POLICY ORIENTATION

on

GROUP APPROACH TO AGRICULTURAL MARKETING IN KARNATAKA

{Derived from IIPM Capacity Building Programs on Organic, Coconut, Arecanut & Horticulture}

Submitted to

KARNATAKA AGRICULTURAL PRICE COMMISSION (KAPC)

GOVERNMENT OF KARNATAKA

INDIAN INSTITUTE OF PLANTATION MANAGEMENT BENGALURU

(An Autonomous Organization of the Ministry of Commerce & Industry, GOI)

August 2018

KAPC-DoA-GoK KAPC-GoK

KAPC-DoA-GoK KAPC-GoK

CONTENTS

Sl. No. Particulars Page No.

Acknowledgement i

Executive Summary ii – iii

1 Agriculture Marketing System in India: The Current Scenario 1 – 2

2 Group Approach to Agricultural Marketing: An Overview 2 – 4

3 Role of FPOs in Improving Market Access: A Review of International Experience 4 – 7

4

A Review of Cases: Role of FPOs

4.1 Small Farmers’ Agribusiness Consortium

4.2 Farmer Producer Organizations (FPO), Directorate of Horticulture, Karnataka

4.3 Andhra Pradesh Farmers Producers Organization (FPO) Promotion Policy

4.4. FPO as Farmer Collectives: A Case Study of Avirat in Gujarat, India

4.5 Contract Farming through Farmer Producer Organizations (FPOs) in India

4.6 Rythu Kosam Project, International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) Development Centre

4.7 Community Milking Centre: Karnataka Milk Federation(KMF)

4.8 HOPCOMs: Fruits and Vegetables Marketing

4.9 Other Case Successful FPOs

7

7 – 9

10 – 12

13 – 16

16 – 20

20 – 22

22 – 27

27 – 28

29 – 31

32 – 34

5 Karnataka Regulation: Agriculture Marketing 35 – 36

6

Supporting FPOs:

6.1 Role of Central Government Institutions in Supporting FPOs

6.2 Role of State Government Institutions in Supporting FPOs

36

36 – 37

37

7 Problems and Issues Faced by FPOs 38 – 41

8

Capacity Building Programmes:

8.1 Workshop on Stakeholders Need Analysis (SNA)

8.2 Organic Farming and Certification (OFC)

8.3 Sustainable Coconut Farming, Value Creation and Marketing: FPOs Perspective

8.4 Sustainable Management of Co-operative Society in Arecanut Sector

8.5 Sustainable Management of FPOs for Horticulture Business Management

41 – 42

42 – 43

43 – 55

55 – 59

60 – 65

65 – 69

9 Policy Landscape 69 – 73

10 Summary and Conclusion 73 – 77

11 References 78 – 80

LIST OF BOXES

Box 1 Role of FPOs in Transforming Indian Agriculture

Box 2 Lesson from Cases (International) on FPOs

Box 3 Successful Management of Cooperatives for Agricultural Marketing

Box 4 Successful Management of Cooperatives for Agricultural Marketing (Andhra Pradesh)

Box 5 The Case of Avirat in Gujrat

Box 6 Contract Farming Through FPOs

Box 7 Advantages of Marketing through Group

Box 8 Support for Promotion of FPOs

Box 9 The Case Analysis: Sahaja Organics

Box 10 Coconut Hybridization: Deejay Group

Box 11 Advancing FPOs – Issues and Challenges

LIST OF TABLES

Table 1 Principles of Sustainable FPO and its Major Impacts

Table 2 Business Plans and its Market Linkages

Table 3 Framework to Identify Benefits and Costs of Private and Public Order

Table 4 Andhra Kashmir Farmer Producer Company

Table 5 Function of FPOs Across Agriculture Value Chain (AVC)

LIST OF FIGURES

Figure 1 Model of Farmer Institution Building under SFAC

Figure 2 Governance Structure under SFAC

Figure 3 Process Diagram of Jasmine Trade

Figure 4 The Intended Organization Structure for Setting up of FPO

Figure 5 Functions of FPO

Figure 6 Structure of Coconut Producers Organizations

Figure 7 Organizational Structure: Grijan Vikas NGO

Figure 8 HOPCOMS Operations in Karnataka

Figure 9 Four Levels of Development Concept for Institutionalizing Cluster-led Building Process

Figure 10 (A) Formation of Organic FPO (M4 Perspective)

Figure 10 (B) Formation of Organic FPO (M4 Perspective)

Figure 11 (A) Organic Park

Figure 11 (B) Organic Park

Figure 12 Establishment of the State-of-the-Art Arecanut Board of India (ABI)

Figure 13 Horticulture FPO: Production to Profitability

ACKNOWLEDGEMENT

I would like to take this opportunity to thank the Karnataka Agricultural Price Commission

(KAPC), an Advisory Body of Government of Karnataka, for providing an opportunity to

Indian Institute of Plantation Management (IIPM) Bengaluru to undertake the Consultancy

Project on Group Approach to Agricultural Marketing in Karnataka.

It is a great opportunity for IIPM and self to work with Dr. T. N. Prakash Kammardi,

Chairman, KAPC-GoK on the theme of Group Approach to Agricultural Marketing in

Karnataka. I would like to thank Dr. T. N. Prakash Kammardi and his colleague Dr.

Parameshwarappa, for their constant support to IIPM.

I would like to acknowledge the valuable contribution rendered by Shri. Manoj Rajan, IFS-

BBMP, Dr. K. Narayana Gowda, Former Vice Chancellor, University of Agricultural Sciences

(UAS)-Bengaluru, Dr. D. L. Maheswar, Vice Chancellor, University of Agricultural Sciences

(UAS)-Bagalkote, Dr. Kshema Patil, Deputy Director, Department of Horticulture-GoK,

Shri. B. Rama Rao, General Manager-NABARD, Shri. T. V. Srikantha Shenoy, Executive

Trustee, Initiatives for Development Foundation (IDF), Dr. Vasanth Kumar, Former, Director,

Department of Horticulture, Shri. Konkadi Padbhanabha, President, Arecanut Market Board,

Shri. Sachin Mega, President, Karnataka Congress Committee, Kisan Unit, Shri. P. V. Krishna

Bhat, Ex-Member of Legislative Council, Shri. Hanumangowda Belagurki, Former Member,

KAPC and President/CEO/Director/Members of Cooperative Society, Company, Federation &

Farmer Producers Company Limited, etc., for extending support during the project.

I acknowledge the contribution of Dr. Sarbani Mukherjee, Assistant Professor-IIPM for

preparation of policy paper. I would also like to thank Ms. Rani and Ms. Pushpalatha for

their secretarial assistance.

Bengaluru Prof. V. G. Dhanakumar

15.06.2018 Director, IIPM

i

EXECUTIVE SUMMARY

Farmers in India are often unable to realize optimal value from their produce due to

fragmentation of landholdings and lack of grassroots level organizations. Also, the share of

farmers in price is abysmally low due to presence of middlemen. Direct marketing, contract

farming, direct linkage with retailers/processors/exporters and market-oriented production are

some of the approaches to overcome these problems. Recently many initiatives have been taken

by National Bank for Agriculture and Rural Development (NABARD) and other organizations to

promote Farmers Producers Organizations (FPOs) in direct marketing of the farmers’ produce for

better price realization. FPOs can help smallholder farmers participate in emerging high-value

markets, such as the export market and the unfolding modern retail sector in India. Such

collective action can help to enhance farmers' competitiveness and increase their advantage in

emerging market opportunities. The success of FPOs, however, depends on farmers'

commitment to the group, integrity and quality of leadership, its acceptance within the

community, as well as the market environment. It has to be economically beneficial for the

participating farmers to market their excess production through the FPO. At the same time,

appropriate knowledge needs to be provided to the FPOs/Federations to generate excess

production from within the community in order to maintain linkages to the target markets. This

policy paper is an attempt to discuss the concept of group approach to agricultural marketing

with specific reference to Karnataka based on extensive review of cases on FPOs. It presents a

review of the existing policy landscape and highlights appropriate interventions required for

leveraging the benefits of collective action.

IIPMB in association with KAPC organized a State-level stakeholders’ participatory workshop to

identify commodity-specific felt-needs for designing an appropriate Capacity Building Programme

on Group Approach to Agricultural Marketing in Karnataka. Based on the discussion during this

workshop, it was identified to organize four Capacity Building Programmes on i) Organic

Certificate, ii) Coconut, iii) Arecanut and iv) Horticulture Enterprise. The deliberations during the

capacity building programmes throw light on pertinent policy aspects which are summarized in

this paper.

The organic producers’ cluster should focus beyond production and strengthen organic business

by improving quality, certification, tourism, nutraceutical and other associated services. The most

ii

important factors which influence the sustainability of organic producers’ society include i)

personal capacity building of cluster leaders (skill in public speaking, instinct motivation,

identification of community issues, interagency co-ordination), ii) popular participation and co-

operation (ability to co-operate well with members), iii) commitment for innovativeness, skills

related to fund raising and grassroots development process, iv) level of education, v) professional

contacts for mobilizing inter organizational activities and vi) setting up an exclusive value creation

unit as organic park.

Different types of Rural Leadership Programmes already exist around the globe. However, such

programmes do not exist in India, especially in the commodity sector. There is a need to initiate

programmes like Karnataka Rural Leadership Programme (KRLP). Objectives of KRLP could be; i)

gaining new perspective on major issues faced by Indian society, ii) better understanding of

economic, political, cultural, and social structure within local, state, regional, national, and global

context, iii) knowing how to develop sectoral and multi-dimensional community development

task. Integrated coconut market approach has been suggested for the coconut industry. In

addition, innovation is important to expand the market, for example, using cocono-oleoceuticals

(good molecules from oil) as capsules like omega 3 or omega 6 in fish. An emphasis is given on

value creation as part of business venture in coconut sector through virgin coconut oil, Neera

(Kalparasa) and other growing opportunities for coco-ceuticals or coco park facilities are the

other important aspects that could be emphasized with lean start-up to promote

entrepreneurialship in Karnataka.

Establishment of Arecanut Board of India (ABI) has been proposed. Deliberations during the

workshops focused on formation and other related modalities of the proposed Arecanut Board.

Arecanut being an international commodity may create a niche market both at domestic and

global level. Strategic promotion of Indian origin arecanut may be ensured through branding.

Consumer-driven production and Post-Harvest Handling for maintaining quality needs to be

focused on for Sustainable Management of Horticulture Business. This would require developing

a long term plan & strategy and analysing factors affecting price fluctuations in the market. FPOs

need to focus on ‘consumer-driven’ production rather than ‘market-driven’ production. The

institutional structure of FPO should have 4 levels to meet the farming system from production

to consumer viz., M1 (Micro), M2 (Meso), M3 (Macro) and M4 (Mega) to link production until

consumption to fetch price realisation on a continual basis.

iii

1

GROUP APPROACH TO AGRICULTURAL MARKETING IN KARNATAKA

POLICY PAPER

1. Agriculture Marketing System in India: The Current Scenario

More than three-fifths of India’s population draws their livelihood from agriculture that

adds just one-fifth to its GDP. There exist obvious concerns about efficient functioning of

this sector in terms of its output /productivity and marketing. While output and productivity

are supply side factors, markets provide an intermediate link between producers and final

demand by consumers. Efficiently functioning markets add to welfare of producers as well

as consumers. Efficient agricultural markets can also be a potent tool for poverty reduction.

In India, farmers’ produce is generally disposed off in the village, rural / primary market or

secondary agricultural market. However, National Farmers Commission recommends

availability of markets to be within 5 km radius (approx. 80 sq km). Regulated markets are

managed by Agricultural Produce Market Committees (APMCs), though in some States they

may be given different names such as Agricultural Market Committees (AMCs) in Andhra

Pradesh, Regulated Market Committees (RMCs) in West Bengal and so on.

Linking small primary producers with markets has been identified as one of the major issues

in improving livelihoods for millions of poor in the developing world. Although small

producers have competitive advantages by virtue of their traditional knowledge in farming,

they face the challenge of demand for standardized products in global and national markets.

Typically, farmers complain a lack of market for their produce, while processors, exporters

or supermarket retailers complain of a lack of adequate supplies of quality produce. This

marketing paradox is present because often, buyers do not reach out to explore new

suppliers or farmers lack an understanding of markets as well as the ability to identify mew

markets or to take advantage of such opportunity with value addition activities like grading,

cleaning, sorting, packaging and primary processing. Globally, and more so, in the

developing world, including India, in numerous types of market linkage arrangements,

success depends on the market and the efficiency of operations. Some offer higher price

opportunities for growers, while others offer lower marketing costs, thus increasing

producer profit margins either way. But, most of these arrangements, especially indirect

ones, do not ensure that small growers are part of these arrangements. Many market

2

linkage arrangements just provide another alternative to the primary sellers without any

commitment to buy or add value as is the case with most fresh F&V retail chains in India

which procure only ‘A Grade’ produce without any contract and the producer is left to sell

the rest of the produce in other channels. Most of these channels also deal with individual

growers and there have been few attempts of encouraging the formation of grower groups

or associations through the producer company route in India. Hence, there is a need for a

reform in agricultural marketing by empowering producers with knowledge, information &

capability to undertake market-driven production. Also, it is essential to recognize the

importance of small producers in the value chain and facilitate their inclusion in the wider

economy.

2. Group Approach to Agricultural Marketing: An Overview

India is still lacking considerably in the field of agricultural marketing. These inadequacies

are becoming more acute with the significant changes taking place in agri-food systems in

domestic and overseas markets. Importantly, the attainment of competitiveness is

becoming increasingly dependent on the capacity of the country to develop effective and

efficient agricultural marketing. Presently, agricultural marketing system in India suffers

from number of constraints ranging from infrastructure related to government regulation

related to technology related to poor information on domestic and overseas markets

related to unstable and uncertain produce prices related to delayed payment to producers

and finally related to low producer’s realization. The existing marketing infrastructure is

often below required levels both in terms of capacity as well as quality of the facilities.

Indian producers are unable to realize optimal value from their produce and progress

further due to fragmentation of landholdings and lack of grassroots level organizations.

Also, processors are not in a position to get quality raw material in right quantity. Besides

the share of producer in consumer price is abysmally low due to the presence of

middlemen. To overcome these problems, direct marketing, contract farming, direct linkage

with Retailers/Processors/Exporters and market oriented production are some of the

approaches. Recently many initiatives have been taken by National Bank for Agriculture and

Rural Development (NABARD) and other organizations to promote and involve Self Help

Groups (SHGs), Joint Liability Groups, Farmer clubs, Farmer Federations, SHG Federations,

3

Producer organizations such as Producer Companies, Producer cooperatives, etc. in direct

marketing of the farmers’ produce for better price realization.

