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Vol. XXIX No. 23, March 16-31 2020

Role Re-definition Can Give Farmer, Producer Organisations New Life

by A Special Correspondent

The Tamil Nadu Government has decided to offer ‘concessions and incentives’ to Farmer Producer Organisations (FPOs) to empower small and marginal farmers and spur farm growth. It is worth examining whether this would result in any major impact and whether concessions are the answer to activate FPOs.

FPOs are aimed at supporting small producers who do not individually have the volume or ability to derive the full benefit of their output. FPOs can be registered as Companies (FPCs) under the Companies Act or as Cooperatives under the Cooperative Act. One major advantage of the former option is that it is free of bureaucratic control.

In our country, 50 per cent of the cultivated area is with small and marginal farmers who account for over 80 per cent of the holdings. Disturbingly, the average land size of the small holder is becoming smaller and less sustainable. Although NABARD as well as Central and State Governments have taken special initiatives to promote new FPOs over the last 8-10 years, the number of FPOs nation-wide stands at a mere 5,000. It is a miniscule portion of the total need, suggesting that the initiatives haven’t touched the small farmers. Tamil Nadu is reported to have 500 FPOs but little information is available on their activity, economic viability and utility to the weaker sections of the farming community.

If ten years of encouragment in the form of concessions and financial support have not resulted in FPOs making an impact, would more concessions work? Or should we look deeper for reasons for the low response?

If existing institutions in the agricultural sector are addressing the needs of small farmers, it is possible that FPOs are left with no space, explaining why their spread has been at a standstill. Cooperative institutions have a dominant presence. Not counting cooperative banks, there are about 2,000 service and marketing cooperatives functioning at the primary level. At the apex, in Tamil Nadu, is the State Cooperative Marketing Federation which plays a useful role in the distribution of inputs and cold storage facilities. District cooperative marketing societies function under the Federation. Cooperative marketing societies at the district and primary levels protect farmer members from being exploited by brokers when agricultural produce is put out for sale after harvest. Cooperative banks are a major conduit for making production credit available to farmers. The Agriculture Department of the Government has been propagating good practices through various schemes.

There are also commodity federations, particularly for plantation and cash crops, at the state and national levels.

There is a well-spread ­network of farmer associations, relatively better organised, in the states of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra, Gujarat, Punjab, Haryana and Bengal. The Consortium of Indian Farmers’ Associations (CIFA) claims membership of hundreds of farmer organisations, which are engaged in the advocacy of their cause. NABARD too has been promoting farmer groups like Farmers’ Clubs, Joint Liability Groups, Self Help Groups, Watershed Groups.

So, the next question is this – Is there ‘space’ for FPOs to play a useful role in offering services to the small and marginal farming segments that other institutions like cooperatives, commodity bodies and farmer associations do not or cannot extend?

Where do FPOs fit into this institutional maze? Small and marginal farmers need simple production-related facilities, easy access and self-management by the community. There are numerous instances in India and other developing countries of women, though not formally educated or trained, showing extraordinary drive and prudence in managing community facilities in a highly efficient manner. FPOs as presently designed seem to suffer from a contradiction between purpose and structure. The purpose is to mobilise small famers for self-governance – “of the primary producer, by the primary producer and for the primary producer”. The hierarchical structure of Farmer Interest Groups (FIGs) leading up to an elaborate organisation of the sophistication and scale of large corporates are beyond the capability of small producers. Studies have diagnosed that small producers do not have the education, background or aptitude for managing corporate type of organisations.

The “corporate” type of FPOs explained in official documents are overwhelming in their complexity. They do not seem any different from the typical, large agro-based business. The concept of FPO should be simplified to meet the needs immediately post-harvest. It should increase farmers’ holding capacity which enables them to wait for a good price. FPOs would have a future if they can identify that niche. FPOs should act as farmer collectives, for voluntary, collective action by farmers, without being imposed from above and designed to meet needs of small/marginal farmers who are individually small and powerless and who can benefit by aggregation. They should have the necessary infrastructure to operate by themselves. These facilities should be within easy reach of identified village clusters that have a high degree of commonality of needs. Such FPOs should provide support at the stage immediately after harvest, that is, at the sub-primary level not reached even by Primary Cooperatives.

Thus, in a re-defined role, FPOs could become the key to giving the weaker segments a strong collective identity, raising their economic status. As they grow, grassroot FPOs may, by organic progression, federate into sub-district and district level companies. The reverse approach of starting big and trickling down to reach the small holder would not work. The pre-requisites for the re-defined FPOs to play their basic role are easy access and ownership of facilities in the immediate wake of harvest, according to the need of the produce in the area – such as cleaning, grading, sorting, assaying, storage, processing, transportation and market linkage.

Thus conceived, FPOs do not duplicate Primary Cooperatives but can support them by aggregating farmer transactions and reducing costs to the latter. FPOs can act as procurement agencies for food security programmes and for Minimum Support Price-related buying operations; they can function as the contracting grower-body that contracts farming arrangements and cooperates with the Agriculture Department to identify projects of high significance to the locality; they can also supervise implementation, input procurement, credit proceed disbursement, collection of repayment instalments, providing collective guarantee etc. By aggregating these services, the workload and cost per transaction for the lending institution can be substantially reduced. Farmer groups’ intermediation limited to aggregation, without fiduciary involvement, has done away with many of the common ills like mismanagement, overdues, choking of credit pipeline and financial failures that normally afflict cooperatives.

Re-defining their role as an aggregating and intermediating agency for the small and marginal segment and providing them with physical equipment and facilities would accelerate the spread of sub-primary level FPOs and be an interesting institutional reform. They would empower the small players. The benefits would be tangible and can be experienced at the doorstep by many. They could increase earnings. They are a worthwhile investment within available fiscal space. They can win votes too!

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