College of Agribusiness Management,

GovindBallabh Pant University of Agriculture and Technology,

Pantnagar

National Bank for Agriculture and Rural Development

SYNOPSIS

1. Name of Student : Gaurav Pokhriyal

2. Id No. : 44587

3. Degree Programme : MBA(Agribusiness)

4. Date of Admission : July 2017

5. Project Title : Viability of Farmer Producers

Organizations- Study of existing FPOs

promoted by NABARD- Suggestion for

scaling up the operation and attaining self-

viability
1. Introduction
Agriculture sector in India is of paramount importance to the national inclusive developmental agenda as
more than 60% of the population is dependent on agricultural livelihoods, not to speak of the food and
nutrition security. Faced with multiple risks and challenges, the sector, being vastly diverse, calls for
multi-pronged strategies and programmes to make it a sustainable livelihood for millions of farmers.
From this perspective, doubling the farmers' income has been a policy priority of the nation. Small holder
agriculture poses quite a challenge to this national priority what with 80% of operational land holding
being marginal and small and share of marginal holdings (below 1 hectare) has increased to 92.4million
out of the total holdings of 137.8 million and there has been further decrease in the average size of the
holdings itself due to fragmentation. The state of the poverty / deprivation of small farmers in Rainfed
areas which form the bulk of small and marginal holdings has been well documented. Small farming
suffers from several disadvantages – scale, lack of access to credit, technology and market. They remain
deprived, disorganized and diffident. Making the small farming viable and sustainable is a foremost
challenge to the national policy priority of doubling farmers' income. Organizing small farmers and
corporatizing for efficient management of the small farms as collectives has been recognized and adopted
as a key strategy and in the past five years there has been an intensive focus in organizing farmers
particularly small farmers as Farmers' Producer Organizations (FPOs) largely as Farmers Producer
Companies (FPCs)under the company law. Small Farmers Agriculture Consortium (SFAC) of
Agricultural Ministry, Govt. of India and NABARD have been investing in the promotion of FPOs / FPCs
with the involvement of NGOs, Civil society groups and farming professionals.

Collectivization of producers, especially small and marginal farmers, into producer organizations has
emerged as one of the most effective pathways to address the many challenges of agriculture but most
importantly, improved access to investments, technology and inputs and markets. Department of
Agriculture and Cooperation, Ministry of Agriculture, Govt. of India identified farmer producer
organization registered under the special provisions of the Companies Act, 1956 as the most appropriate
institutional form around which to mobilize farmers and build their capacity to collectively leverage their
production and marketing strength. The FPO offer a variety of services to its members. It can be noted
that it is providing almost end-to-end services to its members, covering almost all aspects of cultivation
(from inputs, technical services to processing and marketing). The FPO will facilitate linkages between
farmers, processors, traders and retailers to coordinate supply and demand and to access key business
development services such as market information, input supplies, and transport services. Based on the
emerging needs, the FPO will keep on adding new services from time to time. The set of services include
Financial, Business and Welfare services. An indicative list of services includes:

 Financial Services: The FPO will provide loans for crops, purchase of tractors, pump sets,
construction of wells, laying of pipelines. Input Supply Services: The FPO will provide low cost
and quality inputs to member farmers. It will supply fertilizers, pesticides, seeds, sprayers, pump
sets, accessories, and pipelines.

 Procurement and Packaging Services: The FPO will procure agriculture produce from its
member farmers; will do the storage, value addition and packaging.
  Marketing Services: The FPO will do the direct marketing after procurement of agricultural
produce. This will enable members to save in terms of time, transaction costs, weighment losses,
distress sales, price fluctuations, transportation, quality maintenance etc.

 Insurance Services: The FPO will provide various insurance like Crop Insurance, Electric
Motors Insurance and Life Insurance.

 Technical Services: FPO will promote best practices of farming, maintain marketing
information system, diversifying and raising levels of knowledge and skills in agricultural
production and post-harvest processing that adds value to products.

 Networking Services: Making channels of information (e.g. about product specifications,

market prices) and other business services accessible to rural producers; facilitating linkages with
financial institutions, building linkages of producers, processors, traders and consumers,
facilitating linkages with government programmes.

Table 1.1- current status of FPOs all over India (source: NABARD)

No. of states 29

No. of districts 470

No. of FPOs 2073

No. of shareholders 558538

1.1 Problem statement

India is the world’s largest and second largest producer of many agriculture commodities but there still
exists a huge gap between per capita demand and supply due to enormous wastage during post-harvest
handling & marketing. These losses are a missed opportunity to recover value towards the returns to
farmers. The deploying of appropriate strategic and operating models, will allow the efficient closure of
gaps between demand and supply so as to contribute to doubling farmers’ income.

As identified by Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India,

Collectivization of producers, especially small and marginal farmers, into producer organizations or
promoting FPOs for collaborative farming has emerged as one of the most effective pathways to address
the many challenges of agriculture but most importantly, improved access to investments, technology and
inputs and markets.

