So I watched the Tamil movie, Kaththi, the other day. It was a decent movie if one excuses the heroics of the typical Tamil hero and villainous of the typical Tamil baddie. The main plot of the movie is the unavailability of water owing to the over exploitation of water resources by big corporate companies.
While there is some truth to the story, I don't agree that just ensuring water alone can alleviate the problems faced by the farmers, though it could be a start. However, for farming to sustain itself as an income generating profession, a lot of lessons are to be learnt from the way corporate companies function.
The very mention of farmers adopting corporate practices can be equated from stupidity to blasphemy depending on who one speaks to. Generally, no one has a positive view on this. However, I strongly believe this needs to be the case because going forward the average Indian farmer's produce competes not with a similarly produced product from small farmers but products that are imported from other countries using superior technologies or produced/procured by local companies with strict standards defined about quality, quantity and pricing.
While there is some truth to the story, I don't agree that just ensuring water alone can alleviate the problems faced by the farmers, though it could be a start. However, for farming to sustain itself as an income generating profession, a lot of lessons are to be learnt from the way corporate companies function.
The very mention of farmers adopting corporate practices can be equated from stupidity to blasphemy depending on who one speaks to. Generally, no one has a positive view on this. However, I strongly believe this needs to be the case because going forward the average Indian farmer's produce competes not with a similarly produced product from small farmers but products that are imported from other countries using superior technologies or produced/procured by local companies with strict standards defined about quality, quantity and pricing.
Adopt / Innovate new hardware
Farming has been continuously evolving from being a manual labored industry to an automated industry just like most other industries from manufacturing to software. However, the average farmer in the country side is still largely using obsolete technology which probably is prohibitively priced and doesn't bring much value to the table. Technologies like Farmbot are a reality and the fact that they are open source means people can adopt and adapt it to local conditions better. Considering we are experts in jugaad, I think we have the capacity to bring newer tools and gadgets that work well in conditions prevalent in the country and this is very important. There are a lot of local factors that affects farming in our country ranging from natural factors such as climate, rainfall, soil, geography to social factors such as availability of labor, political patronage for crops which are better understood by locals and hence the need for technology that is developed locally.
Do not fear GM varieties / Blindly trust Organic farming
As the farmer upgrades the hardware, he or she cannot be left behind in getting the crop varieties right. Today a lot of discussion goes on about the benefits and ill effects of the Genetically Modified crop varieties and the need to take the Organic way of farming. The simplest thing to identify here is that both varieties come with its own set of problems and value. The GM crops can yield better quantity, use lesser resources while creating health issues for the consumers and bring down soil fertility. The Organic farming way yields lesser quantity and might use more resources in form of water and manure but is largely healthy and is more sustainable.
Understanding the problems and deciding for themselves can be left to the producer and consumer and all the government can ensure is proper communication of the good and evil in each crop. Later on the market forces would decide the demand, supply and pricing.
Financial Engineering
So where would the capital come in from, one might ask, to upgrade the hardware and the working capital to procure seeds and fertilizers. Well a corporate company would never use its own money to get into such business, they would put in a margin amount and raise debt from banks or markets or both. They call it leverage. A farmer needs to make sure he or she also follows the same route. However, he or she must float a private company or Limited Liability Partnership (LLP), create a Special Purpose Vehicle (SPV) and hedge risks through futures and insurance so that his or her personal wealth is shielded from the prying eyes of the banker. The fact is that the same routes available for industrialist to borrow heavily while transferring risks of failure to banks is available to everyone.
Play the Market - Marketing and Hedging
Most companies sell products that people don't really need. Steve Jobs of Apple computers once famously quipped that people don't know what they want and it was Apple's job to give it to them. Farming goods are more easily marketable than gadgets as the former is a need while the latter just a want. However, that is not the case. That has to change, especially in case of niche food crops raised through Organic farming. The industry needs to unite and come together to form new standards. Such standards must be adhered to and marketed.
Playing the market also involves proper planning and having strategies to handle failures. Agriculture could fail because of umpteen reasons and it is imperative that there are fallbacks to lean on during a crop failure. Corporate companies have risks too such as currency risk, interest rate risk, et cetera. They handle such risks through a process called hedging. Farmers too can use products such as futures to lock their profit and stop the losses.
