Federation of Small Farmers' Associations of Khaddar Area, North India & Sunstar Overseas Ltd

Summary

Sunstar Overseas Ltd has assisted local rice growers to convert to organic production and then helped them set up a farmers’ federation so that the group was eligible for Fairtrade certification. The federation supplies organic basmati rice to Sunstar which markets it domestically and internationally, including to Fairtrade markets in Switzerland, and France. Tesco launched Crazy Jack Fairtrade rice in its UK stores in June 2005.

Location


Deepak Sharma
Rice farmer ©Simon Rawles

The farmers are located in the Khaddar area of Haridwar district in Uttaranchal state, North India. The area is a large flood plain at the base of the Shivalik hills in the Western Himalayas where the River Ganges comes down from the mountains and meets the plains before continuing its journey to the Bay of Bengal. The area is famous for the production of high quality traditional basmati rice.

The city of Haridwar is on the banks of the Ganges, 200k north of Delhi. It is a centre of the Hindu religion with many temples and pilgrimage sites and is one of four sites where the Kumbh Mela pilgrimage is held every 12 years.

 

Background


Sunstar Overseas, an established organic agribusiness, is one of the country’s largest rice exporters and buys almost 50% of rice produced in the Khaddar region. Since 2001 it has developed an extensive organic farming project on the flood plain in partnership with the Khaddar Farmers’ Federation. The company conducted extensive field surveys before selecting this location, concluding that its soil quality, agro-climatic conditions and proximity to the pure irrigation waters of the Ganges and its tributaries were ideal for the cultivation of premium quality organic basmati rice.

Sunstar oversaw conversion of the land to certified organic production and supports the farmers with technical assistance from four full-time staff and an agricultural manager to improve agricultural practices and crop yields. It reduces farmers’ costs and the need to take out expensive loans by providing good quality seeds and inputs (e.g. organic manures and bio-pesticides) at reduced rates and with interest-free credit. Sunstar has a five-year contract with each farmer in the federation to purchase their entire rice crop but the farmers have no reciprocal obligation to sell exclusively to Sunstar.

Rationale for Fairtrade Rice


While many basmati farmers successfully participate in the export market, there are large numbers of small-scale basmati rice growers in India who make a very poor living from it. Traditionally these farmers sell to agents at the local market, receiving low rates which don’t always even cover their costs of production. They are often deeply indebt to the local agents as a result of taking out high interest rate loans from them to pay for necessities. Company buyers therefore don’t deal in person with particular farmers and develop relationships because they buy anonymously via agents or through the auction.

Fairtrade has the potential to bring unique benefits to these farmers:
  • The opportunity to organise and to develop a direct relationship with the miller/exporter
  • To deepen their knowledge of rice agriculture and trade
  • To recieve a fair price to cover their costs of production with a premium to invest in improving their agricultural practices as well as in meeting social needs of the community - such as improved educational opportunities, establishment of financing facilities and improved sanitation in the villages
  • To improve the position of seasonal harvest workers. At harvest time, farmers often use day labourers and the farmers groups are considering how to spread the benefits of Fairtrade to those groups too.

Historically, rice is milled in India by exporters and stored it until it is needed. The rice is then exported as unpolished brown rice and processed in European mills because escalating tariffs made it uneconomic to export processed rice. Now that the EU has reduced the tariff for polished basmati to €175 (zero tariff on brown basmati) it is feasible to export processed white rice to the UK.

However, the problems of rice farmers worldwide have been compounded by the USA heavily subsidising its farmers and then dumping their surplus rice on developing country markets, so driving local farmers out of business. In this context, rice is often quoted as a classic example of double standards – with the EU and USA protecting their domestic rice farmers while forcing developing country governments to stop subsidising their farmers and to lift any protective barriers – with disastrous consequences. Major NGOs such as Oxfam and Christian Aid are running campaigns highlighting these problems in the rice industry.

Fairtrade Partnership


Under the Fairtrade system, small farmers’ organisations are usually certified against generic Smallholder Standards to be eligible to participate. Sometimes, however, small producers are not sufficiently organised (as is the case with these rice farmers) or are organised into structures which have no legal status and so would not be able to participate in the Fairtrade scheme according to the usual criteria. To overcome this, a project has been piloted in which Contract Production Standards are used to certify smallholders. The Contract Production Standards exist specifically to encourage the formation of autonomous producer organisations where they do not exist. Under the pilot, farmers are able to apply to Fairtrade if they are contracted to work locally in partnership with a Promoting Body (in this case Sunstar) and so access the benefits of the Fairtrade system. The Promoting Body takes responsibility for engaging actively in the organisations’ development process such that they eventually gain autonomy and become eligible for certification within existing generic standards. The time frame for this is dependent upon local conditions and is case-specific.

