Abstract
This article seeks to analyse the current business model of FPOs to understand socio-economic consequences for individual members. The study selected 10 farmer producer organisations from Uttar Pradesh, India considering diversity along with geographical location, the field of operation and business model. In total, 10% of the villages covered by each chosen FPO and 5 members from each selected village were randomly selected for data collection. Two separate schedules for FPOs and members were administered for data collection. The study found that FPO members, particularly small and marginal farmers, experienced a positive socio-economic impact on their lives due to exposure to new techniques and enhanced bargaining power due to collectivisation. However, lack of capital due to constraints in accessing finance from banks was found to be a major challenge. The article concludes by underlining what needs to be done to make FPOs sustainable.
Introduction
The Capital vs Design Debate
Recent research on farmer producer companies in India has centred on the capital vs design debate. While the former strand in the discourse argued that it was a lack of capital that acted as the main hurdle in the success of these producer organisations (Kakati and Roy 2021). The design strand considered these recently founded companies as nothing more than old cooperatives in the new attire (Levy 2017). Further extending this debate and while closely aligning with the second strand, it was also pointed out that companies dealing with agricultural produce were different from giant cooperatives trading in milk debunking the possibility of the former emulating the model of the latter.
The Question of Centrality of Members
However, producer-members were the default constituent of the design, but they did not get the adequate agency of their own in this debate. Similarly, the design argument might be claiming that capital could be generated by the pooling of funds held by individual members (Dey 2018; Ganesh 2017; Gowda, Dixit, and Megha 2018; Shah 2016; Singh 2008). In both these cases, it was the members that came to occupy the central position. Once member-producers were given their due central place in this debate, the capital-design dichotomy appears to wither away.
The Study
This study is an attempt to reinstate member-producer as the focus of analyses. It investigates the business models of the recently established farmer producer organisation (FPO) in Uttar Pradesh 1 and their impact on the socio-economic conditions of the producer-members. More importantly, it locates them in the centre of the debate by exploring their perception of challenges that lie ahead.
The article is structured into nine sections. After the introduction, section two underlines the trajectory of discourse on the question of the viability of small farms in India leading to the evolution of FPOs followed by section three on policy architecture on FPOs and section four on data and methods. Business models of studied FPOs are discussed in section five and the socio-economic impact of involvement with FPO on members’ life is analysed in section six. Inflation-adjusted growth in revenue to member households after joining FPO as compared to earlier years is presented in section seven followed by a discussion on challenges faced by FPOs in section eight. Concluding remarks are offered in the last section.
The Question of Viability of Small Farms
Since Independence, 2 policymakers in India have been grappling with the problems of small farmers. With an increasing share in total holdings, efforts have been made to keep marginal and small farms 3 economically viable (Gill 2004). The share of agriculture in Gross Domestic Product (GDP) might have come down drastically (Deokar and Shetty 2014) but the sheer number of people dependent on this sector for their livelihood (Chakrabarti and Kundu 2009) maintained its importance for policymakers (GoI 2022).
Small farms have not been considered important just for livelihood roles but because of their contribution to the food security of the country (Fan and Rue 2020). These farms fulfilled a very large proportion of the food grain requirement of India (Page and Slater 2003). Keeping them alive was akin to feeding more than 1,400 million Indians (Singh 2005). However, new evidence suggested that farm households earned a substantial share of their income from non-agricultural sources, but agriculture income continued to act as a foundation on which diversification edifice was constructed. It meant that households with larger agricultural income also earned larger non-agriculture income (Trivedi 2017).
Small farms have been found more productive than large farms (Chand, Prasanna, and Singh 2011). Agriculture economics in India had seen an intense debate on the relationship between the size of a farm and its productivity (Deolalikar 1981). An overwhelming view since the 1960s has considered small farms more productive (Sen 1964). This has led economists to argue that small-scale farms were likely to maintain the productivity 4 of large farms. Family labour has been considered an asset of small farms that enhances their productivity (Ghatak and Roy 2007; Singh and Singh 2016).
