Blog at Jains - Jain sees drip irrigation as social capitalism
Jalgaon, India — India’s Jain Irrigation Systems Ltd. has grown to a $970 million global company focusing on some of the smallest plastic products — tubing and components used in micro-irrigation systems to help farmers save water and boost crop yields.
Given concerns about water and food scarcity, and with the world’s population expected to top 9 billion by 2050, the company believes its business case is strong.
But Jain executives also say they want to fulfill a larger social mission while making money. The company attracts attention from social capitalists — in August it ranked No. 7 on Fortune magazine’s inaugural list of 51 “Change the World” companies.
The magazine said it wanted to recognize companies that have “made a sizable impact on major global social or environmental problems as part of their competitive strategy.” Others in the top 10 include household names like Google, Toyota and Facebook.
In an interview at their headquarters on the outskirts of Jalgaon, in Maharashtra state, Jain executives offered a look at innovations under development and their plans to continue their global expansion.
Their markets are growing: In the Asia-Pacific region, drip irrigation is projected to grow 13 percent a year between 2015 and 2020, above the 11 percent annual growth projected globally, according to one recent study.
JISL believes its biggest drivers in India are the current low market penetration for the technology, and the development of drip equipment for more types of crops.
“We have merely reached to 5 million farmers in India, which is 5 percent of the 100 million farmers [in the country],” said Bhavarlal Jain, founder and chairman. “Currently, we have covered only the horticulture crops through irrigation system. When we cover cash crops like rice and wheat, sky is a limit.”
To that end, JISL has developed a drip irrigation system for those cash crops, he said, to try to convince farmers to move away from the “age old flooding method of irrigation.”
“The validation of the system is going on,” Jain said. “Once approved by the authorities we will start pushing it in the marketplace.”
Beyond reducing water use, JISL argues that micro irrigation systems can also boost crop yields between 50 percent and 300 percent, depending on the plant, and raise farmers’ incomes. Micro irrigation delivers small amounts of water to precise locations.
JISL has been active beyond India’s borders. It has factories on five continents, and has been expanding in Africa.
“Now we are moving towards the western part of Africa with a focus on improving the income of small and marginal farmers in the countries of Nigeria, Kenya and Rwanda, to bring social change by making farmers self-reliant,” said Managing Director Anil Jain.
Part of JISL’s strategy is to work closely with farmers with small land holdings, educating them on crop techniques and developing customized irrigation solutions.
The company currently sells into Africa from India and from a wholly-owned subsidiary it acquired in Israel, NaanDan Irrigation Systems C.S. Ltd., in 2007. It’s studying building its first factory in the continent.
“Our next expansion would either be a greenfield facility or M&A in Africa in the next couple of years,” Jain said.
JISL currently has 29 factories worldwide, including 14 in India and 15 overseas, with five of those in North America, two in South America, four in Europe, three in Asia outside of India and one in Australia.
The company also expanded its capacity for drip irrigation in Brazil by 20 percent six months ago, with a new factory in Leme, about 130 miles from São Paolo.
And earlier this year, it acquired the assets of PureSense Environmental Inc., a Fresno, Calif.-based irrigation technology firm that makes soil sensors and software to help farmers fine tune water use and better manage crop yields.
Irrigation is only part of its business. It’s India’s largest manufacturer of PE pipes, and has businesses in PVC pipes, plastic sheet manufacturing, biotechnology and solar power.
It’s also ventured into food processing — it’s currently the world’s largest maker of mango pulp, puree and concentrate in the world, and the third-largest processor of dehydrated onions.
But its roots are in micro irrigation, which remains its single largest business unit. It’s India’s largest maker of drip irrigation equipment, and the world’s second-biggest.
Adjusting to business reality
The sector has had its challenges, though. It’s difficult for farmers in India to obtain credit, so JISL said it’s active in build rural financial institutions, adjusting its business model to those realities.
A 2014 University of Virginia study looking at Jain said government policies in India make farmers reluctant to invest in drip irrigation.
That’s because water rights are poorly defined, subsidized energy makes pumping cheaper and the government can take up to a year to pay back the subsidies it provides farmers to buy drip equipment, which strained JISL’s finances, according to the study from the university’s Darden School of Business.
Still, Anil Jain said there is “huge potential” to continue growth that’s averaged 10.5 percent a year for the last half-decade.
Executives said they will also continue to pursue social goals: JISL is developing a training center for plumbers in India, and in July it gave $500,000 to the University of Nebraska to support research on water and food security issues.
“Mere economic growth of the group is not our objective but to bring benefits to hundreds and thousands of poor farmers of this country through continued technological intervention in agriculture,” Jain said.