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Grain revolution
The Hindu Business Line - 19 Nov 2004

Rasheeda Bhagat

What touches your heart at ITC's sprawling Choupal Sagar in Sehore is that along with the larger farmers, it has time... and space... for the small farmer who might have on offer just two bags of grains transported in a small cart.

              Mangelal Verma, e-choupal sanchalak in
            Kakarkheda near Sehore, Madhya Pradesh.

Kailash Pathdhar is a farmer from a village near Ujjain and has come to attend a workshop for e-choupal sanchalaks held at Bhopal by the ITC. Here sanchalaks (farmers trained to operate the computer and offer a myriad of services to fellow farmers) will rub shoulders with bureaucrats, agricultural officials and researchers, and discuss ways of improving their yield. All the farmers grow soyabean — widely known as sona (gold) in this region, wheat, channa, and sugarcane.
As the meeting resembling a mela is on, Pathdar's mobile phone is buzzing. Rahul, his 13-year-old nephew, has good news for him. Even though Pathdhar is away, his choupal (the centre that provides free information on agri-product prices) is active, and Rahul has clinched seven deals in which farmers from his choupal will sell their soyabean produce to ITC that day, at a price of Rs 1,200 per quintal. On each trolley the sanchalak will make around Rs 200 to Rs 250 as his commission.

Pathdhar says that the last time his computer went on the blink, "Rahul came with me to the ITC hub in Ujjain. By the time I finished my work, Rahul had been briefed by the engineer on how to get the computer working, and he set it right after reaching home."

ITC's 5,050 e-choupals have ushered in a revolution of sorts in the six States of Madhya Pradesh, Uttar Pradesh, Maharashtra, Andhra Pradesh, Rajasthan and Karnataka, servicing the integrated needs of 30 lakh farmers. While the core activity is to tell the farmer the price at which ITC will buy soya or wheat that day, the choupals have quickly expanded their activities to help the farmer with soil testing, combating pests, weather forecasts and improving yield through research inputs. Whether it is spreading awareness on consuming iodised salt — something that helps ITC's Aashirwad brand of salt — or getting life insurance (LIC and ICICI Prudential) the choupal plays a role.

Waiting for best price

Some of the smarter sanchalaks keep a sharp eye on the trend in future prices by looking at the price of deoiled soya cake at the Chicago Board of Trade and advise the farmers whether to sell that day or hang on for a better rate. The housewife too has an assured supply of LPG as ITC's choupals have tied up with BPCL for LPG supply. The sanchalak aggregates the demand and once in 15 days LPG cylinders are supplied.

If ITC's choupals are giving the traditional mandis (quasi-government agricultural marketing centres) a run for their money and taking away farmers' patronage, it is not without reason. As Pradeep Bhargav, a sanchalak from Ujjain points out, not only does the choupal give the farmer the price information and the freedom to decide whether he'll sell his produce that day or wait for a better price, the weighment at ITC's procurement centres is accurate and there is no wastage. "In the mandi, when the farmer took his produce, the trader would typically pick out a handful of grain, look at it and fling it, saying scornfully: What kind of grain have you brought.. yeh tau bekar hai (This is useless). What this does to the self-respect of a farmer, who has toiled for months to harvest his crop, can be best understood by another farmer. More than being shortchanged in the price or weight, such arrogant behaviour shatters him."

S. Sivakumar, Chief Executive, Agri Business, ITC, says that what started as an agriculture supply chain initiative for ITC in 2000, has evolved into something which can not only empower the farmer through information and freedom to sell as and when he decides, but also service a whole host of needs. The `malls', known as Choupal Sagar, will eventually become a one-stop halt for the farmer... a place where he can bring his produce in a trailer/trolley, sell it, get cash on the spot, buy whatever fertiliser or pesticide he might require, pick up diesel from the BPCL outlets at the malls, load the vehicle and make the journey back home.

The festival season is of course an ideal time to buy the consumer durables, provisions, clothes and so on, that the glittering mall is stacked with. But with a farmer getting an average of Rs 50,000 for a trolley loaded with soyabean, and that too in cash, there is bound to be some impulsive shopping at the mall.

So how difficult was it to train the sanchalak, essentially a rural farmer, to operate the computer?

"We had no hesitation about their ability; the only question was on time. In June 2000, while training the first batch of sanchalaks, we kept aside two days but they took in the whole thing in two hours and said what next? They have business acumen; if you can demonstrate value and benefit for them, they catch on very fast. If something has no value, they are not bothered; for us too it has been an educating experience to find out what they are not interested in!"

                   A farmer in Sehore near Bhopal.

Farmer after farmer in the villages we visited around Sehore, about 38 km from Bhopal, said he had stopped going to the traditional mandi to sell his produce, and was happy selling his ware to the ITC, where he not only got the right weight and price for his produce, but also cash on the spot and agricultural inputs like fertiliser or pesticide at a discounted rate. But it would be incorrect to presume that everything is hunky-dory and the Indian farmer is having it good as never before.

Hard-nosed business venture

After all, ITC's initiative is a hard-nosed business venture that has eliminated the middlemen as far as procurement of raw material for its branded products and exports is concerned. So unless the farmer is able to provide quality product in ample quantity, the choupal venture will not be a success. Unless the farmer has a bumper crop, the white goods in the glittering mall will not move.

Take soya cultivation in MP; it is largely rain fed and requires well-distributed rainfall for the dana (grain) to be like sona. While there was a bumper soya crop in India last year at 6.8 million tonnes, the highest ever, this time thanks to erratic rainfall, the tonnage came down to 6.1 million. Even though the second largest ever in India, the yield per acre came down from 4-5 quintals last year to around 2.5-3 quintals. Considering that the average landholding of an MP farmer is between one and two acres, this would mean an income of around Rs 7,200 for six quintals.

