SOIL Report- State of India’s Livelihood Report 2021

Context:

The State of India’s Livelihood Report (SOIL Report) 2021 has stated that just 1-5 % of Farmer Producer Organizations (FPOs) have received funding under central government schemes introduced to promote them in the last seven years.

About SOIL Report:

• The State of India’s Livelihoods (SOIL) Report is an annual Report released at the Summit (Livelihoods India Summit 2021).
• It’s an authoritative commentary on policy and program of the government, potential opportunities for the poor, on the role of the private sector and the civil society in livelihoods promotion, tracks trends and analyses the environment in the sector.
• The SOIL Report is an important reference document, widely referred to by policy makers, promoters as well as practitioners and informs and influences policy from other countries in the region. While so far SOIL was limited to tracking trends within India
• It has analyzed only Farmer Producer Companies (FPC — FPOs registered under The Companies Act, 2013) since they make up a large majority of the organizations started in recent years.

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Farmer Producer Organizations (FPOs):

• The concept of ‘Farmer Producer Organisations (FPO)’ consists of collectivization of producers especially small and marginal farmers so as to form an effective alliance to collectively address many challenges of agriculture such as improved access to investment, technology, inputs, and markets.
• FPO is one type of Producer Organisation (PO) where the members are farmers.
• A PO is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen.
• Voluntary Organisations: FPOs are voluntary organizations controlled by their farmer-members who actively participate in setting their policies and making decisions.
• They are open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
• Provide Education and Training: FPOs operatives provide education and training for their farmer-members, elected representatives, managers, and employees so that they can contribute effectively to the development of their FPOs.

What are the benefits emanating from FPOs?

FPOs can yield a variety of benefits, especially for marginal and small farmers. These include,

Provide greater bargaining power: Since FPOs allow its members to negotiate as a group, it will provide greater bargaining power in the purchase of inputs, obtaining credit, and selling the produce.

With the FPOs, small and marginal farmers can get low-cost and quality inputs to members. Hence, they were able to realize higher returns for their produce, in turn, help India to double its farmer’s income.

For example, tribal women in the Pali district of Rajasthan formed a producer company, and they are getting higher prices for custard apples. Similarly, FPOs in Gujarat, Maharashtra and Madhya Pradesh, Rajasthan and some other states have realised higher returns for their produce.

The International Food Policy Research Institute’s comparative study of FPOs in Maharashtra and Bihar has revealed that FPO farmers are doing better than non-FPO farmers. Also, within FPOs, Organically evolved FPOs (OFPOs) are more beneficial than pushed or Promoted FPOs (PFPOs).

According to the survey, OFPOs resulted in an increase in gross income while only 2% indicate a decline in the same. On the other hand, only 32% of the non-members indicate an increase in gross income.

Engage farmers in collective farming: The average farm size declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16. So, promoting FPOs can result in farmers engaging in collective farming and addressing productivity issues emanating from small farm sizes. Further, they may also generate additional employment due to the increased intensity of farming under FPOs.

Development of Social capital: FPOs can lead to 1. Improved gender relations and decision-making of women farmers, 2. Enhance members’ health and nutritional outcomes as they are realising higher returns, 3. Realise the power of working in cooperation instead of an individual level.  All these will improve the social capital of farmers.

Support for FPOs:

• Promoting Institutions/Resource Agencies (RAs): FPOs are generally mobilized by promoting institutions/ Resource Agencies (RAs).
  • Small Farmers’ Agribusiness Consortium (SFAC) is providing support for the promotion of FPOs.
  • The resource agencies leverage the support available from governments and agencies like National Bank for Agriculture and Rural Development (NABARD) to promote and nurture FPOs.
  • Formation & Promotion of 10,000 FPOs: The Ministry of Agriculture and Farmers Welfare has launched the Central Sector Scheme titled ‘Formation & Promotion of 10,000 Farmer Producer Organisations (FPOs)’.
  • Equity Grant Scheme: SFAC has been offering equity grants up to a maximum of Rs 15 lakh in two tranches within a period of three years since 2014.
    • Over the past seven years, only 735 organisations have been given grants as of September 2021— just 5 % of the total Producer Companies (PCs) currently registered in the country.
  • Credit Guarantee Scheme: It provides risk cover to banks that advance collateral-free loans to FPCs up to Rs 1 crore.
    • Only about 1% of registered producer companies have been able to avail the benefits.

Challenges Faced by FPOs:

• Lack of Business Skills: While Resource Agencies (RAs) normally have social mobilization skills, they lack business development and marketing skills, which are critical for the success of FPOs as a business entity.
  • Missing Supply Chain Operations Capabilities: Focus on management capabilities in the supply chain operations, nuances of market dynamics and linkages, business planning according to market intelligence and market development is clearly missing in the majority of the training programmes associated with FPOs.
  • Various Distortions: The present system suffers from distortions like multiple intermediaries and levies, lack of vertical integration (is the combination in one firm of two or more stages of production normally operated by separate firms), poor infrastructure, restrictions on the movement of agricultural commodities, and so on.
  • Limited Market Choices and Lack of Transparency: The limited market choices and lack of transparency have been the major barriers in better price realisation for the farmers.
    • Finding the right markets bypassing the present maze of intermediaries is critical.
    • Many FPOs lack the capacity to manage the supply-chain operations and store the unsold produce, besides faltering in procurement, logistics and price negotiations.

Way Forward

• Capacity Building: FPOs need to secure funding, identify and establish relations with customers, establish internal governance processes, among other things. For this, they need capacity building to be able to move from start-up phase to growth and eventually to maturity.
• Reducing the Threshold for Eligibility: It is important to make it easier for FPOs to avail government programmes and schemes for providing equity grants and loans. This can be achieved either by reducing the threshold for eligibility or by supporting FPOs to reach the eligibility criteria, or both.
• Addressing Structural Issues: Many FPOs lack technical skills, have inadequate professional management, weak financials, inadequate access to credit and inadequate access to market and infrastructure.

Source: Down To Earth