PROCEEDINGS OF THE ROUNDTABLE ON

FARMER PRODUCER ORGANIZATIONS- “OPPORTUNITIES AND CHALLENGES”

Organized by

Small Farmers’ Agribusiness Consortium [SFAC]

and
ACCESS Development Services
JAIPUR, RAJASTHAN
16-17 July 2012

Background
Although the agricultural sector has grown slowly in the last one decade, it has
tremendous potential for improved productivity and possible expansion of employment
opportunities and consequently mitigating the levels of rural poverty. These gains can
be achieved only if concentrated efforts are made to realize the untapped potential of
this sector. Among others, one way of improving the productivity, profitability and
sustainability of farmers, especially small and marginal producers, is to bring them
together into a formal institutionalized arrangement, aggregate their produce and link
these bodies to the agri value chain.

SFAC has been mandated to mobilize 2.50 lakh farmers into 250 producer
organizations across the country by Department of Agriculture and Cooperation,
Ministry of Agriculture, Government of India to demonstrate the benefits of aggregating
producers and increase their access to investments, technology and markets. Under the
intervention, farmers are organized into groups, SHGs/ Cooperatives, producer
companies etc. There are approximately 1200 lakh farming households in the country
but only 5 lakh of them or merely 0.4 % are members of organizations such as
Cooperatives, Producer Companies, Associations etc.

ACESS Development Services (ADS), in partnership with SFAC,organized a two day

Roundtable discussion on Challenges and Issues facing Farmer Producer
Organization at Jaipur on 16-17 July 2012. The roundtable aimed at identifying critical
challenges limiting the mainstreaming of Farmer Producer Organisations and identify a
road map to address the prevailing challenges.

A cross section of stakeholders from FPOs, civil society institutions, banks, resource
agencies and the state government participated in the roundtable discussion. A
complete list of participants is available at the end of this document.
Objectives and Format of the Roundtable

The objectives of the Roundtable Conference were:

9 How to integrate the small farmer in the value chain on a sustainable and
equitable basis through member driven organisations
9 How to sustain an on-going dialogue and partnership between FPOs and other
stakeholders at the State level through SFAC facilitation

Summary of Proceedings

The Roundtable discussion commenced with a welcome address by Mr. Pravesh

Sharma, Managing Director - Small Farmers’ Agribusiness Consortium. He explained
the mandate of SFAC across the country for the formation of FPOs. He shared that the
objective of the Roundtable is to discuss the policy level issues pertinent to FPOs and to
bring all stakeholders together on a common platform in order to create an enabling
environment for the organization of small farmers. He expressed the need to discuss
policy matters, functional aspects, challenges and opportunities that the FPOs are
facing or may face, and the role of the government, banks, private sectors and NGOs to
promote and develop the capacity of FPOs.

He also highlighted some of the challenges faced by FPOs and SFAC’s role in creating
an enabling environment. He also informed that similar roundtables have been
organized by SFAC in others states to understand the issues faced by the FPOs which
moved useful in identifying key issues in building sustainable FPOs. He elaborated on
the importance of a state level platform where representatives of the FPOs and
promoting institutions can come together on a continued basis and join hands to tackle
the issues and challenges faced in promoting and strengthening FPOs.

These opening remarks were followed by an address by Mr. Vipin Sharma, CEO,
ACCESS Development Services. Some of the important points made by him were:

¾ FPO promotion is not to be seen as a one-time exercise. There is a requirement

of continuous engagement with FPOs and there is a need for identifying a set of
standards or requisites to establish an efficient FPO which could be followed
widely
¾ One of the important tasks of the promoting organizations is to organize the
producers and organize the groups in to a federal structure; it is the responsibility
 of the promoting institutions to form strong groups and work towards making
these groups sustainable
¾ Depending on grants alone can cause FPO to dissolve at later stages; revenue
streams of the FPOs should also be identified and planned strategically since its
inception
¾ At this point of time, we also need to organize a platform that can periodically
meet and discuss the issues and take things forward

The Round-Table discussions were divided into three sets of issues:

• Challenges and Best Practices;

• Mobilizing Backward and Forward Linkages;
• Role of Support Agencies and
• Way Forward.

