided to start its own chain of cooperative stores to reach customers directly. For other farmers, this has been an entrepreneurial opportunity.
When Bhausaheb Jadhav, who had 50 acres of sugar cane fields, saw the first supermarket chain opening up, he decided to shift to vegetables and tried convincing other smaller farmers too. Rural Pune is also dotted with sugar mills and telling farmers there was life beyond sugar cane was hard. Ten years later, Jadhav juggles two cellphones, numerous orders for produce from retailers and more than 150 farmers, who route supplies to modern retailers through him.
Every day, Jadhav checks how much and which vegetables his retailers, including Hypercity, Spencer’s, Foodland and Reliance Fresh, need by noon. Accordingly, he tells his farmers, whose farms range from 2-20 acres. They harvest, grade and sort when Jadhav’s trucks come around. A second round of sorting and packing takes place at his collection centre after which farmers are paid. He delivers it to the retailers overnight and they hit the stores in the morning.
Jadhav earns a commission for his services, farmers get a range of buyers and retailers get larger and secure supplies for their stores. He and others in the area who run similar cooperatives have connected farmers to the ways of modern marketing in interesting ways. On Wednesdays, his farmers help Spencer’s, a supermarket chain from RPG Enterprises, sell all leafy vegetables at Rs2 a kg. This is billed as “Hara Bhara”, or green, Wednesday. Jadhav ensures that there is extra help on hand to harvest, supplies get to retailers and farmers sell at squeezed margins, on Wednesday. In return, Spencer’s sells twice the amount they usually do, ensuring farmer incomes are not dented by the lower prices.
“Retailers buying directly from farmers can work if the prices they buy at are transparent, giving the farmer a real choice,” said M.S. Swaminathan, eminent agricultural economist. “Big retailers should publish the price at which they are buying from farmers at their procurement centres so that farmers can then judge where to sell their produce.”
For now, Nikam is trying to do just that.
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First Published: Mon, Feb 11 2008. 11 59 PM IST