Having said that, the question then aroused what ailed the small farm. Why were those small farms continuously crisis-ridden? Was there anything intrinsic to a small farm that made it unviable? The answer would be an emphatic no. There was nothing in the small farm itself that should have left it economically unsustainable. These were mostly externalities that affected the profitability of the small farm (Aragón, Restuccia, and Rud 2022).
The Green Revolution and after
Since the green revolution, 5 the agrarian scenario in India has been changing very fast. It was no more a self-sufficient subsistence farming. It was very closely linked to the market both at input and output ends (Singh 2005). In the contemporary scenario, all the inputs including seeds, fertilisers and pesticides were procured from the market and the marketable surplus was sold in the market (Patnaik 2003). Besides, increasing mechanisation has made capital investments in farm machinery, irrigation equipment and transport vehicles almost a necessity. Without this paraphernalia, the contemporary farm economy could not sustain itself. This also entailed dependence on financial institutions for access to credit. It was precisely at this juncture that small farms faced most of their challenges (Reddy and Mishra 2009).
These challenges were hurting the farm economy from both ends. Punjab 6 experience suggested that heavy investments might lead to a stage of ‘overcapitalisation’ resulting in underutilisation of assets and indebtedness (Singh and Sidhu 2004). While experiences in relatively backward regions revealed a vicious cycle of low productivity and the absence of capital investment and market linkages (Gandhi, Kumar, and Marsh 2001). The agriculture in these regions appeared to have been caught in a low-end equilibrium.
Small Farms and Collectivisation
It was not the case that policymakers in India were not aware of these challenges nor were they bereft of a solution to the ever-burning agrarian problems. From the very beginning, policy architecture in India has emphasised the collectivisation of small farms into large viable units. This collective was conceptualised to work at all three parts of the economy viz input, production and output (Agarwal 2010).
The cooperative movement 7 was the first major attempt at the collectivisation of small producers in India. Except for some, the movement did not yield the desired results in most Indian states. A vast amount of literature existed on experiences of the cooperative movement in India. This is no place to enter the debate on the successes and failures of cooperatives. Suffice would be to say that the cooperative model presupposed a relatively homogenous participant group (Miler 2012). The way land reforms were implemented in India, land inequalities persisted. The size of landholdings might have come down due to generational subdivisions, but most of the land remained in the hands of the original group of owners (Trivedi 2022). The cooperative movement in several places proved to be a non-starter in its true spirit due to persisting land inequality resulting in sociopolitical disparities. This situation leads policymakers to think about some alternative forms of aggregation (Kumari, Bharti and Tripathi 2021). A producer company was one such idea that started gaining currency in the last decade (Mourya and Mehta 2021).
Perhaps, the changing economic environment also favoured a market-based solution rather than being dependent on State support (Borras 2003). However, FPO was a unique form of organisation where a producer company receives support from government agencies in its initial years of formation. While conceptually both cooperatives and FPOs were based on the same premise of the economy of scale and efficiency the former operated on the site of the State, and the latter was premised on market principles.
Keeping in mind these peculiarities of FPOs, this study follows Shah’s (1995, 1996, 2016) framework of analysis that places members in the centre of design thinking which was a dynamic process of interaction between members and their organisation fulfilling aspirations of the former while strengthening the latter. This process works on the relationship between members and the system on the principles of cohesion, accountability and performance to ensure ‘patronage interests of members’, ‘holding system answerable’ and ‘members’ requirements’. In Shah’s (2016, 16) framework, this paper picks up the notion of ‘members’ centrality’ for a detailed discussion that articulates ‘the significance of the organisation to members’ livelihood constitutes one of the most important elements of sustainability and growth of the organisation. Data on socio-economic impact and growth in revenue to member households after joining FPOs could throw light on the organisation’s significance in the livelihood prospects of members.
