Of latitude and longitude

“We never used to go out or know about new things.  Now that we know about ‘line siri [SRI technique]’ we are practicing that.  The paddy production is much better now.”

“Now even if the men are away somewhere, we can go get fertilizer from the [Farmer Producer] company shop ourselves.”

These words spoken by women farmers in Lucknow district are emblemic of farmers I have met elsewhere in the country.  The women are thirsty for more information and access.  They toil away on family farms without acknowledgement of their labour and contribution.  Worse, they are not included (and in some cases actively excluded) from knowledge networks which might help them make better decisions about crop choice, cultivation practices, and markets.

The women talked candidly of their experiences and concerns.  The meeting was full of warmth, openness and enthusiasm, which I find to be invariably the case in meetings with women farmers across the country.

In this village, many farmers have come together to form a Farmer Producer Company (FPC).  The company has set up an inputs shop for its shareholders (~20% of whom are women) in a village about 1.5 km away.  Prior to the FPC shop, women had not been involved in the process of purchasing and picking up inputs from any shop; this was a role reserved for men (who have greater mobility).  They explained that now they could get information through awareness camps conducted by the NGO which was supporting the FPC.  Some women said that they find it very convenient to buy inputs from the shop and they were excited about learning new techniques like SRI (System of Rice Intensification).

The shareholders of this FPC are marginal farmers, with an average of 1.5 acres of landholding, growing paddy, wheat, mustard, potatoes and a few other crops.

Earlier in the day, my colleague and I had met the board of directors (all men; there was one female director, who was not available).  The discussion was animated and covered a wide range of topics, not dissimilar from other such discussions I’ve had in northern India. They commented on how the fertilizer in the market is highly adulterated and the distributors charge over and above the official MRP, often 50% more than the IFFCO MRP.  Not surprisingly, they explained how the creation of a Farmer Producer Company has been instrumental in getting access to good quality fertilizer at MRP when they need it.

The male farmers explained that when they had started the FPC, they had raised only a limited amount of equity capital.  They needed additional funds to buy good quality fertilizer in bulk. No bank or other formal sector entity would give them a loan.  After several attempts, the farmers took a loan from the Pradhan, who is also a member of the company.  They also organized loans from many other sources, which enabled them do proceed with their activities.

They feel frustrated by agriculture policies on several fronts.  For example, they say that the  government has not notified FPCs as being on par with farmer cooperatives when it comes to distribution of fertilizer. As a result, during peak season when fertilizer becomes available, it is first sent to cooperatives and the FPC is unable to get sufficient quantity.  They thought of buying during off-season but they don’t have enough working capital or storage capacity to store enough for all members.

The farmers grumbled about other interactions with bank officials:  The officials don’t know what a producer company is.  We had to tell them about FPCs.  Even then they didn’t want to support us because they did not have a circular.  The farmers claimed that one government circular stated that a particular scheme is available only to FPCs registered by SFAC.  “They don’t even know that SFAC does not register companies and only ROC (Registrar of Companies) does. We tried to convince them but they demanded a revised circular.

They gave more examples:  The FPC, under the guidance of the NGO-promoter, tried getting a license to procure at MSP (minimum support price), to become an “MSP centre” as they called it.

The FPC got the license and decided to open the centre for procurement.  After a few days of procurement they were informed that they must pay farmers for the procurement within 72 hours or face jail.  But they were expecting FCI (Food Corporation of India) to pay them about a month later. The head of the procurement centre was in a bind and felt distressed, saying ‘ab ya to jail ya fansi‘ (I am facing jail or suicide by hanging).  Somehow or the other, with the help of other producer companies and the promoters, well-wishers, etc, they managed to come up with the funds.  Not surprisingly, they decided to terminate all MSP procurement activities immediately.

The Chair of the FPC board lamented:  “How are marginal farmers supposed to come up with enough money to pay for all their entire produce within 72 hours?  We should be given advance like govt MSP centres are.”  

Perhaps a practical approach might be to allow FPCs to pay after receiving funds from FCI.  It is odd that these rules are being enforced without understanding the nature, capabilities and purpose of FPCs.

