Muzzafarpur’s Litchi Growers increase margins by selling on NeML’s FFresh platform.

Litchi 2

Until recently, every summer, Litchis were as ubiquitous as Mangoes in most markets in North and Central India but available only in a few select markets in West and South India. This was quite understandable because Litchis, which are predominantly grown in Bihar – most notably in it’s northern district of Muzzafarpur, have a very short harvest season of 2 months (May – June), and a shelf life of only 1-2 days. While Air transport could have worked well for Muzaffarpur’s Litchi Growers to expand their market reach, poor margins due to a long chain of intermediaries played an impeding role, until now.

The traditional system of Litchi marketing in Bihar has largely remained unchanged for decades with a majority of Litchi Growers choosing Post-harvest Contract Management (PHCM) system over self-marketing to market their produce. In PHCM, Growers rent their orchards in advance to Post-Harvest Contractors (PHCs) at a negotiated price. The PHCs in turn rent out these orchards to Commission Agents or Wholesalers who undertake end-to-end responsibility of harvesting, packaging and transportation of the produce to the retail markets. Many a times, the Wholesalers themselves act as Commission Agents and in cases where orchards are located in remote villages, a Village Aggregator is added to the early part of the supply chain.

The district of Muzaffarpur produces arguably the best quality Litchis globally – the Shahi Litchis. However, the margins received by the Growers is negligible owing to the long value chain. For example, if the prevailing market price at the time of harvest is higher than the pre-negotiated contract price, the PHCs do not share the higher returns with the Growers. However, in case it falls below the pre-harvest negotiated price, the PHCs deduct 10% from the value of the produce sold by them while paying the Growers*. Lack of access to alternate market mechanisms, poor understanding of risk mitigation practices, improper training and perceived risks of long-distance transportation dissuade the Growers from indulging in self-marketing and make them stick to their traditional way of marketing.

All this changed when NCDEX eMarkets Limited (NeML) decided to conduct a pilot exercise in the Kanti region of Muzaffarpur to help Litchi Growers access new markets and improve margins. NeML’s FFresh team quickly identified and on-boarded Fixed-Price Buyers and Litchi Wholesalers from the West and South Indian markets on the FFresh (online) Trading Platform and got the Village Aggregators and Farmer Producer Organizations (FPOs) growing Litchi to sell their produce directly through FFresh. The FFresh team stood with the Growers and handheld them at every step of the sale process – from selecting the most appropriate packaging materials, to sharing industry best practices in packaging techniques, to negotiating lowest Air Cargo rates with Indigo Airlines for same-day delivery, to real-time information sharing on the quality of the produce at the time of the final delivery.

In the first phase of this pilot exercise, Kanti’s Litchi Growers shipped over 40 Tonnes of fresh Litchis to far flung markets in Pune, Ahmedabad, Bengaluru, Chennai and Hyderabad through the FFresh platform. By facilitating a direct access to it’s buyer network and streamlining the entire supply chain, NeML not only helped the Litchi Growers increase their realizations by over 30%, but also empowered them to unshackle themselves from the long chain of middlemen. Buoyed by last year’s success, this year the Litchi Growers themselves contacted NeML to be associated with FFresh.

In a bold decision, using Bhaba Automic Research Center’s (BARC) breakthrough shelf-life prolonging technology, some progressive Litchi Growers seamlessly delivered their produce to Chennai markets through the FFresh platform. Undeterred by the associated risk, the Growers have shown a strong commitment to take marketing in their own hands with the able support of NeML.

With every passing day as word spreads out of this success story, more and more Litchi Growers in Muzzafarpur are registering themselves on the FFresh platform and transforming themselves from passive orchard owners to successful entrepreneurs marketing their produce nationally. The FFresh team is now gearing up to adapt Muzaffarpur’s success story to other Litchi growing States in the Country.

*Source: ‘Supply Chain Analysis Of Litchi In Muzzafarpur District In Bihar’ by Mr. Gulab Pathak, 2016.

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