Policy Architecture on FPO
A Producer Organisation (PO) is a legal entity formed by primary producers. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. In some forms like producer companies, institutions of primary producers can also become a member of PO…. Farmer Producer Organisation (FPO) is one type of PO where the members are farmers. (NABARD 2015, 1)
National Policy for the Promotion of Farmer Producer Organisation (NPPFPO), 2013 8 adopted by the Government of India envisaged FPOs to work on the principle of democratic governance of the organisation by its members. FPOs were seen as autonomous and independent organisations controlled by their members. According to the policy, these were non-discriminatory organisations that were opened to all voluntarily irrespective of their social, religious, political and economic status. The cardinal principle of these organisations, as perceived by the NPPFPO, was equitable contribution and democratic control of the common property thus created. The National Policy envisaged a situation where the proliferation of FPOs would reach a level where these producer companies would create their ecosystem at various levels by way of cooperation among themselves. Most importantly, NPPFPO conceptualised these organisations to be dedicated to the sustainable development of the community to which they belonged. In other words, these were not merely profit-seeking business enterprises but should work for socially just, environmentally sustainable and economically equitable development (GoI, 2013). National Bank for Agriculture and Rural Development (NABARD) was a leading financial agency in India that promoted and supported the formation of FPOs. 9
The Study: Data and Methodology
Given the crucial role of the FPO model in emerging responses to ensuring agrarian problems, government agencies were planning to scale up the model. This entailed an in-depth study of existing FPOs, their operation, governance, financial aspects and challenges. For the purpose, 10 FPOs were selected primarily based on their geographical location aiming at covering all regions of Uttar Pradesh, giving representation to a diverse set of FPOs in terms of field of operation/ business model adopted by them. Other criteria for the selection of sample FPOs were the length of their operation. Organisations working for more than 3 years and having attained autonomous functioning after completing the handholding period were included in the sample.
The broad objective of the study was to analyse the management and working structure of FPOs and how it was influencing members’ economic, financial and social life conditions. The specific objectives of the study also reflected the twin purpose of reviewing the functioning of existing FPOs and understanding the strength and weaknesses of the model.
The ten selected FPOs belonged to nine districts of Uttar Pradesh viz. Mirzapur, Kanpur Nagar, Fatehpur, Prayagraj, Pratapgarh, Hamirpur, Lalitpur, Bijnor and Bareilly. 10 Each District had one sample FPOs except Kanpur Nagar District, which had two sample FPOs. These 10 FPOs were spread in around 323 villages and were associated with 5,614 member producers (Table A1).
In total, 10% of villages of the total villages were covered by each FPO and five members from each village were selected for the field survey. After taking round off the number of villages from each FPO, finally, 33 villages and 155 members from all ten FPOs were included in the survey. This study assessed the functioning of an FPO and its socio-economic impact on members, two separate questionnaires were designed, one for office bearers of FPOs and another one for general members of FPOs.
Like every social science research, the study does not claim to be completely free from limitations despite best efforts to limit them. An attempt was made to contain reporting bias by selecting a sizable sample from different geographical regions. 11 Similarly, a relatively longer recall period for some indicators was also tackled.
The Business Model of FPOs
According to Miler (2012), in the context of the value chain, the term ‘Business Model’ referred to a specific strategy adopted for value addition within a network of producers, suppliers and consumers. The data collected from the sample FPOs revealed that their business model was based on the premise of aggregation at both ends-inputs and outputs, thus creating the economy of scale, reducing transaction cost, enhancing market reach causing increased bargaining power, and lowering risks, resulting in profits for shareholders. In the process, shareholders could earn economic gains both as producers and shareholders of a business company. In the production process, economic gains might be generated by reducing cost which comes through the supply of inputs at a relatively lower cost and hiring-out of agricultural machinery by the producer company. Another consequence of these two supplies would be productivity and diversification. Timely, quality and adequate supply of inputs were likely to enhance productivity, even if collectivisation of the production process has not been part of the business model of studied FPOs.
Another obvious consequence of assured marketing and expected remunerative prices would be diversification beyond food grain crops. Value addition activities were another initiative that helped producers realise better prices. After the direct gains over their produce, the members are also expected to share the profits earned by the company in conducting business activities. However, this share might not accrue directly to members in all cases, the company might decide to reinvest it in capital assets, infrastructure, liquidity for business cycles etcetera. Besides aggregation, the FPOs model also attempted the convergence of business opportunities with financial institutions, government schemes, research institutes and other corporate entities working in the field.
