EDITORIALS & ARTICLES
Can FPOs bring real change on the ground?
The government’s Farmer Producer Organisation scheme has given a major rise to the FPO movement. From corporates to public service organisations, everyone has committed towards promotion of FPOs.
FPOs are collective enterprises formed by farmers to enable better connect between market and rural agricultural produce.
The Farmers Producers Organizations are the latest addition to the family of cooperatives organisations
The major operations of (FPO) include the supply of seed, machinery, market linkages & fertilizer, training, networking, financial and technical advice.
FPOs are formed and promoted through the Cluster-Based Business Organizations and engaged at the State or Cluster level by implementing the agencies.
It is promoted under “One District One Product” to promote the specialization and better branding, marketing, processing, and exports by FPO.
Obstructions with FPOs:
1. Liability of Newness:
A young venture has a higher chance to fail because it is new to the ecosystem. This liability of newness occurs due to multiple battles that the new venture must tackle at a single point of time.
Many collectives begin without looking at issues such as the modalities of the conduct of boards meetings, technical expertise required for better procurement process, and identifying the potential buyers and their requirements.
- As a result, efficiency is compromised resulting in rising coordination costs and early failure of the FPO.
Thus, the liability of newness may arise both from internal processes and external acceptance.
2. Lack of Uniqueness:
Novelty is a central aspect of entrepreneurship and with no novelty to offer, it is often challenging for FPOs to compete in the market.
- These issues bring discreteness to FPOs while dealing with internal stakeholders.
Issues like why any buyer should be attracted to FPOs and why a financial institution should come forward to help FPOs make the external stakeholders aware of their discreteness.
- Mature FPOs would find ways to create discreteness and attract loyalty from stakeholders, whereas a new one would find it difficult.
3. Audience Diversity:
The expectation of a government certifying agency for organic produce would be different from a that of a corporate buyer.
- The certifying agency would focus on intensity while the buyer would be driven by reliability and quality.
Most FPOs identify the farmer as their customer. This is good as well as bad.
- Good, because as a member-driven collective enterprise, centrality of the farmer member is vital for its existence.
- Bad, because single-minded focus on farmer as producer blinds an FPO from the reality of the market and makes it insensitive towards external demand.
Focusing solely on attainment from farmers while ignoring the buyers and regulators harms an FPO.
4. Cryptic Market Category:
Ventures become risky when they have few or no precedent for their operations.
For FPOs getting into a new crop or a new process without any precedence is always riskier than doing something more routine. FPOs operating in a new business environment are often incompletely informed.
The lack of clarity on the market category creates hurdles for the FPO at two levels.
- At the level of inter-organizational relationship, the buyers would find it challenging to engage with FPO since there is little precedence for the same.
- As a result, the inter-organizational relationship often becomes weak and buyers would often start viewing FPOs as inefficient.
- At the level of members there is a mismatch of expectations. FPOs, often in a hurry, would make unrealistic promises to members to increase their membership.
- Such strategy soon backfires as members stopped their transactions once they see the mismatch.
5. Lack of Multiple thresholds:
The single-minded focus on one stakeholder can be harmful. FPOs are required to internalise that different stakeholder have different yardsticks to measure the success of their venture.
Giving a better price to farmers for their produce or offering input services at reasonable cost should not be only mistaken as the success measure of FPOs.
Suggestions:
Increasing the liability of FPOs
- One of the easy ways of increasing the liability is by founding an FPO without investing anything in the groundwork.
- FPOs, earlier required to strengthen their governance mechanism, engagement with producer members, and to work closely with external agencies for securing resources, etc.
Derive support from different stakeholders
- FPOs need to derive support from different group of stakeholders (farmer, government, buyers, NGOs etc.), each with different norms and expectations. It is crucial for FPOs to understand how different groups perceive their venture and act accordingly.
Multiple thresholds for success
- FPOs are required to internalise that different stakeholder have different yardsticks to measure the success of their venture.
Governance:
- FPOs should have good governance systems, be clear about its market and have a distinct identity.
- FPOs are required to internalize that different stakeholder have different yardsticks to measure the success of their venture.
- The farmer should receive timely credit from the FPO as the vital indicator for success.
- The corporate buyer should measure a FPO’s success based on quality of the product.
Road ahead
Regular capacity building of board members:
Some places where capacity building of board members is very important includes; villages where local leadership is weak, large number of small holder farmers are present, villages which are very remote, middlemen is in very strong position, mix livelihood opportunities are available, etc.
Standardized scoring method of FPO:
A standard set of scoring model is required for FPOs in different phase for helping financial institutions, private agencies, CSR agencies and other stakeholders to understand the correct picture of institution before giving resources.
Converging rural, development policies with FPOs:
There are many policies which can be converged at FPOs for supporting it.
- Institutions like NABCONS, SFAC, agriculture department can come together on matters related to FPO and help each other take stock of resources, risks, bottlenecks etc.
Improvement of risk management systems:
FPOs need gearing up its data related management systems, in field of market, storage area, and in meetings should be recorded properly.
A standard MIS solution is required to be pushed by the government and other implementing agencies.
Capital structure of FPO:
Capital structure of FPO needs some flexibility, a blended financial solution with increased accountability of implementing agency and management board.
Intra FPO learning and development platform:
A state-level or district level knowledge forum need to be formed for FPOs, which should be guided under the agriculture department.
- Currently, FPOs are learning from other distant FPO or may be cooperative in some other state, which is mostly irrelevant.
Link FPO with universities and institutes:
It is good to link agriculture universities, management institutions, agriculture department in government, and other knowledge institutions with the government.
knowledge institutions are keen for research studies, to better analyze the success and failure factors, data directly from farmers can help them and policy makers in long run.
Increase the role of FPO in social development activities
To increase the accountability of FPO, there is a need to define its social role.
FPOs are failing because members do not think beyond their produce, and profits. Social responsiveness should be attached to these institutions from evolution phase.
The expectations and subsequent indicators for success become increasingly complex for FPOs. The recipe for failure is to devise a strategy addressing the expectation of single set of stakeholders and continuing the measurement of success by accounting for only one stakeholder.
The aforementioned factors are only an indicative list that FPOs need to avoid to succeed. It is crucial for all stakeholders to make a collective effort for the success of an FPO.
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