Agri-business Value Chain- The Chikku Growers of Amalsad

The Amalsad area in the district of Valsad of the state of Gujarat is one of the high potential
areas for development of ‘Chikku’ (Sapota). The PACS of Amalsad namely – Amalsad
Multipurpose Co-operative Society covers 18 villages and an area of about 5 sq. kms.
Marketing of Sapota through pooling of members’ produce constitutes one of the major
activities of this society, contributing about 70 per cent of its total annual turnover.
The society not only arranges free spraying of the costly pesticide (Rupees Three Thousand
per liter) but also ensures steady supply of fertilizer, credit, extension services and planting
materials at reasonable rates. Each cooperative member is permitted a crop loan of Rs. 7500/-
at 10 per cent interest per annum which is adjusted against sale of Chikku by the farmer
throughout the year. This crop has been most popular in this area over the last 30 years and
this society is handling as much as 80 per cent of the total amount of Chikku currently being
produced in this place.
So far the society has identified only one parameter - namely, size which has been found to
influence price of Chikku. Even though the farmers bring their Chikku in different grades
based on its size, the society checks these grades by drawing a random sample of 10 Kg.
amount out of the producers’ sack and counting the numbers therein. Thus, the prices paid to
producers vary across size of the fruit (Table 1).
Table 1: Price across various size group of Chikku
Count per 10 Kg. Price (Rs.)
130 87.60
135 85.00
140 82.40
145 79.80
150 75.20
155 74.60
160 72.00
175 66.00
190 60.00

The society makes two broad categories (namely, large and small) in response to market
demand with the help of a grading machine for selling the fruit in the Delhi market.
Generally, the best grade materials which constitute about 75 per cent of their total collection
is sent in wooden boxes to the Delhi market on the same day in the evening by trucks so that
the fruit reaches the destination in the morning of the third day, i.e., within 36 hours after
harvesting. The rest 25 per cent produce which is generally small in size, is usually sent in
cardboard boxes to several markets in Gujarat, Rajasthan and Madhya Pradesh. Since
supplying Chikku early in the morning to the society is extremely important in order to
ensure its dispatch latest by the evening truck for Delhi, incentives are given to the first fifty
suppliers by providing them an additional Rs. 5 per kg. as an extra premium. The society
depends on truck transportation only in order to avoid delays with railway transportation. The
truck drivers as well as the truck companies are given special incentives by the cooperative
society for ensuring prompt supply. For example, the truck driver starting at 12 noon on the
first day is paid an extra incentive of 500 Rupees if he ensures supply at Delhi market
promptly at 4 a.m. on the third day. For every 2 hours’ delay in starting, the incentives go up
by 100 Rupees. In the Delhi market, the trader checks the quality at random and distributes it
to various wholesale buyers on the basis of the previous day’s price. The final price is
decided only in the evening of the third day in the Delhi depending upon the demand and
supply conditions as experienced by the wholesale traders. The main trader in Delhi charges
4 per cent commission from this cooperative society. This arrangement with the Amalsad
PACS has been continuing to the mutual satisfaction of both the parties over the last 28
years.

1. What is the business model of Chikku value chain?

2. Identify the business relationship among the vertically related players.
3. How the trust has been developed between the players?
4. What innovations have been made for the efficient functioning of chain?