SMKP Musahar small producer outlet: Linking small Musahar producers to the market

The Seva Musahar Krishi Product Private Limited (SMKP) is a producer run company but also a social initiative aimed at enhancing the social and economic independence of the Musahars, a marginalized community of dalits in Eastern Uttar Pradesh, India. Manav Seva Sansthan (MSS) in partnership with AWO International began its project intervention among the Musahars in 2009. As of now, the project reaches out to 55 remote Musahar villages in Maharajganj District of Uttar Pradesh. Providing access to economic assets and promoting the lievelihood of the Musahars through Low External Input Sustainable Agriculture (LEISA) were some of the major components of the intervention.

Living on the brink of starvation, shunned and cheated by other communities and government agencies and exploited by landlords, the Musahars of Eastern Uttar Pradesh have slowly begun moving into the mainstream of development.  At the same time, the rural – urban income divide has been widening given the slow growth in agriculture and neglect of rural areas. And even though there has been an emergence of organized retail outlets - even in towns likes Gorakhpur -, the small and marginal farmers have been largely unable to take advantage of these emerging marketing options for their produce. The mandis (local public markets) and middle men-oriented corrupt supply chain is usually still the only option, because few farmers have been able to access alternative marketing channels that provide higher returns. Individual farmer productivity is therefore low given the constraint in investment as the traditional mandis offer only low returns.

Given this scenario, MSS came up with the idea to establish a producer run company to reengineer the supply chain that links producers directly to high value markets. The journey started with the mobilization of Musahar farmers into farmers’ collectives; subsequently non-Musahar small and marginal farmers from Scheduled Castes were also involved.  These collectives got intensive training in low cost agricultural practices, on-farm support through demonstration plots, and support in the form of seeds, bio-fertilizers, and low cost irrigation facilities.  Later, MSS established 15 collection centers across the project area to cater for the needs of the members of the farmers’ collectives associated with the project. These collection centers are operated by community based organizations (CBOs) named Seva Musahar Vikas Samiti. In the initial stages the products collected from the producers were marketed at local mandis and few centers were directly linked with sales agents and intermediaries. However, MSS wanted to break the monopoly of the agents and intermediaries by creating an innovative and alternative business opportunity. That is why in 2011 the Seva Musahar Krishi Product Private Limited was created as a producer run company and later on registered under the Companies Act, 1956. A sales outlet in the form of a family store was established in Gorakhpur (a major city located near the project area) to link the producers directly with the high value market. The outlet is run by the Seva Musahar Krishi Product Private Limited. The company is governed by a 22-member Board of Directors, of which 21 belong to the Musahar community. The company serves more than 1.000 primary producers from Musahar and non-Musahar communities.

Compared to standard commercial business models, MSS thus created and operates a very different kind of business model. The primary producers directly transport their produce to the collection centers run by Musahar-CBO’s in the various project locations. The collection centers procure the products and the producers are provided with competitive market prices. Then, the Musahar women Self-Help Group (SHGs) and CBO members grade the products at the center. Grade ‘A’ products are packed, branded and transported to the outlet and Grade ‘B’ products are sold to retailers at the local level. SMKP provides financial compensations to the CBOs and SHG groups engaged in this work. The outlet established at Gorakhpur adopts a ‘one stop family store’ model to cater to the daily, weekly and monthly shopping needs of consumers. The product offerings include a wide range of fresh fruits & vegetables, pulses, grains, FMCG products, personal care and home care products, and general merchandise. Out of these products, 40% of the products sold are from Musahar communities, 40% from Non-Musahar small and marginal farmers and 20% FMCG products procured directly from company agents.

A quick business analysis reveals encouraging facts. Within 50 days of its existence the outlet run by SMKP has started generating an operating surplus estimated at INR 78,661 (ca. 1,099.25 EUR). The profit projected for the year end (2012) is around INR 650,000 (ca. 9,085.91 EUR). A part of the profit earned by the company will be distributed as development grants to the Musahar-CBOs (Seva Musahar Vikas Samiti) to initiate development programs for the Musahar communities and small farmers associated with the company. In the long run, to generate a higher operating surplus, SMKP will also start direct institutional sales of agro based products to restaurants, and residential schools run by government and private agencies.   

Musahar shareholders in front of their producers's outlet.

Observing the range of products in the outlet.