New Delhi: Chander Singh and six other faramers huddle around a computer in the village of Bhaukhedi watching soya bean prices rise. While the nearest road is a kilometre away, a portable satellite receiver connects them to the Internet.
Singh tripled his income over the past six years by selling beans to ITC Ltd, a 96-year-old tobacco and food company that has built a network of computers to provide information to farmers and convince them to buy the company’s products. Growers who use the service say they receive higher crop prices, cheaper pesticides and scented hair oil that keeps their wives happy.
“Access to information has changed my life,” says Singh, 33, wearing a knee-length white tunic and baggy pants against the 36-degree Celsius heat. “Knowledge of new farming practices has raised yields.”
Indian retailers are teaching farmers how to plant crops and fight pests to win rural customers as the country’s economic boom spreads to the countryside. Consumer spending in small towns and villages across the country is forecast to rise 60% Rs74,000 crore ($18.1 billion) by 2012, according to an industry lobby, the Associated Chambers of Commerce and Industry of India.
Rural productivity has increased since 2003, when the government allowed farmers to sell crops directly to wholesalers and abolished state-run monopolies that paid fixed prices to ensure affordable food supplies.
Higher incomes are attracting supermarkets, which are challenging small merchants who have traditionally sold a narrow range of mostly locally made goods. Reliance Industries Ltd, India’s biggest non-state company, and four other firms plan to build 2,900 rural stores in the next five years.
“The landscape of villages is changing,” says K.G. Kshirsagar, an economist at the Gokhale Institute of Politics and Economics in Pune, Maharashtra. “There are a lot more two-wheelers and cars. Mobile phones are becoming common.”
To tap into that growth, ITC is building a national crop procurement network of 6,500 “e-Choupals,” kiosks named after the Hindi word for village meeting place. Farmers sell their crops online, then deliver the produce to supermarkets where they can buy everything from cookies to pesticides.
“Everyone comes here,” says Gulab Singh Verma, 38, a farmer who works part-time running ITC’s Bhaukhedi kiosk in Madhya Pradesh. “This is our connection to the outside world. Villagers talk about politics, read newspapers on the Internet, check weather reports, learn about new farming practices and place orders.”
The kiosks also provide small holders with an alternative to grain markets where farmers sell to government agencies and corporate buyers such as Cargill Inc., the largest US agriculture company.
“It takes me the whole day at the grain market,” complains Shriram Kedia, 75, as he buys sugar, cooking oil and toys for his grandchildren after delivering soya beans to ITC’s buying center. “Here it takes about an hour. I get better prices and I am not cheated in the weight of my produce.”
Women buy individual sachets of jasmine-scented hair oil at the ITC centre, allowing them to avoid the local man who dispenses his product from drums strung off a bicycle.
Shopkeeper Dharmendra Kesari says he’s being forced to respond to threats from corporate retailers. While his 80-sq. ft shop still stocks sacks of loose tea and wheat, he now sells expensive branded shampoos and cookies.
“People are demanding products they see on television,” he says.
For now, Bhaukhedi’s prosperity isn’t typical of rural India, which suffers from poverty and rising suicide rates among heavily indebted farmers. Farm production increased an average of 2.3% annually over the past five years, compared with 8.8% industrial production and 9.3% for services.
Productivity is low because 60% of plots are smaller than one hectare (2.5 acres) and 40% lack irrigation, according to the National Commission on Farmers. Poor roads, limited telephone services and a lack of power in more than one lakh villages also constrain growth.
“The single-biggest obstacle is electricity,” says S. Sivakumar, who heads ITC’s agriculture arm. “For people to access the Internet, the access to the computer has to be reliable.”
Prime Minister Manmohan Singh wants to boost farmers’ prospects by spending Rs1.76 lakh crore between 2004 and 2009 to build roads, provide telephones and link villages to the power grid. The government is calling on state-run banks to increase loans to farmers by 18.4% this year.
What farmers need to compete are affordable supplies and practical advice, says Ajay Shriram, chairman of DCM Shriram Consolidated Ltd, a fertilizer and petrochemical maker that plans to open 200 rural supermarkets by 2009.
“Until the farmer benefits and makes his extra margin, we can’t get anything out of it,” Shriram says.
The company’s strategy is on display at a rural complex 125km from New Delhi. On a baking afternoon, 60 farmers crowd into a DCM Shriram warehouse to hear a lecture on potato growing methods before heading to the adjoining supermarket to check out the latest goods.
“Once you benefit from their advice, it becomes our moral obligation to purchase goods from their store,” says Prem Sagar, who grows mustard, potatoes and wheat on his 48 acres. By providing advice to farmers, companies are helping them produce more with less, says A.N.S. Raghu, Madhya Pradesh’s deputy director of agriculture. Soya bean production in the state’s Sehore district rose to 3,39,750 tonnes last year from 2,65,400 tonnes six years earlier as the amount of fertilizer used per hectare fell 25%.
“Farmers are using the Internet to get more information, improving yields, cutting consumption of inputs and ensuring higher prices for their produce,” Raghu says.
Critics say the free market will ultimately lead to lower prices for farmers and higher costs for consumers.
The Communist Party, a member of India’s ruling coalition, has called for the reinstatement of price controls because it says commercial farming breeds speculation. Futures-trading in rice and wheat was banned on 28 February, after consumer prices rose 7%, threatening the government’s prospects in key state elections completed this month.
As corporate crop buyers develop national purchasing networks, they may end up abusing farmers, says Krishan Bir Chaudhary, executive chairman of Bharat Krishak Samaj, a New Delhi-based lobby group for five million farm families.
“When they capture the whole market then they will play their game,” Chaudhary says. “They will decide the price for the consumer and fix prices for farmers.”
Of more concern to investors is whether a still slow growing rural market can support so many new retailers.
“Villages are unlikely to support more than one store,” says London-based Chakri Lokapriya, who manages about $275 million in Indian stocks, including ITC shares, for BNP Paribas Asset Management. “Companies have recognized that and not gone into head-on competition with each other.”
ITC is betting its village-based kiosks will help it win customers. Information is zapped to the kiosks via portable satellite receivers, allowing ITC’s prices to be update daily, along with comparative data from national and international exchanges.
Access to such information is boosting farmers bargaining power, says Kalyan Chakravorthy, who heads the agricultural advisory unit of Yes Bank Ltd, a lender to food processors that is partly owned by Rabobank Groep of the Netherlands.
“They were always at the mercy of the immediate buyer,” he says. “Three years down the line, you will see livelihoods improving.”
In Bhaukhedi, Singh and his friends elect to hold their harvest a few more days after watching exchange-quoted soya bean prices increase.
Singh says cheaper seeds and fertilizer from ITC helped him earn Rs1.5 lakh last year, income supplemented by renting out his new tractor at Rs300 an hour.
“Lowering my expense on inputs really boosted my income,” he says. “The choupal gave me information to improve productivity.”