The seeds of a profitable crop

By : Amy Kazmin
Posted on : 20thMarch 2015, Jalgaon (Source : 21st April 2010, http://www.ft.com/)

Down a rutted road lined by brilliant red fire trees lies the Indian village of Jarandi, a once impoverished community that is being transformed by the kind of drip–irrigation technology that made Israel’s desert bloom in the 1960s.

Until recently, most Jarandi villagers depended on rainwater to irrigate their cotton fields and struggled to coax just three to four quintals (300kg to 400kg) of cotton per acre from their land. Even the landowners and their children were forced to supplement the family income by working as labourers in others’ fields.

Then, in the mid–1990s, one of the wealthier farmers bought a small drip–irrigation system, a technology unknown among the poorly educated villagers, from Jain Irrigation Systems, a family–run Indian business. Cotton yields on the drip–fed land quadrupled and a second villager tried it, then a third and so on.

Today, nearly every landowner in Jarandi has bought drip–irrigation systems and local cotton yields are 15 to 20 quintals per acre. Yields of food crops have also increased dramatically. With surging agricultural output, local life is changing. The farmers’ children now go to school, ownership of motorcycles has soared and diets are improving.

"Earlier we only used to get good food like wheat and rice on festivals, and we could only afford to eat meat twice in a year," says Ganesh Choudhry, a large farmer who was one of the first to try drip irrigation.

"Now, every day is a festival, and we eat meat every Friday and Sunday."

The evolution in Jarandi highlights the potential for transforming Indian agriculture through modern technology such as drip irrigation, a fast–growing business in which Jain is a pioneer and market leader.

The company is the biggest in the Indian market, which is expanding by an average of 25 to 30 per cent a year, making it the world’s fastest–growing micro–irrigation market. The sector is projected to be worth about Rs40bn ($899m, €667m, £585m) this year.

This growth is attracting international companies. Netafim, the Israeli company that pioneered drip irrigation in the Negev desert and is the global market leader for the technology, set up an Indian subsidiary in 1997 and now has two plants in the country manufacturing systems for local use and for export to elsewhere in Asia.

Netafim also employs big marketing teams to try to raise awareness among Indian farmers.

John Deere Water, a subsidiary of the US tractor and agricultural equipment maker, is also gearing up to sell modern irrigation systems in India.

According to Lalit Mishra, business development director at Netafim India: "It is a sunrise industry, so a lot of people want to get into this."

In spite of the new competition, Jain, the company that introduced drip irrigation into the country in the late 1980s, retains the strongest links with smallholders.

As well as being a domestic company and having the first mover advantage, it assists poorly educated farmers unfamiliar with modern technology by custom–designing its systems for each of them.

At the same time, its 1,500 agricultural experts advise each prospective customer on the best crops for their particular land as well as offering information on how to achieve a better harvest.

"Most companies are just selling products," says Ajit Jain, one of the founder’s four sons, who is now joint managing director of the company. "We provide design and planning as part of the product."

The tone for the company was set by Mr Jain’s father, Bhavarlal H. Jain, who founded the company. Now 73, he was an agricultural supplies trader, dealing in seeds, fertiliser, pesticide, farm equipment and plastic irrigation pipes for traditional flood irrigation, who started manufacturing pipes in 1980.

That led to a trip to an agricultural trade show in California in 1983 where he saw the drip–irrigation technology demonstrated for the first time. It showed how water could be delivered only to the plants the farmer wanted to grow – thus cutting not only water consumption but also labour costs, because there is less need for weeding, fertiliser and fuel. Ever since, he has embraced drip irrigation as the cause of a lifetime.

Traditionally, Indian farmers with access to canals or their own bore–wells use "flood irrigation", in which they use pumps to lift water and then send it gushing across their fields.

The initial challenge for Jain was to persuade farmers and agricultural experts that the new approach worked. Steeped in the belief that more water yielded a better harvest, they scoffed at the idea that they could harvest more with less when Jain began promoting drip irrigation.

"They would say: ‘With this quantity of water, the plants will not survive, the plants will fall down’," says Ajit Jain. "They were used to seeing 2in to 3in of water on the field."

But by gradually persuading farmers to adopt the technology, it became easier to convince others of its merits by showing them how it made farming more efficient and productive.

As Netafim’s Mr Mishra puts it: "For the Indian farmers, seeing is believing. Although it is scattered, it is almost a revolution."

Both Jain and Netafim also take farmers on field visits to see how other cultivators are successfully using the technology. For smallholders, this has meant travelling to nearby villages or districts.

Investors in Jain now include Singapore’s Temasek, George Soros’s Quantum Fund and the International Finance Corporation, part of the World Bank group.

Jain’s sales of micro–irrigation products – including drip irrigation and sprinkler systems – in India has surged to Rs9bn in the latest financial year, from Rs906m in 2004–05. Of the estimated 2m hectares now under drip irrigation in India, its systems cover about 1.2m hectares.

But while the technology has proved a boon to farmers such as the villagers of Jarandi, much of the sector’s growth is due to direct support from the government, as it tries to deal with the twin crises of plummeting water tables and serious food price inflation – currently running at 17 per cent.

Usha Rao–Monari, a senior manager in the infrastructure team at IFC, one of Jain’s shareholders, says: "The need of the hour in India are measures that one can take on the agricultural side to improve water use efficiency."

New Delhi provides subsidies to help farmers install drip irrigation, which can cost up to Rs25,000 per acre to irrigate a widely spaced crop, such as mango or apple trees, to up to Rs95,000 per hectare for a closely spaced crop, such as vegetables, cotton or sugar cane.

This year, the government has increased subsidies for micro–irrigation to Rs10bn, up 133 per cent from last year.

The total subsidy available to farmers is between 50 and 75 per cent of the cost of installing the systems and the support is channelled through India’s state governments, who sometimes add more. Despite this support, many farmers still struggle to pay their share and, therefore, install systems gradually.

But Jain estimates that the payback period is just two to three crop cycles, given the lower input costs and higher yields.

Nevertheless, Mr Jain says farmers still face obstacles in obtaining drip irrigation, including insufficient and restrictive credit for agriculture, and cumbersome processes for obtaining the government subsidy. But with food price inflation increasingly contentious, water management is likely to remain high on India’s reform agenda.

As Mr Jain says: "There is no food security without water security."

And for companies such as his and Netafim, this means ample opportunity to build their businesses.

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