To promote direct interactions of producers with consumers in fresh produce, there have

been farmers’ markets in India in the form of Apni Mandis in Punjab, Rythu Bazaars in

Andhra Pradesh, Uzhavar Santhai in Tamil Nadu, and Shetkari Bazaar in Maharashtra,

promoted by State agencies. Farmers’ markets have helped participating farmers to become

aware of the products required by the markets and helped farmers to improve product

quality and diversify their product portfolios, besides bringing about resource use

maximization. However, farmers’ markets have not had a major impact on farm incomes as

sales through this marketing channel are generally small, both in terms of number of the

farmers participating and volumes of produce. The more significant Govt. initiatives include

Horticultural Producers’ Cooperative Marketing & Processing Society (HOPCOMS – a

Cooperative) in Karnataka and SAFAL F&V project of National Dairy Development Board

(NDDB) in Bangalore.

Organizing farmers into formal or informal groups is a way to meet the volume

requirements and strengthen farmers’ bargaining power. Group activity is more effective for

the benefit of the members of the group than the individual efforts. Informally formed small

groups called as Self Help Groups (SHGs) have exhibited their strengths in various fields

including agriculture, in improving financial conditions of the members. Also, Farmer

Common Service Centers (FCSCs) are conceptually small scale commercially viable entities

owned by Producers’ Associations (PAs). Around 15-20 Producer Groups in a village or a

group of villages within the radius of 3-5 kms are federated into a PA which registered under

the Society Registration Act. FCSC mainly deliver some basic value added activities and carry

out input and output marketing. This could involve supply of inputs like seeds, fertilizers,

manures, pesticides, cattle feed to the members and also could help in aggregation of

produce, and it’s cleaning, grading & marketing.

In a nutshell, producers organizations could be one of the best alternative for enabling

farmers/producers to get better remuneration for their produce because it enables

aggregation of the produce and in turn gives the necessary bargaining power to get better

4

price. To strengthen the Producer Organizations (PO) and to make them play an effective

role in alternate marketing the following areas need attention: Credit availability, Capacity

Building, State Support to Producer Companies (PCs), and Convergence of various schemes

to PO.

Box 1: Role of FPOs in Transforming Indian Agriculture

3. Role of FPOs in Improving Market Access: A Review of International Experience

In principle, small producers organized in groups are better able than non-organized

producers to share information on market conditions, standardize production practices to

comply with food-safety or fair-trade requirements, monitor the quality of their produce

and supply homogenous products to meet market preferences and absorb shocks through

temporal and spatial arbitrage in agricultural markets. Collective action can facilitate more

direct links between producers and the upper end of value chains. Well organized farmers

are able to bypass assemblers and brokers in rural markets and connect directly with urban

wholesalers, high value retailers and processors or exporters. Recent empirical studies in

Africa, Asia and Latin America, have documented the role that farmer groups play in

enabling smallholders to access high value markets (Wollni and Zeller 2007; Shiferaw et al.

2008; Bernard et al. 2008; Bernard and Spielman 2009; Hellin et al. 2009; Narrod et al. 2009;

Traditionally, Indian farmers have gained knowledge and skills by sharing within the community, through Government programmes and private sector involvements in inputs, processing and trade. The collective strength of farmers could enable them to increase their competitiveness through easier access to credit and technology, reducing costs of distribution and providing greater marketing power and negotiation capacity. FPOs could emerge as one of the most effective pathways to address agricultural challenges. Through adequate policy and infrastructure support these aggregators can become not only the ‘connective tissue’, linking supply and demand, bridging a major missing link but also become instrumental in faster deployment and acceptance of modern agricultural technologies (including mechanization).

The Ministry of Agriculture (MoA) has defined a policy and process guidelines for FPOs and NABARD has given special focus and has set up a Producers Organization Development Fund (PODF). However, there is lack of penetration of the FPO concept among farmers, though the concept had many advantages to transform the economy. Apart from lack of awareness and capability among farmers to operate FPOs, there is a need to synchronize stakeholders, including the State and Central Governments, officials, bankers, financial institutions, private sector organizations, civil society groups, elected members and others to popularize the FPO concept. There is another school of thought that suggests that so far the focus of agriculture in India was on producing more, but with FPOs the focus would shift to commercialization of agriculture and potential unionization of farmers, which may be inhibiting Governments to actively pursue the cause. Looking at the overall benefits of FPOs, it is imperative to promote and scale up FPOs rapidly in the country to scale up Indian agriculture.

5

Kaganzi et al. 2009; Wollni et al. 2010). Wollni and Zeller (2007) showed that in Costa Rica,

coffee marketing through cooperatives increased average price obtained by 0.05 US$/lb.

The authors also showed that cooperative membership increased farmer participation in

specialty coffee channels which, by their nature, pay farmers a higher price for their coffee.

In Africa specifically, producer organizations have increasingly been involved in marketing

functions though much of the experience and recorded success in the past relate to cash

crops (e.g., coffee & tea in Kenya and tobacco & tea in Malawi) and high value commodities

e.g. horticultural export crops in Kenya (Stockbridge et al. 2003; Thompson et al. 2009) as

well as urban and peri-urban dairying (Staal et al. 1997; Holloway and Ehui 2002). Kaganzi et

al. (2009) document the success of a farmer organization in South-western Uganda in

supplying higher value potatoes to a fast-food outlet in Kampala. In this case, collective

action combined with strong leadership and an iterative market-led learning process

enabled the farmers to meet the stringent quality parameters of a modern food outlet.

More evidence from studies in Kenya and Ethiopia has also shown that collective action

enables smallholder producers to access markets that go beyond high value crops. Bernard

et al. (2008) employed a propensity score matching model to demonstrate that cooperative

members in Ethiopia received between 7.2% and 8.9% higher prices for their produce than

their non-member counterparts. This finding corroborates the study of Wollni and Zeller

(2007) in Costa Rica on coffee marketing which showed that marketing through

cooperatives increased average price obtained by 0.05 US$/lb (7.3%). The study also

showed that cooperative membership increased farmer participation in specialty coffee

channels which by itself increased prices by 0.09 US$/lb (13.2%). There is also evidence that

farmer groups can play a role in market development for underutilized crops. A study in

Southern India found that farmer groups were instrumental in creating incentives for

production and consumption of minor millets (e.g. finger millet) which initially faced weak

demand mostly due to consumer ignorance of useful product attributes and poor public and

scientific knowledge about the crop (Gruere et. al. 2009). The study concluded that

collective action through producer groups was a necessary but not sufficient condition for

successful commercialization and sustainable use of underutilized crops.

6

Access to extension information and new agricultural technologies is critical for economic

viability and market competitiveness of smallholder production. Many producer

organizations therefore seek to improve members’ access to agricultural technologies (e.g.

improved varieties) and know-how on productivity-enhancing and/or risk-reducing

management practices, including post-harvest grain handling and storage. In addition to

agricultural extension, opportunities also exist for producer organizations to ensure

improved access to inputs such as seed, fertilizer and credit. Such access to extension and

technologies plays an important role in increasing productivity and enhancing food security.

Evidence from Latin America suggests that in the case of low value commodities such as

grains, collective action makes more sense when it comes to accessing inputs, such as

improved seed, rather than marketing grain in output chains (Hellin et al. 2009). The

evidence presented below on the importance of collective action in the adoption of

technology is based on technology adoption studies in Nigeria (Kristjanson et al. 2005);

Zimbabwe (Jera and Ajayi 2008); Kenya (Shiferaw et al. 2009); India (Matuschke and Qaim

2009); Honduras (Wollni et al. 2010); Thailand (Schipmann and Qaim 2010) and Uganda

(Kassie et al. 2011). Using survey data from 462 households in Northern Nigeria to assess

the adoption of Improved Dual Purpose Cowpea (IDPC) varieties, Kristjanson et al. (2005)

estimated a tobit model to provide empirical evidence that belonging to a farmer group has

a positive effect on adoption of new varieties.

Kassie et al. (2011) studied the key determinants behind the adoption of improved

groundnut varieties in Uganda. Using primary data from 945 farm households, the authors

concluded that group membership had a significant positive effect on adoption of improved

groundnut varieties. In Honduras, Wollni et al. (2010) analyzed farmers’ decisions to adopt

soil conservation technologies. Based on data collected from 241 smallholder farmers, the

results showed that group membership had a positive and significant effect on adoption of

soil conservation technologies. Households that belong to groups were 24% more likely than

their non-member counterparts to apply more than one soil conservation practice on their

land. The authors concluded that farmer groups fill an important agricultural information

gap caused by the privatization of extension services in Honduras. Meanwhile, Schipmann

and Qaim (2010) found that group membership significantly increases the likelihood of

adoption of improved germplasm among farmers in Thailand growing sweet pepper.

7

Similarly, Matuschke and Qaim (2009) analyzed the impact of social capital on adoption of

hybrid wheat and hybrid pearl millet in India. They found that group membership had a

positive and significant impact on adoption of hybrid wheat as opposed to hybrid pearl

millet. These finding seems to suggest that collective action institutions accelerate access to

new technologies (in this case hybrid wheat) where information flow and other services are

limited.

Box 2: Lesson from Cases (International) on FPOs

4. A Review of Cases: Role of FPOs

4.1. Small Farmers’ Agribusiness Consortium

Small Farmers’ Agribusiness Consortium (SFAC), a society promoted by Dept. of Agriculture

(DoA), Govt. of India (GoI), has been nominated by Ministry of Agriculture to act as a nodal

agency to coordinate with various State Governments, civil society partners, private sector,

financial institutions, resource persons and other stakeholders to help in the conduct of

baseline studies, promote Farmer Producer Organizations across the country and link

producer groups (both existing ones and newly formed institutions) to marketing

opportunities. SFAC has identified suitable civil society, private sector and state level

partners in each target State through a process of empanelment based on open bidding to

promote new FPOs and strengthen existing ones.

The participant farmers are supported to identify appropriate crops relevant to their

context, and provided access to modern technology though community based processes

including Farmer Field Schools (FFS). Their capacities are strengthened and they are

facilitated to access forward linkages with regard to technology for enhanced productivity;

value addition of feasible products and market tie-up. Farmers are organized in small

neighborhood informal groups which are supported under the programme to form

The above-discussed case studies jointly reinforce and strengthen the hypothesis that collective action institutions in the form of participation in farmer groups and associations play an important role in overcoming market imperfections that limit farmer access to information, credit, seeds of new varieties, new technologies and complementary inputs. However, the key question is under what conditions collective action institutions enhance farmer access to information, market and technologies and under what conditions they fail to do this.

8

associations/organizations relevant to their context including confederating them into FPOs

for improved input and output market access and negotiating power.

Table: 1 Principles of Sustainable FPO and its Major Impacts

Source: SFAC-FPO Process Guidelines for promotion of FPOs, Ministry of Agriculture and Farmers Welfare

SFAC , thus through its scientific practice of participants selection, adopting a suitable organization

structure & dissemination of technical and financial practices with infusion of key skills like planning

and training along with the systems support and linking them with market through FPO model has

created significant social and economic benefits. The proposed FPO model and governance structure

under this project are given in the Figures 1& 2.

Principles for Sustainable FPO Major impacts

Focus on shared member needs and

common objectives.

A range of different organizational

approaches and forms should be used

(based, small group, inter-group

association, cooperative, producer

association, income generation-focused,

technology-focused etc.) that is appropriate

to the group objective and particular stage

of development for group members.

Ensure that the groups become financially

self-reliant.

To balance the conflict between the role of

the member as a “user of the group’s

services” and as “an investor in group

business” and ensure that the group

savings and capital contributions to the

enterprise continue to grow to ensure that

more capital investments are attracted.

Per hectare production improved by

10% by end of project period

Increase in net return to farmer

(Inflation +10%)

Increase in sub-sector development

for agriculture

Reduce gap in availability of inputs

by 20-25%

Increased food & nutritional security

Market linkage for the backward and

forward integration will be ensured

with competitive market

Additional employment generated

due to increased intensity of farming

Increased bargaining power for input

purchase and output marketing

9

Figure 1: Model of Farmer Institution Building under SFAC

Source: SFAC-FPO Process Guidelines for promotion of FPOs, Ministry of Agriculture and Farmers Welfare

Figure 2: Governance Structure under SFAC

Source: SFAC-FPO Process Guidelines for promotion of FPOs, Ministry of Agriculture and Farmers Welfare

10

4.2. Farmer Producer Organizations (FPO), Directorate of Horticulture (DoH), Karnataka

The Directorate of Horticulture, Karnataka along with SFAC, undertook the project of

forming FPOs in various parts of Karnataka. Collectivization of producers, especially small

and marginal farmers, into producer organizations has most importantly, improved access

to investments, technology and inputs and markets. Department of Agriculture and

Cooperation, Ministry of Agriculture, Govt. of India has identified farmer producer

organization registered under the special provisions of the Companies Act, 1956 as the most

appropriate institutional form to mobilize farmers and build their capacity to collectively

leverage their production and marketing strength. The Directorate of Horticulture assisted

in the formation of FPOs and funding was provided by SFAC. The two resource institutions

that played a predominant role in the formation of FPOs were International Competence

Centre for Organic Agriculture (ICCOA) and Indian Society of Agribusiness Professionals

(ISAP).

The main objectives of the project were to prepare i) a workable business plan in

consultation with the Board of Directors of the concerned FPO which would be approved by

DDH of the district and ii) a linkage for input supplies and marketing of at least one produce

of the FPO. To achieve these objectives the following steps were taken in a span of one

month;

1. The problems with the functioning of selected FPOs in the concerned village were

identified along with the areas of improvement required. The details about the

farmer members in the FPOs were also collected.

2. Through extensive field visits, the potentialities of FPOs and gaps in the existing

system with respect to market linkage were identified with focus to the major crops.

3. The various business opportunities for FPOs were analyzed on the basis of value

chain or supply chain of major crops cultivated and most suitable business plan in

consultation with the BODs, CEO and progressive farmers for the respective areas

and crops along with possible linkages to companies for output business was

formulated.

