Corporate farming, redux ; By helping farmers till their land, Coromandel International has created a new revenue stream.

At Cherlopalem village in Nellore district of Andhra Pradesh, aninteresting sight awaits any visitor-uniformed farm hands eithertilling the land or transplanting rice seedlings. The fields look alot greener (read productive), too, and more orderly than those thatone usually sees in paddy-growing areas.

The fields belong to 48-year-old Tatineni Ramesh, who has 32acres in the village. He has no sons and his only daughter isstudying in one of the bigger cities of Andhra Pradesh. Untilrecently, Ramesh had to depend entirely on hired labour. Even thatchanged when hired hands became scarce as they flocked to work forschemes under the Mahatma Gandhi National Rural Employment GuaranteeAct offering better wages.

The predicament was the same for Ramesh's friend M. Raghuramaiah,55. His two sons have moved to a town to work in a private company."Our land is our pride -we own it. It cannot compare in intrinsicsatisfaction to what a private company can offer as salary," saysRaghuramaiah, hoping that his sons will one day come back.

In fact, many farmers in Nellore district are passionate abouttheir land. But they increasingly worry that with their children notready to take up farming and the ever increasing shortage of farmhands, they may have to exit farming altogether. But the seeds ofhope have been planted by the Rs 14,000-crore Murugappa Group, whichsaw in farmers distress a great opportunity to create an allnewrevenue stream by working more closely with them -its maincustomers.

"At our Mana Gromor centres, we were getting feedback about thefarmers' distress," says N.S.B. Hariprasad, Area Sales Manager,Retail Operations. Mana Gromor chain of retail stores were set up byCoromandel International, formerly Coromandel Fertilisers, to peddlefertilisers, pesticides and nutrients along with lifestyle productsto the farmers.

Coromandel drew up a unique model and decided to help farmers sowcrops for a fee of Rs 4,500 per acre. Unlike contract farming, itdid not involve taking over of the farmland on lease or buying backthe produce. The farmer remained in charge of the land, chose whathe wanted to grow and where to sell. All that Coromandel did was tohelp him sow the crop by using the latest machinery and advising himon the right mix of fertilisers, pesticides and nutrients.

In November 2009, Coromandel International began by handling 400acres around Nellore -ploughing the land and transplanting seedlingsusing imported machinery indigenised for the purpose. The idea wastremendously successful and soon demand rose to 1,200 acres for thenext season. The farmers happily paid for the service -they wererelieved to see a crop in their fields.

"For the coming season in November-December, we hope to do 6,000acres," says G. Raviprasad, Vice President for Fertilisers Sales andMarketing at Coromandel. He is very optimistic about covering100,000 acres as part of the first tranche of the company's plan"very quickly" once the business plans are finalised.

The reasons for the immediate success of the model are many.Fragmented landholdings deter farmers from investing inmechanisation as it is not viable. Murugappa Group found a way totap into this by spreading costs over many farmers. For instance,the conventional method of carrying the seedlings from the nurseryand then planting them by hand requires intense physical labour andis done mostly by women.

At least 12 women work for eight hours to cover an acre. The riceplanter, operated by two trained hands, does the job in two hours.The mechanised method also ensures better spacing leading to bettersunlight and aeration for the crop and so better growth than in theconventional method of transplanting.

Some farmers were even willing to pay another Rs 4,500 per acrefor completing the entire process of farming; harvesting, threshingand bagging. "We are now freeing the farmers to take up otheractivities such as dairy or poultry farming or shrimp cultivationand grow their income," says Raviprasad. In fact, large farmers likeRamesh Reddy, who owns 300 acres and had gone to become a governmentemployee, have expressed their intention to return to farming.

For the Murugappas, the tangible and intangible benefits aremany. Farmers do not mind waiting a day or two for the company'sconsignment of compost or fertiliser to arrive rather than buy areadily available brand from a competitor. Farmers are increasinglytaking to specialty chemicals (bio nutrients and pesticides) made bythe company. Coromandel expects sales of its compost to touch 90,000tonnes this year.

It helps the company since increasing sales of non-subsidiseditems such as compost fatten its margins. "Also, by selling themthings like footwear, T-shirts, and mixer grinders through the ManaGromor chain, we aim to lock them in to be with us completely," saysRaviprasad. That apart, there is also a new revenue stream to tap.The servicing income from paddy alone would eventually amount toseveral hundred crores.

The total potential is estimated to be around Rs 3,000 crore.Coromandel has a strong presence in Tamil Nadu, Karnataka, AndhraPradesh and Chhattisgarh, which are predominantly rice-producingstates. The company is also considering extending the mechanisedmethod to other crops like maize and cotton. A. Vellayan, Chairman,Murugappa Group, is proud of this effort.

"We have sown many firsts in Coromandel. But this time, we havesown the beta seeds of farm mechanisation in the country, whichshould help in modernising agriculture," he says. Indeed, when anobsessive focus on productivity management is fast becoming areligion in Indian manufacturing, why should agriculture be leftbehind?

THE INITIATIVE

-- Coromandel International helps farmers with mechanisation offarm activities for a fee

-- Also provides the necessary farm hands

-- Offers farmers soil sampling and testing

-- Runs specialised retail stores to meet farmers' needs . theystock both farming and lifestyle products

THE OUTCOME

-- Gets deeper relationship with farmers that goes beyond pointof sale, ensuring brand loyalty and market share

-- Helps bring mechanisation into the country for betterproductivity

-- Addresses farmers' problems of shortage of hands, thereluctance of the next generation to work on farms and avoidoutright sale of farmlands

-- A new revenue stream for itself, and an opportunity to sellits products and other services, particularly financial services