Farmer Producer Organizations (FPOs)
Dr A.K. Sood and Kanav Sharmai
Indian Agriculture sector has progressively become predominantly smallholder driven as 86 per cent farmers possess less than two ha. of land, having a share of only 46 per cent of area. The Agricultural Census (2015-16) indicates that the average size of a landholding had declined to 1.08 ha from 1.41 ha (Agricultural Census, 1995-96), which is hardly enough to eke out a livelihood opportunity for a family. Small holders often suffer from poor access to quality inputs, institutional credit and other resources, organised markets, modern farming technologies, etc. Economies of scale are not available to most smallholders, which becomes a weakness as overheads on inputs and services purchased are very high. Their bargaining power in the marketplace for outputs too remains limited by their low individual marketable surplus.
Scenario of Agriculture sector in the UT of J&K: Agriculture sector is an important sector in the economy of the UT with contribution of 18.4% in SGDP. Over 70% of the population in the UT of J&K is directly or indirectly dependent on agriculture and allied occupations. However, the scenario of agriculture sector in the UT of J&K is no different than the one mentioned above. Around 95% of the total landholding in the UT are small & marginal, with average landholding size of 0.61 ha. Some of the major challenges faced by the agriculture sector in the UT are Marginal & Fragmented land holdings, Low level of farm mechanization, low resource use efficiency, inadequate access to institutional credit, inadequate market structure, absence of value chain etc.
Despite the above challenges, the agriculture sector of the UT has got inherent strengths in the form of Diverse Natural Capital such as soil uniqueness, quality water, biodiversity & micro-climatic variations, Niche crops etc. It also offers huge opportunities in the form of comparative advantage in several agri-commodities, huge potential for processing, scope for off-season agriculture, pristine production environment etc. In order to effectively utilize strengths and opportunities offered by the agriculture sector of the UT to overcome the challenges hampering the development of this sector, promoting collectivization through formation of FPOs may emerge as game changing step in transformation of agriculture sector in the UT.
Farmer Producer Organizations: Bringing together farmers to form Farmer Producer Organisations (FPOs) is considered to be a promising approach to address the challenges facing the small holders by providing them the benefits of economies of scale. FPOs facilitate the aggregation of input required for agriculture and allied activities as also output/ produce for sale in the market. With aggregation, through FPO, benefits accrue to the farmers, due to economies of scale i.e. procurement of inputs at lower cost and sale of produce at higher price due to increased bargaining power. Aggregation is also an effective method to mitigate risk in agriculture.
Role of NABARD in promotion of FPOs: Recognizing the importance of FPOs as a means of linking farmers to agri value chain and increasing the farmers’ income, the Union Finance Minister, in his budget speech for 2014- 15, announced setting up of “Producers Organization Development and Upliftment Corpus (PRODUCE) Fund” of Rs.200 crore in NABARD to be utilized for the promotion of 2000 Farmer Producer Organizations (FPOs). Accordingly, PRODUCE Fund Scheme for promotion of Farmer Producer Organizations (FPOs) was operationalized for implementation over next 3 years’ period.
Central Sector Scheme on Formation & Promotion of 10,000 FPOs: The success of the FPOs promoted under PRODUCE Fund encouraged the Govt. of India (GoI) to announce a Central Sector Scheme on Formation and Promotion of 10,000 FPO in the Union Budget of 2019-20. The scheme aims to provide holistic and broad-based supportive ecosystem to form new 10000 FPOs to facilitate development of vibrant and sustainable income-oriented farming and for overall socio-economic development. NABARD has been designated as one of the Implementing Agency (IA) by GoI for formation and promotion of FPOs under the scheme.
FPOs as growth engines for transformation of Agriculture Sector in the UT: NABARD has promoted around 80 FPOs in the UT of J&K under various schemes, benefitting around 10000 farmers of the UT. These FPOs are involved in various diversified products such as saffron, walnut, almond, maize, basmati-rice, mushroom, organic vegetables, honey etc. NABARD has also set-up a credit guarantee fund of `1000 crore to provide guarantee cover to eligible lending institutions to enable them to extend collateral free direct loan to these FPOs. These interventions are likely to rejuvenate the agriculture sector of the UT in multiple ways such as area expansion under various crops, increased production, cost rationalisation, better price realisation, increased level of farm mechanization etc.
Success of the FPOs can be measured through different indicators such as quantitative indicators like; the number of farmer members, amount of equity mobilised from members, turnover, net profits and qualitative indicators like; how quality of member’s produce improved, how they captured the local market and export market, how FPOs were awarded licenses by government agencies for selling fertilisers and pesticides etc. are often used. Among the various FPOs promoted by NABARD in the UT, there are FPOs which are close to reaching annual turnover of `1 cr, selling their products throughout the country, granted various types of licenses such as license for sale of fertilizers, export license, packaging and processing license etc. These FPOs have been successful in increasing the income of their members by 20-40%.
Getting into niche crops: A niche product for a niche market usually assures success. The UT of J&K is bestowed with various unique and niche products such as saffron, kashmiri lal mirch, basmati, bhaderwah rajmash, kala zeera etc. which have got high commercial value in the national and international markets. Already many FPOs have been sanctioned by NABARD which are involved in the production, aggregation and marketing of these products under the ambit of their own branding and packaging. This has helped these FPOs in achieving better price realisation by providing traceability of such produce (such as GI tagged saffron in Kashmir valley).
FPOs will also be successful if a marketing company uses them as procurers and aggregators of commodities.
Further, the FPO model may prove to be a success in addressing various challenges associated with such crops such as lack of commercial value chain & traceability, lack of adequate quality planting material, decreasing area under cultivation etc. As this market of niche crops has the potential to augment agriculture income of the farmers of the UT manifolds, the FPO model may be utilized for boosting integrated, multi-commodity approach aggregation and value addition.
Way forward: The future of Agriculture sector in the UT will depend upon the success of the FPOs. These entities have the potential to transform marginal and small farms from subsistence farming to market-oriented commercial farming provided that their promotion and nurturing is implemented in a mission mode. Even the Mangla Rai Committee formulated by the UT Government for framing a comprehensive Agriculture Policy for holistic development of Agriculture & Allied Sectors in UT has outlined potential for formation of 300 FPOs across the UT. With the constantly increasing no. of FPOs coming up in the UT, the next important aspect of FPOs would be their governance. How to transform them into leaders and market makers through orientation, training and capacity building would be a challenge. Every successful FPO is led by an entrepreneur; a competent CEO, an enabling board, charismatic president or a NGO promoter. Successful FPOs will be those who would understand buyer’s requirements. They would need to mobilize considerable member’s equity which is a reflection on its leadership and member’s perception of benefits of being in FPO. Hand-holding of FPOs and the FPO movement is crucial to upgrade farmers from producers to marketers. An enabling ecosystem with empathy to our farmers may aid in this transformation which may benefit entire ecosystem of agricultural development in the UT.
( The authors are CGM NABARD and DDM NABARD (Rajouri) respectively