Mr Ashwin Mahavadi, Founder and CEO of Krishiyog researches and works towards providing end-to-end services to farmers to make farming more profitable for farmers.
Can we start with a little about your background?
Academically, I am an engineer. I did my under graduation in Civil Engineering; post which I pursued Masters in Structural Engineering. I specialized in Earthquake Engineering. After my graduation, I took up a job in Earthquake Engineering and worked in that sector for about 3 years. The job was a good one in terms of addressing intellectual curiosity etc. I enjoyed it much. But, even before I went abroad, I always had this thought that I should come back to India and do something that would have a social impact. My idea while doing my Masters and practicing Engineering was that India would need a whole lot of infrastructure in the future and so this education would be handy. So, I aimed at gaining a decent experience, moving back to India and setting up some consulting firm which could help build the next level of infrastructure in India. However, to keep my job exciting I ended up getting into too niche a field. Earthquake Engineering, in general, is extremely advanced and it isn’t put into much practice in India because we do not have such high Earthquake-prone regions, except the North-East and the West to some extent. So, as I got more experience in that field, I realized that moving back to India and practicing the same is almost not possible. That meant that I would have to come back and start afresh in Civil Engineering working on usual buildings and infrastructure projects. My experience, has been into more on the analytical aspects rather than the designing front. That quite didn’t fit the bill. If I had to come back and start something in Civil Engineering, then it is almost like writing off the experience I had gathered all along. With that in mind, I was in a dilemma – on one side I had this strong desire to move back and on the other the thought that my experience would not be of much use in India hassled me. I was about 29 at that time and I had to take a decision on what my future would be like. I had secured an admission for MBA program and also a PhD in my kitty in addition to the fact that my work was going very well. Having said that, I thought that if I don’t move back to India then, I would probably never move back. I had already spent around 6 and half years there and life is easier there. So, it is very easy to convince yourself to move back when you retire etc. That is when I resigned and moved back to India. I really didn’t have a clear picture in mind about what to do back then. I wanted to do something that would have a social impact. Education and Agriculture were two sectors I was looking at and somehow I felt that there are some fundamental problems in agriculture from an engineering perspective. There could be some optimization that could be done. But, I didn’t even know the A of Agriculture to start with. Not even my grandparents have been in this field. I had a fascination towards it though and to top it I had a completely fresh perspective. So, I felt that as an engineer if I had to use any of the basic principles then, it could probably be applied more effectively in the agricultural sector than in the education sector. That is how I took the leap. Essentially when I moved back and decided to start with agriculture and the first thing I started was Advait Organics. In one and half years of running the company, I realised the kind of issues farmers face at the grass root level. Asking farmers to adopt new practices and proposing new solutions without addressing the current issues didn’t seem to be an ideal way of addressing long-term issues. So, I started Krishiyog. The whole intent of Krishiyog is to provide integrated services to farmers. I feel one of the reasons small scale farming is not profitable is because we have a very reductionist approach to the ecosystem we live in. When we look forward to sell; but, we don’t think of how we grew the crop. Also, when we look at growing a certain crop, we don’t think of how/where we will sell it. The 4 major aspects of agriculture – cost of cultivation, agricultural inputs, relevant information and marketing are interconnected. Farmers should turn to market-based production instead of producing whatever they feel like and how much ever possible. In the current approach, they get stuck when it comes to selling the product and hence, terms it non-profitable.
So, you feel small-scale farmers currently have a reactive approach rather than a proactive one.
Imagine a farmer in Maharashtra growing grapes. The quality of the grapes completely depends on thinning and pruning of the crop. Now think of a framer who is reliant only on the existing APMC market; wherein he feels he is not getting the right price. His approach would be to grow more quantity rather than better quality. The farmer may have about 20 bunches and each bunch may have way too many berries which may not be sweet and strong enough. If you only focus on the kg, you would get a higher yield. But if you look at the quality, the price at which it sells is going to be very less.
The farmer may not get the price. The APMC also wouldn’t look at it holistically; they just look at the quantity.