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Table 2: Business Plans and its Market Linkages

BUSINESS PLAN MARKET LINKAGES

Coconut drying unit establishment Indus Coconut Processing Unit, Puttur

Dehydrated tomato powder production Big blender, Bangalore

Aggregation of cocoa Cocoguru, Puttur

Banana fiber extraction ITC, Bangalore

Grading of grapes & marketing Big Basket, Bangalore

Source: Directorate of Horticulture, Government of Karnataka

Process Guidelines for Promotion of FPOs

The stages of project development for FPOs are:

1. Village study and preliminary identification: Where the profiling may indicate one or

more livelihood activities that are predominant in the area and involve a sizeable

number of the poor/women, in which there is a potential for increasing returns

through aggregation.

2. Feasibility study is carried out which involves community background studies,

understanding of social patterns, links between the community and supply of

services and who controls them.

3. Centrality Analysis on whether the commodity/activity is central/significant in the

minds of the community in terms of contribution to livelihood.

4. Organizing is carried out which involves orientation of leaders, discussion with village

committees to come out with an action plan for value addition, linkages etc. through

collective action.

5. Trainings are organized for producers on concepts and roles of the FO & FPO and

their own roles as members.

6. Formalizing is done through creation of vision and mission, designing an appropriate

organization – objectives, activities, structure, rules, legal form and basic operating

system (work flow) in consultation with the leaders, identifying rules and

responsibilities for leadership, coordination of logistics, record keeping, networking,

team building, communication and other roles.

12

7. Facilitate the election of the Governing Board/ Management Committee and office

bearers, as required depending on the legal form of the organization and facilitate

the formation of sub-committees.

8. Opening of bank account, collection of share capital and complete the

documentation required for registration.

9. Systems development including Operating system, Information system, HR system,

planning and review system with monitoring mechanisms, documentation of the

processes.

10. Facilitate long term collaborations with institutions/individuals such as input

suppliers, service providers like designers/veterinary doctors/research institutions as

applicable, buyers, funders etc.

11. Monitor the operations and governance of the institution closely through reports

and visits.

Most of the FPOs are positive about undertaking of the above mentioned business plans.

Thus, the project has effectively identified linkages that could be established through FPO in

order to fetch better value for the produce and has got positive responses from farmers.

Box 3: Successful Management of Cooperatives for Agricultural Marketing

Cooperatives should do networking and coordinate with the other cooperatives. Few similar activities shall be done together to minimize cost and to expand market. Cooperatives should be capable to update themselves with the market information - Should be able to prepare marketing plan and implement activities.

There should be transparency in activities, responsibility, and cash transaction. There should be proper management of accounting, asset, etc. and proper communication to all members. There should be regular monitoring of progress and achievements.

Resource mobilization – Before initiating operations of a FPO all required resources should be mobilized with the help of FPO representatives and the board of directors. Financial, human (staff), technical and physical resources should be developed.

Management systems development - Guidelines for management systems should be able to address all requirements related to financial services and input & output management services. Systems related to management of finance, human resources, stock and inventory, procurement and quality management, marketing, internal audit, internal conflict resolution and other important functional areas should be developed. Standard Operating Procedures (SOP) for these should be established.

Business operations – Business operations are the commencement of procurement, production, processing, marketing and financial service activities of a FPO. Careful training both of the governing and operational structures of the FPO is required in order to ensure the smooth functioning of business operations. The value chain related to various agriculture and allied products and commodities needs to be managed.

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4.3. Andhra Pradesh Farmers Producers Organization (FPO) Promotion Policy

The Government of Andhra Pradesh (AP) aspires to bring together 10 lakh farmers through

1,000 FPOs in the State with an objective to maintain a leadership position in India across

the primary sector. The formation and development of FPOs would be actively encouraged

and supported by the Government of Andhra Pradesh and their agencies, using financial

resources from various centrally-sponsored and State-funded schemes along with resources

mobilized from the financial institutions. An extract of operational guidelines from Andhra

Pradesh Farmers Producers Organization Promotion Policy, 2016 is presented below.

Institutional Arrangements:

1. Advisory board will be constituted at State level consisting of Government officials,

academician, and representatives from industry, NGOs and farmers to provide

guidance, feedback and direction to the agenda.

2. The following departments/agencies are part of FPO/FPC development (i)

Department of Agriculture and Cooperation; (ii) Department of Animal Husbandry;

(iii) Commissionerate of Fisheries; (iv) Commissionerate of Horticulture; (v) Society

for Elimination of Rural Poverty; (vi) AP State Cooperative Marketing Federation; (vii)

Andhra Pradesh Food Processing Society; (viii) any other agencies.

3. Establishment of a Project Management Unit (PMU) within each department at

Commissionerate/directorate level which will act as a project incubation unit where

in FPO’s/FPC’s can be linked to corporate. Their task includes

i. Identifying crops and interventions required to improve productivity

ii. Identifying suitable corporate partner for value chain development and

iii. Market linkage.

iv. Evaluation and approval of PPP proposals submitted by corporate/FPC’s.

v. Channelizing of funds from Govt./FPO’s /FPC’s/financial institutions and

vi. other agencies

vii. Monitoring project implementation timelines and deliverables.

viii. Evaluation of completed projects and documentation.

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4. The PMU will be supported by Project Support Unit (PSU) for strengthening FPO

agenda at the Ss1tate level, assisted by ICRISAT-led consortium of organizations like

Basix, Vrutti, WASSAN, etc.

Government Departments – District Level

1. Agriculture Technology and Management Agency (ATMA) to play active role as a

coordinating agency by deploying team of experts with professional expertise.

2. Government of Andhra Pradesh has initiated ‘Smart Agribusiness Platforms Network

of Andhra Pradesh (SAPNAP)’ through Andhra Pradesh Food Processing Society for

Agribusiness Development and creating an enabling ecosystem for start-ups,

enterprise development, value chain development through creation of Smart

Agribusiness Incubators at District level and Smart Agribusiness Value Chains

Development at cluster level.

Synergies need to be developed with the related corporate, FPOs/FPCs and

Government departments in this regard.

3. Government of Andhra Pradesh is also promoting Mega Food Parks and Integrated

Food Parks across the State that would develop direct procurement arrangements

from the FPOs/FPCs.

4. A District Project Monitoring Unit (DPMU) to facilitate convergence among

departments/schemes and ensure that required licenses/registration processes are

completed within agreed timelines. The DPMU will also functions as a “single

window” for processing all issues related to FPOs/FPCs including grievance redressal.

It will also monitor PPP projects of the district.

FPO Promoting NGOs

1. Local, capable and reputed NGOs having needed expertise would be

identified as FPO Promoting NGOs by PMU and DPMU. Each FPO Promoting

NGO would be promoting at least 5 FPOs in a given location (district).

2. The role of NGO includes:

Community mobilization and organizing farmers into groups. Federation

of groups at appropriate level.

15

Capacity building (Leadership development – members, executive committee

and management) / Facilitation of operations of FPOs

Registration related documentation works of FPOs.

Develop business plan for sustainable development for FPOs and micro plans

for individuals/Farmers Interest Groups (FIGs) with the support of expert

Resource Institutions

Facilitate linkages with departments for technical support on productivity

enhancement, quality enhancement and infrastructure

Facilitate input supply to production systems

Market linkages of surplus aggregated products of FPOs

Establish linkages for financial support

Ensuring statutory compliances to law of the land.

MIS and governance systems/policies at FPO level with the support of

resource agency NGO

Synergies with Existing Institutions of Producers

1. SHG members can be part of the FPOs, performing different roles – aggregators;

business entrepreneurs; service providers, etc. broadly guided by business plan of the

enterprise.

2. Explore the possibility of extending financial support to FPOs from VO/ MMS. Financial

support to SHGs to continue under existing schemes.

3. User/producer groups are to emerge from exiting SHG. These members could federate

at appropriate level and engage in production processes.

Financial Support

Financial support for promotional costs, business activities, infrastructure and for

productivity enhancement of FPOs are provided by the Government of Andhra Pradesh and

their agencies, using financial resources from various centrally-sponsored and State-funded

schemes along with resources mobilized from the financial institutions.

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Box 4: Successful Management of Cooperatives for Agricultural Marketing (Andhra Pradesh)

4.4 FPO as Farmer Collectives: A Case Study of Avirat in Gujarat, India

The potential of FPOs as collective institutions is explored through a case study of Avirat,

one of the first FPOs in Gujarat. The analysis suggests that FPOs have the potential to

provide benefits through effective collective action. The main challenge is however, to raise

sufficient capital that can maximize these benefits. A variety of approaches have emerged in

response to the problems faced by the small and marginal farmers:

1. Contract farming (after the amendment of the Agricultural Produce Marketing

Committee (APMC) Act in 2003) - This arrangement tends to exclude small and in many

instances have benefited the buyers at the expense of the producers.

2. Collective action – Agricultural cooperatives, formed under the Co-operative Credit

Societies Act, 1904, has long been the dominant form of farmer collectives and

experience reveals limitations that prevent effective collective action.

Hence the Indian Government has been promoting a new form of collectives called Farmer

Producer Organizations (FPOs) to address the challenges faced by the small and marginal

farmers.

The result of the study is observed through open-ended interviews of 20 members of the

FPO, Avirat, operating in Amreli district of Gujarat to explore their experience with the FPO

and thus broader implications for FPO as an organizational form to address the issues faced

by small and marginal farmers was drawn.

The Government of Andhra Pradesh through its policy has created provisions for institutional arrangements, State department interventions of creating mega food parks etc. and has also explored the role that could be played by NGOs and SHGs to aid in better functioning of FPOs through striking synergies and achieving market linkages and financial support. The operational guidelines document is a reference guide for line departments and development agencies which seek to promote and support Farmer’s Producers Organizations.

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Small and Marginal Farmers and the Need for Collective Action:

In absence of collectivization, the small scale of operations significantly reduces

bargaining power in input procurement as well as sale of output (Kirsten and

Sartorius, 2002).

Lack of capital and education, coupled with poor access to adequate information

leads to a different set of problems, including the use of obsolete harvesting

technologies, affecting the productivity, and poor post-harvest infrastructure,

resulting in 25-30% of the produce being wasted.

Inability to access credit and insurance services and vulnerability to vagaries of

the climate, pests and other risks further complicate the picture of small and

marginal farmers (World Bank, 2008).

Recently, greater import competition has added to the difficulties of the

smallholders in India (Desai and Joshi, 2014).

Small Farmers’ Organizations such as cooperatives and FPOs are expected to

enhance incomes, reduce costs of input purchases along with transaction costs,

create opportunities for involvement in value-addition including processing,

distribution and marketing, enhance bargaining power (Welsh, 1997; Ornberg,

2003; Agarwal, 2010), and provide access to formal credit (Braverman et al.,

1991).

Cooperatives vs. FPOs as Farmer Collectives:

Primary Agricultural Credit Societies (PACS) also known as Cooperatives are

“…autonomous associations of persons united voluntarily to meet their common

economic, social and cultural needs and aspirations through a jointly owned and

democratically controlled enterprise”.

The experience with PACS across the country suggests that they have largely been

state-controlled and, over time, have slipped into the control of local elites (Sharma,

2010). Also, cooperatives focus on welfare rather than on commercial operations

(Mondal, 2010). Cooperatives tend to operate as political rather than economic

entities with under-representation or a total lack of representation of small holders

who often do not even receive credit from cooperatives (Frankel, 1978; Sharma,

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2010). Political and administrative control in general and the overriding powers of

the Registrar of Cooperative Societies to regulate the function in particular have

compromised the functioning of cooperative institutions (Department of Agriculture

& Cooperation, 2013).

The Mutually Aided Cooperative Societies Act (MACS), which was later adopted

could not make a mark as not all the states in the country have adopted it and not

many cooperatives have migrated to its format.

In this context, the Government is promoting the formation of FPOs as a viable

alternative to cooperatives. Producer companies are to be registered with the

Registrar of Companies as limited companies formed with the equity contribution by

the members. The day-to-day operations are to be managed by hired professionals

under the instructions of the Board of Directors elected by the General Body over a

specified tenure (Mondal, 2010).

The Case of Avirat in Gujarat

Shikshan Ane Samaj Kalyan Kendra (SSKK), a network NGO of Sajjata Sangh active

since 1980 in Amreli District of Gujarat, had established a farmers’ collective

under the title Avirat Agro Business Producer Company Limited. SSKK had

initiated work on natural resource management around villages in Khambha as a

Project Implementing Agency (PIA). The impacts were impressive and to continue

with watershed plus initiative and to tackle the problem of vested interests,

members registered the entity under the Producer Company Act which came

into effect from 2005.

Representatives of watershed associations of 16 villages functioning in the area

formed the first Board of Directors. Sixteen hundred farmer beneficiaries

enrolled as members from 16 villages in Amreli. Initially, Rs. 5,000 was collected

from each watershed association and a Chief Executive Officer (CEO) was

appointed from among the members.

Avirat established an Agro Service Centre to facilitate supply of quality pesticides

at affordable prices. The centre also operates a kiosk to provide information on

19

agricultural products and practices to farmers who visit the centre to purchase

inputs. The centre serves farmers from more than 50 villages around Amreli.

Success of the Producers model:

Input Supply Services: Avirat facilitates purchase of Government approved seeds

with price advantages of up to 10-15% for the Kharif and the Rabi seasons. Farmer

Members of Avirat have reported a collective benefit of up to Rs. 10-15 lakh

through lower input prices. Avirat provides inputs through two types of

arrangements. The Avirat Seed Foundation, which is a Public-Private Partnership

(PPP) between the State-owned Gujarat Rajya Beej Nigam (Gujarat Seed

Corporation) and Reliance Industries, functions as a seed bank, providing low priced

quality seeds especially for cotton, groundnut, castor, and cumin.

Technical Services: Includes a variety of training programmes including crop based

training and watershed management training and information dissemination like

market trends, prices of commodities in the market and varieties within

commodities, stock positions, and minimum support prices for various crops; crop-

related information such as new seed varieties, weather related information,

information related to new technology and innovations in farm implements and

equipment. Information along these dimensions is directly passed on to the farmers

through mobile messaging three to four times in a month.

Financial Services – They are not providing financial services due to the high interest

rate nature of loans.

Procurement and Packaging – Unavailability of sufficient storage and other

infrastructure and more importantly, lack of capital to create value addition to the

farm produce appear to be the barriers to establishing mechanism for collective

marketing. As a solution, members have suggested that women members of self-

help groups may process groundnut to powder or candy, thus fetching higher price

and enhancing shelf life, making the product less perishable

Insurance - Provision of weather insurance to the farmers at affordable premiums. In

a rain fed area, this was a welcome initiative but lack of awareness and the

20

premium appreciation to Rs. 750 per year made people discontinue with the

scheme.

