Institute of Rural Management Anand

Course Name: Managing Collective Enterprises (MCE) Programme: PGDM-RM41

Date: 6th February 2022 Term – V Roll No.______________________

End Term Examination – Part B (Open Book)

Duration of Exam: 2 Hours 20Mins Weightage: 25 percent Total Marks: 25 Marks

For the Diwakmata case study can you answer the following questions?

It will help if you use visual aids (maps, tables etc.) wherever possible. Marks are indicated
in brackets.

1. “It takes a village to raise a child” is a famous proverb. Producer collective

researchers now believe that stakeholder theory has better explanatory power in
understanding the growth and management issues of an FPO. They suggest that it
takes “many stakeholders to build an institution”. Based on the case facts, do you
agree with this and can you identify the stakeholders and map them with regard to
their orientation (positive, negative, neutral) with respect to the collective
institution. (9 marks)

2. As indicated by the recent Economic Survey the Govt of India is embarking on a

Central sector scheme for promotion of 10,000 FPOs. Diwak Mata, unlike other cases
you have read about, is a recent FPO. Based on its three year performance what are
your key learnings from this case on managing the growth of FPOs? (8 marks)

3. As a new Cluster Based Business Organisation (CBBO) you have got a mandate to
promote 10 more FPOs in the region. Based on the case, and your insights on
managing collective enterprises, how will you design your intervention strategy?
What would you continue to do and what would you do differently? (8 marks)

ALL THE BEST

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 Of government programs and local ecosystem: The case of Diwak Mata Farmer
Producer Company

Introduction
On a hot summer in July 2020 in Semlop village Rakesh sat in the office of the Farmer Common Service
Center (FCSC) in Pratapgarh district of Rajasthan. The agricultural markets had just reopened following
the pandemic, Rakesh was reflecting on the journey of the young FPC that he has been part of. The new
grading and processing plant had just been installed and a trial run conducted. The farmers were hoping
to see it operational in the coming season. While the FPO was showing promise and farmers were
beginning to get interested, Rakesh faced a personal dilemma. The World Bank supported Rajasthan
Agriculture Competitiveness Project RACP had ended and the promoting institution, Prakriti Foundation
indicated that they would find it difficult to pay the same salary henceforth. Rakesh Kumar Sain, an
agricultural graduate, is the CEO of the Diwak Mata Farmer Producer Company (DMFPCL). Though,
initially reluctant, he has been with this new producer collective for over three years. He is able to
support himself through his constructional material business, but his heart has been with the Diwak
Mata collective. Should he work for the farmers’ collective voluntarily, or should he leave everything to
focus completely on his construction business? Or was there a middle path?

Of agriculture and markets: the RACP

Agriculture is the main livelihood in Pratapgarh district in Rajasthan that shares its borders with Madhya
Pradesh and Gujarat. The net sown area is a third of the total geographical area of 6 lakh hectares. Out
of the total cultivable area, 72.83% is irrigated and 27.17% is un-irrigated. While the Jakham dam
project, 45 Kms from Pratapgarh, has brought prosperity to the region in the Jakham river command
area downstream, the catchment area of 22 sq kms is dominated by small and marginal farmers
engaged in un-irrigated cultivation. The Jakham cluster was one of the clusters chosen for the RACP
covering113 villages in total in 3 blocks viz. Pratapgarh (35), Dhariavad (75), and Pipalkhut (3). The RACP
was started in 2012 by the Rajasthan Government with support from the World Bank. It was envisioned
that the project would be private entity-led, with the government departments just providing support
roles. Dr. Pritpal Singh, the coordinator of RACP from 2015-20 recounts “…the roles of the various
Government departments were not clear until 2015. It was then decided to give the Agricultural
Department, Government of Rajasthan more say and be the nodal department to ensure convergence.”

