Partnering for Rural Prosperity

May 15, 2013

Laxmi Prakash Semwal, Chairman of Shri Jagdamba Samiti (SJS), a Rishikesh-based NGO talks about farmer-led companies which he has been setting up in the Himalayan region in partnership with financial institutions, technology-providers and importantly, small farmers. He writes a concept note in which he talks about how such an entity functions and how it delivers results and profits to the apple-growing farmers in the states of Uttarakhand and Himachal Pradesh.

Since 2006, a new approach to local (economic) development has been pilot tested in India, by setting-up farmer-lead companies. New in this approach is that farmer organizations become equal business partners with private sector parties and a social investor. This social investor is willing to invest in setting-up of agro-businesses, which can create sufficient value addition to the farmer’s products in order to become healthy, self-sustaining companies.

The farmers, through their organisation, become shareholder in this company, alongside private sector parties, that secure the interest of the social investor. The ultimate aim of this approach is that the economic benefits of the company are plought back to the participating farmers, mostly in the form of premiums over their supply (based on quantity and quality), while the investments made by the social investor are fully repaid on commercial terms.

To what extend is this a new approach? Similar to the self-help groups and cooperatives, the aim is to set-up healthy business in handling, processing and trading farmer’s commodities on a commercial basis. The main difference of the new approach is that the farmers, along with social-conscious corporate partners, become equal business partners of the investor. No government or political influence. Instead, the company is run by a professional management and professional board to secure business rigour and hence the long term interest of the company.

Similar to the cooperative model, the farmers have full rights to the economic gains of the company, but in this new approach they have no direct control over the daily management, which is in the hand of professionals that reports to the Board of Directors. In this Board, the farmers are represented, but a majority is in the hands of professionals and representatives of the private sector parties, alongside the social investor. The farmers will gain full economic ownership, once the investment is repaid fully, but the management and BoD remains with professionals. No paternalistic form of aid, but a sound economic partnership between an investor and a (farmer-owned) company, supported by experience entrepreneurs.

This new approach is pilot tested with apple growing farmers in Uttarakhand, and with coffee growing farmers in Kerela. A more detailed description of the approach is given in the paper “…… “ by the same authors as this paper. In this paper, the authors wish to explore how this approach could be replicated in India. The intention of this paper is to engage in a broader debate in India with different actors, ranging from banks, knowledge institutions, government, finance institution, private sector, NGOs, committed individuals and others. To do so, it is good to take stock of some of the lessons learned in implementing the above projects so far.

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India’s Minister for Water Resources, Harish Rawat, lauds the innovative apple project of Uttarakhand, a model that has freed small apple farmers from the clutches of middlemen besides introducing business acumen in them.
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