Market Linkage - Farmer members of Avirat reported coming together to form

informal networks, pooling produce and transporting the same to the city markets,

thereby increasing the selling price of the produce. One farmer has suggested

organizing farmer melas seasonally to create visibility and enhance income of the

farmers through sale of fresh produce directly to local consumers. Futures trading

through NCDEX are also being talked about.

Networking Support - Collaboration with agricultural universities helped availability

of agricultural research to enhance quality of farming, networking with other

collectives had brought in farmer-to-farmer knowledge sharing, thereby also

creating social networks.

Box 5: The Case of Avirat in Gujarat

4.5. Contract Farming through Farmer Producer Organizations (FPOs) in India

Contract farming operations are usually placed under 5 models i.e. centralized model,

nucleus-estate model, multipartite mode, informal model and intermediary model

(Examples: Karnataka -Coleus –Natural Remedies Pvt. Ltd – Centralized; Karnataka –

Gherkins – Several Private companies – Intermediary).

Benefits to farmers

Access to inputs and production technology

Credit and Financial services

Assured revenue flows

Market access

The experience of Avirat (one of the first FPOs in Gujarat) puts forth a strong case for

extending support to member-based farmer collectives and creates policy implications

like the training need assessment, increase the capital availability, formation of FPO

as an aggregation of a set of smaller Farmer Interest Groups and promote more

sustainable environment friendly input usage. A negative of this model being FPO

membership may in reality increase the risk profile of farmers in terms of a forced

adoption of market-oriented agricultural production.

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Benefits to Firms

Increased control over supply chain

Quality control

Long term supplier base

Cost efficiency as the land is not owned by the corporation.

Disadvantages of contract farming

1. Farmers face the disadvantage of manipulation where the produce is rejected citing

quality reasons, they are left indebted due to the inability to repay the credit

provided by the company, another concern is that contract farming arrangements

rely heavily on inputs and production techniques that may contribute to

environmental degradation in the long run .

2. Corporates face the difficulty of input diversion, side selling and disagreement on

using high yielding variety due to social and cultural factors.

Moral Economy of Contracts

Narayanan (2012) found that 44% of farmers who were engaged in contract farming at the

time of the study had failed to make good on their contracts at least once in the past.

Similarly, 10% of farmers in the same study believed that the firm had not adequately

fulfilled its obligations as laid down in the contract in the last growing season. These facts

are used to support the thesis that contract farming in India is based on relationships and

mutual trust, rather than the threat of legal action against either party. This arrangement is

termed “The Moral Economy of Contracts”.

Farmer organizations differ on the basis of organization, Government involvement, legal

legitimacy, access to credit and several other factors. The more relevant question is which

type most satisfies our needs. Private ordering is contrasted with public ordering by the fact

that it requires voluntary cooperation and applies a specialized body of rules to participants

who volunteer to subject themselves to the said rules. Richman (2004) however lays down a

framework to identify the benefits and costs of private order as compared to public order

and vertical integration, these are summarized below:

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Table 3: Framework to Identify Benefits and Costs of Private and Public Order

Source: Richman, 2004

Entry barriers characterize reputational private ordering, for newcomers are unable to

contract with existing members due to the lack of proven credibility. It can be argued that

the private ordering within the FPO serves to bolster the faith of both parties in public

ordering. FPOs are required to have disciplinary systems in place before operation.

Organized private ordering systems are characterized by two criteria; fast provision of

information and a coordinated community response. As a result, the self-regulation

mechanism within the FPO automatically reduces the incentive to renege on contracts.

Box: 6 Contract Farming Through FPOs

4.6. Rythu Kosam Project, International Crops Research Institute ICRISAT Development

Centre

The research report from ICRISAT Development discusses about the successful FPOs in

Andhra Pradesh. Case of a few FPOs is presented below.

The nature of agricultural contracts in India impacts the decision of the parties to the contract to defect. Given the unwritten nature of contracts coupled with the costs of legal enforcement in India prevent corporate from pursuing legal action against farmers when they defect. These two conditions constitute a “Moral Economy”. Hence, farmers organizing themselves into Farmer Producer Organizations (FPOs) can reduce the costs of public order by establishing private order within the FPO to censure any defections and thus reduce the incentive of both parties to defect on the contract. Rather, contracting with an FPO might even change the incentive to defect of both farmers and corporate. FPOs contracting with corporate constitutes a unique interaction between private and public ordering. The private ordering occurs within the FPO, being a firm and the public ordering occurs in the enforcement of the contract between the contracting firm and the FPO.

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a) Chandragudem Jasmine Collection Center

Mylavaram is well-known for jasmine production. Local commission traders in the village of

Chandragudem in Mylavaram collect jasmine flowers from farmers and send them to

commission traders located at big agriculture market yards.

Figure 3: Process Diagram of Jasmine Trade

Source: Sowmya and Raju, 2017

Process of distribution from APMC market yard - Similar to how local commission agents

in villages have multiple traders they are associated with; the traders also have multiple

agents from across the region who send them flowers. The traders also give credit to the

farmers associated with them when necessary, for both personal as well as cultivation

needs. In return they collect larger commission from the farmers’ payment instead of

charging interest. In such a case the farmer is obliged to deposit his flowers only with

the particular trader he/she has taken credit from. In this way the traders retain their

farmers and enhance the farmer-trader relationship.

FPO Idea

A Jasmine FPO is soon to be registered in this area. The main motive is to stabilize the

commission taken by the local agents from the farmers. All the agents associated with

the FPO will be authorized to take only Rs.10 per bag as commission for transportation

regardless of the season and supply.

24

Figure 4: The Intended Organization Structure for Setting up of FPO

Source: Sowmya and Raju, 2017

a) Noveeal Coconut Producers Company Ltd. (Amalapuram)

It is started with an objective to improve the farmers’ profitability by reducing input

costs and direct marketing of the produce in the market.

Figure 5: Functions of FPO

Source: Sowmya and Raju, 2017

The FPO has 2 primary functions: i) Information support: The FPO conducts regular

information sessions to keep its members informed about the latest schemes they can

benefit from and apply. Under a Government Demonstration Scheme inputs are given twice

in the lifecycle of a coconut tree; ii) Training of workers in harvesting of coconuts – The FPO

gets local workers trained in the skill of harvesting coconuts. The training program is

conducted at Dr. YSR Horticulture University in Ambajipeta, West Godavari and funded by

25

the Coconut Development Board (CDB), Andhra Pradesh. Master trainers are associated

with the FPO. It is a six-day training after which the trainees are given the necessary

equipment to climb trees.

Figure 6: Structure of Coconut Producer Organizations

Source: Sowmya and Raju, 2017

They aim to improve processing facilities and value chain. Under ICAR (Indian Council for

Agriculture Research), the CDB runs All India Co-ordinated Research Program on Palms.

Under this program, production is enhanced by introduction of improved varieties. New

varieties will be introduced into the market only if they can improve the yield or quality

by 15% -20%.

b) Girijan Vikas NGO

Tajangi-Chintapalli is an extremely backward tribal area which was until recently infested

with extremists. The connectivity is bad, as a lot of villages do not have even a basic road

connection. The villagers have abundant land and the average land parcel is about 5

acres. The cost of living is low and the farmers here do not have the habit of saving.

Farmers do not break even and therefore are not motivated to adopt new practices.

Hence their crop quality and quantity is poor. Girijan Vikas is an NGO working in

Narsipatnam for the past 15 years. They have worked on multiple projects, three of

which are in the process of being converted directly into FPOs. The NGO aims to support

these three FPOs initially for a commission in the profit until the heads of each FPO can

be trained to handle the marketing of the produce.

26

Table 4: Andhra Kashmir Farmer Producer Company

Source: Sowmya and Raju, 2017

Organization structure: Ten directors, one CEO and six committee members per village.

Each committee represents its respective village.

Figure 7: Organizational Structure: Grijan Vikas NGO

Source: Sowmya and Raju, 2017

Activities and market linkages:

Exposure visit of farmers to Erode to understand better techniques of turmeric

cultivation.

Propagation of the practice of intercropping: Cocoa-pepper and mango-turmeric.

Interaction with district horticulture representatives for area expansion of pineapple.

90 acres of pineapple plantation developed with the support of the horticulture

department.

Training was provided for farmers through tie-up with the local agricultural research

center on best

27

Practices for the cultivation of pineapple.

Fertilizers have been obtained by farmers through department schemes.

Procured boiler and polishing units for turmeric processing.

MARKET LINKAGE: The CEO of Aromos International, New Delhi, visited the FPO on 5

March 2017 and interacted with the directors regarding the procurement of

turmeric.

The cases of FPOs mentioned above are all in various stages of functioning. Some are yet

to be registered, some are in the initial stages of setting up a system of functioning,

some are getting ready to enter the market in this year and some are already

participating in trade. Irrespective of the stage at which they are currently in, the FPOs

have the same objective i.e. to improve the profit of the farmers and to enhance their

income. In this aspect, all the FPOs still need to reach their potential to cater to 100% of

their member base.

4.7 Community Milking Centre: Karnataka Milk Federation (KMF)

The term community milking centre has been coined by Karnataka Milk Federation and

DeLaval (India), for mechanized milking facilities at cooperative society. Based on the

recommendations from milk unions in 1999, KMF drew up a project plan to promote

modern milking technology for quality milk production with improvement in productivity.

The milk unions wanted to rule out possibilities of adulteration that were alleged to be

resulting in low lactometer readings in some of the dairy cooperative societies. In 2002-03,

Technology, Information, Forecasting and Assessment Council (TIFAC) under department of

Science and Technology-GoI, had framed a project on "Improvement in milk quality and

establishment of modern dairy farming" at Kolar district in Karnataka. Under this it has

commissioned twenty community milking enters with milking machines under Kolar Milk

Union (KOMUL).

The introduction of community milking centres TIFAC and KMF is a totally new concept

under semi-intensive dairy production system of the country, usually having one or two

milch animals. It can be termed as a "co-operative movement towards farm mechanization".

Thus KMF created a bench mark as the "the first cooperative in India to establish the

28

community machine milking centres". Following the success of the project, KMF proliferated

the concept to selected dairy cooperative societies of all its milk unions. The centers

represent new technology to be implemented at village level including bucket milking

machines and cooling tanks. The system requires farmers to bring their dairy herd to the

centre and milk the cows by machine. The milk is then directly cooled and stored at the

centre thereby facilitating quality control. In traditional system the milk produced in farm

has to cross many stages to reach a dairy plant having cooling facility. However, in CMC

system milk producers bring their dairy herd to the CMC for machine milking twice a day

where the amount of milk is first measured and controlled before being stored and cooled

in bulk milk cooler. The milk is collected once a day by a tanker from the dairy and

transported to the dairy plant having the cooling facility.

It has been found that half of the CMCs have a microfinance scheme, which could be linked

differently to the centre. The centre may both be responsible for the complete procedure

and solely handle the contact with the bank or the centre just acts as a provider of collateral

for society members who would like to receive a loan. High level of satisfaction is observed

amongst stakeholders with the Community Milking System (CMS). Decrease in human

effort, increase in freedom and flexibility especially for women and the enhancement of

self-esteem among farmers connected to the centers are appreciated. A more fair payment

system and increase in transparency involving less harassment at society level are other

interesting findings. Income and milk yield has not been affected to the same extent but

where changes were found, they were positive. There is an obvious lack of training

opportunities for farmers and society staff and demand for training widely exceeds supply.

From the dairy industry point of view the concept until today, primarily has resulted in

substantial increase in milk quality and freshness.

In an effort to rule out possibilities of adulteration and hygiene issues KMF has started an

innovative approach “community milking centres" and succeeded. This can be summed as a

“co-operative movement towards farm mechanization”. Thus KMF has created a benchmark

and has proliferated the concept to selected dairy cooperative societies of all its milk

unions.

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4.8 HOPCOMs: Fruits and Vegetables Marketing

The major objectives of HOPCOMS are to (i) to ensure remunerative prices to producers of

horticultural crops; (ii) to free both producers and consumers from the clutches of

middlemen; (iii) to ensure quality supply of F&V at reasonable prices to consumers; (iv) to

expand marketing and cold storage facilities progressively for the benefit of farmers; and (v)

to promote horticultural development on scientific lines by providing inputs and necessary

technical advice (Kolady, et al, 2007). The membership of HOPCOMS is comprised of four

categories: A, B, C and D. Class A comprises of farmer/producer members with 4% share in

equity. The associate members which include: NGOs, other co-operatives, National Co-

operative Development Corporation (NCDC) and National Horticultural Board (NHB)

together constitute Class B which has a share of only 1%. The Class C which was earmarked

for Government of Karnataka (GoK) constitutes 95% shares of HOPCOMS. The Class D had

traders and commission agents and had very marginal share in HOPCOMS equity. HOPCOMS

is under the aegis of the Department of Horticulture, Karnataka managed by a Board

consisting of 20 members: 11 elected from A‘ class (producers), five Government nominees

and four Government officers. The President and the Vice President are elected from among

the elected producers. The Managing Director is an officer of the Department of

Horticulture, Karnataka, whose services are lent to HOPCOMS. Different Zilla Parishadshad

provided Rs. 11.57 lakh to strengthen and expand the activities of HOPCOMS. For various

development programmes, NHB had provided Rs. 28.18 lakh as grant and Rs. 1.08 lakh as

loan. The entire amount had been utilized to strengthen and develop HOPCOMS and the

loan amount had been repaid. The NCDC sanctioned a project for Rs. 448 lakh to expand the

activities of HOPCOMS by opening central godowns, Collection Centres (CCs), retail outlets,

processing units and for purchase of transport vehicles. The loan amount of Rs. 215 lakh

from NCDC had been repaid with interest. During 2007-08, HOPCOMS had a turnover of Rs.

48 crore (HOPCOMS website).

HOPCOMS procured F&Vs both from farmers (members as well as non-members) and the

open market. On receiving the indent from HOPCOMS, producers brought their produce on

their own either at CC or directly at the Distribution-cum-Collection Centre (DC-cum-CC) (fig.

