Overcoming post project pangs: What does it take for an FPO to survive?
Updated: Aug 3
What happens to FPOs after withdrawal of project support? Are there good practices that can enable their continued survival and growth after promoting institutions withdraw? The Diwak Mata Farmer Producer Company (DMFPCL) from Rajasthan offers insights on how to harvest results from engaged stakeholder incubation.
A good support ecosystem and engaging stakeholders early and often is the key to the survival of a collective enterprise, as we have opined in our earlier blog. DMFPCL emerged from a World Bank project (Rajasthan Agriculture Competitiveness Project) implemented through the Government of Rajasthan through its various departments, and business planning done by a business consulting firm and Prakriti Foundation involved in mobilization and capacity building. While other partners left on project completion in in 2020, DMFPCL and Prakriti had to plan for continued growth and survival in the midst of a pandemic that disrupted many agricultural operations.
During our recent revisit to Pratapgarh we were pleasantly surprised to find a few budding initiatives that indicates how the FPO ecosystem is, and can, be enabling and can leverage existing opportunities. NABKISAN sanctioned a working capital loan of INR 10 lakhs and Samunnati indicated active interest in procuring soybean from DMFPCL at MSP. Samunnati was also keen on offering a working capital loan to DMFPCL that did not work out after advanced discussions due to high interest rate.
A story of ingenuity and resourcefulness
How does an FPO continue to engage with a local entrepreneur cum CEO after the project is over? How does it ensure capacity utilization of its community asset created through the project? How does it keep the members engaged despite fall in revenues due to the pandemic?
As it often happens with busy CEOs Rakesh welcomed us to Pratapgarh telling us
“sir, I am in the Neemuch mandi selling ajwain. I can only meet you tomorrow….”.
During his first interview in 2021 an almost desperate Rakesh had said
“sir, I am not able to form partnerships in the market”
The change was phenomenal. We had time to catch up with Farukh, the field coordinator from Prakriti Foundation discussing how the Foundation has been able to continuously engage with DMFPCL, across the border being itself based in Gujarat. Prakriti Foundation is keen to help Rakesh in searching for a market for his spices and mustard in Gujarat, with Farukh readily asking for samples to take with him.
When we met Rakesh, he had sold ~10 Qtls of ajwain on behalf of the farmers and was ready to sell another lot of 3 Qtls before shifting to mustard. The next crop in line was wheat for which DMFPCL had two markets, the APMC and a trading account with ITC Ltd. Rakesh has plans of starting the flour mill and retail sales of flour and whole spices viz. ajwain, mustard and coriander in the Pratapgarh market. The possibility of the FPO being engaged with the produce of its members throughout the year seemed real.
Rakesh’s entrepreneurial spirit has led him to experiment with unorthodox practices. One of them being selling farmer produce in the mandi not as a single lot aggregated by the FPO but as individual lot of farmers. Since the volumes being traded by DMFPCL are not huge as yet, this practice is manageable and helps the FPO save tax. A good practice that DMFPCL has begun is that of involving BoD members in operations. Rakesh pays a small per diem amount of INR 50 for 1 hour and INR 100 for whole day plus fuel charges to the BoD members whenever they venture out for FPO related work. Some conventional good management practices are also serving DMFPCL well. Rakesh has formed small 1-2 person committees for managing various tasks at the FPO, including accounts, legal compliance, APMC sales, procurement and aggregation, meeting and stakeholder relations etc.
The formation of committees, the agreement to pay per diem and fuel expenses and the visible effort that Rakesh is making to sell member (and non-member) produce at the mandi has made the BoD members active and interested again. In the meeting with the BoDs, it was interesting to see an old farmer and a BoD member asking Rakesh to decide the exact date when to switch from selling ajwain to the next crop in line i.e. mustard. Another metric of a very active BoD is that they are meeting almost twice every month for the past 2-3 months. Slowly, BoD members are also getting how sales happen in the mandi and what to be cautious about. Soon, Rakesh may have a second in command from among the BoDs, to look at the actual mandi sales. He can then focus on forming the market linkages and taking more strategic decisions. One of BoDs members, from a nearby village of Dhekania is a farmer and a kirana shop owner. In an FPO, such people who understand both agriculture and doing business can be huge assets. Incidentally, it was in his premises that the earlier input shop of DMFPCL was started after registration in 2018, before the land for FCSC was bought. The shop has now been converted to a warehouse and can store almost 120-150MT of farmer produce.
Making the ecosystem work for you
Apart from the internal structure of the organization, the organization owes its success to a strong support ecosystem. Rakesh has been able to leverage his goodwill with the APMC secretary to start selling farmer produce at the mandi and is also in the process of getting a shop inside the APMC premises, on lease. With the help of Prakriti Foundation, DMFPCL has been able to get a working capital loan from Nabkisan and has a potential lender and business partner in Samunnati. It just needs one transaction to set the ball rolling. This season, Rakesh’s phone has been ringing with queries of procuring mustard and wheat, and this brought ITC Ltd. at the doorstep of DMFPCL with the offer of a trading account where DMFPCL could sell wheat aggregated from farmers, with transportation cost taken care of by the local ITC dealer in Pratapgarh, and a smartphone application for better information access and management of work at the FPO. ITC may also consider partnering with DMFPCL for sorting and grading of procured commodities. Rakesh has also been able to approach input dealers both public and private for seeds, fertilisers and pesticides and even irrigation equipment.
There was some discussion on the recognition of FPOs to be at par with cooperatives by IFFCO. Mr. Rajendra Jaiswal, the executive director at Prakriti, had raised the issue with the IFFCO Bazar representative. This required some changes in the bylaws of IFFCO and would prioritise FPOs along with cooperatives and enable DMFPCL to avail membership benefits. It seems that indeed IFFCO has considered making FPOs members of the apex cooperative federation. This goes on to show that a strong ecosystem can help the FPO raise issues and get updates and information on the policy and market level changes.
DMFPCL, that had started looking like a typical case of a struggling collective enterprise with so many negatives, including top-down project implementation, premature closure of project, Covid19 related challenges, seems to be finding a footing after all.
As we have tried to highlight, the role played by the ecosystem is significant in this success with newer links expected to emerge. In that respect, we can assume the future success stories of FPOs will largely depend not only on the ecosystem players being there but on the ability of the individuals to leverage such opportunities.
The skill of the individuals and promoting institutions is not so much in forming the connections but also using it at the right time. DMFPCL has been able to do this in a short span of time. However, there is a need to carry on this streak over the next few seasons, while at the same time finding new partners in the market and trying out new initiatives, before DMFPCL is on completely solid ground.
Abhishek Saxena is an FPRM scholar at IRMA.
Arnab Chakraborty is a Research Associate with the Living Farm Incomes project at IRMA.
C Shambu Prasad is a professor of strategic management at IRMA.