FOR ADARSH KUMAR, it’s seed capital with a twist. The Harvard Kennedy School alum and former World Bank consultant is negotiating with a clutch of outfits such as Omidyar, IFMR Trust, and the Acumen Fund for $5 million (Rs 23.28 crore). He plans to use this money to set up Livelihoods Equity Connect (LEC), a fund that will infuse private equity into farming for the first time in India and potentially change how agriculture is viewed here.

Sure, the corpus is a trifle compared to the government’s support to farmers—Rs 69,375 crore in farm loan waivers and Rs 64,750 crore in fertiliser subsidies this year. And it’s not as big as companies such as Reliance Industries and Godrej Agrovet which source agri products directly from farmers for sale in urban markets. However, from being a sector that survives on government aid, agriculture can become one which can be run like a business that responds to modern management intervention.

“Agriculture needs long-distance smart money. Investors need security and returns, and the best way is for the producers to have a stake. It’s not a loan. In fact, it’s a win-win, exactly the way smart money helps small firms with cash and better management techniques,” says Kumar.

The idea behind LEC is to convert select farmer collectives and registered co-operatives into unlisted public limited companies. There will be around 25 of them. Each company will have 1,000 farmer-owners, stumping up around Rs 2,400 each (or roughly a twentieth of their annual earnings) as equity while LEC will put in another Rs 92.5 lakh.

Thus, the farmers will end up owning 20% of a company, LEC 70%, while the rest will be held by employees and local community leaders. Each entity may also raise another Rs 92.5 lakh as debt. Given India’s regulatory ceiling on large land holdings, every company will own around 1,000 acres.

LEC’s immediate focus will be on fruit—apple and pear farms in Uttarakhand, mango orchards in Tamil Nadu and strawberry farms in Maharashtra. This makes sense, as grain production is notoriously dependent on monsoons and soil conditions.

It’s not the first time Kumar’s embarked on such an ambitious project. In March 2003, he helped create the All India Artisans and Craftworkers Welfare Association (AIACA)—a membership-based apex body for the handloom and handicraft sectors—in collaboration with traditional crafts, clothing and food company Fabindia, the Ford Foundation, and the Dorabji Tata Trust. The
AIACA raised Rs 13.87 crore and roped in 90 craft organisations as members. LEC is loosely based on Fabindia’s community-owned company model and, similarly, promises inclusive capitalism.

Kumar plans to launch LEC in October. He has also entered the G-20 SME Finance Challenge, winners of which will receive funding assistance from G-20 nations and institutions.

Kumar’s guru of sorts and Fabindia managing director William Bissell says LEC is “inspired use of smart money.” Over to the farmers now.

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