Exactly! So, the farmer has adapted himself to that approach. Even if he is interested in growing the right quality, he feels he is not going to realise any benefit. So, he opts to grow more, ignoring quality and elevating quantity. Now, if you look at the other side of things. As a consumer, I am not interested in eating sour grapes. As a customer, I am willing to pay an extra amount for the grapes I enjoy. A customer is going to pick the product off the shelf of a retail store when it looks right – the bunch should look good, etc. There is a big gap in terms of what the consumer wants and what the farmer grows. If this gap is bridged, a lot of the problems get solved.
Yes, that is the challenge that the agricultural industry faces today. What initiatives or ideas do you have around that?
Once I observed it, I felt that this is more of a general issue. Things like, what inputs farmers grow, how they look at their produce etc., is aped. If one farmer does something, others follow. If you have to go and address that and you look at small and marginal farmers as your target customers to influence, then it becomes a cumbersome job of getting them to do it. If you look from the marketing perspective, for me to procure and give a farmer what he needs, the extra price to get at least one farmer with 1 acre to change his practice, doesn’t make sense because I will have to travel at least 5 times to his farm. That is the reason FPOs have been on the forefront lately. Cooperatives haven’t really worked well in terms of addressing the commercial aspects of the post-harvest farming. So, FPOs got built for the same intent – we have an aggregation of farmers growing the same crop, we could address the marketability of the products, we could support the system in terms of providing the right input, etc. When I looked around, I felt that FPOs are a really great vehicle in addressing the end user farmer issues if only they were to function at their full capacity.
So, how to get them to do that when they do not have all the right resources? That is the problem that we have picked up. We want to combine the services and address the profitability of small farmers. We have to look at their aggregation, which is the FPO, many of which are not being viable.
We look forward to empowering them by providing the necessary support. We provide those services that they intend to provide at the farms.
From what you have observed, what are some of the problems these FPOs are facing?
Let us understand how FPOs are formed. At the idea level and policy level, things are wonderful. But, when the mobilization phase happens, the NGOs that were responsible in forming these FPOs, in my opinion, did not do a good job of telling exactly how an FPO is different from a cooperative. The mobilization phase was quite rushed. When you look across the country, you will find 1000s of FPOs. But, talking to a farmer who is part of an FPO, who is not a Director, will in all probability not even know what an FPO is. He perhaps, has just paid the share capital or maybe he just has his signature listed. Then, there are people claiming that there is an FPO formed. When the mobilization doesn’t include the education of the farmers – the shareholders of the FPO – you will have no influence on their behaviour. For instance, one of the objectives of an FPO is to aggregate the produce and market on their behalf. If the farmer doesn’t understand that the FPO does make profit in doing this activity, he, being a shareholder is entitled to a dividend and such benefits actually comes back to him, he will not be willing to risk not giving his produce to his regular aggregator. So, even if the FPO starts procuring, individual framers won’t supply to him because he is not absolutely convinced if he will get the money or not. The farmer, you should understand is sceptical if the FPO arrangement will fetch him money just once. He is hassled that in future he will perhaps be left with little/no income, given that by then he would lose his regular purchaser. This is just one aspect to it. Similarly, if the farmer doesn’t take ownership and/or doesn’t see the immediate value in such an arrangement, there is no association. The next thing is, most people who set out to run the FPOs are mostly NGOs. NGOs, to a certain extent can build social capital. But, FPOs were formed to do business and NGOs, honestly, do not know how to run a business. That requires a different level of approach than running these companies and making sure these activities continue and that these activities gather some profit, which essentially go back to farmers and also take care of the sustenance of the FPO.
Owing to this, you get someone graduated in BSc Agriculture to be the CEO of the company, who however, may not know how to run a multi-crore business. If you are looking at 1000 farmers, it is already a multi-crore business, be it on the input/output side. So, without the right training and right hand holding, expecting someone to do all these 4 activities, which are completely different and highly complicated. So, the bottom line is unless the farmer feels that there is a benefit in the making, by selling his crop to the FPO, he won’t take a step forward. And, the person running it doesn’t have the expertise to run a business. So, as a result, they exist on paper but they are stuck at the same level without making progress.
Have you looked at FPO examples that have worked well?
Yes! Of course, if it works well, nothing like it. But, my point is look at the overall success ratio. Also, look at the amount of resources that have been committed to promoting FPOs – it is crores of money and thousands of FPOs. We can’t be happy about the fact that perhaps 2 FPOs in Karnataka/5 FPOs in Maharashtra are doing well. If the government is spending so much, my take is, why can’t we make the most of it? Why do we have to build an entire parallel system altogether? There is some social capital stacked up somewhere, which we can mobilize. Why can’t we use it to increase the capacity of the FPOs?
