Why India should promote more Farmers Producers Organisations?

Farmers Based Organisations
Farmers Based Organisations

Out of 329 Mha total geographical area, India has 60.4 per cent land as agriculture land (World Bank 2014), second to the USA and even higher than China. About 45 Per cent of the total agriculture land of country is irrigated, which is largest in the world. It is second largest producer of fruits, vegetables, rice and wheat in the world and largest producer of milk in the world. Though these statistics seems to create rosy picture, country’s agriculture has many challenges before it.

About 52 per cent of the countries work force is engaged in the agriculture and depend totally as source of livelihood, but their contribution in the total GDP is only 14 per cent, reflecting disguised unemployment. Country’s productivity of fruits, vegetables, and cereals is much lower compare to China and other developed countries. Shrinking average size of land holding (1.16 hectare in 2010-11 from 2.82 hectare in 1970-71) constraints the farmers in accessing improved technologies and services leading to low production and productivity . In India, small and marginal farmers (less than 2 ha) constitutes  85 per cent of operational holding and 44 per cent of operated area. Another major problem faced by Indian farmers is market inefficiency which reduces the producers share in consumers’ rupees giving less remunerative prices to the farmers for their produce.

A feasible answer for achieving economies of scale in production and marketing in a smallholder dominated agrarian situation is collective action. Different farmers’ collectivisation models had been tried and tested in India. Among them, one of the emerging, innovative and participative models is the creation of Farmers Producers Organisations (FPO). FPO can be either created through Co-operative society act or Indian Companies act. Some core areas where FPOs can contribute to a great extent are summarised under following broad headings. 

Promotion of Mechanisation in agriculture

Level of farm mechanisation in India is 45-50 per cent, of which majority contribution (60-70%) is of rice and wheat harvesting, which is less compared to other developed countries (up to 95 %). There are high levels of regional disparity, with states like Punjab, Haryana and Uttar Pradesh with high level of mechanization where as the eastern and north eastern states have very low level of mechanisation. Two important factors that hindering mechanisation are the fragmentation of land and low capital availability for investment in case of small and marginal farmers. Promoting mini machineries and small equipments and making them available through custom hiring centres can solve these location specific problems. FPO can play important role in making available these machineries and equipments to the members collectively by charging nominal fee from the members through custom hiring centres. Small and marginal farmers can have access to machineries by collectively purchasing the machineries in FPO. A good example of promotion of mechanisation through farmers’ organisation is the Satmile satish club, an NGO from Cooch Behar district of West Bengal promoting mechanisation through farmers club, where the members can hire machineries like mini combine harvesters which can be used in small land holdings. 

Post harvest losses and value addition

As per estimates of Ministry of food processing industries (2016), post-harvest loss of India’s major agricultural produce is estimated at Rs 92,651 crore. The Central Institute of Post-Harvest Engineering and Technology (CIPHET), Ludhiana has estimated about 16 % losses in fruits and vegetables. Despite of second largest producer of fruits and vegetables, only 2.2 per cent of fruits and vegetables are processed (Much lower than Brazil-70 %, USA-65 %) and in case of milk, 37.7 per cent is processed. Considering agricultural produce as a whole, value addition is only to an extent of 20 per cent. Upscaling value addition of agricultural produce need investment in infrastructural facilities like pre cooling and cooling units, cold storage facilities etc. Farmer Producer Organisations can mobilise investment opportunities for establishment of processing and storage infrastructures at grassroots level which will help in reducing post-harvest losses, enhancing shelf life and better price realization for the farmers produce. In Maharashtra, MAHAGRAPES, a marketing partner to grape growers cooperative had established cold storage units at each cooperative society.

Sahyadri Farmers Producers Company from Nashik District of Maharashtra is processing fruits and vegetables available in the nearby areas, giving more income to members than selling of fruits and vegetables in the market. Sai Pravara Farmers Producers Company in Ahmednagar district of Maharashtra has started processing of pulses and animal feeds giving more income to the member farmers. Cooperative models like Amul and Mother Dairy are well known in the value addition of milk. Similar activities in fruits, vegetables and milk can be started all over the country taking advantage of large production.

