Finding the silver lining: Interesting supply chain models emerging during lockdown in Tamil Nadu, India
In a collaborative effort, ICRISAT, with the Department of Agriculture Marketing and Agribusiness, Government of Tamil Nadu, has overseen the implementation of the Tamil Nadu Supply Chain Management (TNSCM) project. Recently, they designed and executed initiatives to connect farmers, processors, retailers and consumers directly and swiftly in Tamil Nadu state. This could serve as a model to be scaled up in other regions too as India tries to assist farmers during the nationwide lockdown due to COVID-19.
Under lockdown conditions, supply chains for fresh and perishable commodities are being adversely affected. Though the government has allowed traders and bulk buyers to buy perishable commodities like fruits and vegetables at farm gates to ease procurement, farmers are being offered very low prices for their produce.
On the other hand, consumers resorting to panic buying of large quantities of products has led to inconsistent supply, enabling intermediaries to exploit the situation, resulting in 30-40% higher price for the consumers. Establishing a direct linkage between farmers and consumers, which would ensure consistent supply and competitive prices to the consumers at their doorstep, would be ideal.
ICRISAT and Tamil Nadu government collaborative initiative
Over the past two years, TNSCM has established 64 Primary Processing Centers (PPCs) for fruits, vegetables and other perishables across 10 districts of Tamil Nadu.
On our recommendation, established PPCs were handed over to local Farmer Producer Organizations (FPOs) for their operations and management. As a result, FPOs are aggregating produce from their member farmers through PPCs and producer networks, selling directly to consumers through mobile shops and to private food marketing companies and HoReCa (Hotels; Restaurants; Café). For instance, the FPO Tamil Nadu Banana Producer Company Ltd. procures and packs vegetables at Pochampalli in Krishnagiri district, supplying 5-6 tons of fresh vegetables to Tamil Nadu Horticulture Development Authority’s (TANHODA), Adyar Ananda Bhavan, etc. It also manages the Cumbum PPC, exporting 100 tons of G9 Banana to Iran, Dubai and Saudi Arabia.
Totally, about 27 FPOs are aggregating almost 120 tons/day of fruits and vegetables directly from farmers.
Proactive initiatives to encourage new interventions
To create an enabling market and policy environment of business during these challenging times, the Tamil Nadu government passed a Government Order (GO) in April 2020 to facilitate the following:
- A revolving fund of ₹ 3-5 lakhs (≈US$ 4000-6600) per FPO to eight FPOs with a total outlay of ₹ 32 lakhs (≈USD 42,250) from the Market Committee Funds for three months.
- ₹ 10 lakhs (≈13,200 USD) under Mezzanine Capital Assistance Scheme for each eligible FPO involved in supply of fruits, vegetables and other essential commodities. The Capital Assistance provided in the first year can be redeemed at the end of the fifth year.
- Waiver on rents for fruits and vegetables stored in the government-operated cold storage during the lockdown duration.
- Waived market fees for transactions through government-regulated wholesale markets until the end of May 2020.
Emerging opportunities for inclusive, competitive supply chain models
Potential models to scale up from the current situation in Tamil Nadu have been presented here.
Case I: FPO-Retail-Consumer linkage
Ahimsa Agritech Producer Company Limited partnered with Vetri Farmers Producer Company Limited (Vetri FPCL) in Palacode. Vetri FPCL purchased fresh produce from local farmers. Produce was washed, sorted, graded and packed at the Palacode PPC facility. Ahimsa provided safe and hygienic delivery of fruits and vegetables to consumers, ensuring better prices to the farmers, even packing assorted vegetable combinations in cloth bags as per the consumer needs. These packs were door-delivered to consumers by retail partners e.g. Maasilla, Sowkea Agro. Ahimsa has been successful in packing and selling around 1500 combos of assorted vegetables and fruits per day. A delighted customer from Coimbatore, Mr Natarajan, said, “I booked fruits and vegetable combo pack through a mobile number given by Coimbatore corporation, made the payment online, and got good quality products the next day.”
Case II: Collective effort of FPOs
In Tiruchirapalli region, there are two shining cases of successful partnerships between FPOs:
Agathiar Farmer Producer Company Limited, which operates Manachanallur PPC, has partnered with Sri Suriyaa Vegetables and Fruits Farmers Producer Company Limited, for the purchase, aggregation and packaging of different vegetables to form combinations. Combo packs of 6-6.5 kg were packed and sold door-to-door in the region.
Anaimalais Coconut Producer Company Limited and Sri Suriyaa FPC came together for sourcing, primary processing, packaging two different kinds of combo packs such as fruit and vegetable baskets and supply to online orders of the Coimbatore City Municipal Corporation.
Case III: FPO-Zomato linkage
Apart from the regular mobile shops to reach households, the team from ICRISAT initiated the process of connecting FPOs involved in the packing/sales of vegetable combos to the online food delivery platform Zomato, with two possible models that can be used (yet to be tested on the ground).
Model A: The FPO’s offering will be listed on the Zomato app at the specified location. While Zomato will serve as a facilitator to aggregate orders, the FPOs will carry out deliveries, with Zomato’s delivery module serving as a local guide to reach customers free of cost. This model will have only cash on delivery orders.
Model B: FPOs list themselves as sellers on Zomato (like any restaurant), and start selling their offerings as per their rate list. Zomato executives pick up, deliver and collect payments in real time. This model has got a highly positive reception as it reduces field exposure of retailing FPOs’ sales force. The ICRISAT team trained FPOs on how to run business in the app, including receiving orders and delivering them to Zomato executives within five minutes or fewer.
Case IV: Government e-commerce initiative for fresh produce
The Government of Tamil Nadu has set up a portal, www.ethottam.com, (Thottam = Garden in Tamil) managed by TANHODA, for online sale of retail combo packs to consumers in Chennai. FPOs in the TNSCM project for fruits, vegetables, and other perishables are doing the sourcing, consolidation, and supply for e-thottam. Anaimalais Coconut Producer Company Limited supplied about 5100 packs – about 35 tons – to the portal in just a week since the launch.
Post-lockdown interventions assessment
Once the lockdown is removed, we will analyze the above initiatives. Competitive supply chains that were successful in connecting farmers to consumers without intermediaries may be robust enough for continued use, with research to support scaling up strategies. Successful FPOs may be supported through special incentives to capitalize on their experiences.
Further, the Ministry of Agriculture and Farmer’s Welfare has taken steps to promote FPOs across the country to streamline the consolidation of land as well as the integration of smallholders into the agricultural value chain. Currently, more than 6500 FPOs (including 3000 registered) are operating across the country. The success of any FPO is dependent on many factors, including prevailing policy and business environment in specific states. Therefore, we need to collate success stories of FPOs from different states emerging from the pandemic so as to analyze and create effective scale-up strategies for the future.
About the authors:
Dr S Nedumaran
Innovation Systems for the Drylands,
Mr S Aravazhi
Agribusiness and Innovation Platform,
Dr Ravi Nandi
Innovation Systems for the Drylands,
with support from ground team of AIP-ICRISAT based in Chennai (Mr T Muthukumar, Mr Suriya Kiran and Mrs Pratibha Bisht)