In what is believed to be a roadmap for farmers’ prosperity and rural development, Prime Minister Narendra Modi, on September 24, inaugurated a mega food park in Tumkur, Karnataka. The appeal of the Food Park to the local farmers is in the promise of increase in farmers’ income and creation of employment opportunities, particularly in rural sector. The promise of the Food Park also is in the belief that farmers would not be exploited by middlemen.
While inaugurating the mega Food Park, Prime Minister Modi said,
“I dedicate this food park to India’s farmers. The economy of a city/town improves when the purchasing power of a farmer improves. We have to increase farm production capacity.”
About 50 km from where the Prime Minister delivered these remarks, in Tiptur is a Pioneering Venture, part of the small but growing Organic Farm. What makes this venture unique is its goal of making the Farmer an Independent Entrepreneur and Farming a viable Enterprise. The brain and passion behind the venture is Dr GNS Reddy.
Dr Reddy echoes the Prime Minister on the need to improve the purchasing power of the Farmer. He in fact goes a step further and makes a forceful argument on the need to create Wealth for the Indian Farmer. But Dr Reddy is deeply sceptical of what the 1000 crore, 22000 tonne capacity Food Park spread over 110 acres can really do for the Farmers in the area.
His scepticism rises from decades of experience and failed experiments. His scepticism also is rooted in the sorry track record of Large Indian Enterprises that entered Food Retailing in recent years. Their failure to pay Farmers on time and their history of dishonouring contracts or distorting contractual obligations is still fresh in his memory.
It would be a mistake to confuse Dr Reddy to be a left leaning protectionist or to be one of the many socialist do-gooders.
He is of a rare breed of Indian Agriculture Technocrats who firmly believes that the Indian Farmer needs Freedom from Flawed Subsidies and Freedom from counter-productive Government Control if he or she has to create Wealth. One needs to understand Dr Reddy’s life story to appreciate his economic world view for the Indian Farmer that runs to counter to the dominant politico-economic narrative.
Dr Reddy’s story begins with BAIF – an organisation established by one of Gandhiji’s disciples Dr. Manibhai Desai in 1967 to promote sustainable livelihood in Rural India. Dr Reddy’s work over the decades at BAIF taught him a deep lesson that the NGO model dependent on grants was not a sustainable model to make the Farmer truly Independent. He learned soon that the only way to make the Farmer viable and independent was to make him or her MARKET savvy. From this rose his core conviction that sustainable Agriculture requires Farmers to think act and operate like Entrepreneurs and Farming has to be scaled with Enterprise Design Principles.
From this began Dr. Reddy’s mission to re-invent agriculture with an alternate model resulting in the creation of Akshaya Kalpa. The first thing that strikes you about Akshaya Kalpa is its Mission Statement of Wealth Creation.
So what is Akshaya Kalpa ?
Akshaya Kalpa in their words is a unique private sector initiative to incubate rural-entrepreneurship based business models in Indian Agriculture. In conversation with Mr. Reddy what strikes you is his repeated emphasis on getting the Business Model right for the Farmer.
What is new and different about what he is attempting ?
The critical difference lies in his attempts to elevate Indian agricultural production practices from existing subsistence to enterprise level, there by generating attractive livelihoods opportunities for rural youth. According to Dr Reddy, to elevate the wealth creation capacity of the Farmer you need a combination of capital (that is hard to come by), technology (little innovation), skills (lost over generations) and market support (distorted by state subsidies and state controlled monopolies). Given the politico-economic conditions in India Agriculture is not INVESTMENT friendly to private capital. Between a flawed Subsidy regime and a corrupt Banking System he sees a steep challenge in the Indian Farmer becoming truly entrepreneurial and Independent.
The fundamental design principle underlying Dr Reddy’s model is insulating the Individual Farmer from risks. His solution – a Hub and Spoke model where a centralised Marketing Hub takes the risks on behalf of individual farmers while they focus on production. The hub assumes the MARKET risks and the bio/weather risks so the farmer is insulated from them while he sets his feet firmly on the path to wealth creation. With an initial focus on Diary Production, Dr Reddy’s entrepreneurial experiment is designed to help farmers with five acres of land to be viable without the need for flawed subsidies or distorted minimum prices from Government-controlled dairy monopolies. One of the biggest challenges for his model is availability and cost of power. The model has gotten around it with Biogas and minimal dependency on diesel.
