how an engineer is disrupting the nepali agro business
Changing the status quo requires not only convincing others but also holding your ground when the proponents of the status quo retaliate. Paluwa Trading is set to introduce a disruption in the agro sector that could get farmers their fair share, the quality that consumers deserve and a system where nothing goes to waste.
A few months ago, some men came up to Tikajit Rai in Gajuri, Chitwan – one of the places where his company Paluwa Trading was piloting its new project. The men were from a syndicate that controlled the agro-produce of the region. Aware of the risks to their muscle-backed business if Rai were to succeed, they were there to warn Rai.
Before coming to Nepal, Rai was working in the US, where he set up Nepal’s first e-commerce company – KathmanduNepal.com – with two friends. In 2003, having lived in the US for 12 years, Rai decided to come back to Nepal and do what he always wanted to do. “I am from a family of farmers from Solukhumbu,” says Rai, “even after working in the US as an electrical engineer, farming has always been something I can easily relate to.” Soon after coming back home, he met Bishnu Gautam, an acquaintance with a solid knowledge of business and great network. Together they formed Magnus Consulting Group, a private limited company. Since then, his company has been working with Small Farmers Agriculture Co-operatives (Sana Kisan Sahakari) in rural parts of the country. The company introduces localized ICT systems to support computerized accounting systems in agro-based co-operatives.
For these efforts the company was also recently awarded with the International Project Management Association (IPMA) Gold Achievement Award. However, this wasn’t what had caught the attention of the local goons. It is Rai’s new company- Paluwa Trading that is causing the disruption.
The agro sector has seen an emergence of numerous indecipherable networks of syndicates in the recent years, keeping away benefits from the farmers. Now the company seeks to bring the produce from farmers directly to the market, cutting out the middle-men. Rai says, “After a ten-year long effort through Magnus Consulting Group, we have gained the trust of farmers from 210 co-operatives in 42 districts. There are in average 600 households connected to each co-operative. This gives us the numbers and the technological leverage, to make an impactful change.” The seemingly impossible task now seems possible for Paluwa; and this has threatened some cartels that had till now been profiting at the farmers’ cost.
“For a kilo of brinjal for which a consumer pays fifty rupees, for example, farmers are only getting paid twenty; we want to minimize this unfair disparity,” says Rai. The produce is collected from the farmers by members of a syndicate, which is transported to a wholesaler after changing hands with few other syndicates. Then the produce reaches retailers from whom it is bought by the consumer, for prices that are usually more than double of what was paid to the farmers.
To change this, Paluwa has been establishing collection centers in each Sahakari, so that the produce can reach the retailers and consumers directly. In addition, the company is also trying to root out the very cause that has helped syndicates flourish– the disconnection between the farmers and the downstream market that leaves farmers with zero bargaining capacity. The ICT system set up by Magnus Consulting is now also being used to communicate accurate market rates to the farmers, empowering exploited members of the single most dominant sector of our economy.
Paluwa Trading also wants to make sure that there is a reliable demand side. This requires a reliable list of hotels, restaurants and retailers as customers. “There is a lot of demand; the demand side is not the problem. However, big hotels and restaurants require certain standards,” says Rai, adding, “For example, a restaurant in Jhamsikhel offers a dish with trout in the menu. The hard part for them is that Rainbow trout that they have been buying comes in different sizes. That makes it difficult for them to serve a consistent dish. Now, we offer them standard sized trouts, which are fished after the order is made.”
In return for offering quality good with specific requirements – size and freshness- met, the company demands timely payments. “Efficiency is the key to our model. We need farmers to be efficient, and to follow specific procedures to make sure the produce is of the best quality. The farmers must sort the produce, and package and label it accordingly. In return, we offer them good prices and timely payments. To make sure this side of the bargain is kept, we need the businesses to pay us on time,” says Rai.
Currently, the company is dealing with strawberries, kiwis, oranges, coffee, tea and Rainbow trout fish. Rai says, “Coffee and tea are easy to deal with, they have a longer shelf life. However, handling fruits like strawberries, kiwis and oranges was a bit of a challenge in the start. Now, we are also piloting Akbarey chilies.” The produce is priced according to its grade and is brought to the market. Businesses and households that require certain specifics buy higher graded produce. The lesser graded goods are sold at cheaper prices. The leftovers are then used to make processed foods, such as jam and juice. The company is also offering online transactions facility, providing options of placing orders through both mobile app and an e-commerce website.
Despite the rationally sound plan, it’s not only the adversary that is posing challenges to Rai’s effort. Getting the farmers to trust the new system and make that extra effort has been a challenge in itself too. “It is always hard to introduce something new. When we were starting Magnus Consulting Group’s project, we did a version that brought down weeks long processes to minutes, and still there were a few skeptics,” says Rai. However, after a three-year long pilot phase that took a lot of convincing and demonstrations, the farmers have now come onboard.
Rai’s initiation, after ten years of hard work, has come to a point where his company can contribute to the agriculture sector in ways where most efforts have failed till now. Agriculture, which according to the Central Bureau of Statistics report provides 35 per cent of the state’s GDP, is still a sector whose members, specifically farmers, are still struggling to reap the benefits of technology. Rai has been working for ten years through his company Magnus Consulting Group and now Paluwa Trading, without taking any salary. The profits from both of the Private Community Partnership (a model introduced by Rai) based companies are re-invested into the companies, so they can scale their services to even more co-operatives. Rai’s earnings from independent consulting work provides for his personal expenses. To justify for all these years of hard-work and also the show of courage at times, Rai says, “This is why I came back.”