What steps have you taken towards correcting these issues that you have cited?
As an engineer and an outsider, I felt even I had limited understanding as to how I would change this. I understood the problem well.
The FPO CEO wasn’t gaining any support to start some activity that he/she had in mind. Even if we could help them get more business, I felt we could set those as examples and then recharge other around the same area. So, the problem we saw was that they were enthusiastic about doing a particular activity but they didn’t have the lead. For example, they are interested in procuring grapes from individual farmers but they don’t know where to sell those grapes. If all the FPO sells it at just any market then it won’t be able to ensure that farmers break free from their local aggregator and work with the FPO because the prices won’t be great. Then comes the question of whether he has the resources to do the mobilization at the back end and also do the marketing at the front end. Mostly the answer to this is a No. We thought if we could help him get the leads and if he could just manage the back end, then it would perhaps get him to do more business. To generate those leads, I wanted data. So, we developed a software for FPOs and we would appoint local entrepreneurs, on our payroll, to collect data. Based on this data, we would know which farmer produces what and when the harvest is scheduled. We would approach big retailers and other organised buyers, based on this data. In the process, we would collect the buyers’ requirement too and pass it on to the FPOs. This way the FPO would benefit from the trade. This was our approach.
We brought a whole lot of leads and advised them to use those leads rather than simply selling the produce as bulk. They could sell to different avenues, based on grades of produce procured. That was the next level of operation issue we faced.
• How do we categorize the produce and grade them?
• Who takes the risk of the transaction?
• Where is the facility?
Due to these hurdles, leads were not translating into transactions. Even when we advised them to change their ways of operation, no one actually adopted it. If there was a local buyer who had the buying power and if he asks the farmer to provide his crop with a certain input, without questions, the farmer would use it on the farm. So, the issue of leads not getting converted into transactions was a common issue across FPOs. So, that was a learning after which we realised that this software and this lead generation alone doesn’t help. They need support even in terms of operations.
Since last year we have set up collection centres near FPOs and we have been able to provide the farmers with better returns on their produce and slowly the farmers have begun trusting us for realising about 10-15% increase in income. Now, we have turned the tables. They come and ask us as to how they can improve the quality of their yield. If things trend this way, we will be able to give the next level of support. Hopefully, doing this offline and online – this hybrid method will help us set up these channels. The existing channels were not going near FPOs. If we build these offline channels in our capacity and make FPO the centre through which a particular service is provided, for which they also realize benefits, then there is hope for transformation for the better.
Great! I am thoroughly impressed with your thought process and your zeal to help the current situation. We have often heard from people like you that no matter what you do, the middle men find a way to yield profits.
That is where, I feel, aggregation is going to be of help.
I can see the pains you are taking and there is a parallel structure being developed. Having said that, unless some big players come in to the market to procure, the middle man gets a chunk doing hardly any work.
Right! I am in Himachal Pradesh this week. There is an FPO that works with apple farmers. The average procurement price is around Rs. 40-50. If you go to any of the malls, you see a tag of Rs 130 for apples. I am totally aware of middle men and the fact that there are way too many in remote areas.
Is there a way you can think of doing way with that system?
For that to happen there needs to be some amount of organizing structure that needs to happen at the buying level. So, currently majority fruits’ sale – almost 80%-90% – happens on the push cart. Now, the entire retail market put together comes to about 10% of the market. Then the question lies in how to distribute the produce?
We perhaps have to think of huge storage mechanisms.
Right! That is where most of the Companies are trying to break grounds. If you bring in some sense of organizing in the back end and front end, then we can bypass APMC. Unfortunately, we aren’t there yet because of which they remain the benchmark for prices. So, I think the new stores that come up to sell fruits and vegetables also aim at organizing the front end. Once that is in place, any solution becomes viable. In terms of the new startups propping up, they are vetting on better organized retail markets. So there are many activities happening as we speak. Hopefully, in the next 3-4 years, we will be able to bypass the middle men.
– CONTACT –
Mr.Ashwin Mahavadi
Krishiyog
2-5-74/1, Select Talkies Main Road, Kummari Basthi
Secunderabad – 500010
Telangana
Phone: 9100900812
Email:ashwin@krishiyog.in
Can we start with a little about your background?
