How can we make farmer producer companies both financially and socially empowering?
The centre has intensively promoted farmer producer organisations (FPOs) under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments and NGOs for nearly a decade but still the FPOs lack penetration towards large proportion of Indian farmers.
Need for Farmer Producer Companies in India
- Declining average size of farm holdings: It is the main reason for increasing agrarian distress in India because the average farm size declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16.
- Increase in share of small and marginal farmers: It has increased from 70 per cent in 1980-81 to 86 per cent in 2015-16.
- At the state level, the average size of farm holdings in 2015-16 ranged from 3.62 ha in Punjab, 2.73 in Rajasthan and 2.22 in Haryana to 0.75 in Tamil Nadu, 0.73 in Uttar Pradesh, 0.39 in Bihar and 0.18 in Kerala.
- Lack of access to inputs and marketing facilities for farmers: A number of innovative institutional models are emerging and there are many opportunities for small and marginal farmers in India.
- A group or collective is one of the main institutional mechanisms to help the country’s marginal and small farmers.
- Small numbers of FPOs are operational in India: The studies show that we need more than one lakh FPOs for a large country like India while we currently have less than 10,000.
- Addressing structural constraints through collectivization: In India, the small and marginal farmers make up 86 per cent of total operational landholdings.
- The idea of farmer collectives gained fresh impetus in the light of an amendment to the Companies Act in 2002 allowing farmer collectives to operate as companies, and hence allowing greater market integration.
Challenges faced by Farmer Producer Companies in India
- FPOs struggling to fulfil its mandate: The experience shows a mixed performance of FPOs in the last decade because some estimates show that 30 per cent of these are operating viably while 20 per cent are struggling to survive.
- It is estimated that remaining 50 per cent are still in the initial phase of mobilisation and business planning.
- Lack of technical skills and inadequate professional management: The frequent staff turnover and competing work demands affect the functioning of FPOs, which require constant support and oversight.
- The Board of Director (BODs) and Chief Executive Officer (CEO) are having very less managerial skills and limited exposure to entrepreneurship and business development.
- Weak financials and inadequate access to credit: As Farmer Producer Organizations are not having anything other than farmer member’s equity to leverage borrowings, it is very difficult for any banking system to provide them capital in huge amounts.
- Challenges related to policy: The FPOs are unable to take benefits of several schemes launched by SFAC and other related organization because they of lack of particular direction of flow of information.
- Mobilization of farmers: Every FPO is having their respective Resource Institution and one promoting agency which are facing issue with manpower attrition, so they are facing problem in formation of FPOs that leads to less number of farmer mobilization into FPOs.
Importance of Farmer Producer Companies in India
- Empowerment of marginalised sections of farmers: The FPOs in Gujarat, Maharashtra and Madhya Pradesh, Rajasthan and some other states have shown encouraging results and have been able to realise higher returns for their produce.
- A tribal woman in the Pali district of Rajasthan formed a producer company and they are getting higher prices for custard apples.
- In Tamil Nadu, under collective farming, so far, six lakh small and marginal farmers have been integrated into 6,000 farmer producer groups at an outlay of Rs 300 crore.
- Benefits of FPOs for gross income and productivity: The survey reveals that 98 per cent of the respondents for organically evolved FPOs (OFPOs) report an increase in gross income while only 2 per cent indicate decline in the same.
- For Promoted FPOs (PFPOs), 64 per cent report an increase in gross income while 27 per cent report no change in income.
- The results shows that FPOs are doing better than non-FPO farmers and within FPOs, organically evolved FPOs are more beneficial than pushed or promoted FPOs.
- Fostering community interest in formal business organisations: The functioning of FPOs have disrupted the traditional value chain, given how embedded intermediaries have been in rural economies since times immemorial.
How Farmer Producer Companies in India can be empowered?
- Development of strong risk mitigation: The FPOs have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc.
- They need a lot of data on markets and prices and other information and competency in information technology.
- Grouping contiguous tracts of land: The FPOs can be used to augment the size of the land by focusing on grouping contiguous tracts of land as far as possible.
- The women farmers can be encouraged to group cultivate for getting better returns as well as the FPOs can also encourage consolidation of holdings.
- Women empowerment through FPOs: It requires a longer-term investment from stakeholders committed to the vision of promoting women-managed and controlled FPOs.
- Capacity building and development programmes: It is required to have time to time training and development programmes for mobilization of farmers and to improve the skills of skills of BODs and other staff related to FPOs.
- The Promoting Institutes should involve themselves more and more with FPOs so that they can help them in networking the business.
- Overcoming the issue of finance for FPOs: The FPOs has to develop such system that they should earn round the year by different method.
- The FPOs can take dealership with public and private companies working in fertilizer sector, pesticide industry and seed selling company so that by supplying these three inputs should be supplied to farmers and this way farmer are also benefitted with company.
Way Forward
- The FPO seems to be an important institutional mechanism to organise small and marginal farmers as aggregation can overcome the constraint of small size.
- The real hope is in farmer producer organisations (FPOs) that allow members to negotiate as a group and can help small farmers in both input and output markets.
- The FPOs have to be encouraged by policy makers and other stakeholders apart from scaling up throughout the country to benefit particularly the small holders.
- The FPOs can teach to their farmers about Good Agricultural Practices (GAP) and time to time update them with latest technologies and researches related to agriculture and allied sciences.
Next
previous
Latest News
General Studies