Indian demand for branded seeds shooting up, says Rallis MD

The copious south-west monsoon in India this year was the only saving grace for an embattled economy plagued by a huge current account deficit and slowing industrial activity. Though the cost of farming has gone up manifold, a bumper kharif crop is expected to bring some relief for consumers.

The India Government has lent a helping hand to farmers by increasing the minimum support price for kharif crops such as soybean, maize and red gram. The recent gas price has pushed up fertiliser prices. With production cost going up, agriculture-focused companies are keeping their fingers crossed.

V. Shankar, Managing Director, Rallis India, a Tata Group company, said in an interaction with Business Line that farmers were affected by three major costs — labour, fertiliser and diesel. While diesel costs may ease due to better monsoon, high labour and fertiliser costs are here to stay this year.

There are contents from the interview:

Do you expect food inflation to come down?

No. I do not think there will be a sharp fall in commodity prices though there may be improvement in crop output and yield this kharif season. Commodity prices are not expected to go below the minimum support price. However, it may soften a bit as the increase in support price was significantly lower compared to the trend seen in the last three years.

Will the good monsoon help Rallis?

Yes. We are seeing better demand for our products. Our seeds business is shaping up well. The demand for branded seeds is growing faster. We are almost done with the process of realigning our product offering to ensure sustained cash flow throughout the year. We now have a more balanced revenue flow round the year compared to earlier. Typically, Metahelix and seeds business contribute during the first quarter, while crop protection and fertiliser demand peaks in the second and third quarter. Our international business chips in during the fourth quarter.

You have stopped red triangle (pesticide) products. What is the impact?

All our products are now of greener variety. We want to make sure our products are good for farmers, soil and consumers. The crops grown with our green products leave no residue on the end product. It’s true that some of the greener products are expensive, but they ensure better quality and yield for farmers.

Are farmers convinced with greener products?

It is a continuous process. We are in the process of educating farmers in value creation. We have a database of one million farmers and touch the life of about seven million farmers under our Kisan Kutumb programme. If I tell this to non-Indians they almost faint — it’s the population of their country. But in India, we have 110 million farmers. Unlike olden days, farmers are now generating cash and affordability is not an issue.

How is your contract farming shaping out?

It cannot be called contract farming as such. We are working closely with farmers in pulses. Last year we touched about 1.6 lakh farmers and in the next four to five years we plan to work with 10 lakh farmers.

We intend to influence 15-20 per cent of pulses production in the country. This programme increases our engagement with farmers and educates them on the benefits of our products. We will also procure a portion of yield improvement that happens out of this programme.

Do you face any difficulty in executing buyback deals with farmers?

It is a learning process. We have to do it cautiously. There is no binding on farmers to sell there produce to us. Since we hand-hold them from the beginning, they invariably give it to us. The price is determined by the market. Procurement and managing price risks need a different competency. We procure pulses say once or twice a year, but we have to sell them throughout the year. This involves a huge price risk. Managing working capital also becomes a challenge. Storing it in the right way to ensure quality for consumers is the key.

What are the challenges in contract farming?

The main challenge is to make farmers execute your instructions. If it is not followed, yield may vary tremendously. Secondly, even if he listens to you, there is no guarantee that he will buy your products. He may buckle under dealers’ advice. Now we have to see how to convert the economic demand I create into a commercial demand. If I don’t, all the investments I make and resources I deploy go to others.