Small Farmers - Big Challenges and even
Bigger Opportunities


Challenges in the Agriculture Sector

The Government of India has set itself the objective of doubling farmers’ incomes by 2022. While the announcement has triggered a debate on whether this target is too ambitious or even achievable, it has also brought in focus the specific challenges that the Indian agricultural sector faces towards the realisation of this objective.

In India, the agriculture sector has been under duress of multiple challenges. Agricultural growth has been at best stagnant and has been marked by declining productivities in many regions. This has led to livelihood stress for farmers and waning interest in agriculture. The hurdles in the path of agricultural growth in India become even more apparent when one looks at the context of land distribution and the impacts of climate change and natural resource degradation. About 85% of farmers in India are small and marginal and characterised by low investment capacity and risk resilience. The challenge gets compounded by the impacts of climate change that are being manifested in the form of droughts and erratic rainfall patterns amongst others, specially affecting the rainfed areas which constitute about 60% of the net cultivated area.

It is apparent that the span between the ambition and the current situation is a wide one and that which is riddled with a host of critical challenges. Any roadmap designed for achieving the stated objective would thus have to address these critical challenges in an intrinsic and holistic manner. A significant first step towards this has been the recognition by the Government that boosting agricultural growth from its current stagnation will require a shift in focus from food security of the nation to income security of the farmers. As put by the PM, agriculture has to be employment oriented to make it attractive to the new generation of cultivators.

FPOs as a Promising Approach

It is in this context that the approach of establishing Farmer Producer Organisations (FPOs) takes centre stage as one of the promising approaches towards enabling farmers to operate in a more profitable manner and thereby secure their livelihoods. This is acknowledged even at the national level as reflected in the identification of FPOs registered under the special provisions of the Companies Act, 1956 as the most appropriate institutional form around which to mobilise farmers and build their capacity to collectively leverage their production and marketing strength by the Department of Agriculture and Cooperation, Ministry of Agriculture, Government of India.

Collectivisation of farmers into FPOs has emerged as one of the most effective approaches to address the many challenges facing the agriculture sector. Especially in the case of small and marginal farmers, it has enabled improved access to investments, technology and inputs and markets by effectively negating the handicap of poor bargaining power that they face when dealing with markets and other agencies in their individual capacity.

Lessons from Ongoing FPO Initiatives

While many of the mainstream initiatives on the promotion of Farmer Producer Organisations (FPOs), such as those by NABARD and several State Governments, are relatively new and in the establishment phase, there have been several older pilot initiatives implemented across the country by various agencies that have already provided lessons that can inform the policies for the promotion of FPOs that are being adopted at the national and the state level. The Taragram Yatra 2016 held in September 2016 had ‘Community Models in Agriculture for Food, Resource and Livelihood Security’ as one of its key themes and provided a platform for decision makers, civil society practitioners, academicians and businesses working in areas of farmers’ livelihoods and food security including the promotion of FPOs to share lessons from their respective fields and deliberate on the challenges and opportunities for promotion of FPOs. The participants also had the opportunity to engage with members of Sahaja Aharam Producer Company, a FPO in Medak District of Telangana nurtured by the Centre for Sustainable Agriculture (CSA). Some of the issues that emerged as being key for the sustainable development of FPOs are discussed in further detail while also drawing from the context of the National Policy for the Promotion of Farmer Producer Organisations.

Adopting Triple Bottom Line Performance Indicators

While a FPO is primarily a business entity, there is a risk that a narrow focus on financial performance indicators can undermine the various other benefits that it has been observed to have on its member farmers and as well as on the natural resources management regime in its catchment area. The national policy seems to suggest an emphasis on financial growth while the prerogatives pertaining to institutional strengthening and orienting the FPOs towards promoting environmentally sustainable practices are briefly mentioned or implied. The policy and its implementation mechanisms can be strengthened through more overt emphasis on integrating a holistic implementation and evaluation framework that gives equal emphasis to the performance of FPOs on the social and environmental front besides its monitoring along economic parameters and which takes cognizance of incremental but sustainable improvements.

Strengthening the Institutional Foundation

It is important to recognise that a FPO can be put on a path of organic and sustainable business growth only on a foundation of institutional strength and resilience. Undue emphasis on financial turnover as the primary performance indicator may lead to a situation where financial growth is being externally driven through the efforts of supporting agencies but such growth is unlikely to be sustainable without the proactive engagement and ownership of the FPO members in the management of this growth. Participatory engagement of member farmers in decision making will require to be emphasised in the implementation guidelines and support systems. Institutional strengthening will also lead to more efficient and effective access by member farmers of existing support systems such as crop insurance and infrastructure development opportunities such as the utilisation of NREGS funds for building water harvesting assets.

Investing in Securing the Production End Sustainably

A recurring insight emerging through the discussions was the criticality of first strengthening the foundation of a FPO at the production end by investing in farmers’ capacities to select and adopt sustainable systems of production and their role in influencing such choices across its catchment of farmers interacting with it as members or customers. It is obvious that the FPO policy alone cannot account for provisions for addressing this requirement and thus there is a need for the implementation of the FPO policy to be dovetailed with the other agricultural policies and ongoing programmes to capitalise successfully in those contexts where the sustainable production base has already been secured. Besides securing production, enhanced emphasis on sustainable agricultural systems will also yield multiple co-benefits in nurturing the ecological health of the natural resource base. The potential presented by FPOs as a distribution channel for increasing the efficiency of last mile delivery of improved agri-inputs needs to be capitalised upon in tandem with targeted capacity building of farmers to be able to adopt these new technologies and practices towards furthering this objective.

Rethinking the Credit Support and Tax Regime

It emerged through the deliberations that FPOs that are able to demonstrate robust financial growth are saddled with high tax rates that kick in with higher turnover figures. However, poor turnover figures make it difficult to attract credit support necessary for upgrading business operations presenting a dilemma where the turnover, whether high or low is proving to be a hindrance to the sustained growth of the FPO. The tax regime may also be designed to incentivise sustainable systems of production.

Flexibility for Enabling Context Specific Approaches

Finally, it will be crucial to embed a level of flexibility in the policies to allow for programmes to be designed in a manner that they are sensitive and cater to the diversity in local contexts including aspects of market environment, farmers’ capacities, investment potential and environmental constraints and opportunities. This flexibility may also need to extend to the window for maturation available to the FPO in the context of its baseline skill sets and management attributes. The growth trajectory of each FPO cannot be completely governed by externally set targets but must reflect the aspirations and vision of its member farmers if such growth is to be organic and sustainable.

Mayukh Hajra

• Policy & Process Guidelines For Farmer Producer Organisations (Ministry of Agriculture, Govt. of India)
• Doubling Farmers' Incomes by 2022 – What Would It Take? (S Chandrasekhar, Nirupam Mehrotra; Economic & Political Weekly - April 30, 2016 vol lI no 18

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