Sunstar is keen to improve the position of its farmer partners and identified Fairtrade as a means of achieving this. The company is liaising with Fairtrade as the farmers’ Promoting Body and has been instrumental in supporting the transformation of this loose network of farmers into a coherent organisation. Twenty-three village-level farmers’ clubs with a total of 520 rice farmers have been organised into the federation structure required for Fairtrade certification. Each club has three executives (representative, secretary and treasurer) who in turn select the executive for the federation. The farmers have a tradition of participating in welfare activities and social institutions at village level but hadn’t previously worked together at this level of organisation.

There is great potential for Fairtrade to bring the farmers together and strengthen their ability to negotiate higher, stable prices with buyers, and also contribute new resources to the socio-economic development of the area.

Rice Production


The Khaddar area is characterised by a very high water table and fertile soils rich in organic matter which, combined with spring floods and monsoon rains, mean much of the land is constantly waterlogged. The majority of farmers can therefore only grow one crop of rice each year which they rely on for 80-90% of their cash income. They are unable to grow other crops for cash or home consumption but usually keep cows, oxen or buffalo for their milk and pulling power and also for making organic farm yard manure to fertilise their rice fields. Some of the more fortunate farmers own land unaffected by waterlogging and can grow crops all year round. Sugar cane and wheat provide about 40% of their cash income and rice around 60%. They also grow lentils and other vegetables for the home and fodder for their livestock.

The federation has a total of 1,860 hectares under rice cultivation, producing 5,832 tonnes of certified organic basmati paddy a year. The average farm size is 1.34 hectares (3.3 acres) with rice grown on 0.74 hectares (1.8 acres). Average production per farmer is 1,662kg a year. Most of the work is carried out by the family but seasonal labour is often employed for transplanting rice at the start of the season and for the November-December harvest.

The threshed rice (known as paddy) is purchased by Sunstar and milled to remove the husk (brown rice) then polished to remove the bran (white rice). Sunstar produces brown and white rice for national and international markets and also exports brown rice to major European mills for polishing. One tonne of paddy is required to make 0.73 tonnes of brown rice and 0.60 tonnes of white rice.

Most farmers in the federation were inspected for organic certification from 2001. All these farms are now certified as organic as per EU standards, BioSuisse standards and USDA standards. Some of the farms also practise biodynamic agriculture and are certified by Demeter.

Fairtrade Price and Premium


The Fairtrade minimum price for traditional basmati rice from India is €243 a tonne plus €30 Fairtrade social premium and €20 organic premium. The social premium can be invested in business, social or environmental projects agreed by a committee of elected representatives. The farmers have already received Fairtrade premium payments for sales to Switzerland and France and each of the village clubs has submitted proposals for community projects. Funds have been granted and distributed to a number of projects which are now up and running:

Infrastructure improvements for schools and roads
Repair the broken boundary wall of a village primary school.
Five groups plan to construct approach roads from their villages to the agricultural fields in the vicinity which become inaccessible during the rainy season.
Raising the level of a school playground which is unusable during the monsoon season because of standing water.
Construction of a bus shelter outside one village to protect waiting passengers from rain and sun.
Construction of a number of small bridges over drains which overflow and make some villages inaccessible during rainy season.

Proposed Loan fund
Most of the farmers depend on one rice crop, and therefore one annual payment at harvest time, for 80-90% of their cash income. They have to take out loans during the year to buy seeds and inputs, to pay for various functions such as weddings and festivals and pay for health care and education. Traditionally they are at the mercy of local agents who charge a very high rate of interest and to whom they are in substantial debt. A revolving soft loans fund would enable members to reduce their debt and the capital fund would grow through the interest payments.

Future projects
The farmers’ villages typically have a primary school but very few children from farming families go on to higher education and the villages lack primary healthcare facilities. The farmers want to look into how they can improve the chances of their children going on to university and the possibilities of funding village clinics or a local hospital.

Members also want to set up family planning and environmental protection programmes and provide training for income generating schemes for women such as fruit and vegetable preserving and handicrafts.
Fairtrade Foundation 2005

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