FPO's and its Roadblocks

India is one old civilization where people of different languages and ethnic identities came together and living as one nation. The Cooperation among citizens not just helped economic and social interest but also strengthens the national building. According to economic historian, Charles Guide “Cooperation is self-help and each for all “. Self-help means the pride of supplying one’s own needs by one’s own resources, of being one’s own merchant banker, money lender and employer. “Each for all”, means to seek liberation, not only for oneself but for and through others.

Cooperatives:

                During the British Rule in India, Nicholson a British officer in India suggested to introduce “Raiffersen” model of German agricultural credit Cooperatives in India. As a follow-up of that recommendation, the first Cooperative Society Act of 1904 was enacted to enable formation of “agricultural credit cooperatives” in villages in India under Government sponsorship. In 1942, the Government of India enacted the Multi-Unit Cooperative Societies Act, 1942 with an object to cover societies whose operations are extended to more than one state. Under the recommendation of Mirdha Committee and the Model Cooperative Societies Act, the Government of India enacted the Multi State Cooperative Societies Act, 2002.

                            

Role of cooperatives in rural areas, play a major self-help role particularly where private business hesitate to go and public authorities do not provide basic services. Associations in many forms already have a strong presence in rural areas. They provide convenient and flexible access for members in light of few or no alternative. The types of co-operatives in India include Consumers’ Co-operative Societies, Producers’ Co-operative Societies, Marketing Co-operatives, Housing Co-operatives, Co-operative Credit Societies and Co-operative Farming Societies. 

Agricultural Cooperative:

                                                             The two primary types of agricultural services cooperatives: Supply cooperatives and Marketing Cooperative. Supply cooperatives supply their members with inputs for agricultural production, including seed, fertilizers, and fuel and machinery services. Marketing cooperatives are established by farmers to undertake transportation, packaging, distribution and marketing of farm products. Farmers are widely rely on credit cooperatives as a source of financing for both working capital and investments. Agricultural marketing societies enable farmers to benefit from increased bargaining strength. By removing intermediaries they help farmers to have a direct interaction with the consumer. The National Agricultural Cooperative Marketing Federation of India (NAFED) is an example. The financial support to the rural sector is provided through National Bank for Agriculture and Rural Development (NABARD). NABARD provides fund to state Cooperative Banks (SCBs) which in turn, indirectly finances the rural sector. The examples of such cooperatives are Krishak Bharathi Cooperative Ltd. (KRIBHCO) and the other brand name like AMUL brought the relevance of cooperatives into lime light. 

Farmer producer organisation:

                                              Farmers Producer Organisation (FPO), also known as farmers producer companies (FPC), is an entity formed by primary producers. These include farmers, milk producers, fisherman, weavers, rural artisans and craftsmen. An FPO can be a producer company, a cooperative society or any other legal form. FPOs are basically the hybrids of cooperatives and private companies. The participation, organisation and membership pattern of these companies are more or less similar to the cooperatives. But their day-to-day functioning and business models resemble those of the professionally-run private companies. The companies Act was amended by incorporating section-IX A in it allow creating and registration of FPOs under it.

i. The objective of the concept of FPC is to organize farmers into a collective to improve their bargaining strength in the market.

ii. They are owned and governed by shareholder farmers (or artisans) and administered by professional managers.

iii. They adopt all the good principles of cooperative and the efficient business  practices of companies and also seek to address the inadequacies of the cooperative structure.

iv. A Farmer Producer Company can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both.

v. The FPCs have democratic governance, each producer or member has equal voting rights irrespective of the number of shares held. 

vi. There is a limitation on the amount that can be distributed as dividend. Profit is largely distributed on the basis of “patronage”, which acts as reward for members contributing to the business. There can be 5-15 directors and expert directors can be co-opted for professional guidance.

Issues of FPOs:
                                           Many issues in the FPO still remain unaddressed due to systemic errors and stagnation of reforms.    Some of them are given below.