Key challenges in Establishment of FPOs

+ The small farmer is an efficient producer but does not enter the value chain. The
strength of scale is required to undertake effective bargaining. In terms of aggregated
action, neither Self Help Groups [SHGs] nor Cooperatives have succeeded. SHGs are
too small in scale.

+Benefits of forming the producer organizations are clear. However, there is not much
clarity in terms of choosing the most appropriate structure of the FPOs. There are
advantages and disadvantages in both forms - cooperatives can avail of concessions
like rebates while filling the income tax returns whereas Producer Companies are
treated on par with all corporate sector companies for tax matters. The advantages of
Producer Company over cooperatives are ease of operations and greater autonomy in
operations and lesser interference from government. Mutually Aided Cooperative
Societies [MACS] have taken care of some of these provisions and MACS has been
adopted in Rajasthan but many states have yet to adopt MACS. It must be noted that
cooperatives have received support for decades whereas this is not available for FPOs.
One of the tasks of the state level platform could be to guide the farmers on choosing
the appropriate legal entity for their producer organization.

+ Regarding the issue of the ground level organization, it could be an informal one that
federates into a formal one. At each level they may take any of the organizational form
available. Farmers’ aim is increased income. That must be kept in mind whatever form
the organization takes.
+ Influential and bigger farmers tend to join cooperatives. An organization with small
and marginal farmers in majority membership is required.

+ It takes 4 to 5 years to form a FPO that can stand on its feet. SFAC should recognize
this and extend support from the present 2 years to 4-5 years.

+ There are not many examples of FPOs and cooperatives being viable. The business
mode of operation is absent. At present farmers do not believe that companies can give
them profits. They are also a little afraid of companies, an unfamiliar form for them.

+ Viability of FPOs needs to consider the following:

¾ Optimum size of FPO – 1500 farmers

¾ There should be a business rationale for aggregation, irrespective of whether the
organization is formal or informal and in-built profitability and sustainability is
necessary.
¾ Feasible Business Plans should be developed. Since most FPOs lack the skill to
do so, assistance in this has to be provided to them.
¾ Source of revenues –the FPO should take a considered decision on whether to
deal in a single commodity or in multiple commodities
¾ FPOs often face stiff challenges in obtaining financial support from commercial
banks at needed point
¾ Lack of infrastructure facilities at grass root level results in high wastage,
transportation etc.
¾ The incentive to stay together in an FPO will be there only if short-term benefits
are available to the members..

+ The FPOs have governance issues that should be resolved. How capable are the
farmers of running a registered Company? They are likely to remain passive and all the
control will be exercised by the CEO. That can be risky. One solution is to have two
Boards – a Management Board of professionals to run the company and a Governance
Board.

+ The process of registering the FPO is complicated. Assistance has to be provided to

FPOs in this. Even CAs do not seem to be aware of FPOs.

+ Government officials concerned with FPOs remain indifferent and ignorant about
FPOs. There are instances of FPOs struggling for recognition even after three years.
Capacity Building

Strengthening and capacity building of any form of farmer organization is important

whether it be FIG, Cooperative, association, company etc. For this the key role is played
by the promoting organization as to how they orient and build the capacities of the
farmer.

¾ Rapid scaling up is not advisable for a FPO. It should be given appropriate time
before scaling up.
¾ Building the capacity at FIG level is critical. Grass-root democracy could be built
through attendance of at least 80-85% members, transparency in accounts,
accountable behavior, regular internal auditing etc.
¾ Both the members and the farmers elected for Board of Director should be
trained adequately in good governance.
¾ Appropriate technology is becoming available rapidly. The question is how to
take it to the farmers. Skill development has to be undertaken in a professional
manner.
¾ The role of promoting should not be considered secondary, FPOs require hand-
holding support for at least five years. However, the promoting agency should
only provide external support for 5 or 6 years otherwise the FPO will continue to
remain dependant. They need to begin with an exit strategy.

Marketing Issues in FPOs

+ There is a great price variation between the retail prices and what the farmers receive.
FPOs should bridge this gap as much as possible

+ Marketing is a specialized work and it can take up to 5 or 6 years for an FPO to be

self-sufficient in management. Capacity building has to be emphasized. End to end
technical back-stopping is required. Agriculture is seen to be an unprofitable venture.
Cooperatives and FPOs will improve only if the farm is made profitable. At the same
time alternative sources of livelihood have to be developed.

