State of India’s Livelihood (SOIL) Report 2021

In News

• The State of India’s Livelihood (SOIL) Report 2021 stated that only 1-5 percent of Farmer producer organisations (FPOs) have received funding under central government schemes introduced to promote them in the last seven years.
  • It is an annual Report released at the Livelihoods India Summit, an initiative of Access Development Services (a national livelihoods support organization).

Key Highlights

• Sanctioned cases:
  • Maharashtra has the highest number of cases sanctioned (144), followed by Tamil Nadu at 104 and Uttar Pradesh at 96. West Bengal has the highest coverage, followed closely by Karnataka and then Tamil Nadu.
• Equity Grant Scheme and Credit Guarantee Scheme:
  • Equity Grant Scheme and Credit Guarantee Scheme were the two primary programmes introduced for FPOs to avail funds to support their activities. 
  • In the Credit Guarantee Scheme, which provides risk cover to banks that advance collateral-free loans to FPCs up to Rs 1 crore, only about 1 per cent of registered producer companies have been able to avail the benefits.
• 10K Policy:
  • 10K (10,000 FPOs) policy has played an important role in bringing attention to the importance of collectivising small and marginal farmers, and more needs to be done. 
• 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. This is a gap that has not been addressed yet.

Farmers Producer Organizations (FPOs)

• About: 
  • It is a generic name, which refers to farmer- producers’ organization incorporated/ registered either under Part IXA of Companies Act or under Co-operative Societies Act of the concerned States.
  • It is formed for the purpose of leveraging collectives through economies of scale in production and marketing of agricultural and allied sector.
• Concept: 
  • The concept behind Farmer Producer Organizations is that farmers, who are the producers of agricultural products, can form groups. 
  • To facilitate this process, the Small Farmers’ Agribusiness Consortium (SFAC) was mandated by Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India, to support the State Governments in the formation of Farmer Producer Organizations (FPOs).
• Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs):
  • The Government of India has approved and launched a Central Sector Scheme  to form and promote 10,000 new FPOs till 2027-28.
  • Prime Minister Narendra Modi, on 29 February 2020, launched 10,000 FPOs across India from Chitrakoot.
  • Under the scheme, the formation and promotion of FPO is based on Produce Cluster Area approach and specialized commodity-based approach. 
  • While adopting cluster-based approach, formation of FPOs will be focussed on “One District One Product” for development of product specialization.
  • Implementation of the Scheme:
    • Under this scheme, formation & promotion of FPOs are to be done through theImplementing Agencies (IAs). As of February 2021, nine IAs had been finalized for formation and promotion of FPOs viz.:
      • Small Farmers Agri-Business Consortium (SFAC)
      • National Cooperative Development Corporation (NCDC)
      • National Bank for Agriculture and Rural Development (NABARD)
      • National Agricultural Cooperative Marketing Federation of India (NAFED)
      • North Eastern Regional Agricultural Marketing Corporation Limited (NERAMAC)
      • Tamil Nadu-Small Farmers Agri-Business Consortium (TN-SFAC)
      • Small Farmers Agri-Business Consortium Haryana (SFACH)
      • Watershed Development Department (WDD)- Karnataka
      • Foundation for Development of Rural Value Chains (FDRVC)- Ministry of Rural Development (MoRD)
• Need for FPOs:
  • Small and marginal farmers: 
    • Nearly 86 per cent of farmers are small and marginal with average land holdings in the country being less than 1.1 hectare.
    • Challenges faced by them: 
      • Production: These small, marginal and landless farmers face tremendous challenges during agriculture production phase such as for access to technology, quality seed, fertilizers and pesticides including requisite finances.
      • Marketing: They also face tremendous challenges in marketing their produce due to lack of economic strength.
• Solution thru FPOs:
  • FPOs help in collectivization of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues. 
  • Members of the FPO will manage their activities together in the organization to get better access to technology, input, finance and market for faster enhancement of their income.
• Objectives of FPOs:
  • To provide holistic and broad-based supportive ecosystem to form 10000 new FPOs to facilitate development of vibrant and sustainable income-oriented farming and for overall socio-economic development and wellbeing of agrarian communities.
  • To enhance productivity through efficient, cost-effective and sustainable resource use and realize higher returns through better liquidity and market linkages for their produce and become sustainable through collective action.
  • To provide handholding and support to new FPOs up to five years from the year of its creation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages and use of technology etc.
  • To provide effective capacity building to FPOs to develop agriculture entrepreneurship skills to become economically viable and self-sustaining beyond the period of support from the government.

Challenges to FPOs

• Lack of/ Inadequate Professional Management:
  • Farmers’ Organizations are required to be efficiently managed by experienced, trained and professionally qualified CEO and other personnel under the supervision and control of democratically-elected Boards of Directors. 
  • However, such trained manpower is presently not available in the rural space to manage FPO business professionally.
• Weak Financials:
  • FPOs are mostly represented by SF/MF with poor resource base and hence, initially they are not financially strong enough to deliver vibrant products and services to their members and build confidence.
• Inadequate Access to credit:
  • Lack of access to affordable credit for want of collaterals and credit history is one of the major constraints the FPOs are facing today. 
  • Further, the credit guarantee cover being offered by SFAC for collateral free lending is available only to Producer Companies (other forms of FPOs are not covered) having minimum 500 shareholder membership. 
  • Due to this, large number of FPOs particularly those, which are registered under other legal statutes as also small size FPOs are not able to access the benefits of credit guarantee scheme.
• Lack of Risk Mitigation Mechanism:
  • Presently, while the risks related to production at farmers’ level are partly covered under the existing crop / livestock / other insurance schemes, there is no provision to cover business risks of FPOs.
• Inadequate Access to Market:
  • Marketing of produce at remunerative prices is the most critical requirement for the success of FPOs. 
  • The input prices are largely fixed by corporate producers. 
  • The cultivators loose through the complex gamut of market processes in the input and output prices. 
  • There are more market opportunities; if FPOs can identify local market needs of the consumers and have tie-up for sale of its produce. 
  • The linkage with Industry/ other market players, large retailers, etc. is necessary for long term sustainability of FPOs.
• Inadequate Access to Infrastructure
  • The producers’ collectives have inadequate access to basic infrastructure required for aggregation like transport facilities, storage, value addition (cleaning, grading, sorting, etc.) and processing, brand building and marketing. 
  • Further, in most of the commercial farming models, the primary producers are generally excluded from the value chain.
• Lack of technical Skills/ Awareness:
  • Inadequate awareness among the farmers about the potential benefits of collectivization & non availability of competent agency for providing handholding support. 
  • Further, lack of legal and technical knowledge about various Acts and Regulations related to formation of FPOs and statutory compliances thereafter.  

Way Ahead

• There is a need 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.

Source: DTE