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Rajalakshmi Menon

MUMBAI, June 1

RALLIS India Ltd has entered into a contract farming agreement with State Bank of India, terminating its earlier agreement with ICICI Bank.

According to sources, to begin with SBI will replace ICICI Bank in the Dindori district of Maharashtra and this tie-up will later be extended to all other centres where Rallis has a tie-up with ICICI Bank.

This alliance with Rallis will be SBI's first such tie-up with a corporate for contract farming. The bank is also currently scouting for tie-ups with other corporates for this purpose.

According to sources, Rallis has terminated the contract with ICICI Bank citing high interest rates (around 13.5 per cent), absence of rural branch network and the lack of a direct cash component disbursement to the farmer borrower.

ICICI Bank officials when contacted said, "We do not have an exclusivity arrangement with Rallis India. They are free to tie up with other banks as we are free to enter to arrangements with other corporates.''

Through the agreement with SBI, Rallis will provide farmers in Dindori, near Nashik, inputs such as pesticides, improved variety of seeds, fertilisers, etc.

The cost of these inputs will be met by SBI and once the crop is raised, Rallis will buy the products and sell them to various companies where it has a buy-back arrangement. Within a week, Rallis will credit the farmers' accounts in SBI with the proceeds of this sale.

While SBI has the benefit of increased lending under priority sector advances and assured recoveries, Rallis has the advantage of the bank's massive branch network, considerably lower rates of interest (around 11 per cent) and the practice of SBI's branches paying the cash and kind portion within the limit sanctioned, thus enabling the use of timely credit for meeting expenses.

The project will commence in Dindori on a pilot basis covering around 200 farmers. The bank has further identified 12 other branches for this purpose. Farmers, who have had accounts with ICICI Bank, will now open accounts with SBI. Agricultural commodities such as tomatoes, cabbage, cauliflower, onion, capsicum, grapes and maize have been identified for the Dindori project.

Rallis currently has buy-back arrangements with organisations such as Hindustan Lever Ltd for wheat in Madhya Pradesh, HL&PICRIC for Basmati rice in Haryana and for fruits with SQF, HLL, Food World at National Dairy Development Board in Karnataka.

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