The farmers cited yet another example: They have recently received a circular requiring them to upload the geographical coordinates of their FPC office (geo-tagging of latitude and longitude) and a photo of their office on the website of the Registrar of Companies.  The farmers are relying on the NGO-promoter for compliance, despite the fact that the NGO’s project funding (and formal support activities) ended a few months ago.  They also pointed out that the forms and the website are in English for which too they need the NGO’s support.  The chair of the FPC board said “Unhi ka sahaara lenge (we will continue to rely on them)”; the NGO team member added quickly “jab tak yahaan hain” (until we are here).  I got the feeling that the farmers were referring to not only the NGO but the individual team members sitting among us, with whom they had built a trusting relationship.

In the course of my work, I have held similar discussions with farmers from different parts of the country.  Once we get over the initial hesitation, the discussions become open and candid.  This meeting was no different.  But it was unique in that most of the farmers’ laments were directed at policies which appear to be pro-farmers on the surface but are impractical, such as MSP procurement centre rules or expecting barely-literate marginal farmers to geo-tag their offices.

This particular group of farmers seemed to be well-informed and highly-engaged, and their FPC was quite active.  Yet they were unsure how they would manage after the exit of the NGO-promoter.

Update: The promoter of this FPC adds, “Today, ROC compliances for TATA or Reliance and a producer company situated at remote rural  location is same.  Recently ROC asked to update KYC of all BODs [Board of Directors] of companies, otherwise a heavy penalty was imposed.  Doing KYC of BODs means [that] each BOD had to upload his video and also whole process was linked with BOD mobile number. BOD received an OTP which he has to send to CA for uploading KYC documents.  In this process many BODs [who didn’t] have smart phone or not able to handle whole process got stuck and the result was ‘heavy penalty on FPC’. We are promoting these FPCs at remote locations to help small and marginal farmers, and we know about status of our country infrastructure and status of digitization.”

GST and small producers

Two days after the GST was announced, a financial planner called me offering to invest in companies supplying branded parts and supplies to consumer goods manufacturers. I was about to reply with the usual “not interested” when curiosity got the better of me. I ended up having a longer conversation with the planner, whom we’ll call Arvind. Arvind’s argument was that GST will make consumer goods companies which make everything from furniture, appliances to toothpase, less willing to buy from informal sector suppliers without GST registration.  They will shift to formal sector suppliers of auto parts, raw materials, textiles, etc.  Therefore, he felt this was a good opportunity to invest in top-tier suppliers in these sectors.

Recent news from informal sectors such as handicrafts or textiles, validates Arvind and his employer’s predictions.

According to the article The GST Regime is Damaging, Not Helping, India’s Crafts Sector  in The Wire:

Artisans who sell across state lines with a turnover under Rs 20 lakhs (2 million) are exempt from filing under GST only if they have a PAN card and send packages through an e-waybill. Yograj [an artisan] has no PAN card and there is no courier in his village that can provide an e-waybill. He usually brings his wares physically with him, and takes the money immediately as he can’t afford to wait for payment. My accountant has asked me to stop working with all artisans who do not have a GST number since it is illegal without all the requirements.


Bhurabhai from Dhamadka, Kutch, who was a village sarpanch, says that almost all printing in Dhamadka is on hold since GST started. Big organisations that sell their hand-printed fabric are no longer buying from printers who do not have a GST number. For a printer to file for GST means that, other than the financial burden of paying an accountant to file for them, they also need to physically go three days in a month to the accountant in a city nearby and waste half a day each time at the very least. Craft in India is gasping to survive and compete with cheaper machine-made goods. With this added burden of GST, we can be sure that most self-employed artisans will be unable to survive in this sector.

An article titled How GST is hurting small businesses in Surat’s textile hub – and spurring a black economy in the Scroll reports on the condition of textile traders post-GST:

In May and June, this reporter saw the traders sitting at desks or on mattresses covered with white cloth, telephones near them. Stacked up in their shops were bales of merchandise. Outside in the corridors, workers from Uttar Pradesh, Jharkhand and elsewhere busily packed finished garments for dispatch.

