Forbes India 15th Anniversary Special

A Rich Harvest: The Win-Win Initiative to Help Farmers

Ranjan Sharma is changing the way lakhs of farmers get credible information. In the process, his partners IFFCO and Airtel are increasing their reach in rural markets

Published: Feb 18, 2011 06:25:19 AM IST
Updated: Feb 15, 2011 02:32:33 PM IST
A Rich Harvest: The Win-Win Initiative to Help Farmers
Image: Amit Verma

For nearly two decades, Banarsi Das had practiced farming in the same way that his forefathers had done. He grew basmati rice, sugarcane and vegetables in the 25-acre plot in Bhutankadi village in Haryana’s Karnal district. When in doubt, he would ask his brothers or peers. At the most, he would go to the local government agriculture officer for advice. Early last year, officials from HAFED, the agricultural co-operative run by the state government, asked him to put a green SIM card in his mobile handset and listen to the five voice messages that would be sent to him every day. The co-op officials promised that it would help him increase the yield of his crop.

The rice harvest is now over. And Das is ecstatic. “Today I can safely say that I know more about farming through these messages than from the 20 years of farming,” he says.  His average harvest of basmati rice has increased from 11 quintals per acre last year to 15 quintals. Those messages carried much-needed information on preventive actions against crop diseases, when and what fertilisers to use, and how to timely irrigate the crop.

The breakthrough that Das has achieved on his farm is music to the ears of Ranjan Sharma. In 2005, Sharma decided to chuck a 27-year-long corporate career in the fertiliser industry. While working in the fields, Sharma realised that “Even for progressive and affluent farmers of Haryana, credible information is hard to come by. Think about the poorer ones in the rest of the country. How many times will the farmer seek help from the agriculture officer? That these sources are not enough is obvious when with the same soil type and weather conditions, difference in productivity can be as much as 50 percent.”

That’s when he came up with an idea: Use the mobile phone as a medium to send information to farmers on better agricultural practices.

Sharma roped in two critical partners: IFFCO, or Indian Farmers Fertilisers Co-operative, which sells almost 40 percent of the fertilisers sold in India, and Bharti Airtel, the biggest telecom player in the country. That partnership resulted in IFFCO Kisan Sanchar, or IKSL. IKSL uses IFFCO’s huge network to sell co-branded SIM cards to farmers, who use them to make calls. They also receive five free voice messages daily on agriculture and related issues. In less than three years, the service is available to over 85 lakh farmers across 18 states.

While IKSL itself remains relatively small — it earned revenues of Rs. 170 crore and a modest profit of Rs. 20 crore last year — it has already proven to be an incredible rural marketing machine for Airtel, a fact that the telco would prefer to keep under wraps. Yet consider the statistics: IKSL accounts for almost half a million of the 3 million subscribers that Airtel scoops up every month across the country. No wonder Sunil Mittal, the founder of the Bharti group, would be glad that he took an early call to buy 24.99 percent stake in IKSL in 2007.

As for Sharma, he’s now divorced himself from operations and is working on new services that add more utility for farmers. In the coming years, he could be looking to list the company on the stock exchanges.

Fruits of Failure
IKSL wasn’t Sharma’s first attempt at turning entrepreneur. Within months of saying goodbye to the corporate world, Sharma set up Matrix Energy. The company promoted use of SIM cards in electric meters to monitor usage and thus reduce transmission and distribution losses. Even though the pilot project in Patiala, Punjab, was relatively successful, it failed to take off. “The government officials were not interested… I realised that just like a good seed, a good idea also needs water and fertilisers to grow,” says Sharma.

Ironically, that fertiliser came from the IFFCO management with whom Sharma had formed a good rapport during his career in the industry. “When Sharma approached me with the idea, one could see that it was a scalable proposition,” says Manish Gupta, director, strategy and joint ventures, IFFCO. Both of them went to IFFCO’s managing director and CEO U.S. Awasthi, who deputed a team to assist Sharma to launch a pilot project. IFFCO’s help was crucial. After all, the behemoth works through over 40,000 co-operative bodies across rural India and counts more than a third of the country’s 15 crore farmers as its members. Each of the co-operative bodies also has a retail outlet. The visibility and acceptance of IFFCO’s 44-year-old brand helped Sharma create an instant rapport with his target audience.

So while IFFCO’s outlets would become IKSL’s distribution arm and also help garner content, Sharma needed another partner to deliver messages. That is when he met his friend Sanjay Kapoor, who is now CEO of Airtel. “He agreed to help us on the pilot project. Airtel supplied the SIM cards and also gave access to its network,” recounts Sharma. If the pilot project took off, it would help the mobile operator. The penetration of services in rural India was less than 2 percent in 2006 and service providers were looking to increase their presence.