The design of the project was complex and involved coordination among six departments: watershed,
water resource, ground water, horticulture, animal husbandry and agriculture. The cluster level planning

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included climate smart agriculture, production, and marketing. After initial difficulties in inter-
departmental coordination the project gathered steam with plans made and funds allocated. Non-
Government Organisations (NGOs) were selected as project implementing agencies based on their track
record of working with farmers and building institutions. NGOs were given the task of mobilization and
reporting and collaborating with government machinery. In the Pratapgarh district of Jakham (surface
water and watershed) cluster, the community mobilization, social screening, and technical support
under the project was taken up by Prakriti Foundation (Prakriti). Founded in 1994, Prakriti is a non-profit
organisation known for its work on participatory development in the border districts of Gujarat and
neighbouring Rajasthan.

Dr. Pritpal Kalra, the Project Coordinator of RACP, reflected that much of the early years were spent in
establishing mechanisms to get six departments, headed by different principal secretaries to work under
the same roof given their own departmental norms. Grant Thornton was roped in 2015 as a specialized
agency to promote agribusiness through the project. FPOs were sought to be established by
implementing agencies or NGOs across the state.

Based on a survey conducted by Grant Thornton (GT) and Prakriti, the commodities that had good
promise in the Rajasthan markets were identified and farmer meetings were initiated. GT worked on a
proposal for share price, share capital, business plan etc. The plan was to be executed such that RACP
contributed the majority of the setting up expenses with only nominal investment from the FPC’s side to
initiate the business intervention by setting up input shops. Subsequently it was planned to set up a
Farmers’ Common Service Centre (FCSC) and set-up units for primary processing of members’ produce
and some space for storing the aggregated commodity, later to be sold through agreements with
government and private partners.

Working at the borders: Prakriti Foundation’s role in collective action

Prakriti Foundation’s expertise involved natural resource management, livelihood enhancement of the
rural poor through collectives’ management and local self-governance. It had formed close to 350 village
institutions including Self Help Groups (SHGs), FPOs, SHG federations and Panchayat Resource Centres
(PRC) aimed at collective management of watershed projects, lift irrigation projects, land resources,
sustainable agriculture practices, women empowerment and provided legal advisory to these collective
institutions.

As part of the survey conducted by Grant Thornton and Prakriti Foundation, Multitask Groups (MTG)
were created with 100-200 farmer members. Rajendra Jaiswal, the Executive Director of
Prakriti

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Foundation, explains, “The mobilisation phase was intense and included repeated meetings with
farmers convincing them to collectivise to form MTGs in 35 villages of the catchment area of the Jakham
dam”. Soybean, maize and groundnut were primary crops in Kharif while wheat, mustard, gram and
barley were sown in the Rabi season.

Farukh, the field representative of Prakriti Foundation, mentions how farmers were skeptical to join any
groups or contribute equity as they were wary of chit fund scams! Numerous evening meetings led to a
total of 219 MTGs that were federated as five Multitask Associations (MTAs). From each of these, two
representatives were chosen to form the Board of Directors that included two women, one of whom is a
graduate. The CEO, Rakesh Sain, was then selected from among five potential candidates following an
advertisement. Rakesh, who hails from a farming family, was working in a seeds company in Jaipur, after
his graduation in agriculture. Farukh met Rakesh’s father and convinced him on the role Rakesh can play
in the empowerment of farmers of his district and was able to persuade a reluctant Rakesh.

Managing the fledgling collective

Diwak Mata Farmer Producer Company Limited (DMFPCL) was registered in June 2018 and has a paid-up
equity of Rs. 6,30,400 contributed by over 525 member farmers (417 male & 108 Female). The FPC is
involved in wheat, pigeon pea and soybean production using climate resilient techniques and trains
farmers on the same. Discussions with farmers revealed that soybean had replaced traditional crops like
maize and urad (black gram) for several decades and few farmers were able to recollect a different
cropping pattern. Soybean was seen as low maintenance and some were discouraged by rains that were
close to harvesting time in a particular year that destroyed the black gram crop. Rakesh enthusiastically
participated in the discussions on trials of mixed cropping and other alternatives to soybean though the
farmers were less keen.

