Open
Forum
New
Delhi, 19 November 2020
Revitalise FPOs
FARMERS’ OWN MIDDLEMEN
By Moin Qazi
The
farmers’ agitation against the new farm laws is far from ebbing. The All India
Kisan Sangharsh Coordination Committee (AIKSCC) has got a boost from 10 Central
trade unions pledging support for its actions and protest march to Delhi next
week. Of grave concern is the Farmers’ Produce Trade and Commerce (Promotion
and Facilitation) Bill, 2020, aimed at ending monopoly of Agriculture Produce
Marketing Committee (APMC) Mandis, where all farmers were required to sell
their produce at government-regulated markets. Arhatiya or middlemen in such
cases helped the farmers in selling their crops to private companies or
government agencies. While APMCs will continue, famers need to widen the
choice.
One
of the powerful ways that famers can serve as their own middlemen is through a
livelihood and development strategy that collectivises the smaller primary
producers into locally-managed Farmer Producer Organisations (FPOs), which are
then integrated into an inclusive value-chain. It is a sustainable,
market-based approach in which resources of member farmers (for example,
expertise and capital) are pooled to achieve more together than they can alone.
This
enables members see their work through an entrepreneurial lens and confers
economies of scale, better marketing and distribution, more investible funds
and skills, greater bargaining power, access to credit and insurance, sharing
of assets and costs, opportunities to upgrade skills and technology, and a
safety net in times of distress. The best-known example of an FPO is that of
Amul (Gujarat Cooperative Milk Marketing Federation Ltd.) which is a dairy
cooperative with over three million producer members.
In this model thousands of scattered small farms are
systematically aggregated and provided centralised
services around production, post-harvest, and marketing. This helps reduce farms’
transaction costs for accessing the value chains and make it easier for small
farmers to access inputs, technology, and the market. It also opens opportunities
to bring primary processing facilities closer to the farm gates and help producers
gather market intelligence and manage the value chain better with digital
agriculture tools.
An
FPO is a hybrid between a private limited company and a cooperative society,
wherein it can enjoy the benefits of professional management of the former and reap
the benefits of the latter.
Smallholder
farmer producer groups are a key medium to build scale on account of the
confidence, support, and buyer/seller power they provide. They are able to
achieve economies of scale through post harvest infrastructure (collection,
sorting, grading facilities), establishment of integrated processing unit,
refrigerated transportation, pre-cooling or cold stores chamber, branding,
labeling & packaging, aggregation and transportation, assaying,
preconditioning, grading, standardising, and other interventions. The key
benefit is the marketing support that links producers to mainstream markets
through aggregation of subsistence-level produce into economic lots that can
significantly raise the share that peasants get of the money people pay for
their food.
The
FPOs are owned and governed by shareholder farmers and administered by
professional managers. They adopt all the good principles of cooperatives and
the efficient business practices of companies and seek to address the
inadequacies of the cooperative structure. The best way for these organisations
is to leverage their collective strength through a full value chain from the
farm to the fork. The underlying principle is similar to that of the full stack
approach. This approach makes the sponsor, catalyst or promoter responsible for
every part of the experience.
In
short, it is a whole-farm systems approach. It creates a complementary support
ecosystem that boosts farm yields, reduces negative environmental impacts, and
increases market access and smallholder farmer incomes. It also provides
sustainability interventions including sustainable irrigation products and
practices. Moreover, the value chain uses a business approach in order to make
it viable.
Apart
from the collective strength that group synergy generates, the support
structures help in building the capacities of producers to deal with input
suppliers, buyers, bankers, technical service providers, development promoting
agencies and the Government (for their entitlements), among others. One of its
important roles is linking them to reliable and affordable sources of financing
in the funding ecosystem to meet their working capital, infrastructure,
development and other needs. The collective works to reorient the enabling
environment by influencing policies in this direction.
The
success of a collective hinges on many factors: The technical support it
receives, its institutional base, social and professional composition, land
access and cropping patterns of members and adaptation of the model to the
local context. The elite farmers are significantly more likely to participate
than the less privileged. They often become administrative members and use
services substantially more to them than to rank-and-file members. It is, thus,
necessary to strengthen democratic processes in these institutions.
Most
promoters of the value chain are now successfully using the subsector approach
which allows for a focus on specific subsectors and helps in strengthening the
ecosystem within which they are able to transition from a comparative to a
competitive advantage. The value chain also facilitates capacity building
support and use of modern tools including technology that can help to improve
weather forecasting, agricultural processing, soil health monitoring crop
identification as well as damage control, and mapping of available water
resources.
Consolidation
of smallholders’ land holdings through cooperatives can also create synergies,
especially for the leasing of large equipment or bulk input orders. It also
helps in creating cold storage for controlling post-harvest losses. Financing
for setting up micro-irrigation facilities and rainwater harvesting modules
would help create an infrastructure for sustainable water supply and hence aid
farm productivity.
FPOs
should also be encouraged to participate in MSP-based procurement operations.
eNAM can connect farmers with distant buyers. However, its and other similar
programmes biggest limitation seems to be that vast majority of farmers are not
tech-savvy. This is further compounded by low internet penetration and erratic
electric supply. We need robust farmer-producer institutions which will have
capital and the risk-taking ability to set up processing zones which are
critical for preventing losses on account of rotting of foodgrains.
There
are several other structural barriers that have to be overcome. Foremost is the
capital constraint. FPOs are initially not able to raise share capital from
their member-farmers and cannot go to the share market to raise capital unlike
the privately-owned food processing companies.
The
next is working capital. FPOs have to deal in cash as their member-farmers need
the money desperately at harvest time to pay input supplier and labour, repay
crop loans and meet their household expenses. FPOs need higher working capital
than the private sector. This is where cooperatives score better and farmers can wait for a few days to
get paid.
The
third barrier is managerial capability. Many FPOs are struggling on account of
lack of handholding support and lack professionalism. They can hire well-paid
professionals if they reach a certain scale as Amul and several other large,
successful cooperative dairies have done. But FPOs will have to reach adequate
scale to pay appropriate salaries to these professionals.
While
FPOs remain the most trusted allies for farmers, they need to be revitalised by
infusing modern design features without diluting their traditional ethos and
philosophy. It would require innovative collaborations between State, civil
society, and the private sector. In the light of new insights, we need to
revisit the model and harness the basics; tweak the traditional design features
instead of reinventing the wheel.
FPOs
can grow as viable, member-controlled, self-sustaining farmer businesses if
they constantly work on reshaping the interaction of their members with
themselves. The failure of cooperatives is often rooted in the inability of
their promoters to understand this interaction. A self-regulatory body designed
to protect the interest of FPOs and farmer members can serve a useful purpose.
---INFA
(Copyright, India
News & Feature Alliance)
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