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Origo works towards improving rural supply chain

Sunoor Kaul Director Origo Commodities says Origo is working towards the improvement of the vast rural supply chain through value enhancement and infrastructure development

Sunoor Kaul
Director, Origo Commodities
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You are currently operating over 350 warehouses and have over 3.5 million tonnes of commodities with a value of $1.5 billion under management. From technology and investment banking, what motivated you take up this challenging task?

In India, agriculture sector as a whole and its supply chain process are very fragmented. We were aware of the potential of this sector, especially warehouse management as part of post-harvest solutions. Our journey in agricultural services began in 2010. Origo today is working with and for farmers by setting up approximately 100 Farmer Producer Organisations (FPOs) across Maharashtra, Rajasthan, Andhra Pradesh, Telangana and Karnataka. The major challenge was that the whole supply chain of agri-commodities remains fragmented. Trust was missing among stakeholders like farmers, procurement agencies and trading houses. That is why diversified product-fold comprises warehousing services, certification, financing, procurement, technology and marketing which forms end-to-end supply chain solutions for agro commodities.

What were the initial challenges that you faced?

First of all, at the farmers’ level there were no storage facilities and it affected cost of production vis-a-vis selling price of the produce. There were gaps in warehouse management. The gap is still of about 30-35 million tonnes of storage. Though there were some credible regional players, nationally we are not very well organised. Delivery at ports turned out to be a major challenge. We are making sincere efforts to bridge these gaps. Though gaps still exist but farmers have some trust now as they have started getting better price and now do not face distress selling.

What solutions Origo has to plug the holes in the supply chain?

Overall, we faced three major challenges – lack of storage facilities, quality certification and aggregation.We provide solutions with regard to these three pain points. Our post harvest solutions aim to strengthen the whole system. We are getting support from NABARD and cooperative banks/societies. For storage, we have created a mother hub which caters to satellite and local hubs. For example, if a farmer contributes two tonnes of produce, we aggregate 100 tonnes from 50 farmers at appropriate price with quality certification and this quantity is adequate for export cargo as well.

So our aggregation process is also a hand holding exercise for farmers. We want to make them self-sufficient. By setting up FPOs, we aim to strengthen the whole system. Our initiatives resulted in significant benefits for farmers, in terms of better input purchases and aggregation of produce for buyers.

Distress selling of produce by farmers is a major issue. What are the solutions?

Negotiable Warehouse Receipt (NWR) financing is an important tool that farmers can utilise to avoid distress sale of their produce and one that helps them to realise the actual market price. Through Warehouse Receipt Financing (WRF), farmers are allowed to make deposits at a warehouse close to their farm and obtain pledge financing to the extent of 70-75 percent of the value of the commodity. This value helps them to manage their interim cash requirements. The initiative would reach out to 20 Primary Agriculture Co-operative Societies (PACS) and around 15,000 farmers directly.

How do you collaborate with NABARD?

We are working towards helping farmers overcome challenges in investment, technology and market hurdles by setting up the FPOs. With the support of NABARD, we will open 200 FPOs by the next year. With these FPOs our goal is to traverse more than 0.5 million farmers over the next three years and support them with required technology, strategic marketing tools, infrastructure and other associated services to ensure enhanced benefits for them. We have also signed a Memorandum of Understanding with NABARD to help support farmers and PACS in Maharashtra to realise better prices and improve market linkages. The Satara District Central Co-operative Bank will be associated in the project and extend financial assistance wherever PACS are needed.

What are your expansion plans?

We are operating in several states including Andhra Pradesh, Telegana, Rajasthan for post harvest solutions. Going forward, we plan to operate in other states like Maharashtra, Karnataka, Madhya Pradesh and Tamil Nadu. As a leading post harvest and warehousing solutions company, we have recently signed a MoU with Odisha government to provide preservation, maintenance and security services for foodgrains at various locations in the state. For the first time ever, Odisha has outsourced warehousing facilities of this magnitude to a private organisation.

And revenue comes from?

See, what we are doing with NABARD is just over corporate social responsibility and we do not make efforts to earn profit from these activities. We are managing warehouses of the governments and private companies. Our revenue comes from this. We aim to touch Rs 350 crore by the end of current fiscal. Commodities financing is yet another vertical to earn. Bank offers finance at the rate of 10.5 percent, we are providing financial assistance at much lower rates. We aim to provide financing benefits to as many farmers as possible through WRF, thus ensuring that they get ‘fair market value’ for all their hard work. We see huge growth in times to come. Our strategic market linkages programs help farmers to reach that extra mile and connect them directly with processors, thereby enhancing the efficiency of the rural supply chains and transforming the commodity markets into real seller’s (Producer) markets.

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