‘Gramin Suvidha Kendra’: MCX’s Corporate Social Opportunity Approach to Inclusive Growth

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Excerpts

After launching its operations in November 2003, MCX operated as an electronic platform to buy or sell commodity futures contracts. This, according to the company, helped in efficient price discovery as all the information available in the public domain could be utilized in the user’s market operations. This, in turn, improved the quality of the decision making of all the participants in the commodity chain. The benefits spilled over to other areas as well, as a futures exchange generated the need for a well developed associated infrastructure. For instance, it stimulated the emergence of better developed spot markets, good warehousing facilities, quality transportation networks, etc. MCX soon realized that despite the rapid growth of the Indian economy since the 1990s, many sectors had been left behind. Agriculture was one of these and the farmers, in particular, were in a pitiable state. There were various problems dogging the sector such as limited land availability and the irrelevance of the technology development and delivery mechanism that had led to the agricultural output stagnating since the early 1990s. Private investment in research in agriculture too was not sufficient to support the growth of the sector. This, in turn, contributed to the lack of profitability of the farming sector. According to MCX, the sector’s lack of profitability stemmed from the fact that agricultural commodity prices had not kept pace with the increase in the prices of industrial products, capital costs, and the cost of technology.

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In 2006, MCX decided to set up the GSK initiative. The GSK center located in a particular place offered various facilities to the farmers including price/market information, addressing technical queries regarding farming, providing scientific warehousing facilities, warehouse receipt issuance, and access to finance, quality inputs, and bank loans. The model had the necessary flexibility to add more services depending on these services’ ability to address issues faced by the rural economy. The idea of the project was conceived in 2006 under the leadership of SA Srinivas (Srinivas), who was then the Vice President of the New Initiatives Department at MCX. Venkatachalam Shunmugam (Shunmugam), the Chief Economist then later took over the activities and brought in the sustainable perspective. Rutten, who was then the Joint MD, steered the CSO initiative......

GSK operated on a ‘spokes and hub’ model that leveraged on the existing multi-tiered structure of India Post. In this structure, head post offices (HOs) existed at the city level, sub-post offices (SOs) at the taluka (sub-city) level, and branch-post offices (BOs) at the village level. Postal bags were exchanged on a daily basis between BOs and SOs. These SOs in turn reported to the HOs on a regular basis. For the GSK initiative, SOs were used as hubs while BOs (usually one for a few villages) reporting to the SOs, functioned as the spokes of the hub. MCX provided each SO with a PC, fax-copier-printer-scanner, web camera, and Internet connection. A youth from that area was appointed as the GSK coordinator at each hub. MCX paid the GSK coordinator a basic salary plus a performance-linked incentive. The coordinators were given individual targets and reported to MCX through reporting systems the company had developed.....

MCX and India Post mutually decided on the details of the post offices selected for launching GSK. MCX entered into an MoU with each State Postal department wherein MCX was entitled to the use of the premises or a portion of the premises in each of the post offices. MCX was also entitled to utilize the services of the post office staff. Identification of the portions of the premises and the post office staff to render the services were left to the sole discretion of the Chief Postmaster General of each state.....

A survey undertaken by MCX in Jalgaon in November 2007 to study the impact of GSK services found that there was significant crop diversification among the growers. The members interviewed said that they were able to obtain better prices from the market by holding on to their produce for sale at a more price-opportune time. They were also appreciative about the quality of the seeds purchased through the GSK platform MCX contended that the GSK initiative had had a positive impact on the lives of the farmers. In addition to direct benefits such as increased productivity and getting better prices for their produce, there were also other more indirect benefits. For instance, since the farmers did not have to travel to marketplaces to get to know the prices and for other requirements, they could spend more quality time with their families. Peace of mind was another benefit. Besides, the farmers were also becoming more aware about quality issues and about farm productivity.....

MCX faced many internal and external challenges in launching and scaling up the GSK initiative. According to Shunmugam, ‘building a business model around it was challenging to move toward self-sustainability and scalability’ as funding remained a constraint to the model. Then, initially there was a paucity of ideas on how to make the model sustainable. Selling the concept to potential partners was also a challenge as many suppliers perceived that catering to the bottom-of-the- pyramid segment was fraught with unnecessary hassles. Identifying the right location for expansion was yet another daunting task as many locations did not have the necessary ecosystem (warehousing facilities, etc.) to support the initiative.....

MCX’s vision was to make GSK a self-sustainable model and to ensure that each farmer in these villages got the correct market price for his produce, that he used the best farm inputs for the highest possible yield and quality of yield, and that the warehouse receipt financing through banks became the norm. The company was also considering offering more services over this platform that would lead to a better living standard for rural people. These included non agri products such as healthcare and hygiene products. It was felt that this would enhance the brand value of GSK and MCX. According to Rutten,.....

Exhibit I: MCX: A Snapshot
Exhibit II: MCX’s Vision and Mission Statements
Exhibit III: GSK: Some Statistics
Exhibit IV: A Branch Post Master Updating the Price Information in the Blackboard
Exhibit V: The Deliverables of MCX and India Post as per the MoU