Academically, I am an engineer. I did my under graduation in Civil Engineering; post which I pursued Masters in Structural Engineering. I specialized in Earthquake Engineering. After my graduation, I took up a job in Earthquake Engineering and worked in that sector for about 3 years. The job was a good one in terms of addressing intellectual curiosity etc. I enjoyed it much. But, even before I went abroad, I always had this thought that I should come back to India and do something that would have a social impact. My idea while doing my Masters and practicing Engineering was that India would need a whole lot of infrastructure in the future and so this education would be handy. So, I aimed at gaining a decent experience, moving back to India and setting up some consulting firm which could help build the next level of infrastructure in India. However, to keep my job exciting I ended up getting into too niche a field. Earthquake Engineering, in general, is extremely advanced and it isn’t put into much practice in India because we do not have such high Earthquake-prone regions, except the North-East and the West to some extent. So, as I got more experience in that field, I realized that moving back to India and practicing the same is almost not possible. That meant that I would have to come back and start afresh in Civil Engineering working on usual buildings and infrastructure projects. My experience, has been into more on the analytical aspects rather than the designing front. That quite didn’t fit the bill. If I had to come back and start something in Civil Engineering, then it is almost like writing off the experience I had gathered all along. With that in mind, I was in a dilemma – on one side I had this strong desire to move back and on the other the thought that my experience would not be of much use in India hassled me. I was about 29 at that time and I had to take a decision on what my future would be like. I had secured an admission for MBA program and also a PhD in my kitty in addition to the fact that my work was going very well. Having said that, I thought that if I don’t move back to India then, I would probably never move back. I had already spent around 6 and half years there and life is easier there. So, it is very easy to convince yourself to move back when you retire etc. That is when I resigned and moved back to India. I really didn’t have a clear picture in mind about what to do back then. I wanted to do something that would have a social impact. Education and Agriculture were two sectors I was looking at and somehow I felt that there are some fundamental problems in agriculture from an engineering perspective. There could be some optimization that could be done. But, I didn’t even know the A of Agriculture to start with. Not even my grandparents have been in this field. I had a fascination towards it though and to top it I had a completely fresh perspective. So, I felt that as an engineer if I had to use any of the basic principles then, it could probably be applied more effectively in the agricultural sector than in the education sector. That is how I took the leap. Essentially when I moved back and decided to start with agriculture and the first thing I started was Advait Organics. In one and half years of running the company, I realised the kind of issues farmers face at the grass root level. Asking farmers to adopt new practices and proposing new solutions without addressing the current issues didn’t seem to be an ideal way of addressing long-term issues. So, I started Krishiyog. The whole intent of Krishiyog is to provide integrated services to farmers. I feel one of the reasons small scale farming is not profitable is because we have a very reductionist approach to the ecosystem we live in. When we look forward to sell; but, we don’t think of how we grew the crop. Also, when we look at growing a certain crop, we don’t think of how/where we will sell it. The 4 major aspects of agriculture – cost of cultivation, agricultural inputs, relevant information and marketing are interconnected. Farmers should turn to market-based production instead of producing whatever they feel like and how much ever possible. In the current approach, they get stuck when it comes to selling the product and hence, terms it non-profitable.
So, you feel small-scale farmers currently have a reactive approach rather than a proactive one.
Imagine a farmer in Maharashtra growing grapes. The quality of the grapes completely depends on thinning and pruning of the crop. Now think of a framer who is reliant only on the existing APMC market; wherein he feels he is not getting the right price. His approach would be to grow more quantity rather than better quality. The farmer may have about 20 bunches and each bunch may have way too many berries which may not be sweet and strong enough. If you only focus on the kg, you would get a higher yield. But if you look at the quality, the price at which it sells is going to be very less.
The farmer may not get the price. The APMC also wouldn’t look at it holistically; they just look at the quantity.
Exactly! So, the farmer has adapted himself to that approach. Even if he is interested in growing the right quality, he feels he is not going to realise any benefit. So, he opts to grow more, ignoring quality and elevating quantity. Now, if you look at the other side of things. As a consumer, I am not interested in eating sour grapes. As a customer, I am willing to pay an extra amount for the grapes I enjoy. A customer is going to pick the product off the shelf of a retail store when it looks right – the bunch should look good, etc. There is a big gap in terms of what the consumer wants and what the farmer grows. If this gap is bridged, a lot of the problems get solved.