6.1) (Subrahmanyam and Gajanana, 2000). The decentralized CCs also acted as outlets for

agri-inputs like manure, fertilizers, hybrid seeds, fungicides etc. (Kolady et al, 2007). In case

30

of Bangalore HOPCOMS, Lalbagh was the biggest DC-cum-CC which accepted quantities

ranging from 30-40 kgs to as large as 750-900 kgs. The other CCs accepted quantities varying

from 20-30 kgs. to 150-200 kgs. The Mysore HOPCOMS‘ scale of operation was about 1/10th

that of Bangalore as the latter had four CCs and 318 retail outlets compared to Mysore‘s

one CC and 40 retail outlets. HOPCOMS bore the unloading charges and made payment to

the producers immediately after procurement up to Rs. 5000 in cash and, if it exceeded Rs.

5000, then by cheque (Kolady, et al 2007).

For transporting the produce to CC-cum-DC, HOPCOMS charged a transport cost of Re. 0.1-

0.2 per kg. of produce. In the initial years of its inception, HOPCOMS procured only 35-40%

of F&Vs from the producers which increased to nearly 85% by the end of 1990s

(Subrahmanyam and Gajanana, 2000). Presently, Bangalore HOPCOMS handles around 100

metric tonnes of F&Vs every day (HOPCOMS website).

Figure 8: HOPCOMS Operations in Karnataka

Source: Singh and Singla, 2011

The procurement prices were announced for the day based on the prevailing market prices

that morning at four or five reference mandis (Kolady et al, 2007) and an additional half

rupee/kg was added to the weighted price (Premchander, 2002). Further, HOPCOMS paid

70-75% of the consumers ‘price to the growers as compared to 43% paid by

regulated/wholesale markets. The price paid to the farmers in general was 10-15% higher

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than the open market prices. Further, during distress sales, HOPCOMS assured a minimum

support price for the produce. Since HOPCOMS had weigh-bridges at each CC, farmers were

assured of correct weighment. HOPCOMS also had infrastructure facilities like cold storage

and godowns to store the produce. The CCs also had some space where the farmers could

keep their produce (watermelons) and sell directly to consumers (Premchander, 2002).

Though HOPCOMS did not classify F&Vs into grades, it maintained quality by accepting only

good quality produce from the growers. It rejected injured, damaged and diseased fruits. In

banana, HOPCOMS rejected the rotten fruits and fruits with bruises and rough handling.

Cracked and blackened fruits due to over-ripening were also rejected. Earlier, HOPCOMS

deducted 20-30% of the produce of the growers towards driage and wastage while making

payments. By 2000, the practice of physical quantity deduction was completely stopped. In

case of cabbage, payment was made only after the entire quantity was sold so as to account

for the loss in quantity due to driage (Subrahmanyam and Gajanana, 2000). Driage and

wastage was around 4-5% of the total procurement of the produce. However, it reduced to

1.85% in 2000-01 (Premchander, 2002). However, another recent study, revealed that

proportion of produce rejected at HOPCOMS was 4.39%; the maximum being as high as 66%

and minimum being nil (Kolady et al, 2007). 77.1% of the HOPCOMS farmers reported that

they sold the rejected the produce elsewhere at lower price, 11.4% each either threw away

the rejected produce or HOPCOMS discarded it (Kolady et al, 2007).

Box7: Advantages of Marketing through Group

Collection in one place to bulking of produce so that volume of produce can be achieved and the traders will be attracted to visit the farmer’s place.

Regular supply is possible if proper planning and management is done.

Price fluctuation can be managed if there are practices like contract farming, agreements etc.

Easy in communication for dissemination of information about price, volume and others.

Cost of production can be reduced by procuring all necessary inputs using big transport.

Collection of produce and transport to reduce marketing cost.

Access to fund without collateral with group as a guarantee.

Easy access of funds and other support services by the Government and donors.

More funds can be gathered from the members if big plans are envisioned.

Post-harvest loss can be minimized.

Provision of capacity building and training from the processing company;

Bargaining power improved

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4.9. Other Cases of Successful FPOs

a) Bhoomitra Farmers Producer Company Ltd – An initiative of Reliance Foundation

Yavatmal lies in the central Vidarbha, it had earned the tag of the ‘farmer suicide capital’. A

census conducted in four villages of the district worst affected areas by the unseasonal rains

say that 67 per cent of the farmers in the areas were suffering from depression. This

indicates the vulnerabilities of farmers of this belt due to crop failures, etc.

Reliance Foundation’s flagship programme, Bharat-India-Jodo (RF BIJ), works to bridge the

development gap between rural and urban India. Programme’s key objectives are

Institutional building, food and nutrition security, water security and ecological

sustainability. Bhoomitra Producer Company was launched in 2011 with the objective of

collectivizing farmers for better economies of scale in agri-marketing and support low cost

efficient means of production. The major crops that Bhoomitra does business in are

soyabean and tuar. The case study captures the process and impacts of the FPO in Tapalheti

village, Yavatmal District.

Expensive seeds and fertilizers due to narrow market research, unseasonal rainfall and lack

of secured irrigation were some of the issues identified in agriculture production. A body

called Village Development Association (VDA) was formed by Reliance Foundation consisting

representations from farmer households of the village with the objective of promoting

collective ownership, decision making and common welfare of the community. Using the

share capital of 28 lakhs, Bhoomitra Producer Company started procurement of soybean

and tuardaal. The godown built by the Reliance Foundation on the donated land was used

for storage till appropriate price to Soybean was not accessed in markets. BODs have

divided themselves as social committee, marketing committee and procurement

committee, based on the needs and functions of the FPO.

This kind of Collective model has led to better use and development of five different types

of assets – natural capital (land, water, biodiversity), physical capital (infrastructure,

machinery), human capital (labour, skills), financial capital (savings, disposable assets), and

social capital (rights, support systems).

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a) Organic Farmers Association (SOFA)

This is a Tribal Health Initiative’s for promoting sustainable agriculture and health amongst

farmers in support with Indian Foundation for Humanistic Development. Sittiling is an

Adivasi Village in the Dharmapuri District of Tamil Nadu, India Tribal Health Initiative (THI)

was started in 1992 by Dr. Regi George and Dr. Lalitha Regi, which today has expanded into

a team of over 55 highly trained people, working to improve the lives of the tribal

communities living in the Sittilingi valley and surrounding hills through a variety of

programmes in health care, community health, farming and craft work.

Dr. Regi along with the framers of Sittiling valley explored possibilities of organic agriculture,

inspired from the Gandhian principle and was agreed by 4 farmers. The results of cost

benefit analysis attracted other farmers, and in 2009, 57 farmers came together to register

as a society under Cooperative Act. It was identified that farmers’ job is to farm while the

Cooperative is responsible for marketing activities by some of the farmers and employees of

THI who travelled across southern states of India to explore market opportunities of agri

produce, looking at different range of value added products and different retailers for sales.

Range of agri-products by SOFA includes bajra, ragi, pulses, foxtail millets and cotton. The

FPO has identified vendors, some of them being Kolikod, Alter media and Organic Kerala

from Kerala and Restore Chennai and Sandy Chennai from Chennai, Tamil Nadu.

b) Puddukkottai Farmers Producer Limited – In support with Indian Foundation for

Humanistic Development

The district has a semi-arid climate with high temperatures throughout the year, and

relatively low rainfall. Paddy and groundnut are the major crops of this district. 90000 Ha.

Other than this, under irrigated condition Millet, Pulse, Cotton, Sugarcane, Gingellyare the

other crops cultivated in this district. Pudukkottai Organic Farmers Producer Company

Limited is a Private incorporated on 19 August 2014. It is classified as Non-Govt. Company

and is registered at Registrar of Companies, Chennai and Promoting Organization is Rural

Organization for Social Education (ROSE) with the objectives of sustainable livelihood of

Farmers Poison Free Food for All Future Generation in Wealthy Agriculture. The Pudukkottai

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FPC’s nature of business is procurement, processing, and value addition of “Indigenous

Paddy, Millets, Pulses and Oilseeds”.

Promotion of organic production with support by ROSE was done during the initial phase. In

the same phase, they have prepared all the farmers for organic cultivation. The remarkable

thing about this entire development process is the company has succeeded in making use of

organic production and marketing of produce in Pudukkottai and Chennai. As a part of the

marketing strategy, FPC is selling 70% of its produce to wholesalers based out in Chennai,

Madurai, Trichy, Kanniakumari and Bengaluru and 30% of the processed products in retail

on cash & carry basis.

Box 8: Support for Promotion of FPOs

Collectivization of Producers, especially Small and Marginal farmers, into producer organizations has emerged as one of the most effective pathways to address the many challenges of agriculture but most importantly, improved access to investments, technology and inputs and markets. Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India has identified FPO registered under the special provisions of the Companies Act, 1956 as the most appropriate institutional form around which to mobilize farmers and build their capacity to collectively leverage their production and marketing strength. As discussed the priority areas in Agricultural Marketing include:

1. Regulation of Agricultural Produce Markets 2. Agricultural Price Policy and Food Management 3. Simplification and Rationalization of Regulations Related to Marketing and Food

Processing 4. Reduction of Farmers Marketing Risks 5. Farmers. Organization and Capacity Building

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5. Karnataka Regulation: Agriculture Marketing

The Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966

vests regulatory powers on the State Government, Director of Agricultural Marketing and

the Market Committee of individual markets. Pertinent to note that providing of

infrastructure and other developmental responsibilities and operating markets is also

entrusted to the Director of Agricultural Marketing and the Market Committee of individual

markets. During the last couple of years, there has been a growing interest in promoting an

enabling environment for the FPOs. Several initiatives have been taken by the Government,

the Apex financial Institutions viz.; NABARD, private donor organizations, financial

institutions and many other institutions to support the growth of the FPOs and facilitate

their emergence as successful business enterprises.

Small Farmers’ Agribusiness Consortium (SFAC) particularly was mandated by the

Government to support formation of FPOs. SFAC’s initiative, started in 2011-12 under two

Central Government Schemes – the National Vegetable Initiative for Urban Clusters (NVIUC)

and the Integrated Development of 600,000 pulses villages in rain fed areas – has since

expanded its scope, and includes Special FPO projects being taken up by some State

Governments under the Rashtriya Krishi Vikas Yojana (RKVY) funds and the National

Demonstration Projects under the National Food Security Mission (NFSM).

Under the 12th Five Year Plan of the Government of India, promotion and strengthening of

FPOs has been one of the key strategies to achieve inclusive agricultural growth. In the last

three years, the growth of the FPOs has witnessed a big spurt in the formation of FPOs. With

large scale promotion of FPOs, the Government of India has initiated the following policies

to create an enabling ecosystem to strengthen the FPOs.

1. The Government has issued the National Policy and Process Guidelines for Farmer

Producer Organizations in March 2013, laying the framework for mobilization of

FPOs with a dedicated source of funding from the RKVY programmes.

2. It also launched the “Equity Grant and Credit Guarantee Fund Scheme” for FPOs in

January, 2014, enabling the FPOs to access a grant up to INR 10.00 lakh to double

members’ equity and seek collateral-free loan up to INR 1.00 crore from banks,

which in turn can seek 85 percent cover from the Credit Guarantee Fund.

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3. All major centrally sponsored schemes of the Department of Agriculture and

Cooperation (DAC) have incorporated special provisions for promotion and

development of FPOs during the 12th Plan

4. Small Farmers’ Agribusiness Consortium (SFAC) has been designated as a central

procurement agency to undertake price support operations under the Minimum

Support Price (MSP) programmes for pulses and oilseeds and it will operate only

through FPOs at the farm gate.

6. Supporting FPOs

6.1 Role of Central Government Institutions in Supporting FPOs

Department of Agriculture and Cooperation (DAC), Ministry of Agriculture, Govt. of India

acts as the nodal agency for the development and growth of FPOs.

Small Farmers’ Agribusiness Consortium (SFAC), a Society under DAC, is the designated

agency of DAC to act as a single-window for technical support, training needs, research

and knowledge management and to create linkages to investments, technology and

markets. SFAC will provide all- round support to State Governments, FPOs and other

entities engaged in promotion and development of FPOs. In particular, SFAC will create

sustainable linkages between FPOs and inputs suppliers, technology providers, extension

and research agencies and marketing and processing players, both in the public and

private sectors.

The mandate of National Cooperative Development Corporation (NCDC) expanded to

include FPOs in the list of eligible institutions which receive support under the various

programmes of the Corporation.

NAFED taken steps to include FPOs in the list of eligible institutions which act on its

behalf to undertake price support purchase operations.

DAC works with Food Corporation of India (FCI) and State Governments to encourage

them to include FPOs as procurement agencies under the Minimum Support Price (MSP)

procurement operations for various crops.

DAC and its designated agencies will work with NABARD and other financial institutions

to direct short and medium term credit for working capital and infrastructure

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investment needs of FPOs. DAC will also work with all relevant stakeholders to achieve

100% financial inclusion for members of FPOs and link them to Kisan Credit Cards.

DAC work with Ministry of Corporate Affairs and other stakeholders to further clarify

and strengthen provisions of the law relating to the registration, management and

regulation of FPOs with a view to fostering fast paced growth of FPOs.

6.2 Role of State Government Institutions in Supporting FPOs

Besides encouraging State Governments to take up formation of FPOs on a large scale

through Centrally-sponsored and State-financed programmes and schemes, DAC suggests

the following steps to be taken by State Governments to support and strengthen FPOs:

By declaring FPOs at par with cooperatives registered under the relevant State

legislation and self-help groups/federations for all benefits and facilities that are

extended to member-owned institutions from time to time.

By making provisions for easy issue of licenses to FPOs to trade in inputs (seed, fertilizer,

farm machinery, pesticides etc.) for use of their members as well as routing the supply

of agricultural inputs through FPOs at par with cooperatives.

By using FPOs as producers of certified seed, saplings and other planting material and

extending production and marketing subsidies on par with cooperatives.

By suitable amendments in the APMC Act to allow direct sale of farm produce by FPOs at

the farm gate, through FPO owned procurement and marketing centres and for

facilitating contract farming arrangements between FPOs and bulk buyers.

By appointing FPOs as procurement agents for MSP operations for various crops.

By using FPOs as implementing agencies for various agricultural development

programmes, especially RKVY, NFSM, ATMA etc. and extending the benefits of Central

and State funded programmes in agriculture to members of FPOs on a preferential basis.

By linking FPOs to financial institutions like cooperative banks, State Financial

Corporations etc. for working capital, storage and processing infrastructure and other

investments.

By promulgating state level policies to support and strengthen FPOs to make them

vibrant, sustainable and self-governing bodies.

