How I (could have) made Rs.100,000 from Rs.25,000 investment in 4 months..

Note:This may read like a story.But it is not. I actually want to talk about an investment idea.But as I can never get to the point quickly, you, my reader, has to read through my 'sonta dabba' (trans: blowing one's trumpet) first.

I have a friend called Srinivas who directed a critically acclaimed, but commercially not very successful Telugu movie. This was a few years ago. Srinivas and I worked on a script last year, and we were ready to meet producers around March of this year. We did meet a couple of producers who showed interest.And then the farming bug bit Srinivas big time.

Actually, Srinivas was always interested in rural development and leveraging traditional knowledge systems along with modern technology.We both had many conversations around how, by creating a database of traditional farming techniques, we could make the knowledge available to every one. We would discuss the script for a while, and then drift into a discussion on farming stories. We both have come from farming families.Though my family has left farming a while back, Srinivas still has his farm in Prakasam district of AP.His brother manages the family property.

So, just before the general elections, Srinivas decided to visit his village, spend a few days and come back with some money.(We had decided that we will pool some money, shoot a few scenes and then approach big producers with the sample of what we can do.) But when he went there, he found a village agri-economy almost in shatters.We spoke on the phone, and decided to postpone the film project, so that Srinivas can stay in the village for some more time and see what he can do.

And then we began the wait for the rains.Prakasam district is known for Ongole bulls, tobacco and red chilli crops, and of course they also cultivate paddy.Srinivas has around 15 acres of farm land, which makes him a middle-class farmer.He wanted to grow tobbacco and leave a bit for Tur dal.In our discussions, I had suggested that any pulse crop would pay rich dividends, and that he should infact encourage the entire village to go for Tur dal or some other gram.

As the wait for the rains grew longer and we entered July, I did not have the heart to call Srinivas.He did not call me either.I knew that Prakasam, and Guntur districts were facing severe drought conditions this year and I was wondering about this cruelty of nature.Reading about farmers suicides in some of the AP districts on an almost daily basis, I started getting worried about the situation in Srinivas' village.

So, finally, I called him last week, when the rains finally started all over AP.He gave me some good news and some bad news.The good news is that Srinivas took a gamble and it paid off.He managed to find some water source, got the water transported to his fields, and wet the fields twice, before planting tobacco.The rains started one day after he completed his planting.He will now make a decent profit.

The bad news is that most farmers in his village did not do what he did.Either they were scared of investing in the seeds/saplings or they simply did not have any cash, and there were no credit facilities.

Srinivas himself could have planted Tur dal.He did not because that would have cost him another Rs.25,000, and he did not have the money.And he did not want to ask his friends (like me, for instance) because farming is a high risk sector these days.And it did not help that there were no phone calls between us for almost 2 months.

But Srinivas passed on the advice to plant Tur dal to his cousin, who had the cash to invest.The cousin's family has 60 acres of land, and they alone, in almost the entire district, planted Tur dal.Cost of seeds plus other expenses for 60 acres came to around Rs.50,000.As per Srinivas' calculation, around 300 quintals can be harvested from those 60 acres in the next month or so. The current market rate is between Rs.6000-Rs.7000 per quintal.So, even assuming another 20-30,000 Rs. investment for harvesting, transport, wastage, commissions etc, his cousin will make around Rs.18 lakh from a Rs. 1 lakh+hard work as investment.In less than 4 months !

If only Srinivas had asked me for the investment, I would have gladly given him Rs.25,000 that he needed for his 15 acres(plus his brother's 15 acres).And out of the 3 lakh that Srinivas would have made on his farm, I could have expected Rs.1 lakh as return for my investment. (Yes, I did discuss this with him and he agreed that would have been a fair deal.)

So, that's how I lost a decent investment opportunity.

Now, here's my weird idea. There are many capable and sincere farmers in our villages.All they need is some cash investment early on in the 2 or 3 cropping seasons.The sums are not very high as I have shown in my example above.There are thousands of IT and other private sector employees with disposable incomes, who can afford to take a risk on a small amount like Rs.25,000.Suppose I have Rs.50,000 to invest and I distribute it between 2-3 farmers, I can even hedge my risk very well. The farmers will benefit because they don't have to run behind PSU banks, Govt agencies, and private loan sharks.They will also be happy to host the IT employee and his/her family for a weekend or two around sowing or harvest times.

What this requires is a platform - technology-enabled so that we can tap the people who can invest.And a network of farmers who are interested in sourcing their investment needs through this model.Personally, I find it easier to trust a farmer than a city slicker.But keeping my opinions aside, it should be possible to create trust by defining a robust process, and keeping things transparent. I have another friend who talks about using web cams in fields, but I think it is far easier to ask the farmers to send an SMS with a photo and the details of the how the money has been spent.

Hope you all get the idea.I have already committed to invest Rs.25,000 for the next cropping season for a cash crop (probably Tur dal again, I donno yet) that I will identify by observing the markets and taking inputs from local farmers.If you have some disposable income, and know a farmer or two, I suggest you strike such a deal too.

Comments, criticism, suggestions, encouragement..please send them in !