Date: 29/09/2022

Relevance: GS-3: Transport and Marketing of Agricultural Produce and Issues and Related Constraints; E-technology in the aid of farmers

Key Phrases: Farmer Producer Organisations, Aggregation, Small Farm Commercialization, Bargaining Power, Marketplace, Digital Literacy, Small Farmers, Agribusiness Consortium, Cluster-Level Federations

Context:

• Indian government has reaffirmed its commitment to reduce rural distress among nearly 93 million farming households through efforts to double farmers’ income.
• The emergence of farmer producer companies (FPCs) as a viable way of supporting this approach is remarkable.

Key Highlights:

• Covid has increased the economic risk borne by farmers.
• Nearly 70% of farming households in India are small and marginal.
• An average farmer in India earns a little more than ₹10,000 per month and nearly half of all farmers are estimated to be in debt.
• Most farms are rain-fed and exposed to climate risks.
• Small and marginal farmers operate with big disadvantages in terms of scale, diversification of crops, potential price risks, and bargaining power.

Farmer producer companies as viable ‘new age’ options to address farmers' distress:

• FPCs, introduced in 2000, to address the challenges faced by the farmers while maintaining India’s present welfare equilibrium.
• FPCs function under the Companies Act of 2013 operating on the long-standing welfare model of ‘collectivization’, wherein shareholding farmers pool resources for better market linkages.
• But unlike older models, FPCs are meant to prioritize business and are assessed by the profits they earn.

What are the benefits of FPC?

• While FPCs may not appear lucrative in the short-term, they offer a chance to own a piece of business led by a professional team that constantly mentors its farmers on good cropping practices, creates market opportunities through e-commerce platforms and client networks, offers support for product branding and ensures transparency of profit distribution.
• This promise of a profit-oriented agri-business maximizing value for its small and marginal farmer shareholders has gained immense popularity.

Measures by the government to promote the FPCs:

• By March 2019, 7,374 FPCs had been formed with a total paid-up capital (PUC) of ₹860.18 crores.
• In 2021, the ministry of agriculture and farmers welfare launched a central scheme to promote 10,000 farmer producer organizations with an allocation of ₹6,865 crores.
• Additional funding opportunities have been provided by the Small Farmers Agribusiness Consortium (SFAC), National Bank for Agriculture and Rural Development (NABARD), and flagship schemes like Agriculture Investment Fund (AIF).

Systemic challenges faced by the FPCs:

1. Raising funds within local communities:
   • Mobilizing farmers and raising share capital from members is a critical activity for an FPC to sustain its operations during the initial phase marked by high capital investment.
   • While high agricultural income and landholding states like Haryana and Punjab offer a better likelihood of raising funds within local communities, states like Odisha and Jharkhand, with much lower disposable household incomes, do not see much action in the FPC space for a long time.
   • Even states like Maharashtra, accounting for numerous FPCs, are struggling with this challenge.
   • Research has pointed out that nearly 65% of active FPCs in India are operating on a meagre share capital which needs to be changed.
2. Lack of engagement of FPCs with service providers:
   • The national policy highlights the role of business development service providers, knowledge partners and technical institutions in helping nurture and foster FPCs.
   • However, a small-sized entity’s ability to engage with these service providers on fair terms is less discussed.
   • Smaller FPCs also struggle in hiring full-time staff for operations, making it difficult to focus on brand building, marketing and consumer outreach, or navigating e-commerce platforms like e-National Agriculture Market. .
3. FPCs continue to be a male-led model:
   • Historically, group farming models tend to embed women in their traditional roles and positions.
   • Hence, women’s membership in cooperatives and collectives is also on unequal terms and the dynamic has hardly changed under FPCs.
   • Barriers to participation start very early and women farmers receive benefits last and least.
   • Women farmers are often unable to pay share capital for FPCs and are represented by men as their proxy owners.
   • Social mobility and norms inhibit the participation of women in FPC meetings, farmer gatherings, knowledge exchange visits, or residential training.

What are the possible options to strengthen this movement?

• Policy platform enabling inter-agency convergence:
  • The FPC ecosystem today has several direct and indirect government stakeholders, each aiming for a certain positive change, but it is missing a policy platform, like Poshan Abhiyaan, which can enable inter-agency convergence.
  • Such a platform could take quick and well considered actions to address various input, marketing and credit challenges.
• Strengthening the capacity to absorb public funds:
  • Although initiatives like AIF create a pipeline of resources, however, the capacity of FPCs to absorb public funds should be further strengthened.
• Mentoring and supporting FPCs:
  • Special hand-holding can be extended for farmers to prepare small-budget proposals or business plans.
  • Government officials at district and state levels are critical stakeholders in mentoring and supporting FPCs.
  • Furthermore, cluster-level federations set up under the One District One Product can mentor FPCs by engaging outreach workers.
  • The role of women in FPCs needs equal prioritization.
• Enabling access to entitlements under government schemes:
• FPCs must enable farmer access to entitlements under PM Fasal Bima Yojana, PM-Kisan, Pradhan Mantri Krishi Sinchai Yojana, Soil Health Card, Kisan Credit Card and other schemes.

Conclusion:

• FPOs have the potential to be change agents in India's rural economy.
• To reach that aim, they will need early aid in acquiring managerial abilities, as well as easy access to operational capital.
• In addition to promoting sustainable practices, these organizations advocate for the rights of farmers. Additionally, they are creating networks of farmers to share knowledge and resources. Their efforts have a positive effect on farmers' lives and the future of agriculture.
• The effects of the FPOs are far-reaching and are sure to have a positive impact on the future of farming.
• Overall, FPOs, can be one of the numerous jigsaw pieces that must fall into place in order to reform Indian agriculture and better the plight of Indian farmers.

Source: Live-Mint

Mains Question:

Q. FPOs have the potential to be change agents in India's rural economy but they suffer from several systemic challenges. Analyze. (250 words).