On July 5, 2019, the government of India announced its intent to promote 10,000 farmer producer organisations (FPOs) over the next five years, as part of its efforts to increase farmer income and reduce agrarian distress.
Such collectivisation can be very powerful. The best known example of an FPO is that of Amul (Gujarat Cooperative Milk Marketing Federation Ltd.) which is a dairy cooperative with over three million producer members.
Seventeen years ago, the government of India introduced a new form of the ‘producer organisation’, namely farmer producer companies, which combine cooperative principles with professionalised business management. The largest such company, Sri Vijaya Visakha Milk Producers Company Limited, has over 100,000 members, who have together contributed more than Rs 200 crore to fund its operations.
Currently, India has thousands of different types of FPOs, including co-operatives, farmer societies and farmer producer companies, which focus on various sectoral activities such as cultivation, dairying, livelihoods related to non-timber forest produce (NTFP), fisheries, and so on. To this, the government is keen to add another 10,000 in the next five years.
The idea of FPOs is appealing because it is predicated on the belief that if hundreds of small and marginal farmers can collectivise, they can pool their resources (i.e. capital) together to undertake processing and trading of agricultural commodities more effectively, leading to an increase in income and ultimately a reduction in distress and vulnerability.
However, the distress faced by India’s farmers is caused not only by low profits from agricultural activities but by multi-layered structural issues.
The cropping pattern changes brought in by a slew of green revolution policies increased food production multifold, enabling it to keep pace with a rapidly increasing population. However, this came at great ecological cost. We now face widespread soil degradation, alarming depletion of groundwater in most parts of the country, loss of biodiversity, unhealthy levels of pesticide residue in food, and other such impacts.
Production in such depleted ecological systems requires greater input and, consequently, greater costs. This creates a vicious cycle: intensive cultivation leads to ecological deterioration, which increases production costs and risks, and lowers returns. Facing losses, farmers intensify cultivation further in the hope of generating remunerative returns.
This pattern is further exacerbated by increasing fragmentation of land holdings due to intergenerational property division and transfer. It is no wonder that the average income of the vast majority of India’s farmers is only Rs 6500-9000 per month. For marginal and landless farmers, who make up more than 80% of all farmers in the country, incomes are regularly less than the expenditure required for meeting basic needs.
Agrarian distress is caused not only by a low level of income, but also the unpredictability of that income in terms of the amount, as well as its timeliness. Farmers’ incomes have always been dependent on the vagaries of weather and markets. To this is now added farmers’ rotten luck with borewells. Uncertainty over water lead many farmers to dig borewell after borewell. An additional worry now comes in the form of the global climate crisis and the changing temperature and monsoon patterns in India.
These are complex issues which are extremely difficult to tackle and require years of concerted efforts to address; only some of these can be addressed by collectivising farmers and forming FPOs.
Operating amidst lack
At the local level, FPOs can contribute to alleviating agrarian distress if they are able to function as imagined. However, most FPOs (with the exception of some dairies) are unable to carry out basic business-like operations because of inadequate funds or a lack of capabilities required to run business operations.
Promoting more FPOs does not automatically lead to improvement in farmer incomes. Since most FPOs are formed by small and marginal producers, they are under-capitalised and need better access to institutional finance in the form of equity and loans. They also require well-trained talent and an ecosystem of professional service providers, both of which are difficult to find in rural areas. FPOs also need easier access to existing government schemes aimed at benefitting farmers (such as warehouse receipts system, procurement at minimum support prices, subsidies for processing units, etc.). For most of these schemes, FPOs can become the vehicles for providing services to farmers. However, current mechanisms make it very difficult for FPOs to do so.
Parallelly, we also need greater focus on programmes which mitigate risk and vulnerability of producer households, such as stabilisation of prices of commodities through market and non-market mechanisms.
The long run
Recent efforts towards promoting more sustainable forms of cultivation through System of Rice Intensification, Sustainable Sugarcane Initiative, Better Cotton Initiative, and some forms of natural farming, need to be scaled up because they have the potential to restore ecological balance and improve productivity in the long run.
Greater attention to the linkages between agricultural production and nutrition security of producers is also needed as most farmers in India are net buyers of food. Poor food and nutrition worsens household health and vulnerability.
Such efforts, which try to weaken or break the vicious cycle of agrarian distress, entail developing policies and interventions to address deep-seated structural issues, as well as initiatives at local levels which include (but are not limited to) promoting and supporting farmer producer organisations.
If collectivisation alone could change the condition of agricultural households, regions which already have many FPOs would show clear signs of lower economic distress than others. However, barring a few exceptions, this is not the case. Promoting more farmer producer organisations does not automatically lead to improvement in farmer income and welfare.
Promotion of a large number of FPOs should be seen as part of the larger solution but not the solution in and of itself.
We must not only promote farmer producer organisations but also provide them with better institutional support to increase their chances of success, and simultaneously, work towards addressing the root causes of agrarian distress at a larger scale over the long-run.
Richa Govil is a faculty member at Azim Premji University, Bengaluru.