Organising a farmer producer company (FPC) is not an easy task, but the more difficult task is in sustaining and expanding its business so that the producer members benefit. FPCs need handholding support on both technical and organizational aspects. P Muralidharan and M S Rajeev illustrate how Krishi Vigyan Kendras (KVKs) could provide this type of support in this Good Practice Note.
Lack of reliable markets that provide remunerative prices to farm products has been one of India’s most important challenges in agriculture. The problems are more severe in the case of highly perishable products where opportunities for scientific storage and value addition are not available. Organising farmers into commodity interest groups and producer co-operatives have been tried in the past and it has succeeded to some extent in some products and some regions but in most cases these initiatives didn’t succeed due to a number of reasons including poor management and political interference.
The Government of India has come up with a new institutional form called ‘Producer Companies’ in 2003, a much needed institutional structure that consists of ethos of cooperation on one side and the business resilience on the other. Recognising the potential of Producer companies, it announced a PRODUCE fund amounting Rs.200 crore for building and promoting Farmer Producer Organisations (FPOs) and entrusted NABARD (The National Bank for Agriculture and Rural Development) for organising such producer organisations. Moreover, Ministry of Agriculture and Cooperation under Government of India had declared 2014 as the year of Farmer Producer Companies and aligned them with existing finance schemes by government. Apart from the Non-Governmental Organisations, Krishi Vigyan Kendras (KVKs), Banks, Agricultural universities etc were asked to come forward for promoting farmer producer organisations. The ultimate goal of these FPOs is overall development of farming community through collective purchase of inputs, timely guidance to farmers, application of good agricultural practices, capacity building, aggregation/procurement of marketable produce, value addition/minimal processing, establishing market linkages and providing high quality products to the consumers.
ICAR-Krishi Vigyan Kendra-Alappuzha hosted by ICAR-Central Plantation Crops Research Institute (CPCRI) and located at its Regional Station, Kayamkulam has been promoting a FPO for spices as Producer Organization Promoting Institution (POPI) with the support of NABARD since 2016. This FPO was registered as ‘Onattukara Spices Farmer Producer Company Limited’ under the ‘Companies Act’ on 7th December, 2016 with 10 farmer promoters. Turmeric and ginger farmers were enrolled as shareholders with a share value of Rs.1000/- Cultivation of spice crops in a minimum area of 10 cents was the criteria for selection of share holders. As of now 241 farmers are share holders of the company with a share capital of 2.78 lakh rupees.
The KVK initiated its interventions among turmeric farmers by introducing an improved boiler for processing turmeric and popularising a high yielding variety. The success of these interventions created an enabling environment for organising the FPO among turmeric farmers. The KVK mobilised turmeric farmers and it partnered with several other organisations to initiate and strengthen the FPC. These are discussed in detail below.
- Introduction of turmeric boiler for processing: Turmeric boiler developed by Tamil Nadu Agricultural University was procured by the KVK for a Frontline Demonstration (FLD) on “Improved processing methods of turmeric” during 2012-13. The turmeric boiler has advantages in terms of (1) time of boiling (only 45 minutes required per batch compared to 3-4 hrs in conventional method), (2) quantity of turmeric boiled per batch (up to 100 kg) and (3) less time taken for drying over the conventional boiling. As this was found successful, it was handed over to a woman self help group at Bharanikkavu panchayath for starting a turmeric processing unit and they started marketing good quality, pure turmeric powder in the brand name “Shudhi’ which had good demand.
- Popularizing the high yielding turmeric variety ‘IISR-Prathibha’: During 2014-15 an OFT was conducted in Budhanur panchayath to assess the suitability of recent IISR turmeric varieties in the region. This was followed by a Front Line Demonstration (FLD) of the best performing variety IISR-Prathibha during 2015-16 with 10 partner farmers in Bharanikkavu panchayath for expanding the area under this High Yielding Variety. Partner farmers were given orientation trainings, and regular field visits were conducted. Prathibha variety recorded higher growth, yield, and quality compared to the prevailing local variety which convinced the farmers. Field Day was conducted on the harvesting day for farmer to farmer spread of the technology. Based on the acceptance, about 850 kg of seed materials produced under the FLD programme was procured by the KVK and provided to more than 300 farmers in the district (1 to 5 kg only) as good quality seed materials after proper seed treatment, for expansion of area under this variety.
