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Best Business Practices of IFFCO

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IFFCO : A SUCCESSFUL
BUSINESS MODEL IN
COOPERATIVES
GOPAL N. SAXENA
Director (Cooperative Development )
Indian Farmers Fertiliser Cooperative Ltd.
New Delhi (India)
1
IFFCO is a Unique Model
 Cooperatives are the Owners
 Cooperatives are the Marketeers
 Cooperatives are the Consumers
 Through a well-knit network of more
than 38000 cooperative societies,
IFFCO caters to more than 50 million
farmers
2
Cooperatives / Farmers As
• OWNERS
– Need more profits/Expansions and compliance to
their felt needs
• MARKETEERS
– Need Quality products, Competitive Distribution
terms and better margins
• CONSUMERS
– Need Assured quality, cost effective prices, timely
delivery, support services for better crop yields
3
IFFCO FOR OWNERS
– Regular Dividend on their investment IFFCO pays
maximum permissible dividend to its member societies
– Joint Ventures and Expansion of existing
Units
Fertilizer
– Diversified Business activities to achieve sustained
growth and Better Economic Returns to Members
Participation in the Governance
• All the member societies given due representation
• Regular meetings of Representative General Body
• State/ Zonal Advisory Committee Meetings
4
IFFCO FOR MARKETEERS
– Produces quality fertilizers
– Marketing through the cooperative network only
– Provides Transportation Support to carry fertilizers
in interior area
– Network of warehouses including Cooperatives
are preferred
– Financial Support to Weak Member Cooperatives
5
IFFCO FOR CONSUMERS
• Educates Farmers on innovative farming techniques
• Undertake “balanced fertilization programme” through
extension, education based on various field programmes
• Ensuring timely availability of fertilizers to the farmers at the
doorsteps in the remotest area
• Direct sale also through own outlets – Farmers Service
Centers
• Education & Training
• Community Development Support
• Environment Protection & Energy Conservation
6
IFFCO : An Introduction
• IFFCO was formed at the initiative of
Cooperative league of USA (CLUSA) now known
as NCBA; and efforts of Government of India
• Registered on 3rd November, 1967 under Multi
Unit Cooperative Societies Act, 1942; Now Multi
State Cooperative Societies Act, 2002
• Has Status of A “National Cooperative Society”.
Continued..
7
 IFFCO presently has three Ammonia - Urea
Plants having installed Capacity of :
• 2.1 MT of Ammonia
• 3.8 MT of Urea
 IFFCO has two complex Fertiliser Plants having
installed capacity to produce 4.3 MT Complex
Fertilisers (NPK, NP and DAP)
 IFFCO alone contributes to Fertiliser availability
(Nutrient basis)
• Nitrogen
19%
• P2O5
25%
8
PERFORMANCE DURING -2006-07

Production
7.2 Million MT

Sales
7.8 Million MT

Turnover
2264 Million USD

Estimated profit before tax 56 million
USD (Payment of 617 million USD in
pipeline)
9
Joint Ventures
• IFFCO has Set Up Joint Venture Projects Such As :
 Oman India Fertiliser Company (OMIFCO):
•
Annual capacity of 1.6 Million MT Urea and 0.25 Million MT
Ammonia
•
The Actual project cost USD 892 million (saving of USD 77 million
on estimates)
 Industries Chimiques du Senegal (ICS)
•
IFFCO holds about 20% of the paid-up share capital.
•
Under long term buy back agreement , 0.5 Million MT phosphoric
acid is lifted by IFFCO
Continued..
10
 Indo Egyptian Fertiliser Company SAE, Egypt
 To set up a Phosphoric Acid Plant of 0.5 Million MTPA capacity
IFFCO holds 76% equity
The estimated Project cost is USD 325 Million
Pre-project activities have been started. The plant is expected to
start commercial production in 2009
 Phosphoric Acid Plant at Jordan
Signed an MOU with Jordan Phosphates Mines Company (JPMC)
to set up a 1500 tonne per day phosphoric acid plant to be located
in Southern Jordan
IFFCO and its associates to have 52 percent equity participation
The estimated project cost is USD 350 million
Continued..
11
IFFCO Tokio General Insurance
Company Ltd ( ITGI)
– IFFCO holds 72.6% equity share
– Balance equity subscribed by Indian Potash
Limited and Millea Asia, Singapore ; a group
company of Tokio Marine & Fire Insurance
Company
• Sankat Haran
• Barish Bima Yojna
Continued..
12
 IFFCO Chhattisgarh Power Ltd.
 Joint Venture Company with Chhattisgarh State
Electricity Board (CSEB) to set up a 1000 MW
coal based mega power plant; Scheduled to be
commissioned in 2010
 The total estimated project cost is USD 1 billion
 Equity participation by IFFCO 74%
 The Company to supply electricity to farmers at
a cheaper rate
Contined..
13
KISAN INTERNATIONAL
TRADING FZE
• Special purpose Vehicle (SPV) for
shipping, logistics and investments in New
Overseas Joint Ventures
• Canalising,
Routing
and
Monitoring of the Raw Materials
Logistics
14
IFFCO Kisan Sanchar Ltd.
– To Strengthen Rural Telephony
– Support Farmers through value
information through mobile telephony
added
– Enhancing the capacity of its member
cooperative societies by providing them an
additional means of generating income
15
Initiatives Focusing Agriculture
& Rural Development
• Promotion of “Commodity Trading” For Better
Prices to Farmers
– National Commodity and Derivative Exchange
Ltd (NCDEX)
– National Collateral Management Services Ltd.
(NCMSL)
16
Socio-Economic Development Work
IFFCO Kisan Sewa Trust
– A Charitable trust with contribution by IFFCO
and Also IFFCO Employees
– To provide relief and rehabilitation to victims in
rural India in the event of natural calamities
– The fund is also meant for undertaking
programs for the welfare and critical medical
attention to needy farmers
17
Indian Farm Forestry Development
Cooperative Ltd. (IFFDC)
• Focuses on development of wastelands.
• Undertakes activities like Promoting Primary Farm
Forestry Cooperatives (PFFCS) to enhance the socio
economic status of rural poor
• Micro Enterprise Development Activities undertaken:




Fisheries
Livestock development
Bee-keeping - as a business opportunity for SHGs/
Associations / Coops.
18
IFFCO Foundation
• Registered as a charitable trust in January,
2003.
• To promote cooperative development, social,
human resources and cultural development by
providing various services
• Main
focus
Cooperatives
on
Primary
Agricultural
• Set up ‘Cooperative Development Resource
Centres (CDRCs)’ to strengthen cooperatives
• Undertakes training programmes for Capacity
Building of the Cooperatives Personnel.
19
Community Building
• Financial Assistance to poor and needy rural community for
their up-liftment
– Education
– Support to Research to Agricultural Related field
– For their livelihood
• Cooperative Welfare Fund
– For the support of weak and smaller cooperatives
• IT support to strengthen the cooperative system
 Effective Communication & Data Base
 Information Kiosks (In Ten Indian Language)
 Networking
20
Cooperative Rural Development
Trust (CORDET)
• Practical “Training Centres” to provide training
to the farmers to improve their skills in
agricultural production, dairy, poultry, fisheries
and professional leadership at village level.
• Extends
farmers
soil-testing
facilities
to
member
• Vocational Trainings to Rural Women
21
Growth of IFFCO
Membership
Initial
At Present
57
38,155
(Year 1967-68)
Share Capital
Production
0.05
95
million USD
(Year 1967-68)
million USD
0.18
(million MT)
7.2
(million MT)
(Year 1975-76)
Turnover
588
2264
million USD
(Year 1989-90)
million USD
22
CRUICIAL DECISIONS WHICH
LAID THE FOUNDATION
 NO FREE SAMPLE OF FERTILISERS
 NO POSTING IN HOME STATE / DISTRICT
 NECESSARY INVOLEMENT OF COOPERTIVE
SOCIETY / COOPERATIVE PERSONNEL IN
FIELD / PROMOTIONAL ACTIVITIES
23
IFFCO’S CORE CONCERNS
• MEMBER DRIVEN (WHOLLY OWNED & CONTROLLED BY
COOPERATIVE MEMBERS)
• DEMOCRATIC GOVERNANCE
• REGULAR
BOARD
MEETINGS/MEETINGS
COMMITTEES OF BOARD MEMBERS
OF
THE
• CONCEN FOR QUALITY; ENERGY SAVINGS & ENVIRONMENT
PROTECTION
• TIMELY ELECTIONS / TIMELY AUDIT
• CODE OF CONDUCT FOR MEMBERS
• EMPLOYEES PARTICIPATION IN DECISION MAKING
24
IT MAY ITSELF BE A RECORD
IFFCO came into commercial production in 1975;
And since then it is continuously Making Profits &
disbursing dividend to its members every year for
the last 32 consecutive years
(20% Dividend for the last Six Years)
Decision in Board are taken by consensus
(There has Never been Division & Voting in the
Board on any issue, even including The Election of
the Chairman / Vice-Chairman)
25
OUR REWARD
• Members have Claimed their Ownership” in the
organization and have purchased entire equityholding held by Government in IFFCO
• Up-holds ‘Cooperative Values’ & ‘Principles’; to
which “Fair Pricing” is inherent
• Today IFFCO is wholly owned by Cooperative
Members & The entire Board of 21 members
consists of Representatives from Cooperatives
only
26
THANKS !
27
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