+ When a marketing aggregator starts succeeding conflicts start. For example, often
the panchayats start feeling threatened and political interference starts. Much time input
is required to manage these developments and the external agency tends to give up.

+ It is important for the Farmers’ Companies to cultivate business sense. The farmer –
members have to realize this and not just the NGO
+ Price realization and increase in incomes has to come about in the short-run. But
price realization can only be one of the hierarchies of objectives. Transportation, pack
houses, reduction in wastage are equally important. Pack-houses could cost as much
as Rs 3 lakhs per month to run. There has to be sufficient turnover to meet this cost.

+ There are shelf-life sensitive transportation issues. Railway containers are the
preferred mode. There is need to increase the quantum of containers available. Small
technologies are available and needs to be adopted to reduce wastage and increase
shelf-life e.g. chilling plants at the village level.

+ Tie-ups with exporters should be encouraged.

+ It must be kept in mind that marketing is monopolized by traders and it will be difficult
to make a break-through.

+ Value addition in agriculture is not under priority sector lending. This needs to change.

+ Brand building is a long and challenging process but it also leads to better
commissions from the retailers. Retail sale is a big challenge and credit management in
the retail market can be a thorny matter. It is easier to collect credit in bulk marketing.
However, for branding and to sell at improved prices even to wholesalers, the producer
has to go to the retail market and establish brand recognition. Sometimes it helps to
start with the shareholders themselves being allowed to buy and resell.

+ A big opportunity for marketing exists in seed production.

+ Costing calculation is a difficult procedure for primary producers. Overhead costs and
unpaid [family] labour costs are often not taken into account.

+ An umbrella marketing organization would be a viable one. There are a number of

food laws, branding, packaging requirements that can be more efficiently done by such
an organization. The risks would be higher if undertaken by single FPOs.

+ The government is procuring pulses from the mandis. It could do so from FPOs.
Finance Issues in FPOs

+ Initially, SHGs were not recognized by the formal financial institutions as bankable
entities. A Working Group was formed to examine this and eventually NABARD
launched the pilot phase of the SHG Bank Linkage programme in 1992. RBI then
provided guidelines to the commercial banks on lending to SHGs. On similar lines we
need to have the guidelines for banks to support FPOs. With this we also need to
identify the organization or the body to bear the initial expenses or invest in the
producer organizations.

+ “Producers Organization Development Fund” (PODF) has been set up by NABARD

with effect from April 1, 2011, with an initial corpus of Rs. 50 crore to comprehensively
support Producer Organizations. NABARD, under its financial Intervention, directly lend
to Producer Organizations for term loans or composite loans comprising both working
capital and term loan requirements. However, similar to commercial banks, NABARD
also asks for a good balance sheet for 3 years and for collateral. This needs to change
if we are to promote FPOs.

+ Farmers are being given interest-free loans of up to Rs 1 lakh from Cooperative

Banks and farmers are coming back to the cooperative fold. A similar facility should be
offered to FPO members.

+ The Registrar of Companies puts Reliance and FPOs on the same level – special
consideration is required for FPOs, especially in procedural issues.

+ The tax on Famers Producer Companies under the Companies Act, is the same as for
corporate. This reduces the returns to farmers whose margins are relatively low to
begin with.

+ Seed companies and other input companies are ready to give credit to farmers and
farmers’ group with a good reputation but no credit is available for marketing.

+ The case of aloe vera juice production and marketing is an interesting case. Marginal
women farmers cultivating degraded common land on lease raise aloe vera and market
it with the help of an NGO- GDS. Effective marketing requires diversification. However,
they are unable to access credit to set up the processing units required to diversify
because of the lack of collateral. Clearly an institutional approach of judging the
business plan needs to be put in place. The capacity to meet bulk orders has to be
built.
+ Possibility of performance rating by an independent agency to assist in accessing
credit should also be looked into.

+ Indian Grameen Services (IGS) has initiated an innovative loan product where they
provide loan to a FPO on the credibility of the promoting organization and FPO itself,
without any collateral. They admit that only 90% loan amount is recoverable.

+ LAMP Funding Criterion includes: 2 years’ balance sheet, seasonal/quarterly trend

report, membership base or share capital in the Company and Promoting Organization’s
capacity

+ Ford Foundation is supporting a Livelihood Promotion Fund that gives loans at 4%.
The risk-taking ability of this facility is high, being external grant money.