Securing quality inputs for farmers through IFFCO Bazaar

Diwak Mata began with input business selling seeds, pesticides and fertilisers to farmers. RACP
facilitated the input sales license for DMFPCL after consultation with the Department of Agriculture and
Commissioner of Agriculture, Govt. of Rajasthan. However, FPC input shops also act as market practices
yardstick, thus impact more than just the FPC members.

Due to interventions of the Department of Agriculture and others DMFPCL has been able to get license
to sell inputs at their own shop in Semlop village, from the IFFCO Bazaar in Pratapgarh situated 25 kms
away. Smart tie-ups by the FPC with IFFCO Bazaar benefitted the farmers through cost savings, with

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DMFPCL making profits through a small margin and increasing sale. Mukesh Ameta, the manager at the
Pratapgarh branch of IFFCO Bazaar has been very supportive. He feels that “FPOs, like DMFPCL, have a
role to play not only in selling inputs to the farmers but also in disseminating information about their
optimum usage.”

The FPC is into input sales and plans to begin seed production business, which, for now is taken care of
by liaisoning with the government department. The turnover for 2018-19 was over Rs. 65 lakhs owing
largely to input sales to 1700 farmers (both members and non-members) and a direct procurement of
10MT soybean by a private buyer in Nimbaheda. The company made a profit of over Rs. 80,000 in that
year.

Creating community assets

Though the mandi license was relatively easy to get, facilitated by RACP, the output marketing including
facilitating sale at the Mandi has not been easy. Rakesh helped broker a deal with Sarvodaya Agrotech
Ltd, a local buyer, for 10MT of soybean but the charges levied by the buyer did not work for DMFPCL. In
July 2019, as provisioned in RACP, DMFPCL purchased land in the Semlop village from one of its
members to establish a Farmer Common Service Centre (FCSC).

The FCSC currently houses an office, a 60MT storage area for input stocks, a shop front for input sales
and a sorting and grading unit with a capacity of processing 1MT/hour. The higher grade can be sold to
private entities, next grade can be sold to mandis and so on. The sorting and grading unit cost Rs .30
lakhs. The RACP grant was 22-23 lakhs as grant, 7 lakhs were contributed by DMFPCL.

Governance and leadership

DMFPCL has five promoters and five directors that were chosen from five multi-task
associations (MTAs) that were clusters of 219 multi-task groups (MTGs). Each MTG has 15-20
members, and a village has, on an average, 20 MTGs. DMFPCL is spread over 35 villages that
are part of the catchment area of the Jakham watershed management project. Among the 10
promoters and directors, two are women who currently do not partake much in decision making.
One of the women BoD members is a teacher in a school in Pratapgarh and takes little interest in
the FPC. Notably, the women are much younger to the men, all of whom are in their 50s.

The BoDs typically meet every three months, and the Annual General Meeting happens usually
in September every year. In the past AGMs new members are added to the FPC and the share
certificates are issued. The records of BoD meetings and the AGM are kept by the CEO in neatly

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arranged registers. Rakesh diligently looks after the day-to-day operations at DMFPCL even
though his village is not among those covered by RACP. His B.Sc. Agriculture background
comes in handy in finding solutions on the production side. Rakesh found bookkeeping
challenging but has been learning the business aspects on the job. DMFPCL had an employee
who was helping in input sales as well as account keeping but could not retain him, since the
input shop was not functioning regularly during the Covid 19 pandemic, and after the RACP
ended his salary could not be paid.

Most of the BoDs are proactive in supporting the CEO as he represents the FPO while seeking
credit and funding support, liaising with the marketing partners including the mandi and
interacting with local ecosystem players like the KVK scientist, IFFCO bazaar manager and the
APMC secretary.

Figure1: Organisational structure of DMFPCL

Challenges of production and marketing: in search of a business model

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Greater availability of irrigation water and inputs has led to soyabean replacing maize as the preferred
crop in Kharif in the region. Despite high volatility of Soybean price in the market, farmers are reluctant
to move away from soybean as it continues to be seen as a low maintenance crop. However, due to
insufficient storage space initially, and in the absence of a deal with a buyer, the DMFPCL has been
unable to procure from the farmers as much as it would have liked.

