Currently, several hundred Farmer Producer Organization’s (FPOs) exist across the country, registered under various statutes such as the Cooperative Laws, Trusts, and Federations and lately under the Companies Act as Producer Companies. Challenges before new FPOs are many. One big challenge is new FPOs have to operate in a globalized farm economy. Unable to respond to this challenge, many new FPOs are struggling to achieve their objectives.
A few issues that are driving the need for new FPOs are: need to support smallholders as a means of tackling poverty, rising urban demand, growth of private sector in linking smallholder farmers to more dynamic markets, increasing presence of vertically coordinated supply chains, and more stringent food safety standards.
FAO says climate change is already posing agro climatic challenges, and the probability of more severe impacts in the near future will exacerbate the threats to producer livelihoods, particularly in marginal regions of developing countries.
In this scenario, institutional innovation is needed that responds to the new ‘rules of the game’ and new types of organization, within rural areas and also for linking rural supply and urban consumption. In order to look to the future, there is a need to understand existing organizational forms of smallholder farmers’ associations and their contractual relationships with other market participants within the context of prevailing sectoral value chains in India. Most FPOs face the following challenges: Lack capital, Lack management capacity and good organizational governance and Compete in markets against entrenched sinister commodity forces.
The potential for exploiting production and managerial economies of scale, overcoming market entry barriers, reducing transaction costs and cultivating supply chain relationships is possible with new FPOs. New FPOs also avoid the pitfalls of cooperatives, wherein collective decision making is cumbersome. However, sufficient examples of successful formal cooperatives exist such as Mulkanoor, to argue that collective ways of organizing agricultural marketing can work. Essential skills to manage new FPOs may not exist at grassroots level, but they can source external management input and equal private sector performance. In this regard, the approach of external supporting organization’s must be patient and realistic.
FPOs may not always work if their asset requirements is not met and external support is not sufficient for successful group formation and operation. Yet, FPOs that are ‘organic’ learn and grow to work. The path to maturity is usually long, and needs supportive investment through a range of planned and sequenced business services. There is no ‘one size-fits all’, and no guarantee that individual successes can be upscaled and replicated
FPOs face several challenges such as weak sense of ownership among producer-shareholders, undercapitalization, inadequate business skills, poor governance and the lack of an enabling ecosystem (Azim Premji University, 2020). This study recommends policy support to producer companies’ growth by simplifying compliance processes, instituting differential regulation, protecting the rights of vulnerable shareholders and enabling external investment through a different class of non-voting shares (with appropriate safeguards and limits).
Accountability mechanism is missing. This draft national policy does not include a plan for monitoring and evaluating the policy’s effectiveness, including metrics for measuring success and a process for making adjustments as needed. Impact of membership and effect of economies of scale on the farmers income of an FPO on the farmer-members’ productivity has not been assessed.
This policy needs to objectives that are specific, measurable, achievable, relevant, and time-bound (SMART) goals that the policy aims to achieve. No target is set for the federation of the FPOs. From among small and marginal farmers, tenants, sharecroppers and other landless farmers, this draft national policy has to identify the target audience. There is significant relation between size, participation and profitability or efficiency. A member of FPO has to be congruent to the internal structure of FPO, because land size is represented by the farmer category.
The proposed draft national policy fails to give a clear definition of the policy’s scope, including the specific areas or sectors it applies to. Field crops, horticulture, apiculture, sericulture, medicinal & aromatic plants, permitted minor forest produce and animal husbandry and fisheries sectors are mentioned in the vision. Each of these sub-sectors have different challenges for institutional growth.
The proposed draft national FPO policy hardly refers to a regulatory framework. On the contrary, it objectivizes ease from regulation, which in itself is general. There has to be an assessment of the regulation that is hindering the growth of FPOs, especially in the Agri-input areas such as seeds, finances and plant protection. Undercutting competition from private sector is problem that is being faced by the FPOs. The structure of central professional Agency, CBBOs need a thorough review. In the past, a rank outsider Ernst and Young (EY) was given the CPA job.
Conclusively, a complete overhaul of this proposed draft FPO policy is required. Government should prepare a National Policy on FPOs through consultations, with inbuilt linkages with other agricultural policies of India. This policy cannot be built in isolation.
FPOs cannot be reduced to pathways for implementing government schemes and programs. These cannot become tools to promote digitization of agriculture. FPOs cannot be a ruse to develop industrial agriculture in India. FPOs cannot be aggregating agents for pesticide, seed and commodity processing and marketing companies.