Things were quieter in early September. The corridors were much less crowded. Even on the street outside, no more than six or so tempos were parked, waiting to be loaded. “There is no business,” said Neeraj Mittal, a trader in his 30s who runs Srutika Sarees. “Orders have dried up.” Srutika’s buyers are based in Maharashtra, he said. They would travel to Surat, buy in cash, and take the garments to sell in their local markets. Those buyers have stopped coming.


According to the managing director of a large sari-manufacturing company in Surat who asked not to be named, local transporters … buy stock in “kuchcha” (without bills) and sell it in neighbouring states. “They have done their setting [with the police],” the managing director said. “They buy stock here at Rs 150 and sell elsewhere for as much as Rs 450-Rs 750.”

So the GST regime has created a black market, and created more opportunities for exploitation of small producers and artisans, rather than doing the reverse.

Update:  Lest anyone think that this is a problem only for handicrafts sector, the Financial Times reports similar distress in small manufacturing.

If a financial Asset Management Company could figure this out in less than 48 hours, it can lead us to only one of two conclusions:  The policymakers understood the implications of the bill on informal sector (comprising >90% of India’s workforce, and ~50% of voters) and went ahead with the bill anyway.  Or, the policymakers didn’t think deeply about the implications before instituting the plan.  Neither of these conclusions increases our confidence in current policy-making mechanisms.

Improving rural incomes and nutrition

First of all, I’d like to apologize for the very long and unusual break in posts on this blog. During the last few months I have been writing about my experiences and learnings in the agriculture sector, which I will share on this blog over the next few posts.

Earlier this year, I visited a nascent initiative by the Covenant Centre for Development (CCD), Madurai, to create a rural-to-rural vegetable supply chain.  Typically, most agriculture initiatives focus on building rural-to-urban supply chains. Their objective is to increase incomes of farmers and they believe that focusing on urban (or export) markets is the best way to do so.   Often, creating strong market linkages for agricultural produce reduces their availability in rural areas since the financial need to sell a commodity for cash is very high.

However, rural India also needs some of these high-value agricultural produce to be available locally, especially the more nutritious commodities such as vegetables, millets, milk and meats.  In villages, rural consumers have limited availability of vegetables and, whatever is available is often not fresh and of poor quality.  If we are to make a dent in the high incidence of malnutrition in India (about half the children in rural India are malnourished), it is essential for us create rural-to-rural supply chains which, while increasing farmer incomes, also increase nutritional choices in rural India.

CCD’s initiate is an exploratory step in this direction. While it is too early to talk about its impact, my team and I captured some of the ideas and insights from their initiative in the form of a case study for the benefit of other practitioners.  You can find the full case study here.

Business management training: A matter of impact

“I would prefer to start a business even if I could make the same amount of money in a job,” said Sanjay, a participant at a recent training session of CREAM (Certificate in Rural Entrepreneurship, Administration and Management”.  Ever since some friends and I created this course, I have volunteered as faculty.

Last week I was in Bihar, delivering the “Strategy and Planning” module over a period of 5 days together with a friend.  This particular module was part of the program being delivered for Jeevika, Bihar’s Rural Livelihood Mission and focused mostly on business planning and starting a business.  It was the culmination of several months of business management training, which covered Overview of Business, Financial Management, Operations Management, Sales and Marketing, and Strategy and Planning.

The participants had already been exposed to the concept of opportunity cost back in March.   So when I asked the question, “Which would you do: a business or a job which earns you the same amount of money?”, I was gratified to have someone use the words “opportunity cost” in his response.

For numerical concepts, such as break-even analysis, we had participants come up to the board, do the calculation and then explain it to the rest of the class.  Here’s an example:

Measuring impact

Every time I teach this program, I end up asking myself about its impact.  Finding out the impact of education and training is always a difficult matter.  It is presumptuous to attribute the success of an individual squarely on her education.  Yet, we need to keep trying to figure out the impact in some way.

We’ve tried collecting data about the business the participants own or advise.  But the data is often incomplete or inconsistent and it is difficult to claim with certainly that any success in the business is due to the program.

In one of our previous batches, when we had delivered a very targeted program for branch managers of a social enterprise, we got definite feedback from the senior management (unprompted!) that they saw a clear impact within a few months.  Apparently, their branch managers were now asking the headquarters staff many more detailed questions about their branch’s financial statements and performance.  The senior management felt that as a result, most of their branches were better managed.  They also felt that the participants now understood the implications of their operational decisions on finances of the business.

