Companies eye market for farm solutions

Investment in contract farming almost trebles in Maharashtra this year

With post-harvest losses due to poor infrastructure estimated at Rs 50,000 crore a year, India Inc’s interest in agricultural commodities is growing. Companies are seeking to provide end-to-end solutions to farmers, like efficient handling and direct marketing.

Owing to the favourable conditions in this segment and the immense scope for investment in horticulture and processed food in the past year, companies have stepped up investment in this space in Maharashtra, specially in fruit and vegetables and large cash crop segments. In 2013-14, the state recorded a total investment of Rs 265.6 crore in this segment from companies  including Mahindra & Mahindra, Hindustan Unilever, Deepak Fertilisers and Petrochemicals, United Phosphorus and Rallis India. In the previous year, investment was Rs 98 crore.

“Over 60 per cent of the goods sold in hypermarkets are processed. Therefore, the agri processing sector offers immense opportunity. Hence, we invite companies to participate with more aggression,” said S K Goel, principal secretary, (agriculture and marketing).

Most companies offer seeds, fertilisers, advisories and other services, in addition to procurement. This helps farmers fetch more, without distress sales. Companies offer easy cash to farmers, in sowing and harvest seasons. During procurement, Mahindra & Mahindra offers a large portion (70 per cent) of the estimated prevailing market price to farmers. After a marginal deduction of 11 per cent as administrative fee, the rest is shared with farmers. “We provide seeds, fertilisers, advisory services and market access,” said Ashok Sharma, chief executive (agri business).

The company, set to enter the branded fruit segment soon, is in contract farming of grapes in 200 hectares in Nashik. Its banana-ripening pilot project is underway in Delhi. It expects to expand this to Mumbai soon.

The price build up of unbranded unprocessed grocery (percentage of price)
Particulars	Share in retail price (%)
Farmers	68
Kutcha arhatiyas	1
Pucca arhatiyas	1.7
Taxes and costs	6.8
Ex-mandi price	77.5
Transportation and losses	2.5
City wholesaler	2.5
Sub-wholesaler	2.5
Retailer margin	15
Customer price	100
Source : KPMG

“Companies will spend money and avail better technology. The government is ready to extend all support, with a huge allocation of subsidy for the growth of agri processing,” said Siraj Hussain, secretary in the Union food processing ministry.

A report by global advisory firm KPMG showed farmers received 68 per cent of the price paid by consumers. Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices, too, pointed to this.

The KPMG report said 80 per cent of India’s 115 million farms were on plots of less than two hectares. One per cent of all farms had an area of 10 hectares, and these accounted for 15 per cent of the cultivated land.

Increased organised retail penetration and mega-food parks proposed by the government are encouraging processors to expand business. This would help improve produce handling and price realisations, and reduce waste.