Market at the doorstep for onion farmers in Maharashtra: The VPFPC experience
Updated: Aug 3
Initiatives of the Vaishanavdham Parunde Farmers Producers Company (VPFPC) Limited in Junnar Taluka of Maharashtra have enabled farmers with better price realisation.
Volatility in prices
Drastic price fluctuations in Tomato, Onion and Potato (TOP) affect the farmers, the consumers, and the government! Reports of farmers abandoning harvested tomato crop by the roadside when the prices that they fetched were a pittance- 50 paisa a kilogram are almost routine. The consumers have experienced both glut and shortages in all the above three vegetables. In 2019 and 2020, onion prices in the retail market went as high as Rs 150 a kilogram. In addition to farmers and consumers, the governments in power both at the states and the centre have borne the brunt of anger and unrest when the prices of these food items have skyrocketed. And yet, even after 70 years after independence, the volatility continues. The first all-India farmers’ agitation in Maharashtra’s Nashik region led by late Sharad Joshi of Shetakari Sanghatna began organising farmers around the depressed prices of onions way back in 1978. In 2021, farmers have organised themselves again, albeit differently, by forming a producer company that can offer them better marketing alternatives with an enhanced price.
Warehouse at a distance
The office of VPFPC
Maharashtra is India’s top onion-producing state accounting for one-third of the total annual onion production of 16 million tonnes. The region between Pune and Nashik is well known for onion production with the biggest market at Lasalgaon. According to one study, the annual arrivals in 2020 at APMC Lasalgaon were 72786.87 MT out of which only onion contributes 82 percent.
VPFPC, a new hope for onion farmers
The VPFPC was set up on 17th July 2017 at Eknathwadi, Savargaon, 90 km from Pune off Pune Nashik Road. The paid-up capital was Rs 5 lakhs and membership has increased from 310 to 500 plus today. In the first two years, the FPC helped farmers in providing inputs on credit for tomato cultivation. No substantial output marketing activity was undertaken in the first two years. Our visit to the FPC on June 9th, 2021 was to study the procurement done by the VPFPC for NAFED. Mr. Dagdu Pawar is the chairman and Mr. Sangam Pawar is the young CEO of the company. Himself a farmer, he completed his education (BBA) from a college in Pune and is currently pursuing B.Sc. Agriculture and Planning.
“Our business turnover in 2019 was about 1.5 Crores. In 2020, it increased to 3.5 Crores. The majority of the summer yield (of onions) is in March and April. However, in those two years, we did not have our own storage space. We hired 13 such spaces (locally called Chall, a structure made of bamboo where onions are stored for a few months). We rented those spaces in 13 nearby villages where farmer members could come and sell their produce. The FPC acting as a procurement agency for NAFED bought onions and earned commission. In the first year, we managed to procure 259 tons. The volume increased to 2500 tons in 2020.”
A warehouse of 1000 tons under the PPP model
In 2020, the bottleneck of own storage space was overcome, thanks to the construction of a godown with a capacity of 1,000 tonnes. The total cost of the warehouse was approx. Rs. 1.15 crore, of which about 92 lakhs was given as subsidy by NAFED under the PPAID scheme. (Public-private Partnership-Integrated Agriculture Development project under Rashtriya Krishi Vikas Yojana). The FPC obtained land on lease for the warehouse. A part of the warehouse is used as a spot market for farmers to participate in the auction to sell the produce whereas the other half is used for procuring and storage of onions for NAFED, sold by NAFED at a later stage.
Market at the doorstep
The procurement for the onion began this year on 14th May. The rate for purchase then was Rs 16 per kg. The auction is held every Tuesday and Saturday. Since the days are fixed, farmers from nearby areas had brought onions in small trucks, tractors, and even two-wheelers. On arrival, the bags are weighed and arranged as per the lots, each lot is for the individual farmer. NAFED each day announces buying rate which is communicated to the farmers through WhatsApp Groups. On 8th June 2021, when we visited, the rate was Rs 22.17 (per Kg). Farmers submit their bank account number, PAN, and Aadhar Card to the FPC before sale. Non-members can also join in the auction but they have to later become a member of the FPC. The transactions at the FPC are based on cash and carry model. At the end of the auction, farmers are paid money but the FPC gets paid by the traders within 2 days. The FPC uses its capital for paying farmers since the working capital cycle is short.
In the auction, participation of traders and farmers facilitated by the FPC
The day we visited the FPC, there were three traders from nearby towns of Junnar, Otur, and Chakan. There were about 50 farmers who had brought in the produce. The auction began around 1145 am and was over by 12.30 noon. The business transactions for that day were for Rs 2.5 lakhs as estimated by the CEO. There was a great variation in the quality of the produce brought by farmers. Traders moved from one lot of a particular farmer, inspected the produce (one bag was emptied on the floor to see the quality). After a brief visual inspection of the produce, the traders began quoting the price, beginning as low as Rs. 50. Most of the deals were finalised between Rs 130 to Rs 150 Rs while a few low-quality produce fetched not more than Rs 60 (10 kg). The best price offered was Rs 180.
The CEO explained that the FPC would itself become a participant in that auction when they would have to procure for NAFED. However, on that day, since most of the produce was of inferior quality, the FPC did not buy anything. The entire produce of about 50 farmers was thus sold on that day. A few farmers murmured that while their produce deserved a price of Rs 165, they ended up receiving Rs 150. Why did they not withdraw from the auction? According to them, that would have meant adding more transportation and loading cost so even lower price realisation was accepted. It appeared, that the farmers were also aware of the quality of the produce that they had brought and settled at a price commensurate with the quality of the lot.
The chairman of the FPC mentioned, that this arrangement of the open auction would continue till August-September. Once the Onion procurement season is over, the same storage facility would be used for buying and storing soybean. The FPC hopes to trade under the ENAM platform however internet connectivity was still an issue. It seems NAFED’s targets of procurement were also shifting. In the first year, the FPC did 259 tons, in 2020 they did 2500 tons however this season, the target was reduced to 1000 tons per FPC, and hence they had to restrict procurement. One has seen a similar change of goalposts in the buying of MSP for Tur Dal and hence creating uncertainty not just for the farmers but also for the FPCs to make any business plan based on the MSP operations. Yet, the availability of a safe and secured storage space for a vegetable that is volatile in price is certainly a positive step for small and medium farmers in the region.
Dr. Ajit Kanitkar is a senior development consultant and ex-faculty at IRMA
Dr. Anagha Mitra is a faculty member at IISER Pune.
Photo credits: Dr Ajit Kanitkar