How to improve Farmers' Welfare?
How to improve Farmers' Welfare?
- Proposed Action Points -
By: Vijay SARDANA
A vast majority of India’s farming operations are carried out by small and marginal farmers or farmworkers. Many of them may or may not be landholders. At the same time, the majority of the farmers are comfortable in farming and not running an institution alongside their regular day.
With small landholding, these resource-poor farmers face several problems including lack of knowledge and technology to have control on cost, lack of process efficiency, lack of access to finance, poor risk management and poor market intelligence.
AMUL, other state milk cooperatives and some new FPOs have provided us with a model with the way forward for the welfare of the farmers.
Unity is Strength for a better future:
Solving these problems is possible with collective bargaining i.e the idea of a cooperative association or a Farmer Producer Organisation (FPO). With the Atma Nirbhar Bharat agenda gaining importance, FPOs will play an important role in linking farmers producers with agri-food markets including retail consumers or institutional buyers.
To remain sustainable and relevant in the market place the following things are essential, irrespective of the sector and size of the economic activity.
Bargaining power
Innovation
Economy of scale
Risk Management
Compliance with changing market demands
It is very difficult to address these challenges at the individual level.
Indian small farmers must operate in Collectively Bargain format i.e. FPOs or Cooperatives
The main aim of the Farmer Producer Organisations is to ensure a better income for the producers through an organisation of their own. Small producers do not have the volume individually to get the benefit of economies of scale. In agricultural marketing, there is a chain of intermediaries, who often work non-transparently leading to the situation, where the producer receives only a small part of the value, which the ultimate consumer pays. This can be eliminated only with FPO or cooperative models. Through aggregation or accumulation, the primary producers can avail the benefit of the economies of scale. Farmers Producer Companies can have better bargaining power in the form of bulk buyers of produce and bulk suppliers of inputs.
FPOs to act as an economic catalyst to improve farmers welfare:
The most critical problems of farmers are- increasing the cost of cultivation and poor market price realisation for her /his produce. Cutting down on the cost of cultivation is not easy, as farmers spend most of their money on input purchases, while market pricing is not within their control. In other terms, farmers buy in retail and sell in wholesale. This way he is the loser on both sides of the business. This should be reversed for farmers' welfare.
At the same time, farmers do not have risk-taking ability and behaviour as individuals.
These challenges can be addressed by collective bargaining. FPOs will help at a macro level – by providing better and cost-effective input supplies through bulk purchases, for instance, seeds and fertilisers are cheaper when bought in bulk. A critical role is also played in getting access to markets and they may set up their own outlets at key locations.
All APMC mandies must have at least 50% reserved outlet places for FPOs.
The role of an FPO is complex; farmers face a loss when they sell right after harvest when prices are lowest. An FPO at this point can offer liquidity to the farmer by ensuring support for selling at higher prices. The set of farmers who come together as the FPO should have access to the working capital from banks as soon as market linkages happen.
Collective bargaining i.e. Cooperative or FPOs can help farmers who are otherwise illiterate to grow together by increased role through greater participation and control over the value chain. FPOs will help strengthen value chains and create more jobs in rural India. A sound marketing advisory is essential for FPOs to develop their capabilities as an institution to understand changing consumer behaviour.
Compliance requirements and FPOs:
Compliance requirements in the modern marketplace are essential in terms of food safety and quality. Often it has been seen that farmers who are the crop producers are also seen as the supplier to the FPO, in many cases they could also be a consumer, the owner and a part of the board of the same producer company.
It is difficult for these small and marginal farmers to navigate these roles professionally. FPOs will be in the position to understand and implement the compliance requirements with proper guidance and handholding. This will help FPO navigate through existing and emerging challenges and compliance requirements.
FPO should have a good governance structure to bring credibility.