Business Model of Studied FPOs.
Vindhya Sabzi Evam Beej Producer Company Limited (VSBP), Mirzapur appeared to be one of the most functional FPO studied. Primarily, the business model of VSBP encompassed input supply to producer members and the sale of their products in the market. For this purpose, they had a tie-up with Indian Farmers Fertilisers Cooperative Corporation (IFFCO), whose outlet run by the company also supplied seed and fertilisers to members. The company also encouraged its members to produce vermicompost and organic pesticides along with seeds of vegetables and food grain crops. VSBP provided market linkage to all these products and often facilitates their transportation using its vehicles. Different stakeholders worked together to form well-oiled machinery. It continued to sell vegetables and other products in the market during the COVID-19 period also. It raised capital for farm machinery bank from members. That reflected confidence among shareholders. The business activities of the company were quite diverse and the scale of operation growing. The FPO allowed members to purchase shares of the company using their dividends. However, VSBP worked in collaboration with Agriculture, and Horticulture Department, the Government of Uttar Pradesh (GoUP) and Krishi Vigyan Kendra (KVK) 12 but it could realise its true potential by attempting more collaborations both in the public and private sectors. It needed to align with financial institutions for the requirements of the company and to allow members to access credit.
In the same region, Pragati Gram Fresh Producer Co. Ltd, Prayagraj was mainly into value addition activities. It ran Wheat, Rice, Mustard oil and seeds processing units. They were also doing vegetable packaging. For value addition, they procured agricultural produce and sold it in the market after processing it. For instance, they sold wheat flour instead of wheat grain. This way the producer company could procure produce at 10% higher than the minimum support price (MSP). 13 They also supported producers by way of supplying inputs like seeds and vermicompost and farm machinery. No dividend had been distributed so far. The company has not reported any attempt at convergence beyond the departments of agriculture, horticulture and KVK. After raising the share of some of the members, they had shown more interest in company affairs than others. But access to credit was an issue for the company. Its promoters availed an advance on a personal level for the company.
The Sonpari Farmer Producer Co. Ltd, Pratapgarh had not been found active on the ground. On paper, it reported the supply of inputs to producers and procurement and the sale of mangoes. The company claimed that it was in touch with the Department of Agriculture, GoUP.
The business model of Vikas Path Farmers Producer Co. Ltd, Lalitpur could be distinguished from that of other FPOs in terms of aggregation at the level of production. The company promoted cluster-based agriculture. Besides, the company was majorly into seed production and marketing. It produced and sold certified seeds in the market. Besides, the production and sale of vermicompost, vegetables, promoting organic agriculture and soil testing were other major activities. On the supply side, the company procured and stored seeds and fertilisers for timely supply to its members. They had a tractor, but its utilisation was limited. The company distributed dividends as per the shareholding of the members. Besides, National Seeds Corporation Limited (NSC) and Uttar Pradesh State Seed Corporation Limited (UPSSC), from where they procure seeds, have not reported any noteworthy plan for convergence. They availed advance from Nav Kisan Finance Co. Ltd and from the open market.
Another FPO from Bundelkhand, the Kaustubh Agro-Processing Producer Co. Ltd. (KAPP), Hamirpur’s model included value addition as the main constituent. The producer company was into the business of food processing, wheat processing and pulses processing. The company also produced and sold cow-dung and cow urine-based products. Besides, they also promoted organic farming and provided advances to members. The company had a well-defined scheme for the utilisation of generated profits. They used 30% for payment to members as a dividend, another 30% as emergency funds, yet another 30% for loan recovery, and 10% for salary payment of company staff. Despite being an active organisation, like most of the other FPOs, KAPP was yet to make efforts on the convergence front. The company understood business opportunities and had developed a suitable product portfolio but could not realise its true potential without tie-ups with corporate entities and government schemes. The branding of their products was also lacking in their business model.
