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  • Karunakar Manthri and Hippu Salk Kristle Nathan

Loans, Liquor, and Targets: Social dynamics and Challenges of forming a new FPO

Updated: Feb 14, 2023

Registering an FPO forms only a small part of making the institution viable. Policymakers need to acknowledge the underlying informal, but enduring social relationships governing farmers’ behaviour to help design more supportive ecosystems.

Narnoor is a mandal in Adilabad District of Telangana. It consists of primarily tribal populations. Under the Government of India’s push to collectivise farmers, the Bhoosampada Farmers Producer Company Ltd. (FPCL) was registered in Narnoor on 22nd July 2021 under the Company Act 2013. The APMAS (Andhra Pradesh Mahila Abhivrudhi Samiti) is the promoting organization and the NABARD (National Bank for Agriculture and Rural Development) is the implementing agency of the FPCL.

The Bhoosampada FPCL comprises of farmers who grow predominantly cotton. The FPCL aims to facilitate agriculture inputs (seeds, fertilizers, sprinklers, tarpaulin, etc.), provide market linkages with good price realisation, and to share the profit with the farmers, who are the shareholders of the FPCL. It has currently 160 members; 35 of them are women. Approximately 70% members are small or marginal farmers. The farmers belong to seven villages of the Narnoor mandal.

Members pay Rs. 1700/- (Rs. 200/- membership fee and Rs. 1500/- share capital) to join the FPCL. This fee amount was decided by the APMAS considering the paying capacity of villagers. The NABARD has set a membership target of 300. Once the FPCL achieves this target, NABARD has assured them a matching equity amount of 4.5 lakh.

Social composition of the area

The villages under the Bhoosampada FPCL comprised three main scheduled tribes: Gondi, Lambada, and Kolam. The Gondi tribe is in majority in the area. In every village, Gondis have a community head, called Patel, whose instructions all Gondis follow. The Lambadis, who are next to Gondis in terms of number, consider themselves superior to Gondis, and try to dominate over them. The Kolams have the least literacy level. They speak a different language compared to Lambadis and Gondis. The fourth community, Maratha, belonging to scheduled caste (SC), are in a minority. The tribes live in segregated colonies, namely, Gond guda, Lambadi thanda, Kolam guda, and SC guda in every village.

Challenges faced by Bhoosampada FPCL

Some of these challenges the Bhoosampada FPCL has faced in mobilizing the farmers are outlined below:

  • In the villages surrounding Narnoor, there is no culture of saving among all the communities. This is not surprising given that tribes have relied on hunting or subsistence farming for centuries. The money earned post-harvest is mostly spent within 2-3 months, and they are completely dependent on middlemen (sethjis) for any financial requirement for the rest of the year. While mobilizing the farmers to join the FPCL, the villagers would say that they can pay the joining fee only after harvest. One villager from Gondi community had said, After harvest season, we will visit our community God in various places so we have to spend money there and we go to market at mandal headquarter weekly. After purchasing all the home essentials, we drink. We do it every week even if we have less money. We have an assurance that we will get money or agri-inputs from sethji.”

Meeting with Gondi Community for FPO mobilization
  • To return debts, they give their produce after keeping their share for self-consumption. The sethji decides whether the crop value exceeds the debt cum interest (typically, 2.5% per year). If so, he pays the balance, otherwise the farmer returns empty-handed but with the assurance that they can get agricultural inputs on debt. Though the interest rate is low, sethji typically devalue the crop or charge an inflated rate for inputs. Still the farmers continue the relationship with sethji and hardly have any enthusiasm to join any FPO. This behavior of the farmers is explained by ‘status quo bias’, which leads individuals to make irrational decisions resulting into a sub-optimal situation.

  • Alcoholism is another reason for their dependency on sethjis, as most of the earned money is spent on buying liquor by men and women. Alcohol consumption is so rampant that during the field visits for any late evening meetings, villagers would say, “Many people will drink during night, so better to have meetings in the daytime.”

  • Villagers’ casual approach to formal loans forms another challenge faced by Bhoosampada. Formal institutions are faceless unlike the informal moneylenders. Further, frequent loan waivers by government at various levels incentivizes the farmers to default. As a result, SHGs have found it difficult to operate in the area. A Village Organizer Assistant, who works under Indira Kranthi Pathakam had remarked, “We used to initiate many loans for the women group. When they are in need they will take money but paying back won’t be their priority, even if the loan is on zero interest.”

Interaction with the SHG members for FPO mobilization
  • Another challenge Bhoosampada FPCL faces is peer competition. In Narnoor area the mobilization for FPOs have been taken up by many promoting organizations: Dhan foundation, Chetan Organic, Prajamitra, Raithumitra, CCD (Center for Collective Development), SERP (Society for Elimination of Rural Poverty), etc. These organizations remain competitive to attract farmers. Also, farmers get an opportunity to choose from different alternatives. However, this has created other challenges such as too many agencies bring down members-size of individual FPOs, thus reducing the advantage of scale based market interactions. Also, SERP working in SHG space have mandated all the women to be part of its FPOs. So, naturally, the proportion of women members in Bhoosampada is less.

Overcoming the challenges

Bhoosampada FPCL currently has members from three communities: predominantly Gondis and a very few Lambadis and Kolams. A greater understanding of socio-economic dynamics of the communities is essential to mobilize them to join FPO. The poor saving culture, dependency on sethji, and alcoholism is most prevalent among Gondis and Kolams; hence needing extensive awareness. Also, for mobilizing Gondis, the Patel’s interest is the key. Some Lambadis and most Marathas are into business and therefore they have some appetite for saving. The FPCL needs to ensure that overtime all communities having their fair representation in the Board of Governors.

Bhoosampada FPCL Board of Directors’ monthly meeting to discuss about matter of the organization

One of the strategies for the government to consider is to either do away with quantitative targets or making it flexible and bottom-up. Bhoosampada FPCL had to have 300 members within four months of registration. This is an unreasonable target considering the above-mentioned challenges. This target was shifted thrice. Finally, NABARD was convinced to go ahead with the FPCL as it could meet half the target by January 31, 2022.

Top-down aggressive targeting compromises with the quality. Targets, in case of FPOs, need to made at the cluster level where the detailed planning based on the ground realities of the FPOs take place. Also, since agriculture follows an annual cycle, one-and-half year time is required to meet the target for places like Narnoor, where farmers have reluctance to adopt to a new eco-system. Adequate time will demonstrate the benefit obtained by the existing members of the FPO, so that others feel motivated to join.


Karunakar Manthri is the CEO of Bhoosampada Farmers Producer Company Ltd. (FPCL)

Hippu Salk Kristle Nathan is an associate professor at IRMA with deep interest in sustainability and socio-political reforms.


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