THE LATEST: FPOs in India: The Way Forward
In India, as with the rest of the world, 2020 was a year of struggle and resilience. My country was under a government mandated lockdown for almost three months which negatively affected many industries, with the service and industrial sectors coming to an almost complete halt. However, the agriculture sector was the least affected by the pandemic, as the government deemed many farming activities to be vital. Now, post lockdown, while various industries are gradually opening but continue to struggle, agriculture is an economic bright spot and has experienced a growth rate of 3.4% during Q1 of 2021. Despite several hindrances like produce dumped for lack of buyers or crashing prices, farmers kept the process running and all major cities across the country continued to receive supplies of fresh vegetables, fruits, and milk throughout the lockdown.
However, the small and marginal farmers who comprises of 82% of the total farming population have not been able to harness the potential of this growing sector. In response policy makers have pushed for more farmer collectives – known in India as Farmer Producer Organizations (FPOs) – to assist smallholder farmers in participating in the gains made by the sector at large. At Tanager we have seen how FPOs can be a mechanism for smallholder farmers to make significant gains in income, market access, and gender equity. Collective groups can enhance farmer incomes, confidence, ability to challenge structural inequalities and oppressive social norms, and enhance their bargaining power in markets – both domestic and foreign.
To achieve these gains however, FPOs must overcome several challenges, including a weak sense of ownership among farmer shareholders, undercapitalization, inadequate business skills, poor governance, and the lack of an enabling ecosystem. Differences of opinion among diverse stakeholders in the supply chain can also cause problems and in many cases the FPOs are struggling to increase farmer incomes and are incurring losses despite financial and operational support from government bodies, NGOs, and other promoting organizations.
In 2002 the Producer Companies Act was enacted. It was envisioned that Farmer Producer Organizations (also known as Farmer Producer Companies) would enable small producers to pool their resources and sell their produce to increase profits and reduce the risks to individual farmers. It has been two decades since the PC Act has been introduced and although many FPOs are doing well, these gains are not universally enjoyed across all states in India.
FPOs in India are in various stages of development which can be categorized as nascent, emergent, expanding, and advanced. Four parameters determine these categories: management, marketing, membership, and money. Through the PSFPO project – implemented by Tanager and Palladium – we are working closely with FPOs in Odisha to improve management, streamline market access, and improve gender equity. Our partner in the project, Palladium, is working with the Government of Odisha to improve their approach to FPO support.
This is nuanced work. In determining the best way forward for each FPO, we consider where each FPO is in their stage of development. For nascent FPOs, farmers may need to be convinced of the value proposition of FPO membership, while more advanced FPOs may need more help with managerial structure, and access to markets.
There is still much work to do to deliver on the potential of the Producers Companies Act. Although the government has invested in FPOs and modified some of their approaches, (such as the CBBOs) there remains a need to stabilize the existing FPOs, as a majority are struggling to make profits and compete with the mainstream companies. To do this, businesses must take advantage of every available opportunity and source of funding, both from government and non-government sources.
Perhaps most importantly, all actors in the FPO ecosystem must embrace the power of partnerships to alleviate economic inequality. Tanager is honored to be working with the Government of Odisha, Palladium, and our funding partners on the PSFPO project to help deliver significant economic gains for smallholder farmers. If we act together, with the lives and livelihoods of smallholder farmers foremost in our mind, we can ensure that smallholder farmers do not miss out on the benefits of the growing agricultural sector in India.