Role of FPOs for Helping Small and Marginal Farmers

Background:

  • The average farm size in India declined from 2.3 hectares (ha) in 1970-71 to 08 ha in 2015-16.
  • The share of small and marginal farmers increased from 70 per cent in 1980-81 to 86 per cent in 2015-16.
  • At the state level, the average size of farm holdings in 2015-16 ranged from 62 ha in Punjab, 2.73 in Rajasthan and 2.22 in Haryana to 0.75 in Tamil Nadu, 0.73 in Uttar Pradesh, 0.39 in Bihar and0.18 in Kerala.

Present status for the promotion of FPOs:

  • Small farmers face several challenges in getting access to inputs and marketing facilities.
  • In the last decade, the Centre has encouraged farmer producer organisations (FPOs)to help farmers.
  • Since 2011, it has intensively promoted FPOs under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments and NGOs. The membership of an FPO ranges from 100 to over 1,000 farmers.
  • The ongoing support for FPOs is mainly in the following two forms:
  • A grant of matching equity (cash infusion of up to Rs 10 lakh) to registered FPOs.
  • credit guarantee cover to lending institutions (maximum guarantee cover 85 per cent of loans not exceeding Rs 100 lakh).
  • The budget for 2018-19 announced supporting measures for FPOs including a five-year tax exemption.
  • The budget for 2019-20 talked of setting up 10,000 more FPOs in the next five years. Some studies show that we need more than one lakh FPOs for a large country like India while we currently have less than 10,000.

Performance of FPOs:

  • Experience shows a mixed performance of FPOs in the last decade. Some estimates show that 30 per cent of these are operating viably while 20 per cent are struggling to survive.
  • The remaining 50 per cent are still in the initial phase of mobilisation and business planning.
  • NABARD has undertaken a field study on the benefits of FPOs in Punjab and Madhya Pradesh.
  • The study shows that in nascent FPOs, the proportion of farmer members contributing to FPOs activities is 20-30 per cent while for the emerging and mature FPOs it is higher at about 40-50 per cent.
  • A study by International Food Policy Research Institute (IFPRI) has undertaken a comparative study of FPOs in Maharashtra and Bihar. In Maharashtra, some of the FPOs have organically evolved (OFPOs) when farmers have taken the lead to adopt market-oriented practices, develop cost-effective solutions in production and marketing. In the case of Bihar, almost all FPOs have been promoted (PFPOs).

Challenges

  • Studies of NABARD show that there are some important challenges for building sustainable FPOs.
  • Some of these are lack of technical skills, inadequate professional management, weak financials, inadequate access to credit, lack of risk mitigation mechanism and inadequate access to market and infrastructure.

3 steps to improve FPOs

1. Enhancing credit

  • Issues such as working capital, marketing, infrastructure have to be addressed while scaling up FPOs.
  • Banks must have structured products for lending to FPOs.
  • These organisations lack professional management and, therefore, need capacity building.

2. Linking with input companies

  • FPOs have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc. They need a lot of data on markets and prices and other information and competency in information technology.

3. Size of land

  • The FPOs can be used to augment the size of the land by focusing on grouping contiguous tracts of land as far as possible — they should not be a mere grouping of individuals. Women farmers also can be encouraged to group cultivate for getting better returns. FPOs can also encourage consolidation of holdings.

Conclusion

  • The FPOs have to be encouraged by policy makers and other stakeholders apart from scaling up throughout the country to benefit particularly the small holders.