Moving towards the central part of the state, value addition continued to dominate the business model of FPOs. Khet Kisan Producer Co. Ltd (KKP), Fatehpur was a growing company that earned rising profits from value addition activities. Mainly in the food items business, its model could be distinguished from that of other FPOs in terms of marketing finished products rather than intermediate products. KKP made available agricultural machinery and encouraged organic farming. The company planned to allocate additional shares to members instead of dividends. Convergence was an important element in its model. It kept close contact with the Cooperative Department, GoUP for running a wheat procurement centre and Agriculture Department, GoUP for subsidised seeds and fertilisers. The company was authorised to sell chemical fertilisers by IFFCO and Krishak Bharti Cooperative (KRIBHCO). They were in touch with Chandra Shekar Azad Agriculture University and Pulse Research Institute. They had established an outlet on the Indian Institute of Technology (IIT) Kanpur’s campus and a ‘rural mart’ in the nearby town to sell their products.
Kanpur was the only district where the following two FPOs are studied: Ekta Nature Farming Producer Co. Ltd (ENFP) and Chaubepur Milk Producer Co Ltd (CMP). Both these companies had different product portfolios but a somewhat similar model to guide their business activities. While ENFP prioritised aggregation, basic value addition, storage and distribution of wheat, pulses and oilseeds, CMP was dealing with the distribution of processed and packaged milk. Besides, ENFP also promoted organic farming and soil testing while CMP leased out agricultural machinery and distributes fertilisers. For this purpose, the producer company was in touch with IFFCO and KRIBHCO. No such scheme for convergence had been reported by ENFP. The ENFP equally distributed generated profits into four parts one each for the development of FPO, administrative expenses, distribution among producer members and dividend among shareholders.
Trading was a crucial element of Bareilly Kisan Agro Producer Co. Ltd (PKAP)’s model. The company traded commodities at both ends of production. They ran an agri-input centre along with a procurement centre. Besides, the producer company ran a farm-machinery bank. PKAP retained 40% of the profits and distributed the remaining 60% as a dividend. They were also planning to expand into the production of vermicompost and scale-up trading after opening rural-mart. The company had developed linkages with IFFCO for fertilisers and pesticide supply, the Agriculture Department, GoUP for farm machinery bank, KVK Pantnagar 14 and G B Pant University for technical support and training and a wholesale seed seller.
Distinct from the business models of most FPOs, Hiltron Honey Producer Co. Ltd. (HHP)’s product portfolio was limited but it worked at all points of production, processing and marketing of one product. The product was honey. The company promoted beekeeping, supplied input, supported technically, and procured and marketed the product. Profit was distributed as a dividend. The producer company approached the Agriculture Department, GoUP for financial assistance, the horticulture department for its schemes, financial institutions and several private companies selling honey like Dabur, Jhandu, Patanjali and Kashmir Honey Co, Ludhiana, and Kejriwal Enterprises, Delhi.
Socio-Economic Impact of FPOs
During the survey, respondents were asked about the change they had experienced after joining FPO. And if there had been a positive change, what were the possible reasons for it. Most of the respondents experienced a positive change in their socio-economic conditions after joining their respective FPOs. Landless, marginal and small farmers assigned to the support received from FPOs in exposure to the new techniques as the most important factor contributing to the positive change in their productivity. On the contrary, a relatively smaller share of semi-medium, and medium farmers reported technical support as the most crucial factor. This proportion was about 20% for large farmers.
Large farmers were more focused on access to High Yield Variety (HYV) as the most important contribution to their economic life of FPO. About 60% of their members reported that HYV contributed to productivity enhancement. Almost 64% of semi-medium and 94% of medium farmers also pointed out this factor. Some other members also reported on the timely usage of fertilisers and pesticides.
A query was posed to the respondents about any change in the selling practices of their produce. More than two-thirds of respondents had started selling through their respective FPO and another 10.6% reported selling wholesale rather than retail. Both these figures essentially referred to collectivisation under FPO. Its impact was much higher on small and marginal farmers as compared to medium and large farmers.
Sale after storage and sale after processing benefited 16% and 7% of farmers respectively. However, on this account, a relatively larger proportion of medium and large farmers drew benefits as compared to small and marginal farmers.