This time around in Bihar, I got another glimpse into the impact of CREAM.  Three years ago, we had delivered a program for Kudumbashree, Kerala’s state poverty eradication mission.  It was a train the trainer program, where we trained 31 people who went on to become master trainers and consultants.  People we trained had trained yet others.

So this time in Bihar, 2 people I had taught directly, and 3 others whom they had taught, acted as mentors to the training participants in Bihar.   This group of 5 had learnt Hindi in a few months and were speaking almost fluent Hindi with Biharis from rural Muzzaffarpur and Gaya!  One of them spoke without any discernible accent which was quite fun to see – but I digress…

From an impact perspective, I got to observe the depth of understanding of this group of 5 from Kerala.  I was quite impressed.  All of them clearly understood the concepts they had learnt 3 years ago.  So much so that they could correctly solve all exam problems and coach their Bihar counterparts effectively during the evening assignments.

Admittedly, Kudumbashree must have chosen their best to send to Bihar as mentors.  But still it is really heartening to see the impact first hand.

Secondly, I spoke with several training participants, especially those who already own and run their own businesses.  All of them were adamant that this program has helped them tremendously.  I played the devil’s advocate – claiming that they must know all this already since they have been running their businesses for years.  Here are some of the responses I got:

“I was running my business, but not in a systematic manner. This training has helped me run it more systematically.”

Participants working on a group assignment

“Before, I used to write down only my sales and expenses, and tracked credit transactions in a separate register. Now I understand how to calculate my profit and loss correctly, and how cash and credit are related.”

“Earlier I didn’t realize that depreciation is a cost of my business. Now I know why it is important to think this way.”

“Learning about how much stock to order at one time was very useful for me.”

Statements like these are heartening to hear and provide a glimpse into the impact of the program.

This group of participants will go on to train another larger set, creating a larger number of people trained in proper business management.  They will act as business advisors to the thousands of businesses that Jeevika plans to create and foster in Bihar over the next few years.

Impact like this, especially its multiplicative nature, is what makes my own opportunity cost of developing and delivering this program worthwhile.

[A version of this blog appeared on yourstory.in on August 26, 2013]

Building the energy industry sector

Every time I come across a new social enterprise, I find myself eyeing them with a healthy dose of skepticism because some of them fail to understand the real needs of their target populations, some are inherently unviable businesses, and some hardly qualify as businesses with a social objective.

Several years ago when I first heard about SELCO Solar, which provides lighting solutions to rural households, I had wondered about similar questions.

Last October, I happened to meet SELCO’s founder Harish Hande at an Ashoka workshop on rural innovations and farming.  Within an hour it was clear that he was someone operating on a different plane than the typical entrepreneur (social or otherwise).

Not a Technology Company

One of the first things that struck me about Harish’s approach was that from the beginning he insisted that SELCO is not a technology company.  He focused on the household and its needs rather than the technology.

He asked the question: what are the kinds of things that a rural household is willing to spend money on? Clearly, they spend money on family functions, pay for bus and train fares to attend weddings, and on buying household assets, however small they may be by urban standards. So what is the thing that makes a household spend on X but not on Y?

To answer this question, Harish lived in a village in Sri Lanka for six months as part of his Ph.D. work.  Later in India, he tried to answer the same question for households in rural Karnataka. He realized that one of the main reasons for households to spend on lighting is to enable them to continue income-generating activities such as weaving during the night.  Other households wanted lighting to enable their children to do homework.

Such insights into the purchase decisions were critical for not only the design of the product, but also its price and financing, as well as the business model he created for SELCO Solar.

Participant at CREAM training at SELCO, explain’s her team’s marketing poster to the whole class

Recently my TREE Society colleagues and I conducted a business management training (“CREAM”) for the managers of SELCO branches. This program focused on Finance, Sales and Marketing (For more about this program, see here and here).

This gave me a fantastic opportunity to meet the operations team of SELCO and develop a deeper understanding of their business.

