Collectives can spur a farmer-led movement

There is hope of rejuvenating agricultural growth and enhancing the income of small and marginal farmers through FPO-dominated agriculture. However, some pain points are needed to be addressed to ensure that FPOs may be able to do what cooperatives could not. Most important is creating public awareness and training farmers to run the collectives, the lack of which is considered to be a major cause of failure of FPOs in Sri Lanka.

Photo for representation only. File photo

SS Chahal

TRADITIONALLY, Indian farming has been dominated by small landholdings with consistently reducing farm sizes due to fragmentation of land, which is much more prominent today than ever before. Sixty-two per cent in 1960-61, various surveys now show that the share of marginal and small farmers is around 86 per cent of the operated holdings. During the same period, there has been an increase in the crop area operated by small and marginal farmers from 19 per cent to 47 per cent. As per Agriculture Census 2015-16, the average size of operational holdings has declined to 1.08 hectare (ha) in 2015-16 as compared to 1.15 ha in 2010-11.

Farmer Producer Organisations

A look at the average monthly income from different sources per agricultural household is gravely disappointing. As per the Situation Assessment Survey of farming households, when the net receipt is obtained considering both the paid-out and imputed expenses, such monthly income is only Rs 8,337 — a meagre amount of Rs 278 per day. Furthermore, the rate of increase in this income has decelerated between 2012-13 (20.38 per cent) and 2018-19 (11.90 per cent). The main reason for this slowdown is the decrease in income from the crop cultivation component from 21.80 per cent (2002) to 4.65 per cent (2013). Various surveys have brought out the reasons for this trend — issues confronting small and marginal farmers such as total absence or imperfect access to credit market leading to suboptimal investment decisions or input applications, imperfect markets for inputs/products leading to small value realisations, uneducated and poor human resource base, low access to extension services and modern technical know-how, and deficiency to compete with products in the international market, individually.

It is expected that the recent promotion of farmer collectives as new-generation cooperatives or Farmer Producer Organisations (FPOs) has the potential to eliminate the negative effects caused by successive fragmentation of cultivated land and farming by small and marginal farmers. With legal status, FPOs can now be established as profit-oriented business organisations within farming communities. These are now also being treated on a par with cooperatives for various incentives and supported by the Small Farmers Agribusiness Consortium (SFAC). Eight other agencies including NCDC, NABARD and NAFED, are engaged in the task of helping them in availing financial assistance, matching equity grant and credit guarantee facility from eligible lending institutions. Collectivisation of small, marginal and even landless farmers in the form of FPOs is likely to provide them the much-needed collective strength to manage their affairs together in the organisations to get better access to various inputs, such as quality seeds, fertilisers and pesticides, suitable technology, machinery, finance and market for acceleration of their economic strength.

Studies have shown that about 7,400 FPOs were registered between 2003 and 2019 in the country after the Companies Act was amended in 2003. It is expected to gain momentum with the implementation of the Central Government’s scheme on ‘Formation and Promotion of 10,000 new FPOs till 2027-28’ which focuses on community-based approach, prioritising ‘One District One Product’ for product specialisation. In 2020, a total of 4,959 FPOs were formed as per data released by the Union Ministry of Agriculture and Farmers’ Welfare. In 2020, a maximum of 1,950 FPOs came up in Maharashtra. Punjab was in the lowest bracket among agriculturally predominant states with the registration of only 13 FPOs, being far behind states such as Uttar Pradesh (654), Haryana (257) and Rajasthan (114). A study by Centre for Research in Rural and Industrial Development, Chandigarh, has revealed that this poor growth and performance of FPOs in Punjab is because of the individualistic trait of farmers instead of working as a group, and vested interests that want to keep FPOs away from public procurement activities. To leverage the FPO culture in the state, it is vital to act on the recommendation of the Committee of State Legislatures (2018) that the agriculture policies of the government should be implemented through FPOs.

There is hope of rejuvenating agricultural growth and enhancing the income of small and marginal farmers through FPO-dominated agriculture. However, some pain points are needed to be addressed to ensure that FPOs may be able to do what cooperatives could not. Most important is creating public awareness and training farmers to run the collectives, the lack of which is considered to be a major cause of failure of FPOs in Sri Lanka. Low membership restricts the turnover, which necessitates upward revision of the minimum membership criterion of 300 (100-150 in North East and hilly areas). Marketing access, efficient marketing as well as modern marketing awareness are essential, for which the alignment with e-commerce, eNAM, commodity exchange and future markets is important. Availability of capital at a reasonable interest rate can help in providing financial security to FPOs. Our experience in Rajasthan has shown that FPOs suffer from weak finances, which result in low procurement volumes, sub-optical operations, poor value addition capability and troubled functioning of the organisations. Hence, along with tapping sources for credit, it is in the interest of such organisations to create their own sustainability funds to attain financial security in the long term.

Some experts are of the opinion that there should be a federation of FPOs for getting synergistic strength, to have exclusive agencies at the national and state levels to oversee implementation of government policies and the governance framework. Finally, exemplifying, incentivising and rewarding successful FPOs will greatly enhance motivation and participation of farmers, spurring the proliferation of this new system of cooperatives, since its success lies in transforming the government-led initiative into a farmer-led movement.

Formation and promotion of 10,000 FPOs

The Government of India launched the Central Sector Scheme for Formation and Promotion of 10,000 Farmer Producer Organisations (FPOs) in 2020 with a total budgetary outlay of Rs 6,865 crore.
It will leverage economies of scale, thus reducting production cost and enhancing farmers’ incomes.
FPOs are to be developed in produce clusters, wherein agri and horticultural produce is grown/cultivated.
Formation & promotion of FPOs to be done via implementing agencies, which will further engage cluster-based business organisations to provide professional support to FPOs for five years.

The author is former VC, Maharana Pratap University of Agriculture & Technology, Udaipur