It enables members to see their work through an entrepreneurial lens and confers economies of scale, better marketing and distribution, more investible funds and skills, greater bargaining power, access to credit and insurance, sharing of assets and costs, opportunities to upgrade skills and technology, and a safety net in times of distress. The best-known example of an FPO is that of Amul (Gujarat Cooperative Milk Marketing Federation Ltd.) which is a dairy cooperative with over three million producer members.

In the FPO model thousands of scattered small farms are systematically aggregated and provided centralized services around production, post-harvest, and marketing. This helps help reduce transaction costs of the farms for accessing the value chains and makes it easier for small farmers to access inputs, technology, and the market. It also opens opportunities to bring primary processing facilities closer to the farm gates and help producers gather market intelligence and manage the value chain better with digital agriculture tools.

India needs at least one lakh farmer producer organizations (FPOs) to cater to its 14 crore farmers. In July 2020, the Government of India published detailed guidelines for the setting up of 10,000 new Farmer Producer Organisations (FPOs) in the country by 2024. While 10,000 may be a good starting point, it is not enough for small and marginal farmers who comprise 86% of total farmers in the country. India has around 12.6 crore small and marginal farmers cultivating around 7.4 crore hectares out of the total 16.4 crore hectares under cultivation.

This works out to an average land size of 0.58 hectare per farmer, which is too small for a famer to invest even in a small machine. This is possible when the farmers pool their land or integrate themselves. When they join registered FPOs, they enjoy pool access to markets, schemes, and credit. The access to institutional credit reduces the dependence on private finance thereby reducing the cost of finance. During a NABARD survey, it was found farmers' benefits increased by 20% to 40% after joining FPOs, because they got inputs at dealer prices. They could eliminate middle-men at marketing stages also.

While FPOs hold promise for small farmers, they will not be able to bring out any significant change in the condition of women famers unless gender-specific orientation is done at policy level. It is estimated that 73.2 percent of the rural female workforce works in agriculture (compared to 55 percent of male workers). Approximately 80 percent of all economically active women are employed by the agricultural sector. In agriculture, their work is often confined to drudgery-inducing manual activities such as transplanting, weeding, and sowing.

According to a report by Azim Premji University in 2019 there were approximately 7,374 FPCs in the country. In the absence of gender segregated data, the study estimated that about 3 percent (or 220) of these were women’s FPCs. If we include women’s cooperatives in addition to this data, the number is likely to go up to around 1,000. This is a mere 5.9 percent of 17,000 FPOs expected in the country by 2024, and disproportionate when compared to women being 73 percent of the agricultural labour force.

The FPOs are owned and governed by shareholder farmers and administered by professional managers. They adopt all the good principles of cooperatives and the efficient business practices of companies and seek to address the inadequacies of the cooperative structure. The best way for these organizations is to leverage their collective strength through a full value chain from the farm to the fork. The underlying principle is similar to that of the full stack approach. This approach makes the sponsor, catalyst or promoter responsible for every part of the experience. In short, it is a whole-farm systems approach. It creates a complementary support ecosystem that boosts farm yields, reduces negative environmental impacts, and increases market access and smallholder farmer incomes. It also provides sustainability interventions including sustainable irrigation products and practices. Moreover, the value chain uses a business approach in order to make it viable.

Most promoters of the value chain are now successfully using the subsector approach which allows for a focus on specific subsectors and helps in strengthening the ecosystem within which they are able to transition from a comparative to a competitive advantage. The value chain also facilitates capacity-building support and use of modern tools including technology that can help to improve weather forecasting, agricultural processing, soil health monitoring crop identification as well as damage control, and mapping of available water resources

Consolidation of smallholders’ land holdings through cooperatives can also create synergies, especially for the leasing of large equipment or bulk input orders. It also helps in creating cold storage for controlling post-harvest losses. Financing for setting up micro-irrigation facilities and rainwater harvesting modules would help create an infrastructure for sustainable water supply and hence aid farm productivity.

FPOs should also be encouraged to participate in MSP-based procurement operations. eNAM can connect farmers with distant buyers. However, the biggest limitation of eNAM and other similar programmes seems to be that most farmers are not tech-savvy. This is further compounded by low internet penetration and erratic electric supply. We need robust farmer-producer institutions which will have capital and the risk-taking ability to set up processing zones which are critical for preventing losses on account of rotting of foodgrains.

There are several other structural barriers that have to be overcome. First and foremost is the capital constraint. FPOs are initially not able to raise share capital from their member-farmers. They also cannot go to the share market to raise capital unlike the privately-owned food processing companies.

The next is working capital. FPOs have to deal in cash as their member-farmers need the money desperately at harvest time to pay input suppliers and labour, repay crop loans and meet their household expenses. FPOs need higher working capital than the private sector. This is where dairy cooperatives score better since milk is produced and consumed daily and farmers can wait for a few days to get paid.

The third barrier is managerial capability. Many FPOs are struggling on account of lack of handholding support. Many FPOs lack professionalism. FPOs can hire well-paid professionals if they reach a certain scale as Amul and several other, large, successful cooperative dairies have done. But FPOs will have to reach adequate scale to pay appropriate salaries to these professionals. The inclusion of small famers in supply chains requires substantial public investment in agronomic training, irrigation, soil-water conservation, and an overall improvement in the support ecosystem which small famers cannot afford.

While FPOs remain the most trusted allies for farmers, they need to be revitalised by infusing modern design features without diluting their traditional ethos and philosophy. It would require innovative collaborations between state, civil society, and the private sector. In the light of new insights, we need to revisit the model and harness the basics; tweak the traditional design features instead of reinventing the wheel. Experience tells us that continuous training, capacity-building and member awareness programmes can reinforce the key elements and help solidify the relationship between members, field staff, professional managers, financial institutions and directors and build a strong bond that can equip the collectives with the will to fight adversities and exploit opportunities.

FPOs can grow as viable, member-controlled, self-sustaining farmer businesses if they constantly work on reshaping the interaction of their members with themselves. The failure of cooperatives is often rooted in the inability of their promoters to understand this interaction. A self-regulatory body designed to protect the interest of FPOs and farmer members can serve a useful purpose.

We need robust farmer-producer institutions which will have capital and the risk-taking ability to set up processing zones which are critical for preventing losses on account of rotting foodgrains. Together with FPOs, farmers can be their own middlemen and India can finally see the dream of farmers’ incomes being doubled being realised. (IPA Service)