Ten-thousand FPOs to propel the Indian Farm Sector with a humane face

The Government of India has approved a programme and scheme for promotion of 10,000 FPOs to be formed in the next five years up to 2024, to ensure higher price realisation by channelizing the benefits of economies of scale through agglomerated action by farmers. Financial and Technical Support will both be available to each of these FPOs for a period of 5 years from the year of programme inception under a new and improved implementation architecture approved by the Government.

In the last 5-6 years’ primary producers have created legal entities, typically Farmer Producer Companies (FPCs) around their primary produce arising from agriculture including food crops, animal husbandry, horticulture, floriculture, pisciculture, viticulture, minor forest produce, bee-keeping and plantation crops. Government Organizations like the Small Farmers’ Agri Business Consortium (SFAC) and NABARD have been engaged in providing technical support for promotion of FPOs in the country, with SFAC, which is a very lean organisation with limited HR base, alone having promoted more than 900 FPOs in this period.

Typically, farmers confront constraints which inhibit farming stakeholders from getting remunerative prices. These include fragmented and uneconomic size of land holdings, lack of economies of scale, limited bargaining power, high costs & erratic supply as well as poor quality of inputs, information asymmetries on prices and lack of access to organised & formalised marketing linkages due to near total dependence on traditional linkages with commission agents or adhatiyas in the local mandis. At times, farmers are compelled to stick to these informal networks in a virtually captive mode, as these networks serve a monetary purpose and meet multiple social and economic requirements of farmers through the year, which the institutional finance system in rural areas is constrained to accommodate.

In this contextual setting, FPOs offer multiple end to end services to their members. These may encompass almost all the stages in a value chain; from the stage of cultivation to harvesting to post-harvest storage and processing and value addition and even extending to provide support services for marketing. FPOs help not only in creating networks amongst member farmers and the larger community of farmers in a specific region or cluster, but also between suppliers, traders, wholesalers and retailers, such that access to information is easier and key business development activities are facilitated.

[box type=”shadow” align=”” class=”” width=””]FPOs generally undertake the following business activities, with the overall objective of maximising value accruals and incomes of member farmers:

• Provide access to agricultural equipment or technical services such as soil or water quality test kits to help members improve the productivity and quality of their produce • Facilitating input supplies to members at competitive prices
• Provide training in numeracy, basic accounting and book-keeping, business planning and management to help members make informed decisions
• Facilitate access to cash loans and input credit
• Reduce asymmetries of information, better analyse market information
• Coordinate production by member farmers to take advantage of demand forecasts and market opportunities
• FPCs may take on the role of trader or intermediary, at times even taking on the mantle of obtaining licence & running mandi Sub-Yards
• Primary and secondary processing of produce to add value
• Apex organizations or federations of FPOs perform functions of lobbying and advocacy services[/box]

Despite the tangible benefits that FPOs (including FPCs) can bring to farmers, the movement to organize farmers’ collectives had been rather slow and tedious in the past. The existing FPCs numbering about 5000 in the country, with 900 having been promoted by SFAC alone, face many challenges in realising their full potential and deriving optimum benefits. Many factors have contributed to this. Typically, Resource Institutions that are mandated to mobilise and educate the farmers on the advantages of collectivisation themselves face issues of limited capacities and capabilities in their cadres. While their efforts at mobilisation are by and large commendable, their ability to handhold and forge credit and marketing linkages are limited. Simple things like mandatory legal and statutory compliances as per FPO registration pre-requisites are not carried out, creating problems of default and penalty, including criminal liability for Board of Directors.

In this setting, importantly, no dedicated plan funds were hitherto available for promotion of FPOs and some last dregs of funds in on-going schemes like NFSM, RKVY and the MIDH were sporadically channelled for creation and promotion of FPCs, without guarantee or continuity of funding. To lend FPC formation and promotion the necessary boost, dedicated and direct budgetary funds were therefore deemed critical to pushing the agenda. Therefore, the new initiative of promoting 10,000 FPOs through different Implementing Agencies like SFAC, NABARD & NCDC with committed funds of Rs.6000+Crore over the next 5 years is a welcome step in the right direction for providing the necessary fillip to the movement for promotion of FPOs, even while contributing significantly to the Government’s agenda of doubling farmers’ income by 2022.

[box type=”shadow” align=”” class=”” width=””]Contributor: Mrs. Neelkamal Darbari, IAS, MD, Small Farmer Agribusiness Consortium, GoI[/box]

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members