Yes, that is the challenge that the agricultural industry faces today. What initiatives or ideas do you have around that?
Once I observed it, I felt that this is more of a general issue. Things like, what inputs farmers grow, how they look at their produce etc., is aped. If one farmer does something, others follow. If you have to go and address that and you look at small and marginal farmers as your target customers to influence, then it becomes a cumbersome job of getting them to do it. If you look from the marketing perspective, for me to procure and give a farmer what he needs, the extra price to get at least one farmer with 1 acre to change his practice, doesn’t make sense because I will have to travel at least 5 times to his farm. That is the reason FPOs have been on the forefront lately. Cooperatives haven’t really worked well in terms of addressing the commercial aspects of the post-harvest farming. So, FPOs got built for the same intent – we have an aggregation of farmers growing the same crop, we could address the marketability of the products, we could support the system in terms of providing the right input, etc. When I looked around, I felt that FPOs are a really great vehicle in addressing the end user farmer issues if only they were to function at their full capacity.
So, how to get them to do that when they do not have all the right resources? That is the problem that we have picked up. We want to combine the services and address the profitability of small farmers. We have to look at their aggregation, which is the FPO, many of which are not being viable.
We look forward to empowering them by providing the necessary support. We provide those services that they intend to provide at the farms.
From what you have observed, what are some of the problems these FPOs are facing?
Let us understand how FPOs are formed. At the idea level and policy level, things are wonderful. But, when the mobilization phase happens, the NGOs that were responsible in forming these FPOs, in my opinion, did not do a good job of telling exactly how an FPO is different from a cooperative. The mobilization phase was quite rushed. When you look across the country, you will find 1000s of FPOs. But, talking to a farmer who is part of an FPO, who is not a Director, will in all probability not even know what an FPO is. He perhaps, has just paid the share capital or maybe he just has his signature listed. Then, there are people claiming that there is an FPO formed. When the mobilization doesn’t include the education of the farmers – the shareholders of the FPO – you will have no influence on their behaviour. For instance, one of the objectives of an FPO is to aggregate the produce and market on their behalf. If the farmer doesn’t understand that the FPO does make profit in doing this activity, he, being a shareholder is entitled to a dividend and such benefits actually comes back to him, he will not be willing to risk not giving his produce to his regular aggregator. So, even if the FPO starts procuring, individual framers won’t supply to him because he is not absolutely convinced if he will get the money or not. The farmer, you should understand is sceptical if the FPO arrangement will fetch him money just once. He is hassled that in future he will perhaps be left with little/no income, given that by then he would lose his regular purchaser. This is just one aspect to it. Similarly, if the farmer doesn’t take ownership and/or doesn’t see the immediate value in such an arrangement, there is no association. The next thing is, most people who set out to run the FPOs are mostly NGOs. NGOs, to a certain extent can build social capital. But, FPOs were formed to do business and NGOs, honestly, do not know how to run a business. That requires a different level of approach than running these companies and making sure these activities continue and that these activities gather some profit, which essentially go back to farmers and also take care of the sustenance of the FPO.
Owing to this, you get someone graduated in BSc Agriculture to be the CEO of the company, who however, may not know how to run a multi-crore business. If you are looking at 1000 farmers, it is already a multi-crore business, be it on the input/output side. So, without the right training and right hand holding, expecting someone to do all these 4 activities, which are completely different and highly complicated. So, the bottom line is unless the farmer feels that there is a benefit in the making, by selling his crop to the FPO, he won’t take a step forward. And, the person running it doesn’t have the expertise to run a business. So, as a result, they exist on paper but they are stuck at the same level without making progress.
Have you looked at FPO examples that have worked well?
Yes! Of course, if it works well, nothing like it. But, my point is look at the overall success ratio. Also, look at the amount of resources that have been committed to promoting FPOs – it is crores of money and thousands of FPOs. We can’t be happy about the fact that perhaps 2 FPOs in Karnataka/5 FPOs in Maharashtra are doing well. If the government is spending so much, my take is, why can’t we make the most of it? Why do we have to build an entire parallel system altogether? There is some social capital stacked up somewhere, which we can mobilize. Why can’t we use it to increase the capacity of the FPOs?
