"Vital but scarce": Promoting Agencies Support to FPOs in Uttar Pradesh

The role of promoting agencies is crucial in establishing, strengthening and ensuring the sustainability of FPOs. A qualitative survey of FPOs in Uttar Pradesh revealed that while they acknowledge the support received from the promoting agencies during the incubation period, the need for handholding beyond project-based timelines is often not being fulfilled.

Uttar Pradesh, otherwise a laggard in the cooperative movement is the second largest state in the country in the promotion of FPO with over 4000 Farmer Producer Companies registered to date. Several promoting agencies (PAs) with funding from diverse funders such as SFAC, NABARD, NCDC etc have promoted FPOs. In an earlier blog the travails and innumerable challenges of promoting FPOs highlighted included time and resource limitations, frequent changes of deliverables, payment delays, a greater focus on quantity vs quality, and policy inadequacies.

We dive deeper into some of the implementation challenges through a survey that was conducted in the state to assess the role played by promoting agencies (PAs) from the perspective of the FPOs. The survey sought to get the response of FPO practitioners on five parameters. In what ways do promoting agency contribute significantly to the performance and effectiveness of the FPOs? Do promoting agencies spend adequate time laying a strong foundation for the FPO? How did FPOs cope after the exit of the promoting agency? What are the challenges faced in providing such support to the FPO? What kind of handholding support is beneficial to the FPOs?

The FPOs studied were funded by NABARD, SFAC, NCDC, UPBSN, NAFED, UPDASP and UP Bio Energy Board who engaged the services of promoting agencies (PAs) for implementation. The field survey was conducted with 20 FPOs in Uttar Pradesh. 10 districts falling under the nine climatic zones in the state were selected and two FPOs from each district were chosen. Four of the 20 FPOs were self-promoted by farmers themselves without the involvement of any promoting agency. The age of the FPOs ranged from 2-4 years. The duration of the support given by the PAs ranged between 3-5 years. The 20 respondents for the survey included CEOs/Managing Directors and board members from each FPO. A structured questionnaire was designed for the survey which was administered by the surveyors in person by visiting the FPOs.

The themes of analysis and findings are discussed below:

The survey data on the role of PAs assessed on six parameters indicated a significant role in institutional linkages for inputs and access to Government grants than financial and marketing and value-addition activities. Financial linkage was limited to facilitating the release of equity grants and project-related community investment funds :

· Institutional Linkage: 85% of the FPOs surveyed said that they benefitted from the linkages established by the PA. These included input distributorship for fertilizer supply, capacity building of BoDs and members and agricultural extension. An FPO director remarked, “Today 80% of our business turnover is contributed from input sales to members. It’s our PA who encouraged us to take the license and helped with procedural formalities.”

· Financial Linkage: 60% of the FPOs surveyed attribute that the support of PAs helped in receiving equity matching grants and community investment funds. However, most of the FPOs could not establish bank linkage even after the exit of PA.

· Market Linkage: 55% of the FPOs indicated that they sell the produce in mandis and the PAs supported in getting the required licences for this. Some of the self-promoted FPOs established tie-ups with institutions for the sale of produce.

· Access to Govt grants: 75% of the FPOs availed the farm machinery bank scheme and 25% FPOs availed the seed processing unit grant with the active support of PAs. The CEO of a self-promoted FPO remarked -- “We lost out on availing Government schemes like farm machinery bank and seed processing unit grants for FPOs which the PA-promoted FPOs were able to benefit from it.”

· Value addition: Almost all the FPOs adapted sorting, grading and cleaning of produce at the instance of PA. The self-promoted FPOs were engaged in a small way in value-added activities such as flour making, neem powder, oil extraction etc.

All the respondents of the FPOs expressed that the time duration over which PAs provided support was inadequate. In response, it seems that while the PAs were aware of these issues, they were constrained by available funds, and expected mandate. A representative from a PA commented, “It was a race against time. A three-year period to establish a well-knit community-based organization that can conduct business operations, enhance the incomes of farmer members, comply with statutory obligations and many other expectations was highly insufficient. We tried to address the input supply aspect and facilitated 100 FPOs in UP to become authorised centres of IFFCO-IFFDC for agri products.”

Another field staff explained the challenges of, “A sudden deluge of demands from the projects derails the entire plan of nurturing FPOs. I recall the order from the project leader to enhance membership in all the FPOs by two-fold to meet project targets, conduct training programs and increase business turnover in FPO to a mind-boggling number, all in a short span. It was quantity vs quality sometimes.”

Following the completion of project cycle and exit of the PA, 70% FPOs were still facing challenges in establishing market linkages. While there was an increase in the turnover of the FPOs over the years, the major contribution was from input supply to members. For 75% of FPOs access to capital is still elusive. 30% of FPOs surveyed expressed that PAs support helped in convergence with government schemes which did not happen subsequently. 25% of the FPOs expressed the need for technical and technological linkages in operations and an extension activity. 45% of the FPOs surveyed were currently being supported by other organizations after the exit of PAs under different programs. FPOs reckon such support has added value especially, in building knowledge and awareness of various business operations of the FPO.

90% of the FPOs expressed the need for extended support beyond the incubation timeline to help them learn business tactics and become sustainable enterprises. The areas in which FPOs sought support include access to working capital, knowledge of emerging markets, and training on statutory compliance. The self-promoted FPOs expressed that they stand at a disadvantage in accessing government schemes. 10% of the FPOs surveyed pointed out that if an appropriate policy to direct banks to finance FPOs and trained manpower are in place, PAs support is not required.

Laying a strong foundation is an important guiding principle for any community-based organization. A farmer’s collective, to develop and establish itself as a business enterprise needs not only a member-centric institution but adequate knowledge and wherewithal to operate in a competitive business environment. The complexity of markets, financial management, legal compliances and the knowledge of these aspects are not readily available and accessible to the farmers who are the owners of the FPOs and on whom the responsibility lies. PAs on the other hand are spread too thin in terms of time, human resources and budget constraints to provide much-needed support beyond the initial phase. Policies thus need to plan for providing PAs with longer timelines and reasonable targets. Given the right ecosystem, PAs can meet the expectations of the FPOs. As evident in the responses, the FPOs see the value of such support as it facilitates achieving the objective for which they are formed.

Gouri Krishna is an Independent Consultant & Advisor to NAFPO. She is the former CEO & MD of Basix Consulting

Rajnikant Prasad is Project Director at Grameen Foundation India