Corporate-backed Community Enterprises Flourish in Southern India

MUTHU VELAYUDHAM

Promotion of corporate-backed community enterprises for value addition and marketing of farm produce is an alternative approach. Community enterprises in food, health and energy sectors in Tamil Nadu, promoted by an NGO, are doing well. This model may be replicated gradually in other states.

CORPORATE Social Responsibility (CSR) was initially conceived as a charity to care for the disadvantaged social segments of the population.Today, it is different and may be divided into 3 categories,
as follows.

1.Corporate sponsorship to meet social needs such as
religious places, hospitals or gardens, disaster relief,
and uplift of weaker sections ;

2.Good business practices with futuristic markets in
mind, such as fair trade-labeled products, and eco–
friendly or green-labeled products; and

3.Merging business interests with societal needs
through the public - private partnerships (PPP).

Grocery, clothes, medicines, vehicles, fuel, communication gadgets etc. are increasingly bought by the rural masses but are produced and marketed in cities. Selling consumer goods to the villagers generates employment for the sales agents. However, consumer costs keep rising more than rural incomes, causing indebtedness that haunts 55% of the rural families.

Thus, more than 50% of the farmers abandon farming and flee to cities for jobs.
Such urban migration causes congestion,pollution, slums, crime and insecurity
in cities. An alternative approach demonstrated here is promoting community enterprises
for value addition and marketing of farm produce. Narrated here is the experience
of 3 Community Enterprises in food,health and energy sectors in Tamil Nadu,
promoted by the NGO, Covenant Centre for Development (CCD).

Community Enterprise Model

CCD uses community-based financial institutions (CBFI) savings as working
capital. CSR grants from such organisationsas Tata and Ford Foundations are used for building and machinery purchase. CCD project grants are used towards transport and marketing communication expenses, and for expert training fees. CCD also helps companies to register with community members as directors and for the initial 2-3 years. CCD staff provides professional services on a fee basis. Thus external contribution is 4–fold:

(a) technology,
(b) institution,
(c) finance
(d) market.

Pro-sumer Model

Gram Moolige (village herbs) Company Limited (GMCL, www.villageherbs.com) was the first enterprise CCD promoted in the year 2001, to sell raw drugs collected by poor women from fallow farms and wastelands in the lean, non-agricultural, dry season.
Since 2003, GMCL also produces and markets over–the– counter medicines, based on local traditional herbal remedies in the “Siddha”system. Today, GMCL turnover is Rs. 9 million,
80% derived from selling raw drugs after grading, cleaning, and packing. It seasonally
employs 1,300 women to gather raw drugs, as well as 100 farmers. 30 women SHGs invested Rs. 1.50 lakh in 2001, won a dividend of Rs. 3.5 lakh and possessed a net share capital of Rs. 5 lakh. SHGs decide the company’s policies, prices and insurance etc.

Co-creation Model

GMCL’s success motivated British Petroleum (BP) to partner with CCD and SHGs to tap rural energy markets. Thus, CCD established Adharam, an energy company,in 2005. Adharam (www.ccd.org.in/adharam) sold 3,000 smokeless stoves in drylands around Madurai in the second semester of 2007 and 4 times more in Marathwada drylands in Maharashtra state, where SHGs linked to a partner NGO, SSP, (www.sspindia.org) provided the marketing channel. BP and CCD termed this business as “co-creation” model. The community was involved at each development stage viz. conceptualization, product design and testing, sales planning and pricing. This gave community the ownership, and marketing vigor. BP offered to sell LPG kits which the community disapproved, and promote smokeless stove sales. BP bought its patented technology from the Indian Institute of Science (IISc) and 15,000 (fifteen thousand) stoves were sold in the 2nd half of 2006 with Rs. 8 million turnover, including fuel pellets from agriwaste, enriching the farmers. Thus, communities and corporates “co-created” a business model to tap the “fortune at the bottom of the pyramid”. The Next Practices (TNP) company that mooted this notion guided BP & CCD.

Aharam company

CCD is also promoting the SHG network to procure and market good quality food products at low prices, since 2004, under the banner of Aharam, meaning food. It sells Rs. 500/- worth grocery (pulses, oil, spices, Fast moving consumer goods) each to 1,000 families with 2 months credit and 90% recovery by the 3rd month. Its turnover is Rs. 3 million a year. Procurement from farmers and processing and  sales by SHGs employ about 100 community members.CCD will replicate thismodel in 6 other states during 2008-2010, with CSR grants. CCD registered Aharam as a “traditional crop producers company” in December 2005 under the Companies Act (2001 amendment) with VAT and export code. Farmers’ SHG federations own shares and more federations or SHGs can obtain membership. Its routine business is managed by professional staff. For profitability, Aharam sold 25 tons of mango at Rs.1 million in 2006 and has orders for Rs. 4 million from Mumbai and Cochin buyers. It also started exports with “organic” labeled cotton and “fair trade” labeled mango, with 30-50% premium over the normal market price. It will soon export “blue labeled” smoked tuna fish from Lakshadweep islands to SriLanka. The Birla retail chain being set up in metros may procure from Aharam spices, fruits and vegetables.

Aharam markets dryland, small farmer products such as maize, mango, tamarind, pulses, honey, forest produce including herbal products, and fishery products, including shell crafts of the Tsunami victims. National Rural Employment Guarantee (NREG) schemes for employment in backward rural areas should invest in these models.

Muthu Velayudham

A professionally trained social worker, Muthu Velayudham is in
the field of social service for last 19 years. He is the founder President of the Covenant Centre for Development (CCD) and served as the Executive Director / Secretary of the organisation since 1989. Muthu Velayudham has a Bachelors Degree in Rural Development Sciences – B.Sc., and a Masters Degree in Social Work and is an active member of and contributor in many of the local and National NGO Networks and Companies. His Covenant Centre for Development (CCD) is a decentralized organization, which revitalizes local economies to impact migration, livelihoods, poverty alleviation, primary healthcare, nutrition and ultimately developmental infrastructure.

Email : mdu_ccd@sancharnet.in/ www.ccd.org.in