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The FPO Puzzle: Ubiquitous but not operational
There are over 8000 Farmer Producer Organisations (FPOs) in India and the Government has issued notifications towards promoting another 10,000 FPOs in the country. These democratic institutional forms are recognised as vehicles of change and are expected to transform the way farmers upgrade their technologies, manage various resources for production purposes, tap into supply chain efficiencies and negotiate with market players.
Despite their rapid and continuing spread, there are challenges in ensuring sustainability of FPOs, as member owned institutions, beyond the project period.
Perhaps most critical, and yet less discussed, are the challenges that FPOs face in building both capacities and confidence of Board of Directors to own, operate and expand these institutions to enable goals like doubling farm incomes. This last mile connect and emphasis has not received adequate investment or attention in the new policy either.
As a farmer, why should I be part of an FPO?
Shantilata, a farmer in Odisha, grows vegetables, pulses and paddy and sells it to traders in her village. One kg of Okra, will fetch her just Rs 10 from a trader, though the end customer will buy the same amount for Rs 35 in the market. The rest of the money is distributed among different value chain actors, who undertake sorting/grading, whole-selling, transporting, distributing and retailing operations and bring the Okra to the market. Some of the Okra also goes unsold and wasted. She was recently informed that a Farmers Producers Company is being formed and encouraged to contribute Rs.1000 to purchase shares and pay a membership fee of Rs.100. Prices, especially of vegetables, were low in the last season and she has barely any savings. How would investing money in this organisation help her?
Image: A group of FPO directors of a NABARD promoted FPO of vegetable growers in Odisha, discussing their training needs related to FPOs, during a learning session jointly organized by Skillgreen and partner DSS.
The purpose of an FPO is to enable better control of producers over the value chain in which producers are present, for better and stable returns to producers like Shantilata. For this, the FPO must have a business model that gives it competitive advantage over other players in the value chain.
Photo: A group of FPO directors, staff from FPOs of tribal farmers, promoted by SERP, Andhrapradesh explaining the difference between non FPO farmer and FPO member farmer, in a learning session facilitated by Skillgreen partner VCF
The messy realities of creating a market ecosystem for FPOs
Developing new business model often involves a combination of many activities, often in a non-linear manner. These include supplying inputs (seeds, fertilisers etc) directly purchased in bulk from companies to members at lower costs; providing members with information on newer and sustainable production systems and innovations, and alternative post-harvest marketing systems. This requires three key linkages— Technical, Market, and Financial. The FPO operates in an ecosystem where these linkages are offered by various service providers, support agencies and promoting organisations. Strengthening the link between the FPOs and the ecosystem in which it operates is a key missing piece in the FPO puzzle.
Incubating FPOs
Unlike the multiple academic institution based incubators, FPOs are typically promoted by Resource Institutions or POPIs (Producer Organization Promoting Institutions), or in the new terminology, CBBOs (Cluster Based Business Organizations), to mobilise members, register the FPO, develop internal structures and systems, and design and implement a business plan for the FPO. If the FPO is to fulfill its purpose of being competitive in the value chain, it has to function like an agri-business company and think like a start-up even as it maintains member trust and allegiance. Building member ownership in the functioning of the FPO is critical for longer term sustenance beyond the three year project period. How does one go beyond the often transactional nature of member-FPO or member-ecosystem relation to one that is mutually beneficial over the long term?
The governance of FPOs throw up several challenges in practice. How does one maintain a balance between keeping the FPO viable and members interested; how to maintain a representative and inclusive character of the organization; how to ensure that the FPO does not falter on compliances; how do members work together to maintain low transaction costs of commodity aggregation and monitoring costs in operations ?
We propose that solving these interlinked issues requires reaching out to the last mile in building ownership among its members.
Photo: A group of FPO directors from Karnataka FPOs supported by Centre of Excellence for FPOs, discussing Business Models, during a learning session facilitated by Skillgreen and Green Innovation Centre
Establishing systems through Spear Head Teams
A lesser-known aspect of the scaling up of the Amul model through the NDDB (National Dairy development Board) was the concept of a Spear Head Team, captured beautifully in the Shyam Benegal film – Manthan. FPOs today need to see themselves as spearhead teams who create systems that the internal stakeholders of the FPO can sustain even after the project teams move out. Facilitating and catalysing cooperation where the FPO’s primary stakeholders have a good understanding of the functioning and business strategies of the FPOs is critical. This is not achieved through conventional classroom based training and capacity building approaches, but needs facilitated dialogue, and the creation of participatory learning platforms where the FPOs and the ecosystem players can interact openly in an atmosphere of trust and openness to learn.
Sashakth Kisaan: Skilling FPOs towards Sustainability
Skillgreen is trying to address this gap through its SashakthKisaan FPO initiative. We see ourselves as facilitators, who work primarily to create these spaces for dialogue between the FPOs and the ecosystem players, with the primary stakeholders at the core.
We do this through need-based and customised participatory learning events, that are not trainings but facilitated learning sessions. The sessions are conducted in local language by trained facilitators that are available locally and understand the local context of the FPOs on one hand and the priorities of the ecosystem players on the other hand. We specialise in asking the right questions and encouraging the participants (FPO directors / staff / promoting organisation staff) to find the answers jointly. We do this through a well-structured and open source trainers manual.
Photo: A group of trainers in Kolkata discussing the functions of an FPO and FIG, during a ToT collaboratively organized by Bhoomika, Skillgreen and several organizations across the country
As the participants’ understanding grows, the circle of influence grows, and more stakeholders join the dialogue with the FPOs — the topic for dialogue shifts from internal governance to statutory compliances to understanding the market to business planning, to financial and human resource management. A virtuous feedback cycle of action-based learning is created through these sessions. We work with promoting agencies, financing partners, technical support agencies and market linkage partners, as each of these stakeholders benefits when the FPO grows. Working with and through the ecosystem is important to make these capacity building services accessible to the FPOs. A snapshot of our collaborative work in numbers is given below:
Building motivation, generating action, and trust within FPOs
The programme creates first, excitement and curiosity among the participants about FPOs and a motivation to make it work. Secondly, it sets off a series of actions that are required for the growth of the FPO — such as mobilising share capital, formation/strengthening of FIGs, the fulfilment of statutory compliances, experiments in business activities, preparing business and action plans and so on. Thirdly, it creates trust and rapport among the FPO and the ecosystem players who are part of the learning and action, thereby creating the foundation for the long-term growth of the FPO.
Going beyond binaries through facilitation
The key challenge that we face is the idea that community engagement and expert/technical/ecosystem services are separate and exclusive of each other. The reality though is that farmers have rich experiences, and there is a need for two-way dialogue that connects their experiences with the new learnings required to run an FPO.
At the other end of the spectrum, is the mindset that FPOs are community institutions meant for welfare and not for profit. However, the reality is that the FPO needs to be competitive to sustain in the market. This requires a professional and businesslike approach that looks critically at margins, keeping customers happy and taking calculated risks.
There are notions that we collectively need to overcome, as we attempt to bridge the two worlds of community and enterprise. FPOs can succeed through investment in integrating professional support with community wisdom.
In a sequel to this article, we will look at the approaches to learning, collaboration and coping with COVID.
Dr. N. Sai Krishna and Parthasarathy. T are rural management professionals, associated with Skillgreen, a social enterprise developing decentralized structures facilitating learning events with FPOs & rural entrepreneurs. They can be reached at info.skillgreen@gmail.com
Prof. Shambu Prasad is a Professor of Strategic Management and Social Sciences at IRMA and has been mentoring Skillgreen.