• The banks are usually wary of granting loans to FPOs as they do not have assets of their own to serve as collaterals. Consequently, the FPOs have to rely on loans from NBFC or micro-finance companies. They forced to raise their working capital at very high interest rates. 

• There is a restriction on trading in the shares of a FPC, as of now there is no exit route for investors. If someone is non-producer and want to invest in the equity of these companies, it is not possible. 

• The resent system suffers from distortions like multiple intermediaries and levies, lack of vertical integration, poor infrastructure, and restriction on the movement of agricultural commodities and so on.

• FPO also face difficulties in operating at the regulated mandis because of the resistance offered by the licensed traders.  Thus the limited market choices and lack of transparency have been the major barrier in better price realization for the farmers. All these issues need to be addressed and enable the FPOs to perform to their potential and reap benefits for farmers. 

Wayforward:

a. FPOs require long term capacity investments, providing hands-on experience in business planning, execution, negotiation skills, monitoring, statutory compliance etc.]

b. E-retailing and e-marketing are viable possibilities for FPOs. FPOs must ensure their ascendance up the value chain as they gain expertise in marketing.

c. ICT tools and block chain technology for agriculture are the need of the hour.

d. Block chain tech, using hyper ledger in the Agri space, enables tracking inefficiencies and improving transparency in the value chain operations. 

e. Mere formation of FPOs doesn’t serve the purpose of helping farmers, as there are many dysfunctional ones due to lack of clear strategies, inadequate capacity, lack of funding support and poor management. It is also time that a new cadre of grassroots level institutional leadership and professionals are nurtured with new inputs.

                                                                            

 Methods adopted by farmers to influence policy makers

Indian agricultural sector is under immense strain in recent times which has forced the farmers to take various actions in order to gain attention of decision makers and influence the government policies.

Padyatra and rallies: 

                                     This method has been extensively used by the farmers to storm the cities in large groups and force the government to take their issue much more important. The act as pressure group for  their polices to made as bills.

Demonstrations:

                                This methods has been getting attention too because of the media coverage and social networks across the educated people. This can be considered a bit violent due to the clashes it had with authorities. The recent Tamil Nadu farmers held demonstration in Jantar Mantar in delhi and displayed skeletal remains to show the dire situation of the drought in their state.

Political Participation: 

                                    Farmer organisations are increasingly participating in politics so as to act as decision makers and influence various policies regarding their welfare. In order to bring a demand to reality in Nizamabad constituency for Turmeric board, around 503 farmers contested in an election. All of them belongs to Telangana Rashtra Samithi . 

               All these methods have been partially successful. The rallies and demonstration forced the government bodies or bureaucracy to reform the system. PM-KISAN and better MSP prices are outcome of such methods.

 Government of India through Small Farmers’ Agribusiness Consortium (SFAC), a registered society under Department of Agriculture, Cooperation & Farmers Welfare, Government of India, is promoting Farmer Producer Organizations (FPOs) by mobilizing the farmers and helping them in registering as companies. As on 31.05.2019, SFAC has helped 816 FPOs in registering as companies.To encourage more farmers to set up FPOs, Government is providing various assistance to FPOs such as Equity Grant Scheme, Credit Guarantee Fund Scheme through SFAC. In addition, FPOs can also avail assistance under various schemes of the Government of India such as Agricultural Marketing Infrastructure (AMI), Venture Capital Assistance (VCA) and Mission for Integrated Development of Horticulture (MIDH) Scheme for promoting their agri-business activities.Thus, we can say that the farming community has renewed their approach in gaining attention that has facilitated better solutions to their problems.


References:
https://pib.gov.in/Pressreleaseshare.aspx?PRID=1578973
https://mofpi.nic.in/sites/default/files/fpo_policy_process_guidelines_1_april_2013.pdf
https://www.drishtiias.com/daily-updates/daily-news-editorials/farmer-producer-bodies-need-help
https://www.iasparliament.com/current-affairs/agriculture/promoting-farmers-producer-organisations