Mani Chinnaswamy’s contract farming model has prompted IIM graduates to study his Appachi formula. After all, it gives farmers the right to bargain the price of their produce with the buyer. Talking to Jyotika Sood, the entrepreneur shares the hurdles in the implementation of the formula and its potential to change farmers’ lives
What makes your formula a novel contract farming model?
Appachi formula differs from conventional contract farming models, especially on the price front. We do not create uncertainty by fixing the price of the produce in advance. Our contract allows farmers to sell their commodity at the prevailing market rate. Though we have the first right to negotiate, farmers are free to auction off the produce in case of a disagreement. We motivate them to form self-help groups to enhance their bargaining power.
Our pricing mechanism usually does not disappoint them as it takes into account the labour put in by the farmer and his family. My company, Appachi Cotton, deals only in cotton because it is a family business, but alongside we encourage our farmers to grow millets, legumes and vegetables, which helps them meet their daily needs and expenses.
Another component of the formula is to ensure that farmers never go short of money and material throughout the cultivation period. The contract assures them easy availability of credit from banks, quality seeds, doorstep delivery of unadulterated fertilisers and pesticides at discounted rates, expert advice and field supervision.
We hear you have stopped facilitating farm credits.
I developed the formula with a vision that everyone who is part of the contract will fulfil their responsibilities. If a farmer takes a loan, he must repay it. It worked well for 10 years. But in 2006, during the assembly elections in Tamil Nadu, some political parties promised waiving off agricultural loans in their manifesto. This led to wilful default by farmers and a bitter end to the idea. To fill the void we started looking for ways to reduce cultivation cost. This made us switch from conventional to organic cotton in 2009. Farmers are always under fear and defensive, applying fertilisers and pesticides indiscriminately, thus increasing cultivation cost. They would sanitise the entire field at the sight of a single insect. There was a need to teach them when to pick up their pesticide guns.
Is organic cotton more profitable than the conventional cotton?
In agriculture, profit can be increased either by increasing the yield or by reducing the cultivation cost. Chemicals and technologies like Bt are pushing up the yield, but they are also increasing the cost of cultivation.
Farmers are organic by default. Through Appachi, we remove middlemen, passing the benefits directly to farmers. An increasing number of farmers are switching from conventional to organic cotton lately. Since the yield reduces during the conversion period, we offer them financial support to keep up their interest in organic cotton. We help them get organic certification.
What are the challenges before organic cotton?
No doubt Bt cotton poses the threat of contamination to organic cotton, but the biggest challenge is seed. All our seed banks have run out of traditional cotton varieties. Hardly any company or agriculture university is coming forward with seeds suitable for organic farming. The government and universities are promoting Bt crops, while people want safe organic crops.
What are the other endeavours of your company?
We have an integrated model for organic cotton farmers and weavers. At present, we have 165 farmers and 50 weavers. We make products like sarees and dress material under the brand name, Ethicus. We put our craftsperson’s name and picture on every piece he creates and mention the time it took to weave the fabric.
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