Wednesday, July 14, 2010


Agriculture is a high risk business. It is probably also low returns business. And most of rural India does agriculture for living.

  1. Loan from Government (Private Banks don't give loans to small farmers)
  2. Weather predictions, untimely rains
  3. Lock in, can only grow one thing at one time
  4. Access to electricity, water, quality seeds,  fertilizers, etc
  5. No access to global demand/supply patterns. No collaboration.
  6. Intermediaries involved in final sale. 
  7. Transportation costs, storage costs.
So many things can go wrong in a single cultivation cycle and even if that doesn't happens other conditions  can cause losses. Every (few) years, government ends up waving off the loans to support farmers. Diesel prices are kept artificially low to help farmers. No income tax on income from agriculture. In Punjab government gives free electricity to farmers. It is magical at in spite of all these measures, farmers continue to live miserable lives. Agriculture is an important and big business and yet the farmers who takes all the risk and government pays all the loans from tax payers money and it is the intermediaries who make all the money.

I believe we can do this better. Agriculture Micro VC - AMVC

  1. Like any high risk business, agriculture should be driven by investment and not loan. AMVC invests in farmers every season. The funding depends upon final share of the output. If the final produce is less, AMVC bears the loss. If produce is good, both farmer and AMVC makes money. 
  2. To make it high return business, we need AMVC who could operate at a large scale to cut out the intermediaries. The difference between price to farmer and price to final consumer is anywhere between 3X to 6X. AMVC should represent its member farmers to operate as a BIG farmer who could have much more negotiating power than individual farmers. Moreover the time of harvesting could be decided subjected to deals/sales to cut out the storage requirements and unnecessary transportation. 
  3. AMVC should have access to what the local/global requirements are can control what is cultivated and in how much quantity. Every body cultivating the same thing, only brings prices down and losses for farmers. By helping farmers decide on what to cultivate based on what others are cultivating, farmers can cut down their losses because of high supply/low demand problems.
  4. Since it is AMVC whose money is at stake all the time, it becomes its responsibility to do everything necessary to make sure that farmers are successful, because that is the only way for AMVC to be successful.
I don't know the specifics of the agriculture industry, but I feel AMVC model can help in uplifting farmers and reducing the risk burden they carry all the time. 

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