Farmer producer bodies need help

Agriculture provides livelihoods to millions of small landholders in India. A few government initiatives to support farmers — such as increased MSP, interest subsidies, free electricity, and loan waivers — reach a limited percentage of farmers and, hence, have a limited impact.

The Telangana Government’s decision to provide direct cash transfer to farmers based on their landholding addresses only a part of the issue. A long-term solution to address farmers’ distress is the need of the hour. Organising the farmers into farmer producer organisations (FPOs) could be one viable option.

Well-organised FPOs engage in providing a range of assistance to farmers like imparting better farm practices, collectivisation of input purchases, transportation, linkage with markets, and better price realisation as they do away with the intermediaries. A few States have formulated specific policy to promote FPOs in a significant manner. However, there are a few areas that require attention to make FPOs operationally successful.

Number and status

FPOs started taking shape in the country in the recent decade, where 80-90 per cent of the members are farmers with small landholding. According to a 2017 NABARD publication, around 5,000 FPOs are operating in the country, which were formed under various initiatives of the Central Government (including Small Farmers Agribusiness Consortium), State governments, NABARD, and other organisations.

Of these, around 3,200 FPOs are registered as farmer producer companies and the remaining as cooperatives/societies, etc. However, the beginnings of FPOs have been rather unpretentious and membership is at a minuscule five lakh only. Mere formation of FPOs doesn’t serve the purpose, as there are many dysfunctional ones due to lack of clear strategies, inadequate capacity, lack of funding support, poor professional management, and high turnover of CEO/professionals.

Promoter conundrum

The FPOs are generally mobilised by promoting institutions/resource agencies (RAs). The RAs leverage the support available from governments and agencies like NABARD to promote and nurture FPOs, but attempting an assembly line for mass production of FPOs has not given the desired results.

While RAs normally have social mobilising skills, they lack business development and marketing skills, which are critical for the success of FPOs as a business entity. Therefore, FPOs should be promoted only after ascertaining the need, absorption capacity, potential membership, and a strong business case in the given socio-economic context. In order to be successful, FPOs should be run by trained professionals.

Further, RAs should also have a clear exit plan once the internal systems for appropriate management, governance and marketing systems is established in the FPO.

Professional capabilities

A few professional institutions are engaged in capacity building of various aspects of FPOs. However, a focus on management capabilities in the supply chain operations, nuances of market dynamics and linkages, business planning according to market intelligence and market development is clearly missing in majority of the training programmes.

These require long term capacity investments, providing hands-on experience in business planning, execution, negotiation skills, monitoring, statutory compliance, etc., inter-spaced with simulation, field demonstrations, internships and institutional attachments.

It is time that a new cadre of grassroots level institutional leadership and professionals are nurtured with these kind of course inputs.

Direct market linkages

The present agricultural marketing systems suffer from distortions like multiple intermediaries and levies, lack of vertical integration, poor infrastructure, restrictions on the movement of agricultural commodities, and so on. Thus, the limited market choices and lack of transparency have been the major barriers in better price realisation for the farmers. A direct selling arrangement can reduce the cost of marketing by linking farmers more closely to the supply chain and consumers.

Many FPOs lack the capacity to manage the supply-chain operations and store the unsold produce, besides faltering in procurement, logistics and price negotiations. E-retailing and e-marketing are viable possibilities for FPOs.. FPOs must ensure their ascendance up the value chain as they gain expertise in marketing.

Finding the right markets bypassing the present maze of intermediaries is critical for the success of the FPOs. A worthy case to replicate is that of Sahyadri Farmer Producer Company Ltd (SFPCL), which successfully ensures production protocols of fresh grapes for export, and standard harvests from member-farmers’ fields reach the cold storage in a matter of few hours.

Other support systems

A few FPOs like SFPCL, Savitribai Phule Goat Farming Producer Company and Vasundhara Agri-horti Producer Company have made notable achievements in crop production and allied farm activities; improving quality of production through best farm practices; tapping the unexplored markets; cutting down the intermediaries in the agri value chain; and enhancing farmers income.

Some of the best practices followed by the FPOs include maintaining crop maturity indices, documenting plant protection chemicals used, geo-tagging the land under cultivation, and maintaining the traceability of the crop output from farm until it reaches the final market for sale.

Implicitly, ICT tools and block-chain technology for agriculture are the need of the hour. Block-chain tech, using hyper ledger in the agri space, enables tracking inefficiencies and improving transparency in the value chain operations. This would also help identifying better markets for the produce, improve banker’s comfort to finance such agri-supply chains managed by farmers.

It is time for funding agencies to focus on financing a few pilots in such agri block-chain technology to facilitate this transformation. Currently, only a few FPOs have developed mobile phone based extension guidance to help reduce cost of cultivation and access information about market prices of commodities.

While FPOs do a good job in the provision of inputs, which is a kind of low-hanging fruit, linking the farmers with the markets with quality products is a challenge. Once an FPO has established its name with product quality and traceability, a niche market opens up for consumers seeking quality products. Success of farmer organisations are critical for ensuring the success of smallholder agriculture and FPOs will remain an aggregator of aspirations for the millions of farmers in the country.

The writers are former Managing Director, NABARD Financial Services, and Professor at Gujarat Institute of Development Research, respectively .

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