- Proposal Development for a Farmer Producer Company: Based on the success of these demonstration programmes and the enthusiasm among the farmers, the KVK initiated the formation of a Farmer Producer Company during 2015-16 with the financial support from NABARD. The company aimed to facilitate the farmers of Alappuzha district to increase the profitability of cultivation of major spice crops in the district , turmeric, ginger, pepper and Garcinia. The project was sanctioned by NABARD in March, 2016 with a budget of Rs.9.06 lakhs for the first three years as per the policy of the Govt. of India.
- Establishment of OSFPC Ltd: Turmeric farmers from different grama panchayaths of Bharanikkavu block viz., Bharanikkavu, Chunakkara, Palamel, Nooranad, Thamarakulam and Vallikunnam were organized during April to September, 2016 by conducting a series of group meetings with the support of local self governments, Agricultural Officers, NABARD farmers clubs, and ATMA.
Progressive farmers, panchayath members and master farmers of these villages were made aware about the importance of organized cultivation and production of quality spice products. Following the group meetings, clusters of 10-15 farmers were formed in each village. Trainings were given to all the participating farmers on scientific cultivation practices of turmeric and ginger. Good quality seed materials were made available at a subsidized rate and all other technical supports were given.
Table 1: Major partners of OSFPC and their roles
|KVK||As POPI – initiation, formation, facilitation, mentoring, technical support, guidance and monitoring|
|NABARD||Financial support for establishment, Review of the performance, capacity building of directors and CEO|
|Local Self Governments||Providing statutory licenses, FSSAI registration, complementary plan projects for the shareholders/groups|
|Gramapanchayath members||Facilitation of group meetings at village level, confidence to farmers to become shareholders|
|Dept. of Agriculture Development and Farmers’ Welfare||Promotional schemes and subsidies to farmers for spice cultivation, Encourage farmers to become shareholders|
|Progressive farmers||Leadership in organizing farmer groups, guidance to new farmers in cultivation, seed production|
|Research/Development organizations||Providing quality seed material, trainings and exposure|
|Shareholder farmers||Expansion of area under cultivation, Follow scientific practices for economic and quality production|
The first Annual GB meeting of the company was held on 02.03.2017 which selected a Director Board of 11 directors from among the shareholders along with 3 officials from the KVK.
The Onattukara Spices Farmer Producer Company Limited (OSFPCL) was formally inaugurated by Sri. G Sudhakaran, Minister of Public works and Registration, Govt. of Kerala in an auspicious function conducted at Kattanam on 21.07.2017. The Minister also released the products of the company- turmeric powder and whole black pepper – on the occasion.
The OSFPC has obtained registrations under FSSAI and GST during this year which are essential for value addition and marketing.
Box 1: Activities of the company
During 2016-17, turmeric was cultivated in an area of 10 acres by the shareholder farmers. After the harvest 1976 kg of Prathibha seed rhizomes were procured form 16 shareholder farmers at premium rate (Rs.40/kg) and made available to 154 farmers after cleaning and treatment (@ Rs. 50/kg for shareholder farmers and @ Rs.60/kg for others) for cultivation in the next season. The market rate of turmeric seed rhizome is normally above Rs.100/kg.
Also 4450 kg of local variety rhizomes was procured @Rs.25/kg from the shareholders while normally they get only Rs.15 to 20/kg on selling. This was processed scientifically and hygienically and the good quality turmeric powder was prepared for marketing in the brand name of ‘Onattukara spices’.
During 2017-18, the company procured around 20 tons of fresh turmeric from 76 shareholder farmers of which 9 tons of Prathibha and Alleppey Supreme as seed and the remaining 11 ton of local variety for processing and value addition. Out of this, 6.2 ton of Prathibha and Alleppey Supreme were redistributed as seed to more shareholder farmers with the idea of expanding the area under the HYVs. The company also procured 2.5 tons of ginger from 8 farmers during the year of which 1.3 tons were of the HYV-Varada which was provided to farmers as seed rhizomes and 1.2 ton of local variety for processing as dry ginger.
