About 86 per cent of operational farm holdings in India are in the small and marginal categories, with farmers practicing subsistence farming, and living in a VUCA (Volatility, Uncertainty, Complexity and Ambiguity) world. Due to fragmentation and disorganisation, farmers face constraints in procuring inputs like seeds, fertilisers and pesticides at reasonable prices, lack bargaining power in the market for realising better value for their produce, and have inadequate access to technology, extension services, market, credit and crop insurance. As a result, majority of small and marginal farm holders are unable to realise optimal value from their farming operations. In order to address these and other problems encountered by these categories of farmers, farmer producer organisations (FPOs)/ farmer producer companies (FPCs)/ collectives have come into existence in the country. the Y.K. Alagh Committee (2000) constituted by Government of India (GoI), recommended the promotion of producer companies that allow the cooperative spirit to co-exist with the operational flexibility of corporates. Over the years, NABARD, SFAC and state agencies have helped form FPOs/ FPCs.
FPOs need to develop as change agents for evolving subsistence farming to farm enterprises, and developing efficient agri-value chains, for transforming the agriculture sector. In 2020, GoI launched a Central Sector Scheme (CCS) for the promotion of 10,000 FPOs within a period of five years, with a total budgetary provision of `6,865 crore. The government will provide financial support of up to `18 lakh per FPO in their first three years. It is expected that from the fourth year onwards, the FPOs will be able to manage without this assistance. Although the government has increased hand-holding and financial support for new FPOs, this may be inadequate, as their working capital needs have not been taken care of. Banks are also reluctant to finance FPOs, as they are unsure of their creditworthiness.
The
issues and challenges faced by FPOs need to be addressed by the government and
all stakeholders in the FPO space, to make them sustainable institutions,
enabling a significant improvement in the income and livelihoods of small and
marginal farm holders. FPOs will require access to cheap credit and much more
for realising their full potential. Enabling member centrality, ownership, good
governance, and business planning capabilities are equally important. There
also needs to be a focus on infusion of technology; well-developed backward and
forward linkages, with focus on export; and improving business orientation,
clarity on compliance needs, and assimilation of market preferences.
FPOs/ FPCs provide end-to-end links between farmers and their markets and allow them to improve their productivity through efficient, cost-effective, and sustainable use of resources. Farmers acquire better capacity for and access to technical know-how on crop planning and management, inputs, credit, post-harvest management, value addition, etc. They will also be able to obtain higher returns for their produce through improved access to markets. This can be achieved through fruitful collaboration with government, financial institutions, CSR foundations, civil society organisations, academia, and research agencies.
There needs to be a policy focus on promoting inclusive agri-value chains, for the benefit of small and marginal farm holders. An effective way to make it possible is through strong and efficient FPOs/FPCs. Linking of FPOs/ FPCs through contract farming arrangements with export-oriented food processing units of food parks created under Pradhan Mantri Krishi Sampada Yojana (PMKSY), for producing processed cereals, fruits, vegetables, fish and marine products, would boost exports of processed food and raise the income of small and marginal landholders and small fish farmers.
It is observed that the larger universe of banking and the rules may not suit the nuanced requirements of FPOs. Therefore, special attention needs to be paid to the aspect of funding arrangement of the collectives in the form of term loan for their investment needs, value chain financing for meeting the credit needs along the FPO value chain, and short-term credit limits for meeting the working capital needs of FPOs/FPCs. The establishment of a social stock exchange by the government may open up the possibility of experimenting with alternative funding opportunities for the FPOs/ FPCs.
The agri-tech start-ups in India have been trying to solve problems of low productivity, sub-optimal efficiency in the supply chain, and lack of access to markets, institutional credit, crop insurance, and quality inputs. The relationship between FPOs and start-ups is symbiotic as most of the challenges faced by FPOs can be solved through partnerships. FPOs truly need to be change agents for transforming Indian agriculture.
