Commodity Analysis

Lending colour to turmeric farming

Rajalakshmi Nirmal | Updated on April 15, 2018 Published on April 15, 2018

Erode co-operative society procures and resells turmeric after value-addition

Turmeric farmers in Erode face many issues. But the work done by Erode Agricultural Producers Co-operative Marketing Society in Karungal Palayam, a suburb in Erode, is transforming the local agriculture market and bringing in much-needed change.

The writer recently visited the co-operative society.

The society has 45,929 farmer-members who receive benefits including free-of-cost warehousing and secured loans at low interest.

While farmers in many mandis across the country depend on commission agents to sell their produce, here the farmer sells straight to the trader/buyer. Since the buyer is usually not in a position to pay the farmer the same day, the society settles the farmer’s dues immediately by using its funds, and collects the same from the trader within 7-15 days.

It is a tough task to remove commission agents from the agriculture supply chain as they do the job of providing credit — to traders and farmers. But at the Erode Agricultural Producers Co-operative Marketing Society, there is no place for these intermediaries.

The society auctions turmeric electronically through a mobile app, saving time and ensuring transparency.

In a recent research paper — ‘Inclusive Growth and Development: A Study of an Agricultural Producers Co-operative Marketing Society in Tamil Nadu’ — C Pitchai, Associate Professor, Department of Co-operation at Gandhigram Rural Institute, acknowledges the work of the society in creating an effective and transparent marketing network for turmeric.

Co-operative societies are turning into a beacon of light for farmers, and there are a few other examples in Tamil Nadu — Tiruchengode Co-operative Marketing Society, Gobi Agricultural Producer Co-operative Marketing Society and Nilgiris Co-operative Marketing Society.

Pricing power

The members of the society do not sell if they don’t get the right price. Those in urgent need of cash take a loan by pledging the turmeric (pledge loan) at 8 per cent (per annum) interest. Others leave their turmeric in the society’s warehouse.

The society lends up to ₹3 lakh to a member. The loan value is 60-80 per cent of the turmeric’s prevailing market price.

The loan is disbursed the same day the farmer brings his produce to the society, says P Kandaraja, the society’s Managing Director. The farmer pays the interest when he retrieves his bags from the warehouse.

Farmers who want to extend the loan can do so. The society, though, rechecks the stock’s quality before renewing the loan.

Turmeric bags can be stored in the warehouse free of charge for three months. After that, a fee of ₹2/bag/month is levied for three months, and then ₹4/bag/month for the subsequent three months. This is done, says Kandaraja, to make sure farmers do not stock their produce for longer periods. “Earlier, it was completely free, irrespective of how long one kept his stock; but then we found farmers leaving their turmeric here even for years in a row” The turmeric is also fumigated for free at the warehouse.

For a trader (buyer) at the society, the advantage is the free credit he gets. Traders get a credit period of 7-15 day, after the society’s board of directors assess their credibility.

Value addition

Another attraction is the society’s value addition for re-sale.

At a time when the global agri market is hit by surplus in many crops, a value-added product makes better business sense and can be more remunerative.

At the auctions held at the society’s floor, a representative from the society participates and bids for farmers’ turmeric. The procured turmeric then goes through a value-addition process and is re-sold to co-operative wholesale stores and other buyers (PDS shops and temples) across the State, and a portion is exported, too.

The society makes value-added products — turmeric powder, chilly powder, sambar- and rasam-mix powder and coriander powder, among other things, — under the brand ‘Mangalam’. The crushing, blending, roasting and packaging machines are installed inside the society’s premises.

The revenue from the sale of value-added products in 2017-18 was ₹7.5 crore, up from ₹5.2 crore in 2016-17 and ₹3.5 crore in 2015-16.

The total turnover (income) of the society in the last year was a little over ₹100 crore.

The major chunk of the yearly revenue comes from the e-auctions. (The society collects a service charge of 1.5 per cent of the value from each of its members). The net profit for (2017-18) after paying out employees’ salary and other expenses, was around ₹1.5 crore.

Of the profits, 14 per cent goes as dividend and is distributed among members, and the balance is kept as reserve to fund various member welfare activities, including lending and warehouse maintenance.

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