What steps have you taken towards correcting these issues that you have cited?
As an engineer and an outsider, I felt even I had limited understanding as to how I would change this. I understood the problem well.
The FPO CEO wasn’t gaining any support to start some activity that he/she had in mind. Even if we could help them get more business, I felt we could set those as examples and then recharge other around the same area. So, the problem we saw was that they were enthusiastic about doing a particular activity but they didn’t have the lead. For example, they are interested in procuring grapes from individual farmers but they don’t know where to sell those grapes. If all the FPO sells it at just any market then it won’t be able to ensure that farmers break free from their local aggregator and work with the FPO because the prices won’t be great. Then comes the question of whether he has the resources to do the mobilization at the back end and also do the marketing at the front end. Mostly the answer to this is a No. We thought if we could help him get the leads and if he could just manage the back end, then it would perhaps get him to do more business. To generate those leads, I wanted data. So, we developed a software for FPOs and we would appoint local entrepreneurs, on our payroll, to collect data. Based on this data, we would know which farmer produces what and when the harvest is scheduled. We would approach big retailers and other organised buyers, based on this data. In the process, we would collect the buyers’ requirement too and pass it on to the FPOs. This way the FPO would benefit from the trade. This was our approach.
We brought a whole lot of leads and advised them to use those leads rather than simply selling the produce as bulk. They could sell to different avenues, based on grades of produce procured. That was the next level of operation issue we faced.
• How do we categorize the produce and grade them?
• Who takes the risk of the transaction?
• Where is the facility?
Due to these hurdles, leads were not translating into transactions. Even when we advised them to change their ways of operation, no one actually adopted it. If there was a local buyer who had the buying power and if he asks the farmer to provide his crop with a certain input, without questions, the farmer would use it on the farm. So, the issue of leads not getting converted into transactions was a common issue across FPOs. So, that was a learning after which we realised that this software and this lead generation alone doesn’t help. They need support even in terms of operations.
Since last year we have set up collection centres near FPOs and we have been able to provide the farmers with better returns on their produce and slowly the farmers have begun trusting us for realising about 10-15% increase in income. Now, we have turned the tables. They come and ask us as to how they can improve the quality of their yield. If things trend this way, we will be able to give the next level of support. Hopefully, doing this offline and online – this hybrid method will help us set up these channels. The existing channels were not going near FPOs. If we build these offline channels in our capacity and make FPO the centre through which a particular service is provided, for which they also realize benefits, then there is hope for transformation for the better.
Great! I am thoroughly impressed with your thought process and your zeal to help the current situation. We have often heard from people like you that no matter what you do, the middle men find a way to yield profits.
That is where, I feel, aggregation is going to be of help.
I can see the pains you are taking and there is a parallel structure being developed. Having said that, unless some big players come in to the market to procure, the middle man gets a chunk doing hardly any work.
Right! I am in Himachal Pradesh this week. There is an FPO that works with apple farmers. The average procurement price is around Rs. 40-50. If you go to any of the malls, you see a tag of Rs 130 for apples. I am totally aware of middle men and the fact that there are way too many in remote areas.
Is there a way you can think of doing way with that system?
For that to happen there needs to be some amount of organizing structure that needs to happen at the buying level. So, currently majority fruits’ sale – almost 80%-90% – happens on the push cart. Now, the entire retail market put together comes to about 10% of the market. Then the question lies in how to distribute the produce?
We perhaps have to think of huge storage mechanisms.
Right! That is where most of the Companies are trying to break grounds. If you bring in some sense of organizing in the back end and front end, then we can bypass APMC. Unfortunately, we aren’t there yet because of which they remain the benchmark for prices. So, I think the new stores that come up to sell fruits and vegetables also aim at organizing the front end. Once that is in place, any solution becomes viable. In terms of the new startups propping up, they are vetting on better organized retail markets. So there are many activities happening as we speak. Hopefully, in the next 3-4 years, we will be able to bypass the middle men.
– CONTACT –
Mr.Ashwin Mahavadi
Krishiyog
2-5-74/1, Select Talkies Main Road, Kummari Basthi
Secunderabad – 500010
Telangana
Phone: 9100900812
Email:ashwin@krishiyog.in
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