Extension and research

Provision of extension has been sole responsibility of the states till 1990s. However after Training and Visit system of extension, external source of fund reduced drastically, constraining the government ability to fund the national extension system. Considering vast diversity in agriculture public extension system in country was not enough to fulfil the extension needs of the country.  NSSO situation assessment survey of farmers  (2005) shown that only 5.7 per cent of farmers accessed public extension worker while 0.7 per cent used KVK as source of information. Though many NGOs and Private sector firms are involved in the extension provision, extension and information need of many farmers is not being met out. Farmers producers organisation can complement and supplement the efforts of public, private and NGOs in providing extension services to the farmers. There are different FPOs which became successful in providing timely, relevant information and training services to farmers by establishing knowledge linkages. Maharashtra state grape grower’s association (MRDBS) provide extension services to its members by organising seminars at block level where experts from related field would guide and educate the farmers.

Our Gross Expenditure on Research and Development (GERD) as percentage of GDP has remained less than 1 per cent despite increase in absolute terms. Identifying alternating funding for agricultural R &D activities will be a major concern in future with the insufficient public funding.  To undertake commodity specific or location specific research capacity building of FPOs can be done. They have advantage in terms of familiarity with the ground reality of resource constraints and consumer preferences affecting the demand of their produce. Maharashtra state grape growers association (MRDBS) has their own Research Advisory Committee, with experts from different organizations working on grapes.   Sahyadri Farmers Producers Company had done extensive market survey and research and has developed two varieties of grapes as per demand of the international customers. Such activities can be taken up by FPO from other states also to supplement the research activities of the public sector.

Market related problems

International Food Policy Research Institute (IFPRI), South Asia, observed that in India, market surplus is relatively low, producers share in consumer rupees is low, transaction cost is high, price volatility is more, cold storage facilities are less and inaccessible and there is greater price variability and volatility. Many Farmer producer organisation in Maharashtra, by establishing direct marketing with the companies (Pepsico, Patanjali etc) are able to remove the middlemen in the market and give more and assured price to farmers produce. Collective marketing by FPO will help in reduction in transaction cost and more bargaining power to the farmers. By mobilising resources FPO can start their own cold storage, pre cooling and cooling units which can help in prevention of distress sale, and managing price volatility in the market. By pooling out their resources, more economy of scale can be achieved by small and marginal farmers.

Input and credit facilities

It has been seen that during few years input prices in agriculture increases by 4-5 folds, but price of the output remained same. This leads to more cost of cultivation and less profit to the farmers. Through the FPO, farmers can collectively purchase the inputs like fertilisers, pesticides etc directly from the company at wholesale rate and even can bargain for lower rate. By doing this, Sai Pravara Farmers Producers Company from Maharashtra could save about 25-30 per cent input cost to the members than other farmers in the village. By associating themselves to the FPO, farmers can get the credit facility provided by the NABARD based on group approach.

Urbanisation and change in consumer preferences

Census data shows that 31 per cent of Indian population lives in urban areas. This increasing segment of population prefers value added products. Farmer Producer organisations can tune their value addition as per demand of this segment. Sahyadri Farmer Producers Company in Maharashtra has started the retail outlet of their value added products at Nashik and Mumbai and is providing the products as per demand and requirement of the urban consumers. Many people in urban areas are demanding clean, organically produced agricultural products and even are ready to pay more for that. FPO can harness this opportunity and can gear up them for clean and residue free production for better price to their produce.

What role extension can play in promoting PFOs

Extension can play following role in promotion of FPOs

1) Mobilise and organise the farmers to form collectives that may be commodity/ crop specific or livestock/dairy specific.

2) Capacity building and training of farmers in organisation and management of FPO, to inculcate better leadership among the farmers and to acquaint them with various innovative and emerging technologies and opportunities available to them.

3) Creation of market linkages for the farmers. This may include creation of avenues for direct marketing, processing, value addition and even retailing.

4) Linkages with research institutes and KVKs to apprise farmers with latest technologies available in the agriculture.

In conclusion, there are many challenges in agriculture viz. Fragmented holding, low mechanisation, low value addition, high market inefficiency, constraints in public extension services etc. Farmers Producer Organisation can provide solutions to many of these problems by pooling their resources and collective marketing. They can harness the opportunities available to them like enabling policy environment, urbanisation, availability of credit facilities, emerging ICT etc. By doing this FPO can effectively bring more economy of scale, more bargaining power to farmers, more value addition, more mechanisation, quality extension services, quality produce to  consumers and of course good income to farmers members.


Also published on Medium.