The Agriculture Ministry’s guidelines on the formation of Farmer Producer Organisations (FPOs) are timely because there is a need to form, nurture, strengthen and scale up these collectives of small farmers to promote agriculture in India. In particular, FPOs have considerable potential to promote horticultural crops providing higher returns to farmers, generating employment and improving their living conditions.

As 86 per cent of India’s farmers are small and marginal, lacking collective strength, the government provides grants to promote FPOs as collectives of small and marginal farmers, who should form at least 50 per cent of these organisations, according to the new guidelines. There are about 10,000 FPOs, promoted by Small Farmers’ Agri-business Consortium through State governments, NABARD and the private sector. The Centre announced that 10,000 more FPOs will be formed. According to the new guidelines, each of the new FPOs will be provided a grant of ₹18 lakh in the formative years, and ₹15 lakh of equity grant and salary support.

Horticultural crops (vegetables, fruits and flowers) account for 13.08 per cent of the cropped area and contribute to about 30 per cent of India’s agricultural GDP. These crops are grown in all the States, although the top five — Uttar Pradesh, Karnataka, Madhya Pradesh, West Bengal and Maharashtra — account for almost 40 per cent of the cropped area.

Horticultural crops have performed well in recent years because of supply- and demand-related factors. Indian farmers prefer horticultural crops (especially vegetables) because of their short duration, enabling them to obtain quick and periodic returns in contrast to those that take longer duration to harvest and more time to fetch an income.

The other supply-related factor is that these crops, which can be grown on small parcels of land of less than one hectare, are suitable to Indian agriculture where 86 per cent of the farmers are small and marginal. Factors contributing to the demand for horticultural produce include growing urbanisation, health awareness leading to higher consumption of vegetables and fruits, and rising incomes.

Key challenges

The prices of horticultural crops crash during the peak harvest season and peak during lean months posing the challenge of regular price slumps. Improper post-harvest handling (cleaning, sorting, packing, storage) and lack of primary processing facilities contribute to price slumps. Post-harvest losses account for 16-36 per cent (estimated at ₹90,000 crore by NITI Aayog) and horticultural crops have a higher range of losses.

Major horticultural exports from India are onions, mango pulp, fresh mangoes, dried walnuts, and fresh grapes, and these are mainly exported to countries in South Asia and West Asia. India’s exports, however, are considerably below the potential at 1 per cent of the total. Why? Horticultural produce is not of international standard due to overuse of pesticides, and is unable to strictly adhere to quality standards required by importing countries. Weak awareness among growers on good agriculture practices (GAP) is the second major challenge.

FPOs registered as a company or cooperative can make a difference here by providing backward and forward linkages to member-farmers. Backward linkages include provision of quality seeds and timely supply of certified fertilisers for higher productivity, creating awareness on benefits of integrated pest management and appropriate technologies for efficient use of irrigation water, facilitate timely access to farm equipment, and credit for enhancing business capacities of farmers.

Forward linkages include establishing formal relationship with output buyers and direct marketing with retailers enabling small farmers to mitigate marketing risks and reduce their transaction costs. FPOs play the role of aggregator by consolidating the information on horticultural produce required by buyers so that small farmers have advance information on what they produce is in demand and in what quantity.

Mobile technology is used to consolidate the information on supply of produce and demand from buyers. This contributes to a change of mindset of farmers from supply-led demand to demand-led supply. In addition, FPOs facilitate market preparation (pre-cooling, sorting, grading, packaging and on-farm storage) and provide cold-storage facilities to farmers so that they reduce post-harvest losses and counter price slumps.

Value addition is created by FPOs by facilitating primary processing, packaging and branding of the produce. This will contribute to additional income to farmers. Some FPOs are promoting horticultural crop exports by providing awareness on GAP, which include voluntary audits that verify that fruits and vegetables are produced, packed, handled, and stored as safely as possible to minimise the risk of microbial hazards. Such awareness, by improving the quality standards of horticultural crops, will contribute to increased share of horticultural exports.

Suffering reduced

Many farmers incurred considerable income loss due to disruption in the supply chain during the Covid-19 lockdown since March 25. They could not market the harvested produce due to non-availability of transport, high transportation costs, non-availability of market and a sharp decline in prices. The average income loss to farmers, for instance in Karnataka, ranged from ₹59,000 to ₹1 lakh on account of the lockdown.

But farmers of one FPO in Bangalore Rural district were relatively less affected as the FPO took the initiative of supplying vegetables and fruits to apartment complexes in Bengaluru city, thereby reducing the adverse impact of market imperfections on farmers. Likewise, another FPO in Andhra Pradesh succeeded in marketing about 300 tonnes of tomatoes for processing, thus providing considerable relief to farmer-members. In both the cases, the government facilitated connection with various segments of the market.

FPOs can, thus, meet the development imperatives of meeting people’s food needs, social equity and promoting environment. FPOs can enable farmer-members earn increased and stable income and address their human development needs of accessing education and health facilities.

FPOs, however, face certain challenges. They can run only if they promote responsive governance. FPOs consist of 1,000 farmers with 50 of them in each Farmer Interest Group (FIG). The board of directors creates the vision and develops policies and a paid CEO seeks to translate that vision by establishing a strong connect with farmers and the world of business for horticultural produce. Second, regular participation of leaders of FIGs is essential for the development of collective ownership and growth of FPO business. Third, harvest and post-harvest infrastructure, which will improve the quality and safety of food, competitiveness in the market and ensure remunerative prices to farmer-members, is missing in most cases.

Fourth, capital infusion is critical to forging forward linkages and for infrastructure development (cold storages, sorting and grading lines, primary processing). The recently announced support to FPOs, as part of the package to fight Covid, is meant to, among other things, strengthen the post-harvest infrastructure, and will hopefully contribute to building a self-reliant India.

The writer is Professor, Centre for Decentralization and Development, Institute for Social and Economic Change, Bengaluru

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