Today several farmers around Tiptur have gotten on his bandwagon on the path to Entrepreneurship but not without challenges from availability of Bank Credit to several engineering design challenges. What strikes you during the visit to one of his model farms is the use of modern technology mostly sourced indigenously and system integrated to make the Hub and Spoke model work. Sensors in the diary help monitor centrally if the Chiller on the farm has kept the milk at the right temperature and sensors on the animals help track productivity and hygiene. Attention to detail in design makes the model standout from where the Animals rest without hurting themselves to how their waste is converted to energy to keep power dependency on the grid at a minimum. The farmer has practically little need from outside the farm with pretty much most of the agricultural inputs being sourced from within the farm.
Dr Reddy’s biggest challenge – to keep the procurement price at a level where both the Hub and the Farmers can make a profit. The Akshaya Kalpa Brand has to compete with distorted prices set by the local state milk monopoly run by politicians. For the individual farmer the challenge is to repay the loans quickly so he can INVEST the net income back into the farm instead of paying interest.
Dr Reddy’s tall promise to the farmer in his ecosystem – ability to generate more than Rs 50,000 net income a month. Many farmers in his ecosystem produce around 250 litres a day, making the model work. Costs are kept low by transporting in Insulated Cans instead of a Tanker.
The key element of the equation is an Urban Consumer willing to pay a premium of about Rs 5 over the state monopoly price for regular milk to buy Akshaya Kalpa’s Organically Produced Milk. Establishing linkages to urban needs is the key. There are also innovative ideas being thrown around on Community Supported Diary Farming and of a CrowdFunding Model to INVEST in the Cows. All of this of course dependent on a regulatory environment that frowns upon uncanny innovation and is invested in preserving status quo. Perhaps the model will ultimately thrive thanks to the health and nutrition conscious Urban Consumer given the emphasis on pesticide and insecticide free production and the promise of Toxins Free Food Products.
A strong advocate for radical reforms to give economic freedom to the farmer, Dr Reddy is a skeptic of FINANCIAL inclusion schemes involving the Banking System given the corruption in the last mile. He strongly favours the dismantling of APMC and ending the monopoly of politician controlled co-operatives like KMF in setting prices artificially below the cost of production. The only role Dr Reddy seeks from the Government is in ensuring the floor price for Agricultural Produce is kept above the cost of production. Since this cost varies by region and season, it has to be locally determined. The rest should be open to bidding so the Farmer has the option to sell to the best price he can get while covering his costs.
Echoing the Prime Minister’s mantra of Minimum Government, Maximum Governance, Dr Reddy points to the plethora of departments and subsidies in the name of agriculture and in the name of helping of the farmer, which have become havens for corruption? Dr Reddy sees subsidies as the biggest enemy of the farmer creating wrong incentive structure and helping everybody else in the value chain except the farmer. The farmer has no freedom from buying anything other than what the large corporates produce due to the way the subsidies are structured. Lamenting the lack of ethical business norms in farming, Dr Reddy calls for the role of Government to be limited to governance of farming with fair TRADE practices while leaving the rest to the farmer and the local economy.
The conversation with Dr Reddy veered back to the Food Park the Prime Minister was launching a few kilometres away. Why does he believe it won’t result in the outcomes that he was talking about? His personal conviction is that wealth creation for the farmer was possible only if end to end design takes into account holistic impact on the farmer, the land, the animals and the ecosystem within which he operates. This is where he believes his grassroots model of entrepreneurship is distinct from the top-down model of large corporates who may end up wrecking the ecosystem and eventually leave the local farmer high and dry.
It is anyone’s guess at this time which model will ultimately prevail – Dr Reddy’s Hub and Spoke model of Rural Entrepreneurship or Kishore Biyani’s Food Park. But Dr Reddy’s is a voice that must be heard and paid attention to by policy makers in Delhi for he is making a strong case for wealth creation and entrepreneurship for the individual farmer without the need for flawed subsidies and distorting pricing policies. In a country where the overwhelming consensus is towards entitlements and protectionism, his is a rare voice standing for economic freedom.
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