FPOs as Sumo wrestlers

PVS Suryakumar | Updated on October 21, 2021

These organisations are key to raising farm incomes

During the inauguration of the Tata Cornell Institute’s FPO hub on September 1, 2021, it was mentioned that FPOs must quickly transform from being a teenager into a Sumo wrestler!

The idea of FPOs and its initial successful implementation happened around the year 2008, in the voluntary sector , and later NABARD and SFAC formalised the idea through their policies and process guidelines. The word Sumo often personifies something big, yet nimble and dexterous, things FPOs must aspire to become.

Nearly 87 per cent of our farmers are small cultivating about 47 per cent of the cultivable area with an average land holding size of about 1 hectare.

The idea of FPO was born with the amendment of Companies Act in 2003 to establish producer companies. Conceptually FPO is a hybrid between a cooperative society and a company and can be registered as a society, trust or company. Farmer producer companies are more in number

There are reasonably successful FPOs but it is difficult to put one metric to define success. Quantitative indicators like; the number of farmer members, amount of equity mobilised from members, turnover, net profits and qualitative indicators like; how quality of member’s produce improved, how they captured the local market and export market, how FPOs were awarded licenses by government agencies for selling fertilisers and pesticides and permissions for procurement for public distribution system, are often used.

Getting into ‘niche’

A niche product for a niche market usually assures success but there are examples of the niche product going out of market, putting the FPO in a spot. When market suddenly demanded white chia (a super food) seeds instead of the black chia seeds, the producer company whose members cultivated and stocked a huge amount of black chia seeds were hit.

Staple food crops like pulses and rice have limited success but when/if the FPO provides traceability of produce and markets it through boutique shops the price realisation increases manifold. Some FPOs grow crops which have specific medicinal properties and have had considerable success. There is an example where a particular local variety of black-gram is in demand as the idlis made with it are bright white like jasmine flowers — they call it malligai idli! These examples depict transformation of a commodity into product through its intrinsic value proposition and niche marketing. FPOs will also be successful if a marketing company uses them as procurers and aggregators of commodities.

Some FPOs have broken the glass ceiling and entered the export market arena. All of them are invariably in niche products; cocoa, calendula flowers, coffee, spices, organic vegetables and fruits etc. Some target specific clientele — expatriates for products like, chilly, coriander, banana, jackfruit products, rose onion, bhendi, turmeric fingers, desi-chana (bengal-gram) etc. They have mastered the fine art of productivity and conforming to export norms like size, quality standards and permissible chemical residues.

The next important aspect of FPOs is governance. How to transform them into leaders and market makers through orientation, training and capacity building is a challenge. Every successful FPO is led by an entrepreneur; a competent CEO, an enabling board, charismatic president or a NGO promoter.

The CEO’s salary is linked to FPO’s business but the board is doing a service and only when these people see the big picture things fall in place. Successful FPOs understand buyer’s requirements. They have mobilised considerable member’s equity which is a reflection on its leadership and member’s perception of benefits of being in FPO. FPOs are a crucial plank for increasing farmers’ income. Hand-holding of FPOs and the FPO movement is crucial to upgrade farmers from producers to marketers. An enabling ecosystem with empathy to our farmers can aid in this transformation which will benefit everyone.

The writer is Deputy Managing Director, Nabard

Published on October 20, 2021

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