Role Of farmer producer's organizations (FPO's) in improving market access
Authors: Palve Gajanand, D.Karthik and Chandan kumar Rai
Ph.D. Scholars Division of Agricultural extension, National Dairy Research Institute (N.D.R.I), Karnal, Haryana,India.

Farmers’ Organizations are seen as a useful organizational mechanism for mobilizing farmers’ collective self-help action aimed at improving their own economic and social situation and that of their communities. Such organizations were perceived to have an ability to generate resources from their members. They could operate at different levels from the local to the national. Many governmental and non-governmental organizations have been trying to organize farmers into groups and integrate them into the development process by actively involving them in transfer of technology, production and marketing, planning, implementing and monitoring of different projects on rural development, agriculture and allied sector development, natural resource management etc. Some of the popular examples of Farmers’ Interest Groups (FIGs)/Farmers’ Organizations (FOs) under National Agricultural Technology Project (NATP), Farmers’ federation under UPDASP, Watershed Associations under Participatory Watershed Management Programs, Vanasamrakshana Sameti under Joint Forest Management Projects, Farmers’ Clubs under NABARD scheme, Self-Help Groups of farmers organized by MYRADA and CEAD in Andhra Pradesh and Rythu Mithra Groups (RMG) in Andhra Pradesh are some of the initiatives taken to mobilize and organize the farmers. The Kerala Horticultural Development Programme (KHDP) formed Self Help Groups (SHGs) of vegetable and fruit growers to help and promote new technology and participatory technology development (PTD) skills, to help farmer’s access credit and strengthen their negotiating power through collective marketing, namely the Vegetable and Fruit Promotion Council, Kerala.

Member based FPOs offer a proven pathway to successfully deal with a range of challenges that confront farmers today, especially small producers. Overcoming the constraints imposed by the small size of their individual farms, FPO members are able to leverage collective strength and bargaining power to access financial and non-financial inputs, services and appropriate technologies, reduce transaction costs, tap high value markets and enter into partnerships with private entities on more equitable terms. With fragmentation of holdings due to generational transfer unlikely to abate, FPOs offer a form of aggregation irrespective of land titles with individual producers and uses the strength of collective planning for production, procurement and marketing to add value to members’ produce. International and national experience in the performance of FPOs makes a strong case for policy support to member based farmer bodies, to significantly increase their power in the market place, reduce risks and help them move up the agri value chain. With the increasing emphasis on FPO at the Central and State level, questions are being raised about the viability and sustainability of these institutions in the long run and their ability to promote interests of their members. In the context of 2014 being declared as “Year of Farmer Producer Organizations (FPOs)” by the Ministry of Agriculture, Government of India, greater attention is likely to be given to these emerging bodies. Any case for enhanced allocation of public and private resources to promote FPOs must be based on solid evidence, which illustrates the benefits of aggregation of farmers into institutions for increased access to income, investments and market opportunities and With the increasing emphasis on FPO at the Central and State level, questions are being raised about the viability and sustainability of these institutions in the long run and their ability to promote interests of their members. In the context of 2014 being declared as “Year of Farmer Producer Organizations (FPOs)” by the Ministry of Agriculture, Government of India, greater attention is likely to be given to these emerging bodies. Any case for enhanced allocation of public and private resources to promote FPOs must be based on solid evidence, which illustrates the benefits of aggregation of farmers into institutions for increased access to income, investments and market opportunities.

What is a Producer Organisation (PO)?

A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. In some forms like producer companies, institutions of primary producers can also become member of PO.

What is the need for PO?

The main aim of PO is to ensure better income for the producers through an organization of their own. Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.

What is a “Farmers Producer Organisation” (FPO)?

It is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.

Who owns the PO?

The ownership of the PO is with its members. It is an organization of the producers, by the producers and for the producers. One or more institutions and/or individuals may have promoted the PO by way of assisting in mobilization, registration, business planning and operations. However, ownership control is always with members and management is through the representatives of the members.

Who can promote a PO?

Any individual or institution can promote a PO. Individual persons or institutions may promote PO using their own resources out of goodwill or with the noble objective of socioeconomic development of producers. If, however, the facilitating agency wishes to seek financial and other support, then they have to meet the requirements of the donor/financing agency.

Who provides support for promotion of PO?