But, as Mangelal Verma, the sanchalak of Kakarkheda, about 48 km from Bhopal — the last few km of which is accessed through a back-breaking ride on an apology of a road — points out, the cost of agricultural inputs continues to go up. "We were promised six hours of power supply by the BJP government in MP, but we hardly get two hours of electricity, we have to depend wholly on diesel. The hike in diesel prices will kill the farmers." He has 40 acres of land and at a stretch needs to get diesel worth Rs 3,000.

Ghisilal Verma, a farmer from the same village with a landholding of 30 acres, says he got only 1.5 to 2 quintals of soya per acre this year. And yet he is sitting on his entire crop, waiting for the price to reach Rs 1,500 a quintal before he will sell!

Even though he might be aiming for the moon, it was heartening to find a farmer who hopes to dictate his price to the market and obviously has the financial muscle to wait for it. "I'm prepared to wait till April by which time my wheat crop will be ready. At that time I'll sell everything, whatever be the price".

But on the whole this Diwali was good for soya farmers. "It was not like last time of course, but I was able to buy fertiliser, diesel and some clothes for my servants. I told my family to wait for their share of new clothes for a few more months."

But Mangelal, the sanchalak, is happy with his income. "I did buy clothes worth Rs 2,000 for my family from the Choupal Sagar at Sehore. I found the clothes not only of better quality but cheaper compared to the store in Sehore where we normally buy our clothes."

Obviously the sanchalaks are better off compared to the other farmers, as their new role gives them additional income. And, typically, the sanchalak has more land. He is also more educated — both Mangelal and Ghulab Singh, sanchalak of Bhavkhedi, are graduates — and well respected in the village. As L.V.L.N. Murty, Business Development Manager of ITC, Bhopal, puts it, "The sanchalak is the karta - dharta of the village in good times and bad. As we also sell insurance through the choupal, in times of death, he assists farmers in getting the claim and in good times helps them get the best possible price for his produce, helps out with advice on his crop, pests, etc."

Suvesh Kumar Suresh, ITC's co-ordinator for social initiative, admits that this year profit margins have come down for farmers because of the rising cost of agri inputs. "Hence we've started low-cost agricultural services in the region; we give them vermin compost and other inputs mainly for organic manure production." The farmers of these villages have pinned a lot of hope on the artificial insemination centre for cattle put up by ITC in Bhavkhedi village and, after two years, when the new stock is ready, they hope their milk production will more than double.

From labs to fields

Emerson Nafziger, Professor of Crop Sciences at the University of Illinois, who is in Bhopal to participate in the farmers' workshop, has been coming to Madhya Pradesh for four years after the India Soya Forum first invited him in 2001. He sees "a lot of promise in this venture. Anything that brings farmers and researchers closer together should work. But one of the unknowns here is how neutral companies can be."

When it is pointed out that ITC does not shy away from its interest in this venture vis-à-vis procurement for its business ventures, he says, "Oh yes, and lack of neutrality is a problem only if it results in less production and lower profitability of farmers and that's not in anyone's interest."

When asked about the choupal initiative benefiting farmers, Dr P.S. Bhatnagar, former Director of the Soyabean Research Institute, and now an advisor to ITC, says that traditionally in Indian agriculture there is a disconnect between the farmers and the researchers and "my dream is that farmers should be able to harness the potential of researchers. That is happening here. Our objective is to increase the profitability of farmers, but that will happen only when the yield goes up and their cost of production decreases. But the farmers are certainly benefiting; they are buying tractors and two-wheelers, and the children of many farmers are now going to private schools, a sign of progress."

A factor crucial to the growth of the choupal concept — ITC hopes to eventually reach at least one-tenth or 10 million of India's 110 million farmers through the choupal — is the response from middlemen. In October the grain merchants of MP observed a one-day hartal against the MP government allowing "multinationals" like the ITC to buy grains directly from the farmers, bypassing the traditional mandis. That the squeezing out of the middemen or traders is a concern with the government could be seen at the Bhopal workshop, where MP Chief Minister Babulal Gaur asked the farmers if they thought the traders too should be involved in some way in such initiatives. The resounding `No' was a clear indicator of what the farmers thought.

So will the middlemen make trouble? "They are of course trying to incite the farmers against the ITC and the choupal. But the Indian farmer is not a fool; he will sell his produce only where he benefits the most. Sometimes in mandis, by the time we found the price and reached it, the price would suddenly drop by Rs 20 to Rs 25. Now the farmer who has invested his time and money to hire a vehicle and take his grains to the mandi, can hardly bring it all back. So he did not have the choice that the choupal system, which is very transparent, gives him."

Sivakumar says that some of the middlemen in the mandis will get absorbed in the malls as samyojak (co-ordinator) but only a small percentage. "So they will still be unhappy but they cannot sabotage something that benefits millions of farmers. Also, they have a fear of the unknown; the response of farmers to the choupal is so extraordinary that they worry if tomorrow anyone will come to the mandi at all. Of course this is an incorrect assumption because in no way can we handle 100 per cent of the Indian produce; we have only so much of the market share, so it's a lack of understanding."

But as more Indian corporates come into such ventures, as is already happening, more and more traders will get absorbed into the system. "Also, thanks to competition the mandis will have to get more efficient and the traders will have to complete. With their monopoly ending the days of free lunch are over... . millions of farmers cannot be held to ransom anymore."