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7. Problems and Issues Faced by FPOs

i. Lack of Marketing Skills

Most of the groups or cooperatives usually do not have marketing skill. They are managed

by someone from the members of a group who do not have any knowledge on marketing

and managing business as such. Groups or cooperatives will have to use marketing strategy

to run their business. Some of the innovative strategies followed are: fair price shop,

branding etc. They should advocate Government to support them in providing services and

finance as a seed capital to start their business.

ii. Lack of Cooperation

Group approach works only when the members of the group have similar problems. The

most common problems with the farmers are marketing of their produce and receiving all

types of inputs regularly. Farmers are reluctant to share their land or work in a common

land for growing agricultural commodities. Group has worked in the land to grow vegetables

and collectively sell in the local market. So, it is better to work in a group for collectively

purchasing inputs such as seeds, fertilizers, pest, etc. so that the cost will be reduced and

also for marketing of their produce. It is evident that the single farmer will not be able to

fulfill the large order placed by the market traders. Farmers can join hands working together

by bringing their produce at the collection centres to sell the traders.

iii. Weak Economic Status

Most of the cooperative societies are not financially strong enough to deliver vibrant

products and services to ensure their market share. This is a basic challenge before the

cooperatives. They should be made financially self-sustained by increasing the members and

their contribution as a share capital.

iv. Access to Local Market

It is very difficult to manage and is costly in marketing of produce far from the cultivation.

There are more market opportunities if people can identify local market needs of the

consumer and farmer can easily make a profit by selling it

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v. Poor Management

Cooperatives are efficiently managed by experienced, trained and professionally qualified

staff under the supervision and control of democratically-elected boards of directors.

Organization should be led and managed by energetic, professional and dynamic persons.

Business should be conducted in accordance with modern management principles. The

managers of cooperative business should be more professional in their market operations.

They should be active enough to trace new marketing opportunities as and when they

appear and make use of them for their further growth. They should make brilliant purchase

decisions by studying the market trends. For example, investing more in fast moving

products may increase the returns. Quality should be the key in cooperatives and steps

should be taken to reduce the wastages and cost of goods sold. In short, the

manager/secretary of a cooperative store should deliver his service in a professional way to

prove himself competent and his business successful.

vi. Leadership and Understanding

Leadership and understanding between the team members are the success factors. If there

is understanding between the members then it will be easy for visioning and planning of

activities. There will not be any dispute and will be an attitude of helping each other.

Leaders should take care of providing marketing services to their members without his

selfishness.

vii. Lack of Communication and Participation among the Members

Interaction between the members and the management committee of cooperative is very

less and takes place when there are only economic activities. This has caused difficulty in

understanding their problems and issues. Experience has shown that success of

cooperatives is due to strong relationship and trust with their membership, which has been

built over years through effective marketing support, services support and transparency of

the exchange process.

viii. Absence of Common Brands

To make cooperative businesses successful there is a need of more common brands which is

absent today. For example, dairy products in India have individual names in each State, and

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they are well-known as cooperative products to people of that particular State only. Instead,

if we could integrate them under a common brand it will be more successful and beneficial.

It will be recognized as the cooperative product of India not only by Indians but also by the

people abroad. This will reduce the marketing overheads, including promotion costs and will

also result in high reach as a single advertisement serves the purpose.

ix. Poor Management of Storage Facilities

There is a common understanding that when there is over supply produce can be stored and

marketed later when price rises. Most agricultural crops are suitable for short-term storage,

may be for few days. Storage is usually expensive and spoils its freshness and quality. In

most situations, when the produce is brought out of the store it has to compete with freshly

arrived produce. Finally, farmer will get less price, and in addition they have to pay for the

storage costs as well. There are few crops suitable for long term storage. Storage in

production areas is often not successful because the storage facilities are under-utilized for

most of the year and are uneconomic.

x. Middlemen make Excessive Profits

There will be variation in the price received by the farmers due to various quality factors.

Also middlemen and traders drain out excessive profits and farmers do not realize

remunerative prices.

xi. Unviable Formation of Groups and Cooperatives

Groups or cooperatives should be managed in a more business-like manner – these are not

social clubs or charity organizations. They should provide advice to the farmers on planting

suitable crops, which earn them higher income. Regular dialogues among farmers,

cooperatives and market authorities should be undertaken to resolve problems. For success,

the farmers’ orientation should be on improving productivity and quality. Farmers will have

to take the risk at different stages of production until the marketing. So risk management

strategies at various stages of marketing from production until the marketing will help to

manage risk.

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xii. Old Traditional Business Activities

There are many cooperatives, which do not take care of market trend and follow the same

old business principle. They are not able to adjust themselves by providing knowledge on

business techniques adopted by other professionals to their members.

However, FPOs can play an important role in agricultural marketing cooperatives as they

allow smallholder farmers to accomplish collective functions that they could not achieve on

their own if they were to function as individuals. The Government needs to promote and

encourage group marketing systems or collective actions by smallholder farmers because of

the limited quantities of produce that they market since this will assist in transportation

(through consolidation of small units of produce) and group bargaining. Most agricultural

producers have relatively little power or influence with large agri-businesses or food

companies that purchase their products. Joining other smallholder farmers in a cooperative

can therefore give them greater power in the market place. Additionally, this can give

smallholder farmers more control over their products as they make their way to consumers

by allowing them to by-pass the middlemen in the marketing chain. Furthermore, the main

goal of these FPOs should be to transform raw agricultural products into value-added

products.

8. Capacity Building Programmes

Capacity Building Programmes at Indian Institute of Plantation Management (IIPM)

Bengaluru, as part of Karnataka Agricultural Price Commission (KAPC), Bengaluru project on

Group Approach to Agricultural Marketing in Karnataka.

IPMB in association with KAPC has organized a State-level Stakeholders’ participatory

Workshop as part of Management Development Programmes (MDP) to identify the felt-

needs of commodity and its stakeholders to assess, design and develop an appropriate

Capacity Building Programmes towards Group Approach to Agricultural Marketing in

Karnataka. As part of capacity Building Programme, a concept of Deep Democracy (DD) of

Lewis method is primarily adopted to access and bring out the wisdom already have with a

group, and particularly to evolve creative and indigenous knowledge that results in

designing the policy based on the practical exposure of commodity group.

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A network of stakeholders’ viz.,

KAPC, Government of Karnataka

(GoK) and Government of India (GoI)

Development Departments such as

Department of Horticulture/

Agriculture, Agricultural Marketing,

University of Agricultural Sciences

(UAS-Bangalore & Bagalkot),

National Bank for Agriculture & Rural

Development (NABARD), Karnataka

State Seed Organic Certification Agency (KSSOCA), Agricultural & processed Food Products

Export Development Authority (APEDA), Coconut Development Board (CDB), Central Food

Technological Research Institute (CFTRI), Central Plantation Crops Research Institute

(CPCRI), Indian Institute of Sciences (IISc), National Institute of Agricultural Marketing

(NIAM), Indian Institute of Horticulture Research (IIHR), Rashtriya E-Market Services,

Syndicate Bank, Indian Institute of Packaging (IIP), NGOs and All India Initiatives for

Development Foundation (IDF), Areca Growers Association, CAMPCO, MAMCO, TUMCOs,

TSS etc., had been involved as a knowledge partner of the programme. Based on the

outcome of the State-level workshop, it was identified to organize four Capacity Building

Programmes on commodities i.e. Organic Agriculture, Coconut, Arecanut and Horticulture

Enterprise. A brief note on the deliberations and practical models is presented in the

following section.

8.1 Workshop on Stakeholders Need Analysis (SNA): The workshop was organized with

eminent scholars, senior officials of

Development Departments of Karnataka,

CEO/Presidents, and officials of Karnataka Farm

Producers’ Society. A Special Address was

delivered by the following dignitaries:

Dr. T. N. Prakash Kammardi, Chairman,

Karnataka Agricultural Price Commission

Deep Democracy: In order to empower the members of FPOs for mutual decision making towards scale of production and marketing, a concept of Deep Democracy (DD) and its utility is shared with the participant. The concept of Deep Democracy is a practical and powerful decision-making method for inclusive decision making, where every opinion is heard, acknowledged and counted. This process recognizes, acknowledges and includes alternative points of view. Deep Democracy is also a method of conflict resolution which helps solve conflicts. The principles of Deep Democracy also demonstrates on how they can be used to facilitate individual relationship, and group transformation in an organization or FPO. Deep Democracy starts with practice of believing in group and develop a Discussion, Dialogue & Discourse (3Ds), to see through others’ frames and to recognize one’s own frame.

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(KAPC, Bengaluru)

Shri. Manoj Rajan, IFS, Special Commissioner (Finance), Bruhat Bengaluru

Mahanagara Palike (BBMP), Bengaluru

Dr. K. Narayana Gowda, Former Vice Chancellor, University of Agricultural Sciences

(UAS), Bengaluru

Ms. Kshema Patil, Deputy Director, Department of Horticulture, Lalbagh

Shri. B. Rama Rao, General Manager, NABARD, Bengaluru

Shri. T. V. Srikantha Shenoy, Executive Trustee, Initiatives for Development

Foundation (IDF)

Shri. Siddhartha, Managing Director, Kalpatharu Coconut Producers Co Ltd.,

Turuvekere

A detailed panel discussion

and individual expert

presentation concluded the

importance of strengthening

group approach to agricultural

marketing with success stories

on Rural Biofuel Growers

Association, Kalpatharu

Coconut Producers Company

Limited, Agricultural-operative

Marketing, University of Horticulture-Bagalkot, Horticulture FPOs, Formation and

Establishment of Producers group (M4 structure) and case analysis of CAMPCO, MAMCO,

TUMCO and TSS. It was suggested that institute to focus on above themes and organize

capacity building programmes for the benefit of FPOs of Karnataka State.

8.2 Organic Farming and Certification

(OFC): IIPM in collaboration with KAPC

designed and organized the-first-if-its-kind

Capacity Building Programme for the

Executives of Organic Producers’

KAPC Stakeholders’ Need Assessment: A Stakeholder Need Analysis (SNA) to identify KAPC commodity group’s felt needs to utilize through a methodology to facilitate institutional and policy reform processes by accounting for and often incorporating the needs of those who have a ‘stake’ or an interest in the reforms of FPO under consideration. With information on stakeholders, their interests, and their capacity building requirement, KAPC-IIPM organized four programmes to meet both beneficiary and policy requirement of Government of Karnataka (GoK). An essential data are collected through interviews – including scaled values assigned to the attributes and relative rankings for designing capacity building programme. At the end of capacity building programme the stakeholders were given an ample opportunity to discuss with the fellow FPO members through group work, analysis, presentation

and conclusion for a particular theme and/, or an issue pertaining

to scale of production, marketing and price realization.

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44

Federation. The Programme titled as “Organic Farming and Certification (OFC)” conducted

between 3rd and 5th June, 2017 at IIPM Campus, Bengaluru. Thirty one participants

attended the programme. The theme for the programme included the following:

1. Formation, Processes and Sustainable Management of FPOs Perspective

2. Formation of Leadership for Organic Group: Games & Role-Ply

3. Organic Certification Standards: Farm Certification, APEDA/NPOP/KSSOCA

Norms and FSSAI Specifications

4. Commodity Derivatives and Futures

5. Quality Management Systems (QMS): Linkage with Specialty (Niche) Market

viz., GHP, GAP, GMP, GBP, HACCP, GLOBAPGAP, Utz etc.,

6. Cooperative Consumer Preference: Experiential Learning

7. Organic Farming: A Farmer’s Case Analysis and Success Story

8. Book Keeping, Accounting and Financial Management

9. Marketing and Branding of Organic Product

10. Packaging for Organic Products

Programme focus was on

establishment of organic cluster

from FPOs perspective and

formation of FPOs with 4M

dimensions for sustainability,

i.e. from Organic

Producers/Community Group

(OPG) at the village level (M1);

group of OPG lead to Organic Producers Society (OPS)/ Co-operatives (M2); group of

Organic Producers Society (OPS) lead to Organic Producers Federation (OPF) (M3); and

group of OPF end its functional link with Organic Producers Company (OPC) (M4), thereby

diversifying its role to domestic market, export, retail outlet, infrastructure etc. To form a

sustainable & stable organic FPO, it should have a good production, network, consistent

quality & scale of production and marketing, homogeneity i.e., interested, like-minded

Organic Producers Community/group at the village level as a strong foundation.

Organic Farming: while conceptualizing a group approach an organic farming through cluster approach, the capacity building programme also nurtured the formation of organic leaders to believe in a totality in production of organic, in a holistic perspective. Controversial discussion on both organic and in-organic had concluded as neither conventional farming with in-organic alone nor organic farming only with the use organic input can face certain challenges. To meet out the food and nutritional security, organic farming helps to improve the quality of production. An emphasis is given on a new way to help policymakers understand the Indian Organic Food System’s vulnerabilities and assess its alternative developments, through organic park.

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Figure 9: Four Levels of Development Concept for Institutionalizing Cluster-Led Building Process

Source: IIPM Programme Materials on Institutionalizing Coffee Producers’ Collective for Business Orientation and Management, IIPM 2012 (presented during Silver Jubilee of Regional Coffee

Research Station, Thandigudi)

Formation of Organic Producers Society results in reduction of cost of production,

procurement of material at subsidized rate, subsidy for development of infrastructural

facilities from the Government/Nodal agency, etc. The programme brought out a new

concept of Organic Park similar to Tea Park, Spices Park, Food Park to promote the

collectivization of organic producers for sustainable marketing.

In addition, the primary focus

of the programme was on

strengthening the idea of

organic farming in Karnataka

and how to make an existing

FPO organization

economically and financially

strong. It was perceived a

need for promoting organic

farming and consumption of

organic products to enhance

health of the society. However, the main challenge before the organic farming community in

Karnataka Rural Leadership Programme (KRLP): KRLP designed with concurrence of stakeholders of arecanut, coconut, organic, fruits & vegetables and feedback from officials of Karnataka Agricultural Price Commission (KAPC). The conceptual design of KRLP was taken from the Wisconsin Rural Leadership Programme (WRLP) of the University of Wisconsin, Madison, USA. The proposed KRLP facilitate FPO members to learn on State level leadership, social change, urban issue, health care, economic development, education, marketing, rural family and natural resources development, followed by National level training and International exposure relevant to particular commodity in a holistic perspective. An emphasis is given on learning ‘Triple Focus’ aspects of leadership administration viz., personal change, organizational change and community change. The triple focus approach is ideal to achieve after building deeper relationship through ‘stand-alone’ skill capacity building programme with an emerging leader or an organization. A prerequisite of 3C leadership qualities such as: Credibility, Competency and Caring are illustrated with its value to FPO leaders.

