2. Introduction

The green revolution introduced chemical fertilizers to obtain high crop yields which resulted in higher demand of these inputs over time. Subsequently, in 1980s and 1990s the Government supported the farmers with huge subsidies on fertilizers and pesticides, free electricity, canal irrigation, agriculture credit and minimum support prices for major crops

Over the years, with government support, private players have emerged in manufacturing a wide range of inputs.

However, the distribution of inputs to the farmers has largely been done indirectly, i.e. selling the input through distributors/retailers as shown in Figure 2.1. Gradually, the reliance on distributors/retailers amplified, as they allowed the farmers to buy inputs on credit. However, farmers have expressed that these input retailers have been selling spurious quality products to the farmers as they have their own interests to push the high margin products and mobilize high commission sales.

The last decade also saw several input manufactures entering in the retail market. They adopted a model by which they aimed at providing quality inputs to the farmers, at places easily accessible to them, with appropriate advisory and guidance at competitive prices. ITC’s Choupal Sagar and Mana Gromor of Coromondal Group are among some of the major input manufacturers to have entered the retail market. These companies managed to create retail stores or outlets in rural areas, for farmers to have easy access to buy quality inputs. As it turned out, operating in the retail segment brought its own challenges for most of the manufacturers.

At present, numerous start-ups and companies have started to connect directly with the farmers. Some of the wellknown names are E-choupal, Agrostar, Green Agrevolution Pvt Ltd, Zamindara farm solutions. These companies provide an online platform such as mobile app and some of them also have their own call centers, where farmers can contact for procuring the agriculture inputs at fair price.

In spite of these developments, the sector still faces its own challenges. The farmers still purchase from its local retailers, as they are already trapped in debt cycles. The assessment of demand of all the farmers remains difficult. The farmers still believe in local retailers and ended by buying spurious products, as there is no regulation on these products.

The seasonality of input purchases affects the capital cycle of businesses adversely. The customer retention in these models is limited and building long term trust with the customers is the need of hour. Apart from online platforms, offline presence is essential to gain long term trust. Here, the FPOs can play a crucial role as the farmer members themselves are the owners as well as managers of the business entity which shall enable the FPOs to build long term trust with the farmers for procuring inputs as well as advisories.

3. Operational Tools for Input Business Planning

To effectively plan the input business, it is necessary to adopt a strategic approach at various stages of input supply chain. In this section, we emphasize on different approaches along with suitable tools used in improving the process of input planning.

4. Successful Case Studies on Agriculture Input Business

This sections represents case of two FPOs and emphasize on the strategies adopted by them to increase their customers, directly benefit the farmers, be cost-effective and achieve high profits in agriculture input business.

Anekal Horticulture Producer Company Limited, Karnataka

The FPO was commissioned under Department of Horticulture, Government of Karnataka in March 2016 with approximately 1000 farmer members as shareholders. They started operations with Input business, CHCs and later added output business to their business portfolio.

The FPO had reached a turnover of Rs. 97.24 Lakhs with a marginal profit of Rs. 1.09 Lakhs in initial commencement year and in FY 2017-18. The turnover increased to Rs. 3.18 crore and profit reached to Rs. 1.18 Lakhs as low margins were set-up for selling the inputs to retain existing customers and attract new ones. In later FY 2018-19, total input business turnover reached Rs. 4.06 Cr with profit of Rs. 9.04 Lakhs was achieved. It was largely possible as FPO was well established and adopted a risk seeking strategy to keep low margins, add high quality products to attract new customers. The customer-centric approach became useful to increase increased sales/revenue during these two years and margins leading to stability in input business.

The FPO had reached a turnover of Rs. 97.24 Lakhs with a marginal profit of Rs. 1.09 Lakhs in initial commencement year and in FY 2017-18. The turnover increased to Rs. 3.18 crore and profit reached to Rs. 1.18 Lakhs as low margins were set-up for selling the inputs to retain existing customers and attract new ones. In later FY 2018-19, total input business turnover reached Rs. 4.06 Cr with profit of Rs. 9.04 Lakhs was achieved. It was largely possible as FPO was well established and adopted a risk seeking strategy to keep low margins, add high quality products to attract new customers. The customer-centric approach became useful to increase increased sales/revenue during these two years and margins leading to stability in input business.

At present, at the FPO input shop 65% of the items constitutes Fertilizers, 30% pesticides and rest 5% are others. In the initial establishment year there were approximately 200 member farmers among 1000 members transacting on regular basis from FPO Input shop. However, it has reached to 600 presently

Green Vision Farmers Producer Company Limited, Maharashtra

Green Vision Farmers Producer Company Ltd, is one of the FPO was established in Jan 2014 with 310 farmer members. Initially, the FPO major challenge was creating awareness among farmer members about availability of inputs at FPO shop, and competing with traditional local input dealers which over the years have provide all flexibility and convenience that farmer needs. During this period, FPO took this as a challenge and changed input business scenario.

Some of the commendable innovative steps adopted by FPO includes appointing a trained member to look after the input shop for effective transfer of technical information to farmers and in turn increasing sales revenue. Also other steps include conducting regular farmer training programs addressed by Input company experts, encouraging purchase and sale of branded quality inputs which have good results in the field. Monitoring items expiry on regular basis and in turn planning sale/purchase etc.

The FPO with above mentioned efforts and under the able leadership of CEO, BODs and chairman saw achieving a turnover of approx. Rs. 0.2 Lakhs with a loss of Rs. O.8 Lakhs in FY 2015-16 and in FY 2016-17 it was total turnover of Rs. 90 Lakhs and profit of Rs. 0.95 Lakhs, in FY 2017-18 it was approx. 1.2 Crore turnover with approx. 2 Lakhs profit. In these three years the FPO saw a turnover increase from year to year but profits stagnated at same level owing to very low operating margins to compete better with conventional retailers, bring about better rapport among farmer members, increase overall sales/ revenue

In FY 2018-19, total input business turnover clocked approx. Rs. 1.5 Crore with an approx. profit of 3.5 Lakhs owing to increased margins from sizeable member transactions and increased sales.

It has also received NABKISAN credit facility of 30 Lakhs to boost their transactions and increase revenue and ultimately to become self-sustainable.

In the initial establishment year there were approx. only 200 member farmers among 310 members transacting on regular basis from FPO Input shop but as years passed member size started to grow and now it’s approximately 750 and still growing from total current member size of 850.

Conclusion

The guidebook is an attempt to familiarize the FPOs about agriculture input business. It starts with explaining the journey of agriculture input sector in India. The growth of input markets in India especially fertilizers, pesticides, seeds and farming equipments. It highlights the present distribution channel available for sale of these inputs. The FPO entering the system can benefit directly due to its large farmers base.

However, few FPOs have achieved some success in input business but there exists lot of gaps in agriculture input management. The guidebook presents various approaches or tools which are useful for the FPO to strategize their agriculture input planning for achieving maximum revenue, managing the inventory and capturing the demand of their farmer members effectively as well sustaining higher profits.

The guidebook demonstrates few successful case studies of input companies and farmer producer organizations. These companies adopted a customer-centric approach which has led to rise in sale of inputs and attaining higher profits. A digitization platform is also mentioned with the case studies which benefits the FPO for credit linkages and more transparency in inventory management.