A few government-funded programs offer initial financial support for formation of farmer producers’
organizations (FPOs). This support usually covers the FPO’s administrative overheads for a few years.
The purpose behind the support appears to be to provide a substitute route for providing services of inputs
and also of pooled marketing to farmers in a contiguous block of villages, particularly after the death of
the multipurpose or sale-purchase co-operatives set up in the bye gone era. In fact, FPOs established and
supported this way are the most numerous.

The rationale offered by promoters of these FPOs is of a common genus — individual farmers have small
bargaining power and knowledge. When they go to buy inputs for their crops, each of them has to spend
on logistics, spend his time and then depend on goods offered by the input supplier who considers him
creditworthy. These suppliers are more concerned with margins offered by the input-producing entities
rather than the quality of the inputs. Hence, farmers end up buying indifferent quality inputs at exorbitant
prices due to their small demand, remoteness and poor access to information.

In the first place, even within a contiguous cluster of villages, the diversity of inputs such as seeds needed
is significant. This arises due to differing objectives of different classes of farmers. There is also an
amazing variation in soil and the degree of match between the soil and the water available for irrigation.
The FPO can’t possibly cater to all this variety and tends to select a few seeds and a few brands of other
inputs in which it will deal. In the process, a degree of responsibility regarding performance of these
inputs shifts to the FPO. Recent experience in western Madhya Pradesh suggests that the FPO faces ire of
the farmers if the seeds and inputs it provided fail to perform.

The second issue is that the logistic costs and information asymmetry faced by farmers arises primarily in
a poorly connected market dominated by an oligopoly. When road networks improve (or when the
quantities demanded by the farmer’s rise, creating an incentive for many traders to enter), the oligopoly
leads to a near-competition and the advantages of pooling of the FPO vanish. On one hand, the overhead
costs of the FPO rise; on the other, the volumes come under stress, putting its finances under strain.

The problems on the output side arise primarily due to the limited working capital the FPO can access and
its complete inability to absorb risks of any trade process. The notion that pooling of produce of a few
hundred farmers will enable the FPO to play a role to decisively influence market price is naïve and
mistaken. Most commodity markets are much deeper than necessary for this possibility.

The question is that on what terms does the FPO undertake marketing on behalf of the members? If it acts
merely as an intermediary of a large procurement agency (such as the state agencies doing procurement
operations), its financial commitment is as small as its real service. Even here, the question is whether it
can negotiate and manage the inevitable valuation variations that arise due to differences at stages of
weighing and quality assessment.

There is also the issue of the fidelity of the staff of the FPO undertaking these operations. There are many
examples where the staff favours one farmer and records weight and quality favorably for him, and makes
deliberate mistakes for another. Even if the staff does not do so, the difference between quality as
assessed at the receiver’s end (for instance, a cooperative dairy plant) and the quality as recorded at the
village level remains. For commodities that the FPO buys, stocks and sells, the issues are more serious. It
needs to manage the stocks properly without pilferage and without losses due to rodents, etc. It must
manage variations in moisture loss, etc.

And of course, it will have to make a part or full payment to producers at the time of receiving the goods,
pay the rent and other costs associated with stocking. And there is a real possibility that the prices will
turn adverse, thus removing any chances of covering all these costs.

The postnatal support that an FPO needs is in managing precisely all the above functions and minimizing
the losses inherent in them. Experienced people used to handle these logistic and merchandising issues
can provide such support. The promoting organizations or financial supporters in government agencies
lack that support or necessary managerial powers to manage the function by absorbing inevitable risks
and costs.

1.2Objectives of the study

a) To Identify the pain points in growth and managing the FPOs
b) To study the current status of FPOs promoted by NABARD
c) To give suggestions for scaling up the operations of FPOs and help them to achieve self-viability

2. Research methodology

2.1 Research design

For this research exploratory research design will be used

2.2Sources of data
Secondary data will be used to identify the FPOs promoted by NABARD
Primary data will be collected from these FPOs

2.3Area of study
Study is based on Uttarakhand hence four district are selected for the study from Uttarakhand,
one hilly district from Garhwal region i.e. Uttarkashi and one from Kumaon region i.e. Nanital
and one district from the plains from Garhwal i.e. Haridwar and one from the Kumaon i.e. Udham
Singh Nagar.

2.4Sample size
A sample size of 16 FPO is taken for the study

2.5Sampling technique
Judgmental sampling will be used for the study
 2.6Instruments used
Questionnaire will be used for primary data collection

2.7Analysis tool used

will be used for analyzing the data
Pie charts and bar graphs will be used to represent the data
Tabular analysis will be used to group the data

3. References
1. Research Report IDC-16 ICRISAT Development Center

2. Annual report 2017-18 Department of Agriculture, Cooperation & Farmers Welfare Ministry of
Agriculture & Farmers Welfare
Government of India

3. Venkatesh Tagat and Anirudh Tagat, 2012The potential of farmer producer organizations in India

4. Policy & process guidelines for farmer producer organizations ,2013 DEPT. OF
AGRICULTURE AND COOPERATION

5. Anshul Bhamra, Tarang Singh, A FPO case study in India

6. NABARD, retrieved June 5, 2018, from http://www.nabard.org