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Karnataka is to find ways of stabilizing the primary market and designing appropriate brand

for Karnataka’s organic products. As part of the programme, institute designed “Karnataka

Rural Leadership Program (KRLP)” for promoting organic leadership and its networking

across State to promote organic movement.

APEDA Organic Certification Standards: APEDA is a Central Government organization

established in 1986. In 2001, national level organic accreditation standards were introduced;

in 2005, National Program on Organic Production (NPOP); and for the first time standards

related to exports was introduced. There are 28 certification bodies in India accredited by

APEDA. In order to obtain certification for organic products, FPOs should approach one of

the certification bodies and certification agency in turn will guide on set of criteria to be

followed for obtaining certification. Once in three years, certification needs to be renewed

by FPOs. Evaluation Committee of APEDA will randomly check the procedures & methods

followed by the organic growers for renewal. If found procedure/standards not followed

properly or involved in fraud, renewal of certification shall be cancelled. APEDA has

introduced Peer Group Evaluation System (PGES) certification standards for selling products

in domestic market, as there were no prescribed standards earlier for selling organic

products in local market. Hence, growers were not getting good price for their organic

products and consumers were in dilemma whether the product is really organic in nature.

Now the consumers can legally fight, if the product is found to be in-organic with label of

organic product inside. NPOP standards remains same for both domestic and export

purposes.

Promotion of Organic Farming by Government of Karnataka and Role of KSSOCA in

Organic Farming as a Certification Body: Organic farming has been identified as one of the

best sustainable system under the motto “Live and Let Live”, wherein biological cycles and

soil organic activities, enhances health of the agricultural eco-system leading to increased

yield and profit. Karnataka is the first State to introduce a policy on organic farming in 2004.

Key aspects of the policy are, implementation of integrated farming methods; production of

organic resources with diversified produce; stress on mixed farming with combination of

animal husbandry; rainwater harvesting; and soil & water conservation. Furthermore, these

are to be implemented through organic Farmers Producers societies, farmers club, SHGs,

47

NGOs, etc. As per the organic farming policy, Department of Agriculture has established

Organic Village/Location Plan at Village &Taluk levels. Additionally, establishment of organic

research centres in Universities with special reference to organic farming, pesticide residual

analysis laboratory, emphasizing promotion & training programs, marketing of organic

farming produce are the other initiatives are warranted.

Under the Organic Farming Policy, during the year 2017-18, it was proposed for market-

based organic crop cluster development programs; establishment of organic produce

market places – it may be federations, companies or private market place; to encourage

market-based activities – new value added processing centres and to strengthen existing

centres through federations. The main objective of market-based organic crop cluster

development programs are to develop a specific product / crop cluster; to cultivate 2 to 3

specific crops in each cluster based on the market demand; quality products in bulk volume

for wholesale markets; cleaning, grading, value addition, etc., at the initial stage of cluster;

to develop commercial organic farming clusters, creation of end-to-end value chain; direct

marketing through e-platform across the state and to create good market linkage for the

organic produce. For the overall integrated development of cluster, there is a need to put

focused effort on development of technology, supply of accessories, financial assistance,

mass storage, aggregate storage, transportation, market linkage, etc.

During the National Trade Fair on Organic Farming & Millets 2017, around 260 shops with

variety of organic products and millets were showcased and sold; established huge

Karnataka pavilion with 56 shops; products of provincial federations were showcased and

sold in 26 platforms; Apart from Karnataka pavilion, Uttarakhand, Kerala, Meghalaya,

Gujarat, Sikkim, NERMAC also participated. Nearly 1,200 representatives participated in the

National Trade Fair and 1,500 farmers participated in the workshop. During the National

Trade Fair, nearly 87.00 lakhs worth business transactions occurred. Discussion among

different producers and marketers with a worth transaction of Rs. 47.00 crore with long

duration business potential estimated at Rs. 100.00 crore. Nearly 20 agreements were

signed between provincial federations and marketers for supply and purchase of organic

products. Karnataka Government undertaking KSSOCA established in 2013 and now acting

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as a nodal agency for certification of organic farming federations. KSSOCA has obtained

accreditation from APEDA in August 2016 and come out of Government ownership during

the current year. More than 150 federations have been given third year certification and

M/s Aditi Certification Agency and ICCOA are also associated with KSSOCA in the

certification process. Session concluded with a suggestion that more awareness programs

on organic farming is essential and ultimately conscience on the part of organic farmers

towards organic farming plays a significant role.

Organic Benefit Plan (Savayava BhagyaYojana-SBY), 2013-14: Total farmers benefitting

from this plan increased from 29,275 to 53,829 and total area covered under organic

farming also increased from 42,831.60 ha. to 63,677 ha. In collaboration with 79 NGOs, the

project has been implemented in 566 Hoblis covering 100 hectares and farmers groups have

been registered through KSSOCA certification. In addition, incentives are being given for

promotional activities that support organic farming in the planning area. Under the SBY

plan, by combining organic farmers’ societies in planning area, 14 provincial federations

have been established across the State. The main objectives of formation of these

federations include; producing quality organic products in large quantities; training for

members of federations, skill development, transfer of technology; creating basic facilities

for storage of products, classification, value addition, processing, packaging, etc.; developing

network for direct marketing with marketers, exporters & retailers and also federations to

initiate organic produce sales stores.

Major crops covered under organic farming across the State are; cereals, paddy, corn, pearl

millet, other minor millets, mango, pineapple, banana, dry fruits, spices, sugarcane, coffee,

coconut, legume grains, oil seeds, medicines & scented plants/perfume saplings, fruits &

vegetables and flowers. As on date, Karnataka stands in 5th place at the national level for

certified organic farming fields and 3rd place in organic production. As on 31.03.2016,

85,432 organic farmers and 93,963 hectares of area covered under organic farming. Organic

products has increased intensively, local markets have grown from 35% to 40%, increase in

average premium price for organic produce in cities (60 to 120%), increase in premium price

to organic farmers (0 to 20%). However, it was also noted that organic products are not

49

available at affordable price for general public and organic farmers are in search of markets

and vice versa. In days to come, it is proposed to produce organic products in group form,

introduce organic farming in large holdings, conversion of areas to organic farming in full

instead of part conversion/parallel production, commitment of farmers in organic farming,

market driven produce plan, value addition to organic products at the field level,

establishment of bulk processing units closer to the field/farm, to encourage collaborative

linkages between farmers societies/federations and large marketers/processors, encourage

Public Private Partnership (3P) plans, brand development and extensive campaign among

customers and to ensure quality and product assurance system to safeguard consumers

interest.

Marketing of Organic Products: An e-based exchange system has been established by the

Government, wherein once the commodity is ready for sale, it is kept in a certified

storehouse/warehouse to meet the specific requirements/specifications of commodities

(certified by the Quality Manager after necessary check). Since, both sellers and buyers are

registered with NSE, information on commodities of concerned parties is reflected in the

terminal connected to National Exchange System and the exchange process starts with

bidding process, entering into agreement/contract, cheques/negotiable instruments,

payment process and ends with delivery receipts. All transactions are controlled by NES.

Minimum period of trading a commodity is 15 days, however, it varies from commodity to

commodity based on its nature, e.g. perishable items like flowers, fruits, vegetables will be

traded much faster than maize, rice, cereals, etc., unless cold storage facility is available for

perishable commodities. The main advantage in commodity trade is payment is secured for

a seller. Seller has the right to deny selling his commodity, but buyer cannot refuse to buy

the commodities after accepting. There are 3 national level and 16 regional level exchanges

controlled by SEBI, GoI organization under Ministry of Finance and it regulates entire

activities of the above market exchanges. Advantages of commodity online trade systems

are; a) price stability; b) availability of registered storage facility; c) finance; d) no

dependence on middlemen; and e) no price risk for the farmers. Main disadvantage is being

availability of quality and quantity of commodities in large volume. Therefore, role of FPOs

in online trading is through pooling and bulk trading with grading of commodities which

results in good price and hedging for the farmers.

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Around the world, as per Quality & Safety Index, India stands at 69th position out of 109

countries and Quality of Life Index, India stands at 49th position out of 76 countries.

However, there is no index available for organic farming. Organic farming should be free

from physical (e.g. stone), chemical (.e.g. pesticides), biological (e.g. compost) and allergent

(e.g. growth hormones) hazards. Organic products meant for export if contaminated will be

rejected without following SPS and TBT standards as per WTO agreement. Organic farming

begins with supply of pure seeds, production, processing, distribution, market until

consumer & customers. Organic farming should focus on entire supply chain not only on a

component such as production domain. In the recent food scenario, most of the consumers

prefer organic product free from hazards and consumers are looking for safe food, which is

free from physical, chemical, biological and allergent. As an organic farmer, it is not

mandatory to obtain a certification. However, as an organic farmer, it is important to grow

the produce with ethical norms and procedures. If farmers are able produce organic product

in the prescribed norms and ethical way, the producers need not wait for subsidy and/or

certification. Alternatively, they can enter into an agreement with the company for bulk

supply of produce with appropriate certification including Utz and in turn share the profits

equally or partially with the collective members.

Nowadays, organic products are available in all market segments, viz. directly from farmers,

retailers, wholesalers, etc., and perception of consumers is also changing as he/she is

becoming more health consciousness, ethical, self-identity, food safety and environmental

concerns. Packaging, Branding (with accreditation from a trusted agency), Labelling &

delivery of right products at the right time, Pricing, Availability, Affordability, etc., also play

an important role in shifting purchase intension of consumers from in-organic to organic

products. To understand the practical domain organic farming and its success a case analysis

of Sahaja organic is appended in the following box.

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Box 9: The Case Analysis: Sahaja Organics

In short, the organic producers’ cluster beyond production should also develop many

opportunities to strengthen organic business to improve the quality, certification, tourism,

nutraceutical and other associated services. In a new emphasis on organic cluster or organic

collectivization, attention needs to be given on strengthening the producers’ cluster and its

Sahaja Organics is the first farmer producer organization of organics in Karnataka established in 2010, where farmers are the owners of the company. Initially, a small interested farmers’ discussion group was established in 2000-01, established as Trust in 2005 which has completed a long, sustainable and successful journey until 2017, with establishment of Sahaja Samrudha Organics Producers Company Ltd (SSOPCL) in February 2010. The main objectives of Sahaja Samrudha are; i) to encourage organic farming, ii) to conduct farmers awareness programs & discussion meetings at farmers garden, iii) to supply seeds and organic manure to interested people from farmers, iv) to organize big fairs to establish contacts between farmers & consumers, etc. In addition, different innovative activities like, protection of desi breed; production of desi-seeds; conducting organic Fairs at different locations; facilitating marketing of organic produce; facilitating group certification process for FPOs, etc.

Sahaja Samrudha has diversified its activities and established Sahaja Organics, Sahaja Seeds and Sahaja Media, to meet the specific requirements of the organic farmers. Sahaja Organics was established to encourage organic farming and to create market for organic produce with good premium price. Sahaja Seeds was established to multiply and supply desi seeds/breed plants to the organic farmers through Desi Seeds Producers Company. Sahaja Media was established to diffuse information related to marketing of organic produce and availability of desi seeds for the benefit of the organic farming community. Through Sahaja Organics, farmers are getting higher & premium rates compared with in-organic produce rates in the market. Farmers are also deriving benefits of ‘withheld price’ (difference in price - actual purchase price, fixed marginal price vs. actual selling price - i.e. additional approx. 5 per cent) for the past three years, in addition to profit earned and distributed to its shareholders. Sahaja Organics has more than 5,000 small and tiny organic producers/farmers group as registered members from Karnataka, Orissa and Tamil Nadu out of which 724 are shareholders. It is supplying in bulk organic produce to more than 400 retail outlets across 11 States, because of which easy access to organic produce at competitive price leading to consumption of pure, tasty nutritionally rich desi organic food and maintaining quality and faith of customers, as the organization has created batch code and traceability system for each produce. Sahaja Organics has been marketing and promoting different types of rice including scented & medicinal rice from more than 1000 paddy growers, millets with nearly 200 species of breeding, wide range of food items like vegetables, etc. The turnover of Sahaja Organics in 2010-11 was Rs. 19,65,93, as compared to turnover of Rs. 7,57,12,841 in 2016-17, wherein from 2014-15 onwards, it started earning profits and the same was distributed to producers. Even though the company is a producers’ organization, paid tax of approx. Rs. 15.00 lakhs to the Government and it is proposed to distribute dividends to shareholders in near future. In this successful endeavour of Sahaja Samrudha, financial institutions like NABARD and Vijaya Bank have been extending financial support through loan facilities. Since inception, no Government subsidy has been taken for asset creation or for any other purpose.

52

capacity building through organic (local action capability) leadership. The major role of

cluster group should be on sustainability of the sector and not on perpetuation of external

support. Even if the meso-level organizations are not fully matured, phasing out won’t make

a big difference, as such support can be provided to them during their operational period.

As it is a never ending process and even the most developed organizations need to work

consistently on the process of capacity building of its members and effectiveness of the

system. The most important factors which influence the sustainability of organic producers’

society are given below:

Personal capacity building of cluster leaders (skill in public speaking, instinct

motivation, identification of community issues, interagency co-ordination)

Popular participation and co-operation (ability to co-operate well with members)

Commitment for innovativeness, skills related to fund raising and grassroots

development process

Level of education, and

Professional contacts for mobilizing inter organizational activities

The organic producers of Karnataka, as part of capacity building programme gave an

opportunity to design structural and functional dimensions of building organic cluster to

meet both production and scale of marketing requirements. The producers group

(participants) was divided into three groups to work-out on the modality of framing a

sustainable organic park, organic producer’s society (M4 perspective) and Karnataka rural

leadership based on participants intuition and knowledge gained from the programme. The

participants had a detailed discussion, dialogue and discourse (3D) as part of group work and

framed the following modules for sustainability of organic farming in Karnataka.

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Figure 10 (A): Formation of Organic FPO (M4 Perspective)

Source: IIPM (Designed by Participants as part of Training Curriculum)

Figure 10 (B) : Formation of Organic FPO (M4 Perspective)

Source: IIPM (Designed by Participants as part of Training Curriculum)

54

Figure 11 (A): Organic Park

Source: IIPM (Designed by Participants as part of Training Curriculum)

Figure 11 (B): Organic Park

Source: IIPM (Designed by Participants as part of Training Curriculum)

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The programme on Organic Farming and Certification towards Group Approach to

Agriculture Marketing in Karnataka has given a sufficient opportunity to participants to

design indigenously an organic park, and associated leadership program towards

sustainability. A session on online trading by FPOs, as registered traders directly at regional,

State and National levels as per recent notification of Government and establishment of

online exchange systems with an aim to reduce uncertainty and minimize the risk of

production, cost, market and value added products orientation were discussed. A session on

book-keeping & accountancy as part of organic production system and different types of

packaging for the benefit of consumer were discussed in detail.

