The Push Small Farmers Need

Context: Farmer Producers Organisations (FPOs) could be a solution to the agrarian distress if they are helped to access credit and markets.

Reasons for agrarian distress in India

• Declining average size of farm holdings: Average farm size declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16.
• Low access to inputs and marketing facilities: for small and marginal farmers

Farmer Producers Organisations (FPOs) Ecosystem

• Financial support for encouraging FPOs
  • Provided a grant of matching equity: i.e. cash infusion of up to Rs 10 lakh to registered FPOs.
  • Provided credit guarantee cover to lending institutions: Maximum guarantee covers 85% of loans not exceeding Rs 100 lakh.
  • Budgetary announcements:
    • 2018-19: Announced supporting measures for FPOs including a five-year tax exemption.
    • 2019-20: talked of setting up 10,000 more FPOs in the next five years.
• Benefits of FPOs: Based on a survey by the International Food Policy Research Institute (IFPRI) in Maharashtra & Bihar:
  • Increase in gross income:
    • 98 % of the respondents for organically evolved FPOs report an increase.
    • 64% of the respondents for promoted FPOs report an increase.
    • Only 32 % of the non-members indicate an increase in gross income.
  • Increase in productivity: FPOs are doing better than non-FPO farmers.
  • Acts as an institutional mechanism: to organise small and marginal farmers and thereby improves their bargaining power.
• Problems associated with FPOs
  • Mixed performance: Only 30% of FPOs are operating viably while 20% are struggling to survive and 50% are still in the initial phase of mobilisation and business planning. 
  • Challenges for building sustainable FPOs: highlighted by National Bank for Agriculture and Rural Development (NABARD)
    • Lack of technical skills, inadequate professional management, weak financials, inadequate access to credit, lack risk mitigation mechanism & inadequate access to market & infrastructure.
  • Numbers of FPOs are inadequate: Ideally, India needs more than 1 lakh FPOs but we currently have less than 10,000. 

Way forward: for the improvement of FPOs in order to help the small farmers.

• Improve access to credit: for which Banks must have structured products for lending to FPOs.
• Provide FPOs the access to data: on markets and prices and other information and competency in information technology.
  • Data can be made available if FPOs are linked with input companies, technical service providers, marketing/processing companies, retailers etc.
• FPOs should augment the size of the land: by focusing on grouping contiguous tracts of land.
  • Encourage women, farmers, to group cultivate for getting better returns.