The Covid-19 pandemic was a defining moment in the political discourse. It has affected all aspects of the economy in all regions and countries. The trade-off between life and livelihood has been a difficult choice for most governments. Strict enforcement of the lockdown around the world impacted economic activity, employment and income. India was no exception, posting a 6.2% decline in gross value added (GVA). However, one sector that withstood the tsunami was agriculture, which posted above-average real growth of 3.6% in 2020-21. Agriculture was a buffer that was able to absorb the shock, providing much-needed support to 49% of all households (PLFS, 2020) that continue to depend on it as their primary livelihood. It is only natural that special measures had to be taken to strengthen the sector.
These times of crisis also present opportunities for governments around the world to innovate administratively. One of the initiatives aimed at reshaping the country’s agricultural landscape is the ambitious goal of establishing 10,000 new farming communities, i.e. Farmer Producer Organizations (FPOs), in the country. The legal origin of the concept can be traced back to the 2000 report of the Alagh Committee. This made it possible to set up hybrid units – manufacturing companies with a cooperative intention. As of March 31, 2021, there are a total of 14,213 manufacturing companies in the directories of the Ministry of Business Affairs. Around 11,715 producer companies were registered after 2016–17. What sets the present effort apart is the mission mode approach. The total spending is Rs 3,000 crore to be spent over the next three years, bringing together about 3 million farmers across the country. In contrast to other agricultural interventions, there seems to be a broad consensus on the aim, intent and purpose of the programme.
It is a flagship program of the Department of Agriculture and Farmer Welfare and is being implemented by organizations with a pan-India presence such as NABARD, NAFED, Small Farmer Agribusiness Consortium (SFAC), National Cooperative Development Corporation (NCDC), etc. The aim of the effort is to and marginalized farmers to bring economic depth and make farming a viable option for their livelihood. It will enable such collectives to build value chains related to specific agricultural commodities by leveraging available government programs, strengthen bargaining power, encourage disengagement from intermediaries through direct access to markets/market participants, and facilitate the formation of effective stakeholders in the agricultural sector. Although the schematic effort seems promising to various stakeholders, implementation at the grassroots level has its own challenges.
In India no social formation can be separated from the realities of caste, class and gender. The asymmetry of power in a rural structure will inevitably be reflected in the power structures that will create such new age social formations. Cases of dominant landowning classes or even intermediaries who hold prominent positions within the FPOs as directors on the board are not uncommon. This results in an informal mechanism of exploitation being transformed into a formal one. On the part of implementing organisations, it will be crucial to carry out regular social audits to ensure that new collectives comply with the principles of social and economic inclusion and gender participation and remain politically neutral blocs.
The administrative innovation that differentiates the government’s current effort from previous interventions is the entrustment of responsibility to an intermediary group called a Cluster Based Business Organization (CBBO) and the creation of a new cadre of agricultural professionals called Local Resource Persons (LRPs). The competence, commitment and capacity of the two determine the final result.
The CBBOs are intended to be professional civil society organizations that attract staff from a variety of backgrounds. Newly established FPOs receive the necessary legal, financial, agronomic and marketing support through such professional organizations during various stages of formation, growth and maturity. Accordingly, the selection of CBBOs with the required qualifications and the regular weeding out of underperforming companies that are consistently underperforming are critical to meeting the various timelines associated with the program. CBBOs are expected to employ experienced staff to oversee implementation and therefore priority should be given to timely payment to them. Most CBBOs don’t have deep pockets, and consistency of cash flow, as measured by benefits, is critical to retaining talent. Late payments were the bane of the development sector. A suitable SOP should be developed to avoid the pitfalls of previous experiments. The other component of success or failure are the foot soldiers – Local Resource Persons (LRPs) who may eventually fill the role of CEOs of the FPOs. Most of them come from rural backgrounds, with little exposure to the world of commerce or the nuances of commercial enterprise. What they may lack is made up for by the excitement of being part of a company that has the promise of transforming the rural agricultural landscape. Therefore, capacity building should be a priority. Appropriate curricula and career paths should be designed that regularly train prospective FPO leaders in human resources management, demand aggregation, logistics planning, and financial management. Responsibility should not be left to CBBOs alone. The government should identify reputable institutional partners such as IIMs, IRMA, etc. to provide content and certify successful candidates. This will make the job attractive to rurally educated youth and encourage their participation in the national project.
Last but not least, such a social experimental mammoth in the agricultural sector can only succeed if various departments of the center and the federal states come together on a common platform. Breaking down departmental silos, orienting and training key officials staffing the relevant departments, and timely interdepartmental coordination are key to the success of government intervention. For example, a lack of clarity among bankers about the role and legal status of FPOs leads to excessive delays in opening bank accounts, which is detrimental to the business prospects of the newly formed entities. The lack of a standardized process for issuing farmer identification certificates has led to rampant abuse by unscrupulous elements in floating FPOs using fake certificates. The certificates represent a farmer’s credentials that entitle him to become a member of the collective. A mechanism to ensure the integrity of such certificates should be worked out for the convenience of the Registrars of Companies officials. As the collectives are tax-exempt entities, due care and diligence should be exercised to ensure that they are not used as a vehicle for tax evasion and money laundering. The fact that around 6,000 manufacturing companies registered under conditions of restricted mobility due to the Covid-related lockdown in the course of 2020/21 does not fit into the overall picture.
The FPOs as New Age farming collectives have immense transformative potential for a country like India. If implemented with the right intentions and active involvement of various public and private stakeholders, this will not only increase agricultural productivity but also create a conducive ecosystem for the value chains associated with each agricultural commodity. India can thus become a major player in the global food value chain.
Former IRS official and founder of Livelihood Alternatives, a startup