While they experienced enhanced bargaining power in the market, about two-thirds of them attributed it to the advanced information about wholesale mandi (marketplace) rates. Again, marginal and small farmers appeared to have benefited in a higher proportion than medium and large farmers. Another one-third gained bargaining power due to their reach to other purchasers and compared the price offered by them. A higher proportion of small and marginal farmers reported this factor beneficial for them than the larger category of farmers. Another major reason for enhancement in bargaining power was the sharing of information among fellow farmers about prevailing rates. Overall, this factor had been reported by over 10% of respondents, but a higher proportion of large farmers have benefited from this.
Growth in Revenue for Producer Households
Household wise Average Real Growth Rate in Revenue from Sale of Agricultural Commodities.
Table 2 presented the growth in revenue from the production and sale of agricultural commodities. Column 2 revealed a year of registration of the FPO. It is this year that formed the base year for the analysis of growth. For the FPOs registered in 2015, the financial year 2014–15 has been taken as the base year while 2015–16 was the base year for FPOs registered in 2016. Column 4 presents cumulative real growth in average household revenue from the year of registration to 2019–20. Column 5 revealed the average yearly growth in household revenue from the production and sale of agricultural commodities.
As per the data, members of VSBP have experienced an average of 12.96% yearly growth in their revenue from the sale of agricultural commodities. The comparable figure for the members of Sonpari Farmer Producer Company was 10.15%, followed by CMP (7%), KAPP (7%), KKP and Vikas Path Farmers Producer Co. Ltd (2% annum each), PKAP (1.33%), ENFP (1.1%) and HHP (0.62%). Pragati Gram Fresh Producer Co. Ltd was the only company whose members have experienced negative average yearly growth in their revenue from agricultural commodities.
The Challenges
Lack of capital was the most crucial issue facing FPOs (Table A3). Most of the FPOs were new and did not have three years audited balance sheet that was a must for applying for bank loans. They neither had any capital asset to mortgage nor any guarantee that could help them avail advance from banks. Without finance, they could not start new ventures. This put them in a vicious cycle of lack of capital and a low asset base.
The producer companies continued to face challenges primarily in terms of enabling policy architecture. The first one related to taxation mostly impacted those FPOs that were into value addition activities and sold their finished product in the market. They noted with awe that while the Income Tax Act, 1961 exempted cooperatives from paying under section 35CCC, FPOs were taxed on par with private and public limited companies. After the enactment of the Goods and Services Tax (GST), the profitability of the organisation had been going down. To help FPOs, the Ministry of Agriculture (MoA), the Government of India wrote to the Ministry of Finance, way back in 2017, for the tax exemption. However, the issue had not been resolved so far causing substantial hurdles.
FPOs reported that acquiring an Agricultural Produce Marketing Committee (APMC) mandi license was tough work given bureaucratic hustles. Although in May 2020, Uttar Pradesh had amended the Mandi Act, where FPOs could directly procure 46 fruits and vegetables from the farmers, members also wanted to ensure MSP for their products. FPOs wanted to run their procurement centres.
Another challenge related to the lack of warehouses in the region of their operation to store the product for a longer time. Hence, FPOs sought to build new storage capacity. They were also planning to set up shops for their product in urban areas. They felt that their product outreach was limited due to a branding problem.
FPOs and their members expected help from the promoter agency for their problems, in this case, NABARD. The foremost demand this study had noted was that in case of failure of a venture, the promoter agency should not leave its anchoring role. Further, they could help establish contact or some kind of Memorandum of Understanding (MoU) with the local agricultural universities or research institutes to access newer technology. Farmers and others associated with FPOs felt that closer linkage should be developed between corporate entities, FPOs and lending agencies.
FPO office bearers unanimously felt that the handholding period should be increased to five years from the current three years. NABARAD had already taken steps for granting two additional years after the tenure of three years. They were also planning to increase the grant to Producer Organisation Promoting Institution (POPI), as felt by FPOs. Most of the FPOs were also planning to expand the range of their activities and needed capital for that. These activities included organic farming, seed production etcetera. More than that, FPOs felt that they could not realise the actual price for their products until they embarked on value addition activities. In this direction, they needed help in accessing the finance and marketing of the finished products. This included quality testing, branding and opening of sale counters in urban areas. There was a perception that FPOs and their members had been less exposed to the new development in their field. Perhaps, this was one of the reasons their products lacked a competitive edge. Efforts at three levels could be helpful—exposure to new technology, quality testing of the products, brand creation and availability of the markets.
