Farmers' collectives: Taking Farmer Producer Organisations beyond 'romance' to 'relationships' -PVS Suryakumar

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published Published on Jan 24, 2019   modified Modified on Jan 24, 2019
-The Indian Express

Development professionals and policymakers have tried many a scheme to address these issues. One idea that has found resonance in recent times is Farmer Producer Organisations or FPOs.

It is well-known that Indian farming is predominantly subsistence-oriented. Over 86% of our farmers operate individual holdings below two hectares, while cultivating 47% of the country’s total cultivated area. The production and productivity of these farms are generally low, and so is the marketable surplus that is generated. Such farmers are also at the receiving end of our marketing system, with even the little produce that they sell fetching low realisations.

Development professionals and policymakers have tried many a scheme to address these issues. One idea that has found resonance in recent times is Farmer Producer Organisations or FPOs. Simply put, it represents the power of aggregation, from many small farmers coming together and forming an organisation that would collectively purchase inputs required by them and/or sell their produce. Initially, only small informal groups of 20-25 farmer-members are formed. Such farmer interest groups or FIGs are, then, aggregated into FPOs, supposedly of the requisite size for tapping input and produce markets. The FPOs, in turn, can remain informal groups or be registered societies, cooperatives, trusts and companies.

That’s where the problems start.

A committee under noted economist Y K Alagh had suggested amending the Companies Act of 1956 to allow formation of farmer producer companies (FPCs), which combine the ideals of cooperatives with the more business-friendly regulatory framework of company law. The recommendation was accepted and many development professionals, too, felt it was a good idea to register farmers’ collectives as FPCs. But remember, we thought of collectives mainly as an instrument for improving the lives of small farmers. And here, we were subjecting them to the rigours of company regulations that they were ill-equipped to handle and having to pay consultants for filing returns.

It raises the question: What is the hurry to incorporate farmer collectives as companies? Why not let them stay as informal FIGs till they are really ready to get into business? Right now, there’s probably an incentive for NGOs to assemble farmers, form them into FIGs and immediately register as FPOs, since the latter are eligible to receive a matching equity grant of up to Rs 15 lakh from the Small Farmers’ Agribusiness Consortium under the Union Agriculture Ministry.

Second, small farmers mostly produce paddy, millets, wheat, pulses, vegetables and other staples, with very few into boutique products such as chia seeds. Even if FPOs/FPCs are formed, are there enough margins in the business of just aggregating staples? Would these leave farmers vastly better-off than earlier, when they were individual sellers in the market? We need to, therefore, address issues relating to when and where to start an FPO, apart from the right product/product mix — whether plain milled rice or the whole value chain from rice bran to single polish, double polish, puffed and beaten rice — and a viable business plan. That calls for strategic thinking and going beyond short-term “infatuation” or “romance” when it comes to helping farmers.

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The Indian Express, 24 January, 2019,

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