Three new farm Acts were recently introduced in the country. The most important of these, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 is aimed at putting an end to the monopoly of the Agriculture Produce Marketing Committee (APMC) mandis. Earlier, under the 1964 APMC Act, all the farmers were required to sell their produce at the Government-regulated mandis. The arhatiya (middlemen) in such cases helped the farmers in selling their crops to private companies or Government agencies. While APMCs will continue to function, farmers will now have a wider choice. But one of the powerful ways that growers can serve as their own middlemen is through a livelihood and development strategy that collectivises the smaller primary producers into locally-managed Farmer Producer Organisations (FPOs) which are then integrated into an inclusive value chain. This is a sustainable, market-based approach in which resources of member farmers (for example, expertise and capital) are pooled to achieve more together than they can individually. It enables members see their work through an entrepreneurial lens and confers economies of scale, better marketing and distribution, more investable funds and skills, greater bargaining power, access to credit and insurance, sharing of assets and costs, opportunities to upgrade skills and technology and a safety net in times of distress. The best-known example of an FPO is that of Amul (Gujarat Cooperative Milk Marketing Federation Ltd), which is a dairy cooperative with over three million producer members.
In this model, thousands of scattered small farms are systematically aggregated and provided centralised services around production, post-harvest and marketing. This helps reduce transaction costs of the farms for approaching value chains and makes it easier for small farmers to access inputs, technology and the market. It also opens opportunities to bring primary processing facilities closer to the farm gates and helps producers gather market intelligence and manage the value chain better with digital agriculture tools. An FPO is a hybrid between a private limited company and a cooperative society. Hence one can see it enjoy the benefits of professional management of a private limited company as well as reap the benefits of a cooperative society.
Small-holder farmer producer groups are a key medium to build scale on account of the confidence, support and buyer/seller power they provide. They are able to achieve economies of scale through post- harvest infrastructure (collection, sorting, grading facilities), establishment of integrated processing units, refrigerated transportation, pre-cooling or cold stores chambers, branding, labelling and packaging, aggregation and transportation, assaying, preconditioning, grading, standardising and other interventions. The key benefit is the marketing support that links producers to mainstream markets through aggregation of subsistence-level produce into economic lots that can significantly raise the share that peasants get from the money people pay for their food.
The FPOs are owned and governed by shareholder farmers and administered by professional managers. They adopt all the good principles of cooperatives, the efficient business practices of companies and seek to address the inadequacies of the cooperative structure. The best way for these organisations is to leverage their collective strength through a full value chain from the farm to the fork. The underlying principle is similar to that of the full stack approach. This approach makes the sponsor, catalyst or promoter responsible for every part of the experience. In short, it is a whole-farm systems approach. It creates a complementary support ecosystem that boosts farm yields, reduces negative environmental impacts and increases market access and small-holder farmer incomes. It also provides sustainability interventions, including sustainable irrigation products and practices. Moreover, the value chain uses a business approach in order to make it viable.
Apart from the collective strength that group synergy generates, the support structures help in building the capacities of producers to deal with input suppliers, buyers, bankers, technical service providers, development-promoting agencies and the Government (for their entitlements), among others. One of the FPO’s important roles is linking farmers to reliable and affordable sources of financing in the funding ecosystem to meet their working capital, infrastructure, development and other needs. The collective works to reorient the enabling environment by influencing policies in this direction. The extension services available through the collectives include augmenting farmer capacity through agricultural best practices, agronomic advice, training on use of bio-fertiliser, pest management, modern harvesting techniques and access to optimal environmental practices. The success of a collective hinges on many factors: The technical support it receives, its institutional base, social and professional composition, land access and cropping patterns of members and adaptation of the model to the local context.
Sadly, rich farmers are significantly more likely to participate than the less privileged. They often become administrative members and use services substantially more for themselves than for rank-and-file members. It is, thus, necessary to strengthen democratic processes in these institutions.
Most promoters of the value chain are now successfully using the sub-sector approach, which allows for a focus on specific sub-sectors and helps in strengthening the ecosystem within which they are able to transition from a comparative to a competitive advantage. The value chain also facilitates capacity building support and use of modern tools including technology that can help to improve weather forecasting, agricultural processing, soil health monitoring crop identification as well as damage control, and mapping of available water resources. Some of these collectives are using digital tools to make farming climate-resilient, nutrition-sensitive and inclusive. The farmers are also able to achieve increase in the quantity, quality and consistency of production of crops. For achieving better scale, the value chain needs to steward limited resources and build production systems that natural systems can support over time. This logic embraces the use of soil management regimes that incorporate modest, targeted use of synthetic fertilisers to boost farmer incomes and production without affecting the quality of soil. The technical support is complemented by better water management through rain water harvesting and recharging of the ground water table; introduction of multi-cropping and diverse agro-based activities; use of low-cost and small plot irrigation technologies, which are commercially viable and environment-friendly. There is also a need for a policy to pool land or increase the size of holdings through collective farming or some other way. Consolidation of small-holders’ land holdings through cooperatives can also create synergies, especially for the leasing of large equipment or bulk input orders. It helps in creating cold storage for controlling post-harvest losses. Financing for setting up micro-irrigation facilities and rainwater harvesting modules would help create an infrastructure for sustainable water supply and hence aid farm productivity.
FPOs should also be encouraged to participate in Minimum Support Price-based procurement operations. The eNAM platform can connect farmers with distant buyers. However, the biggest limitation of eNAM and other similar programmes seems to be that the vast majority of farmers are not tech-savvy. This is further compounded by low internet penetration and erratic electric supply. We need robust farmer-producer institutions which will have capital and the risk-taking ability to set up processing zones which are critical for preventing losses on account of rotting foodgrains. Together with FPOs, farmers can be their own middlemen and India can finally see the dream of farmers’ incomes being doubled being realised.