Capacity Development of FPO
Training cum exposure visit for OSFPC Director Board Members /farmers: Training cum exposure visit of director board members and selected farmers of the company was conducted to ICAR-IISR-Calicut, SUBHIKSHA, Perambra, ICAR-KVK-Kozhikode, and ICAR-IISR experimental farm, Peruvannamuzhy during 8-9, January, 2018. The farmers were given exposure to the activities of SUBHIKSHA, the first Farmer Producer Company in India, engaged in Value addition of coconut and spices, managed wholly by women. The visit to training cum incubation unit for spice crops at IISR, experimental farm, Peruvannamuzhy gave awareness about various machineries used for the value addition and processing of spices, which is a major activity of OSFPC.
The area under turmeric cultivation expanded to 30 acres with almost half covered by the HYVs, Prathibha and Alleppey Supreme. Shareholder farmers, hitherto cultivated turmeric and ginger on small scales, started cultivating on commercial scale expecting a decent price and assured procurement. An elevated enthusiasm and zeal is visible on these farmers. Small groups are being formed for the processing and value addition of these spices for which plan projects being formulated by the local self governments. Individuals/companies in fray in the processing/value addition/marketing activities of turmeric and ginger are getting in touch with the OSFPC for exploring the possibility of bulk procurement. It is expected to have a reasonably stable value chain of these spices through the OSFPC which will be beneficial for both the producers and customers.
Performance analysis of the FPOs based on our experience
- Financial support from NABARD
- Back up/support of Producer Organization Promoting Institutions (POPI) like Krishi Vigyan Kendra (KVKs), NGOs, Co-operative banks etc.
- Farmer producers are the ultimate decision makers in production, value addition and marketing activities
- Lack of initial working capital and infrastructure – The only source is share capital raised from the primary producers and a nominal revolving fund provided by NABARD. It is not easy to mobilize sizeable funds as shareholders are primary producers who do not have the capacity to contribute in large amounts.
- Hiring a person for full time coordination as CEO is not practically feasible since the low payment offered makes it less attractive to anyone.
- Non capability to afford professionals for support in the areas of value addition and marketing. Since they have to compete with corporate players in processing and marketing, they require professional management and services.
- Farmer directors lack experience in organizational management and decision making and since a non-profit activity, tends to spend less time in management.
- It is a collective forum of primary producers, who were already engaged in farming activities. They know the right things of farming in their locality and can succeed if supported in processing and marketing activities.
- Farmer producers companies can involve in all aspects of farming like arrangement of inputs such as seeds, fertilizers, man power, storage facilities, processing and marketing on a common shared basis so that the cost of production could be brought down and returns to the producer farmers increased.
- Hectic process involved in registration of the company as per the Company’s Act
- Local merchants who are already into these activities try to discourage the organized functioning as they tend to lose their business and profits. The company faces competition from other private companies also, who are having good marketing facilities and network.
- Political interference for vested interests affects he functioning of the company to an extend
- Lack of pro-active support expected from Government agencies and Local Self Governments for the promotion of company activities
Farmer producer companies provide a good platform for the primary producers of the country as it is fully governed by a group of primary producers themselves. FPOs can take a collective effort from the beginning of crop production to value addition and marketing though arranging seeds and other inputs, advisory services, aggregation of produce, processing and value addition, marketing etc. By ensuring an organised, professional and sustainable management a farmer producer company can be successful and offer better prospects for the primary producer farmers. But a lot of constraints like lack of working capital, professional manpower, support from other government agencies and the prevailing market dynamics make it very difficult for them to survive and sustain.
KVKs as POPIs could effectively organize and promote FPOs owing to (1) their comprehensive and down to earth/field level experience and knowledge in farming related activities (2) genuine partnerships and linkages with farmers which inculcates confidence in them and (3) capability to coordinate all related/concerned agencies to a common platform to achieve the goals. A pro-active, positive response and cooperation from the partners/stakeholders with a matured leadership by the KVK could lead a long way in taking forward this important movement for the upliftment of farmer producers.
Dr P Muralidharan, Principal Scientist & Head, ICAR-Krishi Vigyan Kendra-Alappuzha, Kerala (email@example.com)
MS Rajeev, Subject Matter Specialist, ICAR-CPCRI, Regional Station, Kayamkulam, Kerala