Exit co-ops, enter farmer producer cooperatives

Sinnar block in Nashik district of Maharashtra is perennially drought-prone.

Water tankers are the only source for many villages in summer. Crop failure and unseasonal rains are part of life of farmers.

But women here, as in other parts of the State, have depended on their own brand of “ATM” to fight agrarian distress. In other words, goats. For poor families, the goat is a resource that can fetch immediate money whenever they want; hence, goat-rearing is popular in the region. Women rear and sell goats and are into milk vending.

Goat serves as insurance against crop failure for the poor, especially single women farmers and widows. Goat is their lifeline. But they had never believed that this lifeline could be strengthened to make their lives better, until the Yuva Mitra, a social development organisation working in Maharashtra, brought together these women to turn their efforts into a profitable venture.

A group of activists interested in equitable participatory development under the banner of Yuva Mitra brought women in Sinnar together and established Savitribai Phule Goat Farming Producer Company Ltd (SPGFPCL) with financial support from NABARD in 2016. Today, every woman who is part of the company earns at least ₹10,000 per month, and over 8,000 women are involved in the venture, spread across 80 villages.

This wholly women-owned enterprise has a paid-up capital of ₹22.7 lakh. The company got ISO 9001:2015 certificate and is marketing goat milk in a big way to provide remunerative prices to its members, who are getting about 78 per cent more than the prevailing market prices.

A milk processing plant forms it core area of operations. NABKISAN Finance Ltd sanctioned a loan of ₹77.15 lakh to the company to set up this plant, which has a state-of-the-art facility for goat milk pasteurisation and cheese making. The company has back-end services such as training and capacity building, veterinary services, insurance services, and market linkage through weight-based goat marketing, goat milk marketing, and manure selling.

A few kilometres away from Sinner is another success story. Formed in 2010, Sahyadri Farms was registered as a Farmer Producer Company (FPC) under a provision introduced in Companies Act in early 2000. Sahyadri is today a leading producer company in India in the fruit and vegetable sector that contributes around about 10 per cent share of India’s total grape export.

Decline of cooperatives

“Maharashtra is one of the leading States where farmers are joining hands to form FPCs. One of the main reasons for the rise of FPCs is the decline of the cooperative sector. There is no doubt that rural development in Maharashtra revolved around the cooperative movement for decades. But corruption, politics, and some dynasties controlling the cooperative pushed common people out of the game. FPCs are filling the vacuum created by the cooperative sector,” says Sunil Pote of Yuva Mitra. He adds that the Companies Act and rules for forming FPCs have enabled farmers to keep the vices of the cooperative sector at bay.

According to Pote, out of 1,900 FPCs in Maharashtra only about 100-150 are functioning efficiently. “But FPCs have great potential to change the picture for rural Maharashtra and could provide jobs to rural youth to manage the value chain. FPCs have the capacity to evolve a new leadership in rural Maharashtra,” he says.

To support farmers in various aspects, ranging from input procurement to market linkages, the Government of India, through Small Farmers’ Agribusiness Consortium (SFAC), a registered society under the Department of Agriculture, Cooperation and Farmers Welfare, is promoting Farmer Producer Organisations (FPOs) by mobilising the farmers and helping them register as companies.

Currently, there are an estimated 7,374 producer companies (according to a March 2020 study on the subject by Azim Premji University) covering over 4.3 million small producers in the country. Over 4,000 FPOs are supported by NABARD and SFAC.

These trends have not gone down well with the cooperative barons. “A lot of effort is being made to block the growth of FPCs. In Maharashtra, the cooperative sector is controlled by dominant caste and class in rural areas. These dynasties not only control cooperatives, but also politics. The cooperative sector is the lifeline of Maharashtra’s politics, and not surprisingly the established leaders are agitated with FPCs,” says one of the prominent leaders in the FPC movement in Maharashtra.

He adds that established politicians are aware that once farmers become self-reliant they will not support them any more. “Politicians controlling a milk cooperative to sugar cooperative could control the life of farmers in all possible ways. But with FPCs, the picture is going to change. Not surprisingly, cooperative barons across India are putting pressure on the Centre to weaken FPCs,” he said.

The cooperative movement, which aimed to enable farmers, has become a noose around their neck, says young farmer Amit Sawant from Sangli district, which has a well-knit network of the cooperative institutions.

Sawant explains his contention with an example. There are cooperative barons in every district of Maharashtra. They have complete control over the cooperative network, from small water cooperative and credit society to sugar mills and education societies. The families who traditionally held a huge chunk of land reaped benefits of the Green Revolution by adapting to the new technology and multiplying their income. It was the same class that took the reins of the cooperative sector and established institutions.

Credit, water supply, government schemes, and benefits come through cooperative barons and farmers have to be loyal to them. When a farmer raises his voice, he is deprived of water to his field and he has to struggle to get credit from credit society. Cooperative barons have distributed their empire among their families and cronies who directly control masses that could be used as a vote bank during elections.

The difference now

“This will not be the case with FPCs. The FPC is a combination of the cooperative sector and the Companies Act, which leaves little room for anyone to usurp the institution. One who is not producer cannot control the FPC and also shares could be transferred only to the producer. There are sufficient provisions in the law to ensure that farmers don’t lose their control over the company,” says Pote, who has facilitated the formation of 20 FPCs in Maharashtra.

Despite opposition from cooperative barons, the government is keen to promote FPOs. Following the announcement in Union Budget 2019-20, the Centre has approved a Central Sector Scheme titled “Formation and Promotion of Farmer Producer Organisations (FPOs)”. The main objective of the scheme is to form 10,000 new FPOs and professionally hand-hold and promote each of these FPOs for five years. Each worthy FPO, provided it meets certain criteria, may be entitled to equity of ₹15 lakh and credit of ₹18 lakh.

Vilas Shinde, Chairman and Managing Director of Sahyadri FPO, insists that farming could be made sustainable if farmers develop a farm-to-fork strategy. According to Shinde, FPCs will pave the way for the socio-economic development of rural India and encourage entrepreneurship.

The Azim Premji University report states that producer companies face several challenges such as a weak sense of ownership among producer shareholders, under-capitalisation, inadequate business skills, poor governance and the lack of an enabling ecosystem.

Social activist Subhash Ware working in sustainable development programmes in Maharashtra says that FPCs must not follow in the footsteps of the cooperative sector. “The cooperative movement was seen as a via media between the public and private sectors. The cooperative sector strengthened the rural economy but today is dominated and manipulated by a few. The poor and marginal sections face an immense challenge of survival in the globalised world and FPCs could be the answer for the rural poor,” says Ware.