The winds of change are blowing through Tata Chemicals. The company recently restructured its fertiliser division as the crop nutrition business (CNB). Driving CNB is Khet-Se Agriproduce India, a 50:50 joint venture between Tata Chemicals and Total Produce of Ireland, set up in 2007. With the objective of bringing the Indian farmer closer to consumers and thus help in raising farmer incomes, the company is setting up state-of-the-art distribution facilities for fresh vegetables and fruits across India.
Kapil Mehan, COO, CNB, talks to Sujata Agrawal about the new relationship that Tata Chemicals is building with the farmer and the business plans for Khet-Se.
On restructuring the business from fertilisers to agribusiness
Fertilisers in the popular sense mean basic nutrients (nitrogen, oxygen, potash); but plants need more nutrients than just these. While these have traditionally been available in the soil, certain factors such as repeated harvesting and increasing focus on high yielding crops have led to a need to replenish these nutrients.
Secondly as the population increases, the demand for food increases. There is also a focus on bio-fuels as an alternate energy source. This puts further pressure on soil productivity. Thirdly, new fruits and vegetables that are being introduced in the market call for new practices and nutritional requirements for the soil.
Looking at all these factors we decided that, India being an agricultural country, remaining only at the fertiliser level will not be beneficial to the farmers. We need to give him solutions and products to ensure good soil for better productivity and help him get better returns from his field.
So we have done a number of things: we have set up Khet-Se Agriproduce through which we buy directly from farmers; we are working with the farmer through Tata Kisan Sansars (TKS) on new technology, product solutions and services; we have introduced products; and we have set up the Centre for Agriculture and Technology at Aligarh which works in different areas to improve soil productivity. All these initiatives come under CNB.
On the current crisis in Indian agriculture
The challenge for the government and the corporate is to ensure a revival in agriculture. And that can only happen if the farmer is able to earn well from his land.
We started evaluating that option from a business perspective and felt that TKS is uniquely placed to help the farmers in this area. Next we did an evaluation of crops grown – farmers are unique customers because each one is at a different price and product level – and found that the maximum value addition we can do is in fresh produce, for two reasons.
In India at least half a billion population is being fed with fresh fruits and vegetables grown in remote areas; they reach the consumer without any sophisticated logistic systems which results in much loss and damage in transit. Secondly a chain of aggregators (intermediaries) has evolved out of necessity, but there is no value addition happening – just margins being added along the chain which means that the farmer gets little monetary benefit.
We felt that we could add value in 3-4 areas: teach the farmer how to grow better crops; help him deal better with post harvest issues; reduce crop damage in transit; and feed the produce better to wholesalers. With TKS, which is like our in-house network, we are trying to package services that offer better solutions to farmers.
So now through Khet-Se we source directly from farmers and deliver directly to retailers. Our first centre was set up in Ludhiana in May 2008 and we have started distributing produce to many retailers, including Wal-Mart India, Reliance Fresh, Star Bazaar. Our produce includes apples from HP, bananas from Jalgaon, grapes from Nashik. We hope to open the second centre in Mumbai by end 2008. Our plans are to set up 20 centres in three years and about 50 in the next five years.
We also cater to small vendors and pushcart vendors through our ‘cash and carry’ centres of which we have set up two in Ludhiana. We hope to expand these centres using the franchisee model.
On the partnership with Total Produce
Total Produce brings in skill sets and knowledge of the entire structure and the processes. They provide IT support through one of their companies which specialises in software for crop business. We also use their network for export – they are the largest distributor in Europe.
We are already emerging as the largest exporter of grapes; we have a facility in Nashik which has received a European certification. Another potential crop is banana. Total Produce is one of the largest banana players in the world and India is the largest producer of bananas. We have set up a very modern banana ripening facility; raw bananas are sourced directly from the farm and it takes a cycle of 4 to5 days for the bananas to ripen – they are spotless and already commanding a premium in the market.
I believe that once consumers begin to receive good quality produce, they will be willing to pay the premium. India, in the next 5 to10 years will be the largest grape and banana exporter, so there is big potential in the business.
On the role played by the Centre for Agriculture and Technology in helping the farmer
The first is to find new and customised solutions for crops. They have analysed the crop within a 400km radius of Babrala, and come up with specific micro nutrients for them; it’s like ready made food for the plants. So we are actually setting up India’s first customised fertiliser business and should be in the market with our products in the next 21 to 24 months.
And finally we are working on developing skills and capability of our field force – building their knowledge on crop nutrition and helping the farmers. We have a collaboration arrangement with the College of Agriculture and Life Sciences for the last four years. They give us inputs on what we should be looking at in terms of soil, crops, etc.
Soil sampling, testing and analysis is an important area for the centre. Our scientists study the chemical, physical and biological aspects of the soil (so far nobody in India has worked on the biological aspects). They also analyse soil from different regions in a scientific manner for nutrient deficiencies and then match it with particular crops. A special software identifies nutrients that are particular to that specific geography and the crops grown there. These findings are communicated to farmers who find this service very useful.
Apart from the R&D centre, we have also set up a new business development cell, which focuses on identifying products that we don’t manufacture but which can be used for particular crops.