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It is not unsurprising that in today’s world, most small farmers do not want their children to follow in their footsteps. With a monthly household income of less than ₹6,000, fragmented landholdings and a 30 per cent probability of buying seeds and pesticides that could be adulterated or spurious, small and marginal farmers in India are playing a yearly roll of dice with the monsoons, with a good monsoon meaning plentiful crops and accompanying price drops and a bad one wiping out the entire crop.
Possible solutions to these challenges include increasing the price the farmer receives, improved practices to reduce inputs, value addition at farm gate, insurance, and credit models that are farmer-friendly. But there is one issue that underlies all these solutions and that is of reach. There is a practical challenge of reaching these small and marginal farmers, who number around 70 million today and the costs involved in such an effort. Collectivisation is a way of addressing this, while also giving them more ‘bargaining’ power as a group.
Farmer Producer Organisations
Collective models are well known and respected. The National Bank for Agriculture and Rural Development (NABARD) began promotion of 2,000 Farmer Producer Organisations (FPOs) in 2014-15. The government also realized the potential of the FPO in the context of doubling farmer incomes and in 2019 launched a 10,000 FPO scheme. While over 7,500 FPOs have been registered so far, only 15 per cent of these are active. Most of them only provide inputs to farmers. The real value of an FPO, to help farmers get credit or better prices for their produce is not happening.
But why are FPOs not working the way they are intended to? An FPO should help grow the farmer base, provide inputs, buy output, give them advice on crops, give them credit and insurance, facilitate post processing, etc. The breadth of activities becomes a key challenge here. How can an FPO made up of 500 to 1,000 local farmers, run by a CEO (on a salary the FPO can afford), manage such a broad set of responsibilities? In addition to working with the farmers, the FPO also has to engage with the broader farming ecosystem to set up and manage post processing activities to increase value for the farmers. Imagine a CEO sitting in Barabanki, UP, trying to negotiate prices with a big organised retailer.
Alternate model
An alternative is to have the FPO focus solely on farmer engagement and an FPO Support Unit (FPOSU) set up to help with non-farming activities. The FPOSU will be set up to work with numerous FPOs and can aggregate demand from millions of farmers to get larger discounts, negotiate with large buyers, source appropriate advisory, credit, insurance and other products and services. This will also give it the perspective of scale, to invest in understanding how partner FPOs are supporting their farmers and help build best practices to help them provide more value to their farmers.
This alternate model could transform the lives of tens of millions of small and marginal farmers. But as a nascent model, there needs to be a concerted effort to catalyze it, just as Brij Mohan did at SIDBI for the microfinance sector or Dr Verghese Kurien did with the dairy sector. We aim to play this catalytic role to develop an alternate model of an FPOSU to help FPOs serve their members better and make them commercially viable. It’s early stages, but we are already seeing interest from a number of players.
It will require supporting players who are already experimenting with such a model (like Kamatan-Samunnati) - to refine their models and help them scale, it will need incubating new players and getting players who are in adjacent spaces to adopt this. The support could include getting them information to expand to new geographies and services, introducing them to local players who they can do pilots with, providing seed funding to absorb some of the early stage risks, solving problems as they arise – be they on the ground (helping with skilled labour for crop care) or at a more macro level (enable access of a government scheme).
The author is president, The/Nudge Foundation
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