NABARD, SFAC, Government Departments, Corporates and Domestic & International Aid Agencies provide financial and/or technical support to the Producer Organisation Promoting Institution (POPI) for promotion and hand-holding of the PO. Each agency has its own criteria for selecting the project/promoting institution to support.

Can an NGO promote PO?

Yes, it can. The NGO may be a non-profit organization, but not the PO. The NGO can promote PO which will provide better income to the members. Sharing of profit among members is an important objective of the PO.

What are the different legal forms of PO?

Producer Organisation can be registered under any of the following legal provisions:

a. Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act of the respective State

b. Multi-State Cooperative Society Act, 2002

c. Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013

d. Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013

e. Societies registered under Society Registration Act, 1860

f. Public Trusts registered under Indian Trusts Act, 1882

Cooperatives and producer organizations provide an array of services ranging from:

1) Enhancing access to and management of natural resources;

2) Accessing input and output markets;

3) Improving access to information and knowledge;

4) Facilitating small producers’ participation in policy-making processes.

How would a PO help the members?

A PO will support the members in getting more income by undertaking any/many/all of the activities listed under point 1.14 above. By aggregating the demand for inputs, the PO can buy 5 in bulk, thus procuring at cheaper price compared to individual purchase. Besides, by transporting in bulk, cost of transportation is reduced. Thus reducing the overall cost of production. Similarly, the PO may aggregate the produce of all members and market in bulk, thus, fetching better price per unit of produce. The PO can also provide market information to the producers to enable them hold on to their produce till the market price become favourable. All these interventions will result in more income to the primary producers.

What are the important activities of a PO?

The primary producers have skill and expertise in producing. However, they generally need support for marketing of what they produce. The PO will basically bridge this gap. The PO will take over the responsibility of any one or more activities in the value chain of the produce right from procurement of raw material to delivery of the final product at the ultimate consumers’ doorstep. In brief, the PO could undertake the following activities:

a. Procurement of inputs

b. Disseminating market information

c. Dissemination of technology and innovations

d. Facilitating finance for inputs

e. Aggregation and storage of produce

f. Primary processing like drying, cleaning and grading

g. Brand building, Packaging, Labeling and Standardization

h. Quality control

i. Marketing to institutional buyers

j. Participation in commodity exchanges

k. Export

What are the essential features of a PO?

a. It is formed by a group of producers for either farm or non-farm activities.

b. It is a registered body and a legal entity.

c. Producers are shareholders in the organization.

d. It deals with business activities related to the primary produce/product.

e. It works for the benefit of the member producers.

f. A part of the profit is shared amongst the producers.

g. Rest of the surplus is added to its owned funds for business expansion.

Problems and Issues

1. Lack of marketing skills

Most of the groups or cooperatives usually do not have marketing skill. They are managed by someone from the members of a group who do not have any knowledge on marketing and managing business as such. Groups or cooperatives will have to use marketing strategy to run their business. Some of the innovative strategies followed are: fair price shop, branding etc. They should advocate Government to support them in providing services and finance as a seed capital to start their business.

2. Lack of cooperation

Past experiences have shown that the group approach works only when the member of the group have similar problems. The most common problems with the farmers are marketing of their produce and receiving all types of inputs regularly. Farmers are reluctant to share their land or work in a common land for growing agricultural commodities. Group has worked in the land to grow vegetables and collectively sell in the local market. So, it is better to work in a group for collectively purchasing inputs such as seeds, fertilizers, pest, etc. so that the cost will be reduced and also for marketing of their produce. It is evident that the single farmer will not be able to fulfil the large order placed by the market traders. Farmers can join hands working together by bringing their produce at the collection centres to sell the traders.

3. Weak economic status

Most of the cooperative societies are not financially strong enough to deliver vibrant products and services to ensure their market share. This is a basic challenge before the cooperatives. They should be made financially self sustained by increasing the members and their contribution as a share capital.

4. Access to local market

It is very difficult to manage and is costly in marketing of produce far from the cultivation. There are more market opportunities if people can identify local market needs of the consumer and farmer can easily make a profit by selling it

5. Poor management

Cooperatives are efficiently managed by experienced, trained and professionally qualified staff under the supervision and control of democratically-elected boards of directors. Organisation should be led and managed by energetic, professional and dynamic persons. Business should be conducted in accordance with modern management principles. The managers of cooperative business should be more professional in their market operations. They should be active enough to trace new marketing opportunities as and when they appear and make use of them for their further growth. They should make brilliant purchase decisions by studying the market trends. For example, investing more in fast moving products may increase the returns. Quality should be the key in cooperatives and steps should be taken to reduce the wastages and cost of goods sold. In short, the manager / secretary of a cooperative store should deliver his service in a professional way to prove himself competent and his business successful.