Playing the market also involves proper planning and having strategies to handle failures. Agriculture could fail because of umpteen reasons and it is imperative that there are fallbacks to lean on during a crop failure. Corporate companies have risks too such as currency risk, interest rate risk, et cetera. They handle such risks through a process called hedging. Farmers too can use products such as futures to lock their profit and stop the losses.
Lobby the Government
Manufactured goods and raw materials entering India sometimes face taxation and pricing to prevent dumping. This is to save domestic players from predatory pricing by foreign countries like China who can produce products at a much cheaper price. They have something called a 'Minimum import price' which sets the bar high for foreign imports letting domestic players survive. And what do we have for poor farmers? The government sets something called a 'Minimum export price' to ensure the farmer has no where to sell except in the domestic market where the asking prices are way too low.
The only way for governments to change this is to lobby them. Ask and it shalt be given and farmers are too small, too poor and too disunited to make a representation to the government. Forming an association like big industries, SIAM for automobile manufacturers, COAI for telecom players, etc ensures such lobbying effort are effectively carried out.
The only way for governments to change this is to lobby them. Ask and it shalt be given and farmers are too small, too poor and too disunited to make a representation to the government. Forming an association like big industries, SIAM for automobile manufacturers, COAI for telecom players, etc ensures such lobbying effort are effectively carried out.
HR practices
Farming in India is predominantly family run. Families, generation after generation, get involved in farming and carry it out in lands they own. However, this might need to change. The farming landscape must evolve and it would call for experts in the field to be recruited and deployed along with better hardware and modern varities. Better data collection needs to be done and can be mined to study soil fertility, crop diseases, pests. Data also helps in identifying monsoon patterns, preparing for demand and supply surges, etc.
Procurement and Sales
Just like any industry that buys raw material and sells finished goods, farming too buys raw materials (seeds, manure, fertilizer) and sells finished goods (rice, pulses, vegetables, fruits). It involves a lot of money and the government plays a big role in subsidizing raw materials. They also support sale price by using Minimum support prices for certain produces. However, government being government is inefficient and corrupt and the small farmer can't get the big corporate companies to provide raw materials at a competitive price nor can ensure big retail brands/industries procure goods from them at a fair price. This is where a big corporate like farm company comes in handy. It can ensure large volumes bringing industries to procure in large numbers from them and can command premiums. It can also procure raw materials through a competitive process involving multiple suppliers.
Horizontal and Vertical integration
And like any other industry, farming must look at horizontal and vertical integration. In horizontal integration, they must look at consolidation of farm lands in different geography to diversify risks that might affect a particular locality such as failure of monsoons, pests.
Farm produce being a perishable commodity, it is imperative that the produce is quickly sold/used. Vertical integration would involve food parks that uses farm produce to make end products that can be preserved over a longer period. This opens up new markets and reduces wastage. Products such as ketchup, pickles are better sold than the underlying these days. This would also provide employment and empowerment to rural areas.
For all these to happen, a corporate entity by the farmers, for the farmers and of the farmers is needed. This would lead to the democratization and empowerment of the farmers. This could be modeled around the co-operative system already prevalent across the country for milk and milk products.
Water is indeed a necessity, but, water ain't the only necessity.
I hope the Indian farmer doesn't become an extinct species and rather evolve to understand and implement a successful business model along these lines.
Farm produce being a perishable commodity, it is imperative that the produce is quickly sold/used. Vertical integration would involve food parks that uses farm produce to make end products that can be preserved over a longer period. This opens up new markets and reduces wastage. Products such as ketchup, pickles are better sold than the underlying these days. This would also provide employment and empowerment to rural areas.
Social changes
Finally, a lot of social changes are needed in rural areas where most of the farming is carried out. Considering the literacy levels, it can be safely said that a lot of people are being misled and divided along caste, religion, etc. This would not help the cause of farming and would only serve political interests. This has to change too and would change when democracy and meritocracy is allowed to flourish in our villages.For all these to happen, a corporate entity by the farmers, for the farmers and of the farmers is needed. This would lead to the democratization and empowerment of the farmers. This could be modeled around the co-operative system already prevalent across the country for milk and milk products.
Water is indeed a necessity, but, water ain't the only necessity.
I hope the Indian farmer doesn't become an extinct species and rather evolve to understand and implement a successful business model along these lines.