A search for the main stay of the business has made Rakesh try various trades including selling irrigation
setup including PVC pipes to farmers, but that business is not profitable since the FPC is not able to sell
the pipes etc. at a profit, and unable to cover costs involved. Despite challenges, Diwak Mata is well-
known in the region. Apart from the IFFCO shop with whom it does business, DMFPCL has good links
with the Krishi Vigyan Kendra (KVK), Pratapgarh. The scientist-in-charge, Dr Yogesh Kanojia was willing
to help the FPC and its farmer members with seed production trials and encouraged the FPC to get into
the seed business even though it was late for the 2020 season. At the local mandi, the APMC secretary
Madan Gujjar, is also supportive of the DMFPCL to market member produce through APMC. However,
he feels that to be a regular at the mandi, the FPC needs to motivate and facilitate the members to take
up grading and sorting of their produce and needs to deal with more volumes. This is something that
DMFPCL has been unable to achieve, despite the sorting and grading unit.

A deal to procure soybean at Minimum Support Price offered by the government was worked out
between DMFPCL and Samunnati. The deal eventually did not work out but might be an important
lesson for Rakesh and the BoD. The local executive from Samunnati, when contacted, informed that
“even though the BoD members were keen for the deal and Samunnati handheld DFPCL at every step,
the deal did not come through.” The executive says that an initial agreement of Rs. 10 lakhs investment
from FPC’s side was changed to Rs. 5 lakhs on Rakesh’s insistence (with the other Rs. 5 lakhs being
loaned by Samunnati) but he later could not honour even the reworked deal. Rakesh informs that
Samunnati was proposing to pay after at least three days of the procurement of soybean, whereas the
farmers in need of immediate cash seemed to prefer the mandi and the lure of instant payment.

Even as the Samunnati deal to procure soybean has failed due to reasons that both parties have
different versions of, Rakesh is intent on installing an atta mill using a part of the Nabkisan loan and
procure wheat from members to process, package and sell wheat flour under DMFPCL’s own brand.

Financial overview
DMFPCL has been a profit-making enterprise since its inception in 2018-19 (see table 1). The major
crops are maize, chana, wheat and soybean, however, currently input sales are the only contributor to

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the revenue in terms of product sales. FY 19-20 again saw a turnover of over Rs. 37 lakhs owing to input
sales to farmers and Rs. 3.25 lakhs from soybean procurement. While the turnover in the FY 2020-21 (as
per unaudited financials) has dropped significantly, but so have the expenses and thus DMFPCL has been
able to improve their profitability over the last two years of operations.

Year 2018-19 2019-20 2020-21

Revenue (Rs.) 2980153 3704667 2022739
Expenses (Rs.) 2812950 3456710 967350
Profit (loss) (Rs.) 166649 242213 1047823
Table 1: Revenue, expenses and profit (loss) for all the years

Till 2020, DMFPCL had been getting support through RACP and thus has not applied for any loan or grant
except the equity matching grant from SFAC for Rs. 5 lakhs, which has not yet been sanctioned. In recent
times though, post-covid, a need for working capital loan has been felt and Prakriti Foundation has been
helping Rakesh and the BoDs to seek loan from Bank of Baroda, Pratapgarh. Even as the talks with Bank
of Baroda are going on, very recently in FY 2021-22, DMFPCL got a working capital loan for Rs. 10 lakhs
from Nabkisan.

Stakeholders’ perspective on DMFPCL

The meeting with the BoD was more of a brainstorming session on what next for DMFPCL. Later there
were discussions with the member farmers on the feasibility of soybean as a crop and possibility of
mixed cropping and a slow replacement of soybean with other crops such a black gram (urad) etc. owing
to volatile markets for soybean. The farmers, though recognised the volatility of the soybean market,
were not easily convinced that soybean could be replaced, especially since urad was prone to lodging in
rains since its harvesting time coincided with heavy rains in the region.