The main objective of bringing these entities under the Company’s Act is to bring out a governance dimension. Compliance in terms of the secretarial/audit dimension is essential to the FPOs as part of their engagement. This makes FPOs stronger in risk mitigation. This will ensure sustainability and the future becomes more sustainable under a better governance structure.
My suggestion is that banks should place experts and experienced people on the board as their nominees to help the FPOs. Investment in building capability will help FPOs members and office bearers in a big way.
Role of Women Power (Nari Shakti):
Women working in FPOs can transform the rural scene in terms of gender equity as well. Opportunities for them must be enhanced. The role of women in FPO governance will make FPOs better. Unless we create an enabling environment, we can’t enable women to participate in an FPO. Other issues include gender biases; women labourers being paid less than men, this will be addressed. In recent decades, a lot of women collectives have trained them on multiple aspects of the business including financial literacy and business skills. Some of the success models like SEWA, Lijjat, Amul, etc. have empowered women in a very meaningful manner.
The challenges seen in creating all women FPOs from these Self Help Groups were finding a common business activity to scale, governance issues and lack of awareness among board members of their responsibilities. This can headdress with policy interventions.
We need an FPO policy to set the structure in place with strong business plans for all women FPOs with the active support of many financial institutions and start-ups. Many CSR funds and women development funds will also flow to many FPOs if women are in the lead position.
Social-economic sustainability and FPOs:
An FPO’s viability is higher when it plays an effective role in ensuring agri-operations and becomes a provider of an essential service to farmers/members. During COVID-19 pandemic has shown how important collective processes like Dairy cooperatives have helped the milk farmers when all retail shops were closed. Information Technology and process technologies helped cooperatives to take their produce to market. Similar support is required from the Government to ensure success in other areas as well.
Rural Youth can be attracted back to modern agriculture with technology and markets:
Rural youth should be brought into this sector and technology plays an important role in this. The type and nature of the activity are important in attracting youth. An ability to handle technology in FPOs boosts the self-esteem of the young. They can deploy new-age techniques to make farming better. To attract youth into farming, there is a need to formalise a more enterprise based set-up so that result-oriented activities can be planned. This will prevent migration to cities as well.
Start-ups and FPOs networking:
Increased participation of youth in FPOs helps in leveraging the role of technology in the farming sector. Many policy level initiatives can bring in private capital flow into the agriculture sector. Many new-age startups are working directly with farmers. It is important to make FPOs more cohesive entities so they can influence the future of farming and rural employment. Start-ups can also fill the technology gap.
Collective bargaining is the only way farmers welfare can improve in India:
FPOs should be units of policy action and areas of focus. The focus of FPOs must be improving input supplies first, then on market linkages for the product and later on processing, value addition and branding.
Quality and statutory compliance are important, but also difficult to achieve therefore a two-tier model can help, where Tier-1 FPOs with experience can help others like AMUL is doing in the milk sector. This arrangement can extend to the procurement of inputs, marketing of produce, capital investments for processing etc. Often, statutory compliance manifests into a better governance system, which facilitates better compliance systems to be in place.
The future of farmers depends upon how good FPOs and cooperatives can work with farmers. Very often local social issues like caste systems come in the way. This also needs social engineering so that farmers feel comfortable working together in a team. Exposure to successful cooperatives and good R&D facilities will help farmers in opening upon their way of thinking and working.
State governments must create FPOs Federation like industry associations so that cross-fertilisation of ideas can also take place. FPOs should feel empowered in their collective form.
The focus of public policies should be on FPOs in place of individual farmers (other than DBT). There is a need to have village-level quality and handling infrastructure creation, capacity building, internet-based reporting and monitoring system of FPOs, market intelligence and capacity building.
Unity is a strength in meeting market demands and becoming profitable, this must be conveyed effectively to all farmers of India.
In the country of 140 crores people, with improving purchasing power, more than 100 crore livestock plus other industrial uses, and demand for agriculture-based inputs will increase. The FPOs should understand this so that imports should not flood the market. This opportunity must go to Indian small farmers.
- End
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