Business Today

Producer companies: Farmer's Best Friend

     Print Edition: Jan 6, 2013

Cash flow was always a problem for K.M. Senthil, a farmer at Kalathuminnapalayam village, 30-odd km from Erode, a town in south western Tamil Nadu. He cultivates turmeric and sugar cane - both annual crops. The sugar mill to which he supplies cane takes its own sweet time to pay him, while the turmeric crop usually has to be stored awhile before releasing in the market, so as to get better prices. Often cash fell short and he had to borrow to manage.

But no longer, not since at the urging of the Erode Precision Farm Producer Co Ltd (EPFPC), he ventured into growing fruit and vegetables as well, from which payment comes in much more quickly. "The company has transformed my life," says Senthil, who is also currently EPFPC's president. EPFPC is a 'producer company' - one of 150 such across the country - which has farmers as shareholders. Begun in 2008, EPFPC has 150 shareholders who own around 2,000 acres.

150 estimated number of producer companies across the country

"Producer companies bring farmers together and thereby enhance their bargaining power while marketing their crop. They also help disseminate modern agricultural practices," says E. Vadivel, Nodal Officer, Precision Farming Project and Extension Services at Tamil Nadu Agricultural University, who has been the force behind EPFPC.

What has EPFPC achieved? Earlier farmers in this region - like most of their counterparts across the country - hardly ever updated their agricultural practices as they had little scope for sharing knowledge. With EPFPC having given the farmers around Erode a platform to do so, these practices have improved, with many farmers taking to drip irrigation and precision farming instead of following tradition mindlessly. (See One Drop at a Time, page 20.) A few members recently planted tissue culture-based pomegranate for the first time in the state, whose produce will earn them Rs 9 lakh per acre at current market prices, compared to Rs 2 lakh per acre from sugarcane or turmeric. "Producer companies can transform agriculture," says Vadivel.

EPFPC has also set up a shop to sell branded fertilisers and pesticides to farmers - not merely its members - benefitting them immensely. "Earlier farmers were at the mercy of retailers while buying these," says V.S. Mahalingam, a director in the company. "Invariably, the retailer, in order to maximise his profit, would advise us to buy and use more than needed. Nowadays, the manufacturing companies approach EPFPC directly."

The company is also gearing up to help farmers market their produce better. Senthil, for instance, has undoubtedly gained by growing vegetables, but the price he gets for them still causes heartburn. "Even today, I sell bitter gourd at Rs 12 per kg, while the retail price at the Erode market is Rs 36 per kg," he says. But this will soon change.

"We will be marketing our produce directly," says S. Jayachandran, one of EPFPC's shareholders. We plan to grow a variety of vegetables in bulk over 100 acres, which we will then sell directly to buyers. This will increase the farmers' income manifold." In future, they even plan to sell sliced vegetables to hotels, set up grading facilities and a cold storage.

"There is only one catch," says Vadivel. "When a farmer sells his produce as an individual, his income is not taxed. But when he forms a company and the company sells it, the profits are taxed. This could ring the death knell for this nascent but promising concept." It is up to the government to set right this anomaly.

N. Madhavan

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