Besides these external challenges, there were some major internal concerns in the functioning of producer companies. It was found that even if the organisation and its majority members were women, they were yet to reach the leadership level. If women members were encouraged to join a leadership role in FPOs, it would positively impact women’s empowerment. Most of the time, parent non-government organisations (NGOs) had long-term control over the functioning of FPOs through proxy functionaries. It also bred non-transparency in the financial matters of FPOs.
Concluding Remarks
Seeking to assess the functioning of FPO in the framework of member centrality, the study collected data from 10 selected FPOs spread in different regions of the north Indian state of Uttar Pradesh. Generally engaged in agri-processing activities, these producer companies adopted specific business models to suit their needs but the underlying premise in most of the cases was aggregation and value addition.
During the research, it was profoundly experienced that given its resource base, priorities, and risk appetitive of shareholders, and business opportunities, FPOs designed their business model on aggregation at both ends-inputs and outputs, thus scaling up their economy, reducing transaction cost, enhancing market reach resulting in increased bargaining power, dropping risks, resulting in profits for shareholders. FPOs attempted convergence with the various government departments and business outlets.
Next, an important finding of this research was that most members who were categorised as landless and marginal farmers and larger farmers’ category found the positive contribution by FPOs in a varied way. For instance, large farmers were more focused on HYV, and smaller farmers benefitted due to exposure to new techniques. This has impacted the earnings of FPOs and their members’ households.
However, the functioning of the FPOs has its limitation as has been discussed above at length. The most important limitation was associated with a lack of credit. It has been known that getting access to credit from the formal financial structure was still tedious work for the benign farmers and their organisations.
Further, the FPO model has the potential to become sustainable in terms of its significance to the livelihood of members, but it would have to learn from some of the success stories of the cooperative movement. One of them is related to achieving a greater economy of scale by forming federations of the producer companies. It would also have to collectivise production to have cost-competitiveness.
Except for a couple of FPOs, most convergence initiatives were very limited, mostly to the government departments and public sector agencies. FPOs should be given guidance to approach private sector entities operating in their field. HHP Company could be a role model for other FPOs in this regard.
The relationship between FPOs and parent NGOs was a complex one. However, the latter’s support is essential for the stability of the former. But continued absolute control, directly or indirectly, had the danger of converting it into a family business and consequently not being able to realise its potential. NGOs should be sensitised on a thin line between ‘support’ and ‘control’.
The role of the members was very limited in the governance of the FPOs. Access to credit was a perpetual problem for FPOs, especially for their expansion plans. Inter-FPO linkages should be strengthened. All FPOs of a district and adjoining region should start doing business with each other.
Annexure
Basic Information of FPOs.
Vindhya Sabji & Beej Producer Co. Ltd, Mirzapur Chaubepur Milk Producer Co. Ltd, Kanpur Nagar Ekta Nature Farming Producer Co. Ltd, Kanpur Nagar Khet Kisan Producer Co. Ltd, Fatehpur Pragati Gram Fresh Producer Co. Ltd, Allahabad Sonpari Farmers Producer Co. Ltd, Pratapgarh Kaustubh Agro Producer Co. Ltd, Hamirpur Vikas Path Farmer Producer Co. Ltd, Lalitpur Hiltron Honey Producer Co. Ltd, Bijnor Bareilly Kisan Agro Producer Co. Ltd, Bareilly
Annual Turnover (in Rs Lakhs).
Annual Profit & Loss (–) (in Rs Lakhs).
Footnotes
Notes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors disclosed receipt of the following financial support for the research, authorship and/or publication of this article: The authors are thankful to National Bank for Agriculture and Rural Development (NABARD) for supporting this study. They are also thankful to the Director, GIDS for continuous support during the support of the study. The authors thank the anonymous referee for her/his insightful comments.