The pilot was spread across 11 villages in western Uttar Pradesh. Sharma himself invested Rs. 5 lakh in the almost year-long project. “We bought and distributed mobile handsets to village leaders, including elders, panchayat heads and co-operative members who would then pass on the information to farmers. Through a code supplied by Airtel, we used to send voice messages to them on weather, electricity and water supply schedules and crop protection,” says Sharma. IKSL opted for voice messages as opposed to text messages to deal with the problems of illiteracy among the rural population.  

The project proved to be a success for all the partners. Farmers agreed that the information helped them. IFFCO’s outlets proved effective in distributing SIM cards; for Airtel, three of the 11 villages turned “100 percent subscribers” despite the presence of other telecom service providers.

 A Rich Harvest: The Win-Win Initiative to Help Farmers

Infographic: Sameer Pawar

IKSL was set up in April 2007 with IFFCO and Sharma’s Star Global Resources (the enterprise through which his investments are routed) as partners. While Sharma held 25.01 percent of the stake, IFFCO owned the rest. To part fund his share of IKSL’s Rs. 5 crore equity, Sharma invested his entire provident fund savings of Rs. 49 lakh. But he was soon flooded with offers to sell his stake. “The word had spread about the success of the pilot project and that we were fast adding numbers,” says Sharma. Among those who came knocking were Vodafone’s now retired chief Asim Ghosh and S.P. Shukla, a senior official at Reliance Infocomm. Not wanting to lose the opportunity, Airtel moved in swiftly. Sunil Mittal personally met the IFFCO management, who agreed to offload 24.99 percent to the telecom major. At that time, IKSL was valued at roughly Rs. 250 crore with a subscription base of 8 lakh. Today, the base has expanded 10 times.

Sharma may have pulled off a smart business model. “The biggest challenge for a new organisation in an emerging market is to create end-to-end value chain,” says Chander Velu, assistant professor, Cambridge Judge Business School, University of Cambridge. This had been achieved by bringing together Airtel and IFFCO. Even competitors tend to agree.

For instance, Reuters Market Light has entered the market with a subscription-based service built around text messages. Its founder and managing director Amit Mehra admits that distribution and creating content are the two most cost incurring items in the business. “That is why since 2009 we have not expanded our distribution network beyond 13 states. At present, we want to stabilise our business model,” says Mehra. He has tied up with agriculture input companies, NGOs and local banking institutes to sell its subscription, which starts with a three month package for Rs. 260. But with distributors’ margins sometimes as high as 37 percent, Mehra says it might take another “18 to 24 months for operations to break even”.

Germinating the Plant
To create content, Mehra can access publicly available information freely from the Internet. But each time he needs to access specific data, he would have to pay for it. Luckily for Sharma, IFFCO’s access to government channels meant that IKSL got to fill its information bank free of cost. “For instance, we have tied up with Indian Meteorological Department for information on weather forecasts. While some of the information that the Department releases every day is free for all, many of the specific data that we can access freely actually has to be bought by others,” says IKSL’s CEO S. Srinivasan, who was deputed by IFFCO. The fertiliser major’s relationship with state-level agriculture departments, information centres and universities also turn them into information sources for IKSL.

An important part for IKSL’s service was to keep the voice messages free. So even if the farmer doesn’t recharge for more ‘talk time’, he keeps getting the one-minute-long messages. But since in many villages the IKSL SIM card is the only service available, its subscribers do end up recharging in many cases. “The average revenue per IKSL subscriber is lower than the rural average of about Rs. 100-125 a month. But it is enough for the business to be profitable,” says Manish Trehan, chief operating officer, IKSL and earlier a senior executive at Airtel.

The business model is simple: Both IFFCO and IKSL get a fixed amount from Airtel for each new subscriber and a percentage of the talk time value every time a subscriber recharges. Thanks to the voice-based service, IFFCO also strengthens its brand among its core customers. On the other hand, Airtel is able to get an enormous first-mover advantage in the rural market.

A Healthy Crop
however, the model is yet to attain perfection. “We have struggled in markets like Kerala and Gujarat. The pick-up rate, or the number of messages that the farmer actually hears in a day, is low at 40 percent,” says Sharma. The key, he adds, is to create even more specific information so that it retains farmers’ interest. Steps have now been taken in Karnataka, where the state has been divided into six or nine crops. The farmer can choose up to three crops on which he wants information. Similarly, there are options for animal husbandry. The initiative will be expanded to other states too. For instance, free call centres, where experts give solutions to farmers’ problems, have been set up.

For Sharma, the race to build bridges with Indian farmers may have only just begun.

(This story appears in the 25 February, 2011 issue of Forbes India. To visit our Archives, click here.)