Dr. Ashok Dalwai, CEO, National Rainfed Area Authority (NRAA), Ministry of Agriculture and Farmers’ Welfare, Government of India provided a session exclusively to the Samunnati leadership team on “A Roadmap for the way forward for FPOs” on 13 August 2020. It was truly an honour to hear his views on how we could enable the FPO ecosystem and improve the livelihood of smallholder farmers. Summarised below are the key takeaways from the discussion.

The Agriculture policy in India has been shifting its importance from production centricity to stable income generation for the farmers. The assumption is, if income is taken as key performance indicator all other components will be taken care of. For an agriculture to be transformed to a business proposition, it has to be looked at as sum of all operations starting from pre-production, through production and post-production. In the process, using all the available resources efficiently will have a crucial role to play. This total factor-based productivity has the potential to positively contribute to farmer’s profits. The difference between gross returns and cost of production is the net outcome which must be efficiently and effectively monetized to a post-production initiative.

  • FPOs can bring in economies of scale and thereby imparting the transaction efficiency in the input management level and output management level. By adding other services for which farmers usually have to pay or end up selling their produce at lower price, FPOs can make the value chain a bit more efficient. In a free trade environment, we should be able to connect to the farmers as directly as possible without any intermediaries. It is not to state that we don’t need intermediaries, they can be a part of the chain as long as they contribute to the services, add value and not behave like a rent seeker. They can be as logistics provider, add value to the produce and help the value to operate more efficiently. Thus, capturing more and more value between the farm gate and the end consumer.
  • FPOs can bring together farmers with common goals in the society and bring about a harmonization among them which creates a social capital within the FPO – Despite the fact that there are larger number of players and differing interests, they have been able to reconcile the differing interests to run it on a corporate style. If we are able to bring the horizontal cooperation required among the farmers which is the essence of the FPO, will be able to meet any management efficiency of that a corporate sector brings. In comparison with a corporate employee, the farmer is not only looking at the financial gain but also on the convenience, co-operation and spirit of secure member of a collective body which the FPOs bring.
  • FPOs can take the responsibility to orient and train the farmers to take effective production decisions – Today, the agriculture markets in a way remains disconnected from the farmers. It is important build robust value systems to directly connect farmers to the markets. To make farmers produce according to the needs of the market, then there must be a continuous flow of information form the market to the farmers about all the requirements the market is looking for. This will enable flow of information between all the players in the ecosystem.
  • FPOs will be able to cater needs of the farmers, as they will be able to achieve economies of scale by aggregating their produce – India is surplus in many commodities, supply and demand determine the prices of these commodities. The prices are going down immediately after harvesting due to glut in the market. In Indian context, the surplus is at the macro level and it happens due to the failure of agriculture logistics to connect the production zone to the consumption zone. This is the cause of the poor marketing price. A commodity seems to be surplus in the micro level, may not be surplus in the macro level.

Ways the New Agricultural Policy is Enabling Agriculture

  • New Market architecture
    The new ordinance allows the farmers and FPOs to connect with the market players directly and through APMC. In APMC also the centre has shared two model system to the state government. One run by the co-operatives and government APMC mandis. The second APMC by the private players. Thus, providing multiple avenues for the farmers and FPOs to market its produce and promoting a healthy competition.
  • Agricultural Exports
    The cluster-based production systems, along with backward and forward linkage will help FPOs reach the exit ports. The kisan rail is classic example of this approach. This intermodal connectivity will help farmers and FPOs better connect with the market.
  • Warehouse Receipt Financing
    Connecting the farmers to the production loans and post-production loans is very critical. Kisan Credit card has made the process easier. The institutional credit system has been strengthened, but the warehouse receipt system is yet to be strengthened. The warehouse compliance will be improved upon by upgrading the quality of godowns under the Atma Nirbhar Bharat to create credibility on WRF. Parallelly the warehouse development authority of India has simplified the procedure for registration of these warehouse.

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