Rakesh shares how the DMFPCL is strong as far as the mobilisation and governance is concerned. But
marketing linkages are tough to come by. During the field visit, Rakesh opines that the APMC market
yard or mandi is an option since APMC is supportive. Asked why it has not happened till now, he shares
that members need to understand the value of grading their produce. There is little benefit in bringing
ungraded produce to mandi. When asked why the sorting and grading unit is not being already used, an
interesting dilemma emerges. Due to the RACP, the machinery is established and tested for sorting and
grading but since then it has been out of use. However, lack of buyers and Covid19 has resulted in
no

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produce procurement and thus there are no volumes to sort and grade. Keeping the machine running
would incur costs of electricity and maintenance, which DMFPCL is unwilling to pay in the absence of
any real market for output.

Rajendra Jaiswal and Rakesh are hopeful that seed production and flour mill will ultimately work for
DMFPCL. Dr. Yogesh Kanojia, was very forthcoming to support the FPC in their efforts towards seed
production business and talked about the various grades of seeds such as breeder, foundation, etc. He
suggested that the farmers can go for a trial of producing truthfully labeled seeds (TFL). Although this
(Kharif 2021) season was over, he agreed to arrange for some mother seeds for soybean. The next
season was to be prepared for, in a more organized manner.

At the APMC mandi secretary Madanlal Gujjar was skeptical of the idea of DMFPCL buying from
members and non-member farmers, in the APMC market yard. In his view “a small FPCs, like DMFPCL,
do not have the manpower and resources to function as buyers in the APMC system”, a point he tried
putting across on giving a tour of the busy market yard and showing the scale of operations and the
complexities of the mandi. But at the same time, he was also of the opinion that if the FPC can get
members’ produce sorted and graded, it can sell in the APMC yard. He emphatically discussed the way
the mandi functions and why he thought that FPC could not be a trader at the APMC. His argument was
that with little working capital and member produce being non-uniform in quality, unless there is some
quality standardization, it is not a good idea.

The future of DMFPCL

Covid has impacted the operations and plans of DMFPCL. Since Covid 19 induced lockdown in 2020, the
input shop has been closed and not been able to do much business. This closure has not only impacted
the input sales directly by also since the shop and the FCSC are the ‘face of the company” for the
farmers, there is a danger of members getting disinterested.

However, membership and share capital have been added and 2021-22 seems to be a crucial year for
DMFPCL. The FPC is now looking forward to reviving its input shop by placing a salesperson and
motivate the members to bring their produce for sorting and grading at the FCSC, before being sold at
the mandi or elsewhere. This will give better returns to the member farmers will get for their produce
even as the business of the FPC improves.

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It has been realised collectively that seed production business might be a sustainable revenue source for
the FPC. In the absence of any liaison with a private buyer, DMFPCL should look towards mandi to sell
the member produce, after grading and sorting.

There are several plans to be executed including the trial of mixed cropping, seed production,
alternatives to soybean, and arrangements for working capital loan, restarting the input shop and
starting the grading, sorting plant so that members can sell their produce in the mandi and to private
buyers when a favourable deal is inked. A working capital loan of Rs. 10 lakhs were sanctioned from
Nabkisan in October 2021.

The office of Prakriti Foundation has refurnished, and some local staff is back and as 2021 ends, there is
some renewed interest in DMFPCL among everyone involved. Rakesh seems to be enthusiastic about
planning to procure wheat from the member farmers and install an atta mill. He plans to sell wheat flour
in the Pratapgarh market under DMFPCL’s own brand name. Rakesh sounded confident and optimistic
when the IRMA team discussed the FPOs with various stakeholders. He had a sense of pride about being
an integral part of a new institution. Could he be the local, rural entrepreneur, that Diwak Mata needed
to take the FPO into its growth phase post incubation? Should he take the risk and work towards a salary
that is part fixed and part variable based on the profit of the company?

Farmer Common Service Centre (FCSC) at Exhibits

Semlop Village, Pratapgarh Input shop at FCSC Semlop Village

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Meeting with farmers Meeting with Board of Directors

Sorting and Grading Unit at the FCSC

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