+ Star Agriwarehousing & Collateral Management Limited assesses the capacity of the
Promoting Organization also and provides loans against stocks.

+ Friends of Women World Banking [FWWB] has a corpus of Rs 1.5 crores and
provides loans to FPOs on the basis of their Business Plan and does not ask for
collateral or balance sheets. It is ironic that while there is such a huge unfulfilled
demand for loans, FWWB could manage to lend only Rs 40 lakhs to 6 FPOs, in one
year. FPOs look for grants and they mostly do not have a viable Business Plan or have
a very basic one.

+ Rs 7000 cr. of subsidy amount is transferred to fertilizer manufacturers annually. The

government is considering direct transfer of the subsidy to the farmers. Can this be
routed through FPOs?

+ Can climate change preparedness be implemented through FPOs rather than

reaching out to millions of farmers?
Way Forward

A State level coordination forum of FPOs can act as a platform where information about
FPO productive potential and produce can be aggregated and leveraged with various
market players. Issues of sourcing inputs, credit, technology and market linkages can
be addressed by the forum. The forum can also look at solutions to HR, financing,
capacity building, regulatory compliance and related challenges. Some of the other
issues such a State level organization can address are:

¾ Cater to transport and other infrastructural requirements

¾ Registration and Formation of the FPOs
¾ Access to Kisan Credit Cards
¾ Group certification for seed production
¾ Brand establishment
¾ Research / Extension Fund of Mandi Board for supporting the FPOs
¾ Data base of human resources such as CAs, tax consultants, lawyers etc. who
understand income tax related issues Value addition facilities – processing units
¾ Ensure subsidies reach the appropriate targets
¾ Bulk purchases of inputs; input supply shops run by FPOs as a means of
regulating prices of input
¾ Assistance for Business planning

The idea of a state forum was unanimously supported and it was agreed that SFAC
would initially support this initiative till it becomes self-sustaining.
List of Participants

