ITC targets to create 5,000 FPOs in 5 years, to offer market linkage

We are working under the framework of farm laws (mainly APMC Act) within each State. We are following those laws, taxation, rules and regulations even though they differ from State to State.

It is a very wrong notion that the tax (mandi fee) charged by a State for a particular crop is higher than another State, the product (of higher mandi fee State) becomes non-competitive. At the end of the day, market/consumer price has to adjust all these factors. For instance, a crop if purchased directly from farmers in Gujarat where there is no tax farmers will receive better realisation compared to another State where there is mandi fees. A company will not pay if one crop is higher because of taxes or yield etc in one State compared to another.

There are multiple factors – what is the demand in a State, what is the surplus, where the surplus is getting sold, what is the variety, what is government procurement – and all these influence the farm-gate price of a crop, taxation is not the only aspect. There is no direct correlation that farmers in a State get a better price if there is lower tax compared to other States. Convenience of trade is a more influential factor on prices than taxation.

Most of the States have come out with the policy where they allow traders/companies to directly buy from the farmers. The difference is some States do not charge any fees while some others charge normal mandi fees even for trade outside mandis. So with the farm laws gone, for companies the challenge is lesser than small farmers who do not have large quantity to sell and are mostly dependent on aggregators.

We have a plan to build a network of 4000-5000 FPOs in next five years and we will leverage from our experience of directly dealing with farmers through e-choupals. We have 6,800 e-choupals across nine States, many of them may be converted to FPOs as they have expressed their willingness to convert, while others would continue to work as usual. Currently most of the FPOs, created by different agencies under the government scheme, are facing the challenge of market linkage.

We believe, as the largest player in the agri sector dealing with 22 crops/products (dairy, marine, horticulture, agriculture products), since we have the advantage of taking care of the buying requirement in the whole value chain our tie-ups with FPOs will succeed. We will be able to provide much better linkages to the market for the FPOs. We are handholding them to get organised, form the company, registered with the government to avail benefits of the FPO scheme, but they will function independently as a separate entity. We have a pilot app in operation through which farmers are provided knowledge to access inputs, improve productivity, financial inclusion and training. Besides FPOs, even farmers will be able to have access to the App.

Prices are likely to be firm, at least for next 5-6 months. Till the issue of Ukraine-Russia settles down, Indian wheat will be in demand. The prices ruling today may continue for next 2-3 months. Government is comfortable with its stock and the pressure to support the farmers through MSP mechanism may not be there. Farmers have the option to sell either to government or private trader without any pressure of price realisation.