6. Leadership and understanding

Leadership and understanding between the team members are the success factors. If there is understanding between the members then it will be easy for visioning and planning of activities.

There will not be any dispute and will be an attitude of helping each other. Leaders should take care of providing marketing services to their members without his selfishness.

7. Lack of communication and participation among the members

Interaction between the members and the management committee of cooperative is very less and takes place when there are only economic activities. This has caused difficulty in understanding their problems and issues. Experience has shown that success of cooperatives is due to strong relationship and trust with their membership, which has been built over years through effective marketing support, services support and transparency of the exchange process.

8. Absence of common brands

To make cooperative businesses successful there is a need of more common brands which is absent today. For example, dairy products in India have individual names in each state, and they are well-known as cooperative products to people of that particular state only. Instead, if we could integrate them under a common brand it will be more successful and beneficial. It will be recognized as the cooperative product of India not only by Indians but also by the people abroad. This will reduce the marketing overheads, including promotion costs and will also result in high reach as a single advertisement serves the purpose.

9. Poor management of Storage facilities

There is a common understanding that when there is oversupply produce can be stored and marketed later when price rises. Most agricultural crops are suitable for short-term storage, maybe for few days. Storage is usually expensive and spoils its freshness and quality. In most situations, when the produce is brought out of the store it has to compete with freshly arrived produce. Finally, farmer will get less price, and in addition they have to pay for the storage costs as well. There are few crops suitable for long term storage. Storage in production areas is often not successful because the storage facilities are under utilized for most of the year and are uneconomic.

10. Middlemen makes excessive profits

Why farmers do not get the retail market price? If the retail price of tomatoes is set at Rs.20 and if the same information is made available in the chart, farmers may not get the same price. There will be variation in the price received by the farmers due to various quality factors.

Traders are blamed for making more profits. Usually traders are the middlemen, who link the farmer’s produce with the consumers. Sometimes they also build linkages with the different market far away from the production area. Many times, they are neglected and tried to sell directly in the market. Actually, the profit margins for the farmers are more than 60 per cent but due to low quantity of transaction, farmers are not benefited. For examples, if farmer sells 10 kg of chilli at the rate of Rs. 80 per kg then will get total of Rs. 800. The retail price of chilli is Rs. 100, which shows that farmers have received 80 per cent margin where as traders margin is only 20 per cent. Traders still make good money taking advantage of selling in volume. If he sells 8 tons, which is one mini truck load and makes profit of Rs.1,60,000.

11. Groups and cooperatives formed only for the sake of getting government and donor’s support.

Groups or cooperatives should be managed in a more business-like manner – these are not social clubs or charity organisations. They should provide advice to the farmers on planting suitable crops, which earn them higher income. Regular dialogues among farmers, cooperatives and market authorities should be undertaken to resolve problems. For success, the farmers’ orientation should be on improving productivity and quality. Farmers will have to take the risk at different stages of production until the marketing. So risk management strategies at various stages of marketing from production until the marketing will help to manage risk.

12. Old traditional business activities

There are many cooperatives, which do not take care of market trend and follow the same old business principle. They are not able to adjust themselves by providing knowledge on business techniques adopted by other professionals to their members.

Points to be considered for successful management of groups and cooperatives

For successful management of cooperatives and groups a capable manager is required. Capable manager should be recruited and trained for successful operation of regular business operation.

  • Cooperatives should do networking and coordinate with the other cooperatives. Few similar activities shall be done together to minimize cost and to expand market.
  • Cooperatives should be capable to update themselves with the market information.
  • Should be able to prepare marketing plan and implement activities
  • There should be transparency in activities, responsibility, and cash transaction.
  • There should be proper management of accounting, asset, etc. and proper communication to all members.
  • There should be regular monitoring of progress and achievements.

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  • Agrawal, Arun & Sivaramakrishnan, K. (Eds) (2000) Agrarian Environments. Resources, Representation and Rule in India . Durham & London: Duke University Press.
  • Alagh, Y.K. (Ed.) (2003) Globalisation and Agricultural Crisis in India. New Delhi: Deep & Deep.

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