We discovered that the pricing of the product was calculated based on substitution cost.  SELCO had calculated that the average spend per household on candles and kerosene for lighting was around Rs. 5 per day and estimated the current lighting budget of rural Karnataka households to be Rs. 150 per month.  Keeping this in mind, they designed lighting systems whose monthly installments would roughly match this amount.  By the way, I am not giving away any company secrets here – these calculations have been covered in previous case studies.

Why sell four lights when you can sell two?

The way any company goes about conducting its business says more about it than any amount of press coverage or awards.  At SELCO, while financial incentives for sales staff are tied only to total revenues, performance metrics also include the number of small power systems sold such as two-light systems (as opposed to the large value systems of 4 lights or more).  This discourages the sales staff from straying too far from the original mission of the company.

SELCO is now a 17 year old company with annual revenues of about $4 million and about 125,000 customers across Karnataka.

Along the way, they worked hard to get banks to recognize lighting as a sector worthy of bank loans.  Convincing the first bank was hardest, but the next few weren’t exactly easy either.  A big part of the sales process now involves helping the customers with the documentation process for securing a loan and building relationships with local bank branch managers for financing.

Growing the sector, beyond the business

The reason that SELCO wanted upskill their Branch Managers was because SELCO was undergoing a transition where the founders and other key members of the original team are leaving SELCO to start a sustainable energy incubator.

Over the last year or so, the company has been undergoing a planned succession from the original team to the next generation of leaders. This is very rare sight even in most large companies where founders remain closely involved with the business even after giving up formal positions.  At SELCO, both Harish Hande and Ashis Sahu (erstwhile COO) have handed over their responsibilities and have turned their attention to launching a pre-incubator in the sustainable energy sector.

Harish explained their thinking:  He believes that the growth and expansion of SELCO beyond Karnataka borders is best handled by the experienced senior managers of SELCO.  He himself will focus on identifying, encouraging and supporting entrepreneurs around the country to create many more sustainable energy enterprises.

In particular, they plan to focus on those entrepreneurs who do not have IIT/IIM degrees and international experience (who seem to constitute the vast majority of incubatees/investees of Indian incubators and venture funds). They want to reach out to non-English speaking entrepreneurs, help them create sound business plans, embed them in SECLO operations for several months to give them a clear idea of what running such an enterprises entails.  The first batch of entrepreneurs has started their journey.

And now they have embarked on their search for the next generation of entrepreneurs (read more here).

I will be watching them closely in the hopes of applying learnings from their efforts towards the agri-sector platform that I’m launching.

Warehouses at the Tropic of Cancer

During my recent visit to Madhya Pradesh, I saw two things I haven’t seen before.

The first was the line of the Tropic of Cancer marked on a road. Usually in India, such things get ignored, so it was nice to see the line clearly marked on the road, together with a road-side sign.

The second interesting thing was something I haven’t seen elsewhere in India: Good quality roads dotted with warehouses every 10-15 km.

Warehouse on a farm by the side of a road

Apparently, farmers whose land is adjacent to roads build these warehouses and rent them out to other farmers for storage.  The farmers we spoke with said they normally store produce at a room in their home or at a nearby warehouse.

There is increasing interest and usage of the system of warehouse receipts in India. Farmers can make more money if instead of selling their crop immediately upon harvest, if they can hold on to it for longer. However, farmers have to have access to good quality warehouses where they can be confident of little damage to their stored grains. If farmers need cash during this time, they can use the warehouse receipt to avail of loans.

Apparently the govenment of India introduced the “Negotiable Warehouse Receipt System” in 2010. So farmers who are interested in availing loans can deposit their produce in warehouses registered with a regulatory authority.

Not sure how well this works, but regardless of loan facility the presence of warehouses can only be a benefit to farmers in Madhya Pradesh.

Water ATMs, powered by the sun

Sarvajal, a Piramal Foundation venture, is creating a network of solar powered water ATMs. Add in a layer of maintenance technology such as an enterprise management system combined with RFID on each water unit, SMS platform for notification of unit production and malfunction, and you have the ability to 

  • Track water production and quality at all Sarvajal locations in real-time
  • Control filtration operations remotely
  • Identify and diagnose potential maintenance issues before they occur
  • Offer 24-7 clean water direct to consumers through “water ATMs”

One of the best uses of technology I’ve seen in development sector in a while…