S. Name Dept./ Organization Contact No. E- Mail

No.
1. Pravesh Sharma MD, SFAC pravesh.sharma@nic.in
2. Y. C. Nanda Ex- Chairman,
NABARD
3. JijiMammen CGM, NABARD
4. Sanjeev Kumar SFAC 9810523350 jeevsgupta@gmail.com
Gupta
5. Jaya Chatterji SFAC Jaya.chatterji@gmail.com
6. AnshuBhartia CEO, FWWB 9099072799
7. Vipin Sharma ACCESS vipin@accessdev.org
Development Services
8. Ajit Singh 9828749927
9. Akhilesh Singh ACCESS 9414178882 akhilesh@accessdev.org
Development Services
10 Anil Kumar Jain ARAVALI 9414083713 anil@aravali.org.in
4
11 Archana Singh NABARD 9928119777 archana .singh@nabard.org
12 Arunava MONSANTO 9915597377 Arunav.choudhary@monsan
to.com
13 Ashok Dhamani ACCESS 9983079923
Development
Services-FPO Jalore
14 AyushiSharda ACCESS 9672971700 ayushi@accessdev.org
Development Services
15 B.N. Tiwari GDS 9828382341 Tiwari.bn@gds.org.in
16 BabulalAhair Udaipur team
17 BabulalBhogara Udaipur
18 BaghwatiLalKum Udaipur team
awat
19 BaluramChoudhr Kekri- FPO
y
20 BanwariLalJat ADH, Jaipur 9829244044 bljat@yahoo.com
21 Bhawari Devi GAPL 9602640751
22 C.L.Vesu Ds. RDD 9413342617 Clvesu_21@yahoo.com
23 D.K. Kardam IFFDC jaipur 9460877669 Dkardam20@gmail.com
24 Dileep Gupta IGS 9414051485 dileepkumargupta@basixind
ia.com
25 Dilip Kumar ARAVALI 9414002620 dilip@aravli.org.in
Yadav
26 Dr. SsRathore KVK- Chomu 9829231351 rathoresskvkjpr@gmail.com
27 Gaurav Vats ISPA Delhi 9311309535 gaurav@ispaindia.org
28 GopalBadhala Areis ,sahapura 9928551928
29 GovindSrivastav AARO 9414277206 Govind_71@yahoo.com
30 HeeraLal Patel Udaipur team
31 HeeraLalYadav Udaipur team
32 HimanshuBais SRIJAN 8875028086 Himanshu.bais27@gmail.co
m
33 HiraLalJat ISAP 9829293042
34 I C Gurjar ISAP 9414339470
35 Jagroop Singh Director
Yadav
36 Joseph Mathew ACCESS 8107924919 joshp@accessdev.org
Development Services
37 JugalPhatak Udaipur team
38 K.B.L Hajel IFFDC 9461664667
39 KamleshChoudhr 9782753748
y
40 L.N. Kumawat Jt Arg. 9414446338
41 LaxmanDamar Udaiur team
42 Mahavir Farmer 9829391134
43 Manav ACCESS 9799495795 manav@accessdev.org
Development Services
44 MeenuChoudhary AAO, doh, Jaipur 9414842778 Meenuskg01@gmail.com
45 Mohan Lal RAPCL 9828718237
46 Monika Khanna ACCESS 9650270424 monika@accessdev.org
Development Services
Delhi
47 MoolchandKhinch ACCESS 9001890037 moolkhichi@gmail.com
i Development Services
jodhpur
48 Mukesh Gupta Morarka foundation 9829014616 mukesh@morarkango@gm
ail.com
49 Naresh Sharma Morarka foundation 9414041635 Naresh.sharma@morarkang
o.com
50 NavinHoro ACCESS navin@accessdev.org
Development Services
51 O.N. Sharma I h s Kekri 9413544543
52 O.P. Solanki DR(plam) 9929195614
53 P.S. Pandey SBGI 9414066096 Premshankar.pandey@shrir
ambioseed.com
54 PiyushTiwari ACCESS 9784192292 piyush@accessdev.org
Development Services
Udaipur
55 PriyankaSaini NABARD 9024903953 sainipri@gmail.com
56 Puran Mal Gurjar ACCESS 9094613900 purnmalgurjar@gmail.com
Development Services
57 Pyush Jain Udaipur team
58 R.P. Tiwari NDDB 9413346053
59 R.S. Jodha GM (NABARD) 9828166110 Jodha.ramveer@yahoo.com
60 R.S. Khurkumic NDDB 9828224483
61 RajendraPatidar Udaipur team
62 RajuLal KPTL 9829638778
63 Rakhlal ACCESS 9929511794
Development
Services-Fpo Jodhpur
64 Ram Lal Mali RAPCL 9829452522
65 RamchandraJang ACCESS 9929619621 ramchandrajangid@gmail.co
id Development Services m
66 RameswarNirma Udaipur team
n
67 RamjiLal Farmer 9829620857
68 RamlalMeena Dy.Div.hortiwelfarejaip 9414049787
ur
69 RihitashSindhu JAPCL ,shahpura 9414238807
70 RuchirChoudhary KPTL 9414005188 Ruchir.choudhary@kptl.com
71 S. Dash ACCESS 9887421437 Subhandu75@gmail.com
Development Services
72 S.K. Gaud SACS 9414093228 sunil@reddiffmail.com
73 S.L.Mehta Exve,MPUAT 9460919188 Slmehta1947@gmail.com
74 Salinder Singh MONSANTO 9915503097 Salindra.singh@monsanto.c
om
75 Sandeep Kumar ACCESS 9984678856
Development
 Services,Udaipur

76 Sanjeev Gupta IFAC 9810523350

77 ShailendraDadhic ACCESS 9602207205 shailendra@accessdev.org
h Development Services
Jodhpur
78 ShivrajVaishnav GAPCL 9928440898
79 Siddhart IGS 9799467281 durgavanshi@gmail.com
80 Sohan Singh Sbr Agri
81 Suresh Mishra Udaipur team 9887804282 Sureshmishra1003@gmail.c
om
82 SushilParashar Consultant(RKVY) 9414313239
83 Shyamendra Pal ACCESS shyamendrapal@accessdev
Development .org
Services, Jodhpur
84 Udaiveer Singh D.D Arg (RKVY)
85 UmeshPowanr Udaipur team
86 V. Raveendra Sta Agri 9351976847 v.raveendra@starargi.com
87 Vedprakash ISAP Delhi 9810414800 ved@ispaindia.org