Spotlight
New Delhi, 18 February 2023
Revisting FPOs
MITIGATE FARMER DISTRESS
By Moin Qazi
The last few decades have witnessed a shrinking of
employment in rural India. Rural-to-urban migration is an inevitable socio-economic
reality, especially for those unable to generate a meaningful livelihood from
rural resources. Rural areas typically face several developmental
impediments: Small land holdings, low savings and capital formation, limited
market access, low levels of human development and a young population alienated
from farming and other rural occupations. They need solutions tailored to their
needs and problems.
Small farmers are the key to promoting sustainable
development. But they have been among the most underserved population and are
highly susceptible to food and nutrition insecurity. They often lack essential
tools and new technologies and don’t have networks to access them, the
financial services to afford them, or the markets to profit from investments.
They are plagued by low productivity and lack access to quality farm inputs
such as good seeds and fertilisers, training and capital and technology and
knowledge that can make their enterprises commercially viable.
Fragmentation of land holdings has left growers with
shrinking farms that are too small to be remunerative. They have poor access to
credit and irrigation, making it difficult to make their scanty land yield a
decent income. A tenth of our farmers are landless. They are forced to contend with
a cycle of low investment, poor productivity, low value-addition, weak market
orientation and depressed margins.
One of the ways to mitigate this rural distress and promote
a farm revolution was to design a livelihood and development strategy that entails
collectivising and strengthening primary producers among small farmers through
Food Producer Organisations (FPOs) and integrating them into an inclusive value
chain to provide end-to-end support. This mutual aid organisation, whose
members pool their expertise and part of their savings, helps the members
achieve more together than they can alone and becomes self-propagating over
time. It confers greater bargaining power, better market and price discovery,
access to credit and insurance and sharing of assets and costs.
After the amendment of the Companies Act in 2003, FPOs emerged
as a new form of aggregation model in India. Last year the government mentioned
its intent to create 10,000 more FPOs. These are to be owned, governed by
shareholder farmers, and administered by professional managers. They adopt all
the good principles of cooperatives, efficient business practices of companies
and seek to address inadequacies of the cooperative structure. The best way for
these organisations to leverage their collective strength is through an entire
value chain from the farm to the fork. The value chain’s 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 agriculture, the complete stack approach includes
helping farmers identify what to grow and how to grow it, what technology to
use and when and where to sell at what price. The farm-to-market initiative
encourages smallholder farmers to use technology to transport and sell their
produce collectively. Collectivising significantly reduces transportation
costs, saves farmers from travelling to the market and consolidates their
selling power. Moreover, the whole value chain needs to have a business
approach to make it viable.
Agricultural business companies, private sector financial
institutions, primary producer organisations and other stakeholders must
collaborate to structure such functional full value chains to make greater
benefits accrue to individual members. It is a sustainable, market-based
approach to systematically and incrementally address the barriers that prevent
individuals from accessing necessary services. Small producers need to reach
the scale required for sourcing inputs and services. Apart from the collective
strength that group synergy generates, the support structures help build
producers’ capacities to deal with input suppliers, buyers, bankers, technical
service providers, development promoting agencies and the Government (for their
entitlements), among others.
The sponsor of the value chain provides a gateway for
primary producers to access resources, information and markets. One of its
important roles is linking them to reliable and affordable sources of financing
to meet their working capital, infrastructure, development and other needs. The
collective works to reorient the development and funding ecosystem to make it
more responsive and relevant to the needs of small producers. It also strengthens
an enabling environment by influencing and orienting policies in this
direction.
The extension services include lengthening farmer capacity
through agricultural best practices for enhanced productivity, agronomic
advice, fostering connections to local farm financial services, training on
methods of application of bio-fertilisers and pesticides, modern harvesting
techniques, appropriate integrated pest management, integrated nutrient
management and access to optimal environmental practices and
regionally-appropriate crops for planting. However, questions regarding the
FPOs status and characteristics such as geographical spread, membership
patterns, and financial attributes remain largely unanswered.
The key benefit in the FPOs is the marketing support that
links producers to mainstream markets through the 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 success of
collective hinges on many actors: The technical support it receives, its
institutional base, 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.
Moreover, the better-off often become administrative
members and use services substantially more to them than rank-and-file members.
The collectives, therefore, positively affect household welfare for elite
members, but the impact is lower for rank-and-file members. It is, thus,
necessary to strengthen democratic processes in these institutions.
Evelyn Huang, a celebrated design thinking trainer in
American financial sector, who believed in ‘reimagining the way 60 million
people interact with their money’, implicitly suggested that the design of cooperative
enterprises should be about constantly reimagining how thousands of potential
members interact with their cooperative so that the process imparts strength
and vitality to the latter. It found that the failure of cooperatives is often
rooted in the inability of their promoters to understand this interaction.
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. In light of our learning, we need to
revisit the model and harness the basics, tweaking designs of traditional
structures instead of reinventing the wheel. Experience tells us that
continuous training, capacity-building and member-awareness programmes can
reinforce the design features and help solidify the relationship between
members, field staff, professional managers, financial institutions and
directors and build a strong bond that can equip the collectives with the will
to fight adversities and exploit opportunities.
FPOs can continue to grow as viable, member-controlled,
self-sustaining farmer businesses if they constantly work on reshaping the
interaction of their members with themselves. A self-regulatory body designed
to protect the interest of FPOs and farmer members can serve a useful purpose.
We don't have to throw the baby out with the bathwater. The ecosystem has
improved for the performing FPOs, but many emerging and dormant FPOs need care.
Members need to have faith in their FPOs so that others can trust the FPOs.---INFA
(Copyright, India News & Feature
Alliance)
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