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Enterprising growth benefits locals

Aug 30, 2011

A non-profit in the southern Indian state of Tamil Nadu is helping local herb gatherers and cultivators earn more for their produce. By grouping them into a corporate structure, the initiative has opened access to local markets and business deals with large companies.

About 40 km out of Madurai and on the road to Tuticorin lies Sevaiyoor. It looks like any village in Tamil Nadu- large, green fields edged by trees and many, many farmers. Life has a certain level of tranquillity and there is not very much to complain about. 

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The name Sevaiyoor (meaning place of service) isn't very old, but then the village itself isn't very old. Until not too long ago, this land was classified as waste. "We have created a manmade forest on a 200-acre area. We also gave it a name," says a proud N Muthu Velayutham, Founder, Covenant Centre for Development (CCD).

The forest and the farmlands inside it are at the heart of three initiatives started by CCD- Aharam, Adharam and Gram Mooligai. While CCD is a not-for-profit organisation, Gram Mooligai (GMCL) is a public limited entity whose shares are owned by the primary producer groups of medicinal plant gatherers and cultivators who work out of Sevaiyoor. 

"We have a variety of herbs being cultivated in this farm," says Velayutham as he bends to examine a stack of dried leaves of Eclipta prostrata (commonly known as Bhringraj or false daisy). "We produce 55 tonnes of this each year here," he adds. What the 11-year-old GMCL does is simple: it provides assured market support to its shareholders by taking orders for medicinal herbs from ayurvedic companies, extract makers and the like and passing them onto the primary producer groups. They grow the herbs and send them off after sorting, drying, crushing and packing them properly.

GMCL today supplies 1,000 tonnes of 18 different herbs every year to companies such as Himalaya Drug, Natural Remedies and CavinKare. Its growth has been impressive. Registered in early 2000, it has grown from Rs 25 lakh turnover in 2001-02, to Rs 86 lakh in 2008-09 and Rs 1.26 crore last year. "We are in a growth mode," says Velayutham happily.

Humble Beginnings

Velayutham's journey started in the late 1980s when he interacted with slum children in Madurai in the course of his post-graduate degree in social work. He founded CCD in 1988 with a simple aim: give back to society. Nearly 25 years later, while the focus remains unchanged, CCD has grown far beyond Velayutham's imagining: it is a Rs 10 crore enterprise that employs 250 people and has a community membership of over 22,000 across states like Tamil Nadu, Madhya Pradesh and Orissa. "I grew up in a village so perhaps it's easier for me to understand the concerns of the people living here. And that has helped me in the business," he says.

None of the land at Sevaiyoor actually belongs to CCD. It is all owned by well-wishers and residents of the nearby villages who hand it over to CCD for 20 years for free. Over the next three years, the organisation plans to "acquire" another 100 acres in the same manner. 

Social Impact of Gram Mooligai:-
Starting amount: Rs. 2000
Revenues: Rs 1.26 crore
Employees: 250
Customers: 22 companies and 50 social enterprises.
Social Impact: Providing a sustainable living to farmers, women and the underprivileged

While some part of the land has been kept aside for trees and cultivation of seeds, herb cultivation accounts for nearly 80-85% of the available area. The 250 permanent employees are actually part of the producer groups working with GMCL and are, therefore, shareholders in GMCL. They come from 20 women gatherer groups and 12 farmer groups, all from the neighbourhood. They live within 2-3 km of Sevaiyoor and walk to work everyday. During harvest, many more- as many as 10,000 people in a season- are hired on a part-time basis.

For the producer groups, the association with GMCL has been empowering and liberating. As farmers and farm workers earlier, they would sell their produce to traders with no information or conception of how the market operated. Now they sit on board meetings and have a say in how the company functions. Take Kumarayee, for instance. 

Earlier, she worked as an independent herb gatherer and gave all that she collected to traders with no knowledge of where the herbs would end up, in what form and on what basis she was being paid. "Today, my income at GMCL is based on the quantity of herbs I supply. It is a more transparent mechanism," she says as she displays the share certificate that her group owns in GMCL. Her son is also employed with GMCL: he assists with the procurement and quality control of herbs.

It wasn't easy getting CCD and GMCL off the ground, even though the biggest asset- the land- hasn't cost the organisation anything. Then, Sidbi gave a loan of Rs 3.8 lakh given its social goals of providing a sustainable livelihood and empowering women. That opened the gates for more financing- Pandian Grameen Bank offered CCD a Rs 14 lakh loan. "Funding became easy after that," says Velayutham.

Of course, it helps that GMCL has built excellent credentials in the market. The popularity for herbal products is rising and not just in India, points out UV Babu, Head of R&D in agrotech and phytochemistry at Himalaya Drug. "India has large tracts of fertile land and is also rich in biodiversity. Popular herbs like amla, neem and tulsi are found in abundance and can also be easily cultivated," he says. 

From the herbal companies' point of view, they reach out to farmers to develop a secure supply chain. "Some herbs can be cultivated on fallow land and can also be grown as inter crops," says Babu. "Farmers can continue to grow their regular kharif and rabi crops, and supplement their income through herb cultivation," he adds.

Himalaya's decade-long partnership with GMCL is part of its CSR initiatives, with a focus on economic empowerment of marginalised communities, especially women farmers. "This partnership has been mutually beneficial," says Babu. "Himalaya is able to procure good quality herbs from GMCL and the women farmers earn additional income through cultivating and collecting herbs for us. It’s a win-win model," he says.

Power To The People

Another big story at CCD is Adharam Energy, which offers low-cost green energy products to rural people. Conceived as a private limited corporation in early 2006, Adharam sells Oorja smokeless biomass stoves in partnership with British Petroleum. Till date about 50,000 stoves have been sold, in the process generating jobs for 600 women across the country.

The deal with BP came from the awareness that smoke emitted by fuels posed a serious health hazard. CCD, along with Mumbai-based development organisation Swayam Shikshan Prayog (SSP), got an offer from BP to create a low-cost solution for village households. 

"It is important to reduce the levels of carbon emission in the villages," says B Jeyabala Murugan, CEO, Adharam Energy. During the study, it was found that the bulk of rural income- about 60%- went into food. "After the outgo on education and other things, the man is left with barely 10%," adds Murugan. Oorja is a smokeless, biomass stove. It is not only devoid of health hazards but is also more cost-effective, leaving the household more to spend on better, cleaner food.

Today Adharam is a Rs 3 crore company and is looking to expand in a big way into bio-fuels. "We call ourselves the manufacturers of bio-fuel, solar and hydro power," says Velayutham. CCD's third entity, Aharam, is a traditional crop producer that procures cereals and pulses from farmers and processes them. It is then marketed through a retail chain that exists in five districts in southern Tamil Nadu. "Since this is based on a co-operative set-up, we are not allowed to make profits or raise equity," says Velayutham.

How the future plays out for CCD will depend greatly on the progress of existing businesses and other areas like groundnut production, fruit processing and yarn production. According to Velayutham, CCD and its affiliate companies have learnt a great deal by working for some of the large companies and over 50 social enterprises. 

"We always thought it was a big thing to work for companies. I am now convinced that my objective of having a community corporate structure is just as achievable. That will take care of everything else," he says. "Everything else" would mean farmers getting the right price for the produce and a continuous interaction between companies and the man on the field. Sounds like the perfect growth potion.

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