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Social enterprise model gives new life to apple biz

Business Standard:  June, 2012

Dehradun: For Uttarakhand’s poor apple growers, a Dutch-designed philanthropic business model, comprising six small companies and nearly 4,000 farmers, has brought the promise of growth and prosperity.

The success story of this social enterprise unfolded in Nogaon, a small hill town in Uttarkashi district last September, when a controlled atmosphere storage (CAS) facility (a system for holding produce in an atmosphere in which oxygen, carbon dioxide and nitrogen concentrations as well as temperature and humidity are regulated) began functioning.

Apples can be stored in this facility, which has a capacity of 1,000 tonnes, for six to nine months.

Stichting Het Groene Woudt (SHGW), a Dutch foundation, and Fresh Food Technology (a Dutch company) invested Rs 15.5 crore to set up the storage facility. The local logistics were provided by Shri Jagdamba Samiti (SJS), an Uttarakhand-based NGO. The business is based on a social model in which the shares of all the companies will eventually be transferred to farmers.

SJS helped in setting up four companies of farmers from different apple zones of the Garhwal region. A separate company, Himalayan Fresh Juice Pvt Ltd, was set up for producing juice from C-grade apples.

“This is entirely a social model for doing apple business, where farmers are getting a better price for their produce. Moreover, we have effectively removed middlemen,” said Laxmi Prakash Semwal, the head of SJS.

One of the guiding principles of the project is that farmers are not merely beneficiaries but an equal business partner of these six companies. “This is the first cold storage exclusively for apples in the entire Garhwal region,” said Semwal, whose NGO took the initiative to bring the Dutch players into Uttarakhand’s apple belt.

The apple project consists of four decentralised apple collection centres in the Garwhal region. Farmers are encouraged to join the cooperative through which they can process and sell their produce jointly at better prices. A joint venture company comprising farmers and the Dutch players has been set up for procuring apples from different areas.

In the first season after the installation of the CAS, the apples were sold at an average price of Rs 92-93 per kg in the market, against the average procurement price of Rs 50-55 per kg. Farmers got Rs 20-25 per kg more than they used to get from middlemen earlier.

A total of 800 tonnes of apples was procured, of which 300 tonnes were sold immediately, 400 tonnes were stored in the CAS and 100 tonnes were processed for fresh juice.

But it was the CAS facility that totally changed the business scenario. After deducting various expenses like electricity bills and transport, the net profit was around Rs 40 lakh for the company owning the CAS, from where nearly 400 tonnes of apples were sold. Farmers are being given a price premium of Rs 5 per kg, amounting to a total of Rs 20 lakh (that is, half of the net profit).

The rest of the profit will go to a social venture fund of the joint venture company where farmers will get shares of the CAS and the money will be utilised in setting up new businesses. “This is a self-perpetuating model where farmers will have the option of exploring new businesses in future,” said Semwal.

Despite stiff competition from Kashmir and Himachal Pradesh, the demand for varieties like the Royal Delicious, Red Delicious and Golden, grown in the Tyuni-Nogaon-Harsil belt of Uttarakhand, is growing across the country.