8.3 Sustainable Coconut Farming, Value Creation and Marketing: FPOs Perspective: A

Programme on “Sustainable Coconut Farming,

Value Creation and Marketing: FPOs

Perspective” has been organized for thirty

one Executives / Members of Coconut

Producers Company between 4th and 6th July

2017 at IIPM campus, Bengaluru. A summary

of the deliberations is discussed:

Strategic Administration of FPOs and the role of CEOs in Attaining the Strategic Vision of

an FPO: Success or failure of an FPO depends on the leadership qualities of the CEO’s. The

leader should play a vital role to exercise appropriate skills to achieve determined objectives

of FPO. In the past, leadership style exercised by most of the FPOs of the organization

focused on authoritative, as compared to recent times, wherein leadership is more

participative in nature. The participants were facilitated to understand 3Cs of leadership

qualities which are Credibility, wherein a leader is being trusted & believed in; Competency

is to do things effectively & successfully; and Caring is very kind & concerned towards

his/her organization. This in turn, leads to ‘triple focus leadership’, viz. personal,

organizational and community change. There are three types of leadership: a) authoritative

or autocratic leadership, where a leader makes his decision alone and enforces his decision

on members’ reward, fear or punishment; b) Democratic leadership style, a leader

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delegates’ authority to his/her members and are involved in decision making process; c)

Laissez-Faire Leadership style is neither authoritative nor democratic in nature. In this styles

of leadership, members are given authority & power to make a decision. However, this

leadership style is considered as least satisfying & least effective management style. Overall,

in FPO organization, where a CEO believes in the leadership style of ‘we’ instead of ‘I’, which

helps in achieving its specific goals & objectives.

The leadership framework of FPO in Coconut sector was discussed within M4 perspective.

M1 denotes ‘Micro level’, wherein Coconut Producers Cluster (CPClr), workforce & local

organization come together to form an FPO at grassroots level; M2 denotes ‘Meso level’, in

which a group of local FPOs come together to form a Coconut Producers Society (CPS) or

cooperative; M3 represents ‘Macro level’, wherein a group of cconut producers society

come together to form a Federation; and M4 denotes ‘level of Mega’, to form a Company

for marketing. A CEO of an FPO organization should adopt diversified leadership style in

order to focus from suppliers to end customers. Session included group exercise followed by

discussion. It was concluded that an effective leader is the one who understands & assesses

the members not based on face value or outer appearance but with inner strengths &

aptitude of the members. Therefore, when FPO organization is formed, it is important to

select like-minded group of people at the beginning of formation of M1 level.

Framework for Establishment Karnataka Rural Leadership Programme (KRLP) for the

benefit of Karnataka FPOs: The session was designed based on the understanding of

Wisconsin Rural Leadership Program (WRLP) of UW Madison-Wisconsin. A concept of rural

leaders was discussed with participants with existing functional dimension of Karnataka

FPOs. An effective rural leadership program is designed which make the leader to

understand from grassroots to global perspective (civic), community, organization,

education, environment, etc. Therefore, it is essential to initiate rural leadership

programmes for the leaders/CEOs across the country. There are different types of Rural

Leadership Programmes already exist around the globe, viz. Wisconsin Rural Leadership

Programme in Madison, WI (USA), Australian Rural Leadership Programme (ARLP) in

Australia, Kellogg Rural Leadership Programme (KRLP) in New Zealand, Texas Rural

Leadership Programme (TRLP), USA, African Leadership Initiatives Programme (ALIP), etc.

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There is no such leadership programmes existing in India, especially in commodity sector.

Government of India or Karnataka should initiate such programmes, viz. Karnataka Rural

Leadership Programme (KRLP), which helps to gain new perspective on major issues faced

by Indian society, especially in Karnataka.

Proposed objectives of KRLP is indicated below:

1. To gain new perspective on major issues faced by Indian society;

2. Better understanding of economic, political, cultural, and social structure within

local, state, regional, national, and global context;

3. Tact of knowing how to develop sectoral and multi-dimensional community

development task.

Selected benefits of KRLP could be that:

1. Selected participants gain understanding on overall governance from the levels

of District to State, National and Global perspective.

2. Programme covers issues related to State Government, leadership & social

change, agricultural development, social-economic aspects, education, rural

family & community, environment and other associated area of rural operations

and administration.

3. Attain state-of-the-art rural leadership skill in adapting to social change and

interpersonal dynamic in exercising the role of leadership.

Book-Keeping, Financial Management and GST: Keeping books of accounts has become

inevitable due to introduction & application of GST compulsorily. It is essential to maintain

bill book containing name of the person/organization, address, GST number, invoice number

& date, particulars with rate of a product/amount/total, HSN number (8 digit universal code

Harmonized System of Nomenclature), CGST, IGST, SGST with rate of tax and grand total, in

order to prepare book of accounts (original for buyer / duplicate for transporter / triplicate

for self), subsequently, entries made in Sales register with similar format of bill book on

daily basis. Similarly, Purchase register, Debtors & Creditors ledgers, Cash book, Bank book

are to be maintained. In case, different types of businesses are carried out, it is essential to

keep separate book of accounts for each businesses to ease business operation. The cost of

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logistics in India is very high as compare to other countries. Therefore, check posts have

been decommissioned to ease logistics and goods movement, especially perishable

products. There are number of in-built norms to take legal action on the concerned party in

case of default.

Value-Addition Cooperative Movement in Coconut: A co-operative movement is required

in coconut industry similar to diary business, wherein farmers get a percentage at the end

sales proceeds. In case of coconut, farmers get price for selling a coconut and not for its by-

products viz. coconut oil, value added coconut water in tetra-packs, coconut sweets,

coconut cake, coconut milk, neera, coconut carpets, coconut wood products, desiccated

sugar, flower syrup, coir, virgin oil, coconut sugar etc. Integrated coconut market approach

is a must for coconut industry. Consumption of fresh coconut is good for health in general,

which needs to be widely spread. In all this, ‘processing’ of coconut is very important.

Therefore, there is a need to form a National Coconut Knowledge Base including

representatives from India, Indonesia, Philippines, Malaysia, etc., to raise voice on behalf of

the industry across the globe.

Innovation: Now-a-days, consumers are looking for healthy & nutritive products. Therefore,

innovation is important to expand the market, for e.g. using cocono-oleoceuticals (good

molecules from oil) as capsules like omega 3 or omega 6 in fish. Therefore, what is good

should be encouraged to grow further. Further, value addition through virgin coconut oil

and growing opportunities for coco-ceuticals or coco park facilities are the two important

concepts of tomorrow’s world. An enterprise should be supported to growth so that the

farmers get the benefits just like a co-operative movement in diary industry. Coconut oil can

be used in 4000 products including usage of coconut oil in cosmetics. MNCs are making

money and the farmers are suffering. Therefore, there should be active coconut co-

operatives to link the two.

Virgin coconut oil acts as healthy aging agent and consumption of fresh coconut leads to

kidney cleansing, gives brightness to skin, increase brain power and keeps the brain alert.

Tapping global knowledge is important to expand the market horizon of coconut sector.

Coconut should be used in products like biscuits, snacks, etc., in near future, to expand the

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coconut market. Therefore, oil technologists should work in this direction. R&D is in

progress on application of coco-genomics (certain molecules in coconut oil) to fight the

genetically acquired diseases, protecting molecules destroyed by nicotine through cigarette

smoking, etc. Followed by a session on coconut hybridization for sustainability: Deejay was

handled with a focus on Deejay hybrid coconut and its importance in high productivity nuts,

coconut water and other associated value added products. A case analysis on Deejay farm is

appended below.

Box 10: Coconut Hybridization: A Case of Deejay Group

Deejay Group is into coconut breeding for the past 34 years, since 1983. There is a new change because of high value planting & agriculture in general and today’s discussion will focus on new hybrid coconut and its usefulness to the farmers. Today, farmers can get very good returns provided best technology & best planting materials are used and there are good planting materials available for coconut farming. It helps farmers to earn more money so that people from cities come back to farming and get their rightful place in the sector. India grows coconut intensively and in Indonesia coconut trees planted at the border of the farm. Even though, Indonesia has 3.78 million hectare under coconut farming, productivity is not so high as compared with India, which has 2.14 million hectare under coconut farming. Tamil Nadu has highest productivity/yield per hectare as compared with other States in India. Deejay Group has more than 30,000 mother palms in breeding farms in Madurai, Ambur (Tamil Nadu), Bailur (Karnataka), Goa and Penakonda (Andhra Pradesh) and sold over 2 million seedlings which are yielding. Deejay hybrid coconut trees starts flowering from second year and 90 per cent of trees start yielding from third year and local palms takes 4 to 5 years for flowering; highest yield recorded is 250+ nuts per tree per year, whereas, it is 110-120 nuts in case of local palms; size of nuts on an average it is recorded at 700 gms in Sampoorna hybrid and 1000 gms in case of Pushkala hybrid; On an average, coconut water in one Deejay hybrid coconut is 500-700 ml, which is 200-220 ml in local palms and on an average 210 gms of copra is available in Deejay hybrid coconut as compared to 110-120 gms in local palms. Deejay Group tries to improve mother palms every year through R&D support. In addition, Deejay has entered into value added products like virgin coconut oil, coconut sugar, coconut flour, coconut neera, coconut ethanol, etc. Deejay is producing 6 to 7 times more ‘coconut sugar’ than regular sugarcane sugar, the reason being that sugar can be extracted from sugarcane only once in the life of a plant and sugar can be extracted from coconut neera, for every day for the whole year. For e.g. 1 kg of sugar can be extracted from 6.2 litres of neera. Also 3,000 litres of water required to produce 1 kg of sugar from sugarcane, whereas it takes 200 litres of water per tree to produce 1 kg of coconut sugar. The main objective of Deejay Group is to bring the farmers from poverty level to middle-class level and ensure good financial safety net through regular monthly income. Deejay Agri Foundation has been established to facilitate farmers to teach, train, advice & provide consultancy services in hybrid coconut farming, after getting seedlings from Deejay.

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8.4 Sustainable Management of Co-

operative Society in Arecanut Sector:

Programme was conducted between 6th

and 8th September, 2017 at IIPM Campus

for the benefit of thirty one participants

and programme deliberated on the

following themes; Feasibility for

Establishment of Arecanut Board, as a

State-of-the-Art- Arecanut Board of India (ABI), GST & its Application in Arecanut Sector,

Commodity Derivatives & Futures, Value Addition in Arecanut Sector, Alternative Business

Model for Emerging Arecanut in Products: Golden Triangle

[Innovation/Investor/Entrepreneur], Arecanut Development Research, Formation &

Functioning of Karnataka Rural Leadership Programme (KRLP): A New Initiative for CEOs of

Arecanut Producers Company, Mechanization of Arecanut Production and Processing Units.

During the workshop, it was discussed that arecanut growers’ cooperative societies viz.,

TAMCOs, MAMCOs, CAMPCO, TCSS along with horticultural universities should always work

together for development of the Arecanut farming community. Initiatives for development

of arecanut farmer may include; protection against disease, financial support and subsidized

loan facility, awareness creation regarding nutraceutical value of arecanut, strengthening

existing cooperatives for better functioning. Arecanut Cooperative Society should be a

multipurpose cooperative society facilitating provision of a package of services i.e. loans,

hospital, education, training, selling of their products at market rate, pesticides insurance

etc. Collective leadership is the one of the success for any cooperative society. It was

perceived that arecanut and its parts as an enterprise is similar to coconut.

Based on the demand of arecanut stakeholders, and KAPC, a session on establishment of

Arecanut Board of India (ABI) was conducted. It was discussed that proposed Board’s

funding should be shared by State and Government of India and the CAMPCOs President,

Vice Presidents and traders of cooperative society would serve as the advisory members of

Arecanut Board. It should be established through Act of Parliament. Deliberations also

focused on formation and other related modalities of the proposed Arecanut Board.

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Arecanut being an international commodity can achieve excellence within 5 to 10 years in

promotion of its value added products globally, as a policy body. It may also create a niche

market both at domestic and global level. It may ensure strategic promotion of Indian origin

arecanut through branding.

Arecanut or betelnut (Areca catechu L.,) is an important cash crop in the Western Ghats,

Eastern Ghats, East and North Eastern regions of India. Arecanut is an important component

of the religious, social and cultural celebrations and economic life of people in India.

Arecanut is also used in Ayurveda and Veterinary medicines. About 20 per cent of total

areca production in the country is consumed as ripe fruit. India is the major producer of

arecanut in the world with about 49% of area and 51% of production followed by

Bangladesh and Indonesia. In India crop is cultivated over an area of 4.5 lakhs ha with a

production of 7.5 lakhs tones annually. The crop cultivation is mostly confined to States of

Karnataka, Kerala, Assam which account to 82 percent of area and 88 percent of the

production in the country.

Arecanut is a notified commodity in about 32 regulated markets of Karnataka. There are

more than 15 cooperative marketing societies handling arecanut in Karnataka state. The co-

operative societies have been fairly successful in their functioning and about 30 per cent of

the marketable surplus in the state being handled by them. All these co-operatives are

functioning as the agencies of CAMPCO (Cocoa and Arecanut Marketing and Processing

Cooperative) Ltd., Mangalore. Shimoga is a major market for the red boiled type of arecanut

in the country. The pre-bearing age of the palm ranges from 5 to 8 years. The decline in

prices of new arecanut is attributed to a combination of factors that include ban on gutkha

in several states and flooding of inferior and cheap variety from Bangladesh and Nepal. The

north Indian markets are flooded with imported arecanut from Bangladesh and there is no

demand for good quality arecanut grown in southern states. As a result, drastic increase in

imports was hurting arecanut growers. The imports have gone up ever since the

government of India allowed duty-free import of arecanut from least developed countries in

the SAARC region. Particularly, imports from Bangladesh have gone up seven times to

53,000 MT in 2012-13 (till December) as against 7,60 MT in 2009-10. In view of a paradigm

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growth from production to productivity, value addition, diversification and export earning

it is proposed to establish state-of-the-art Arecanut Board of India (ABI).

Establishment of Areca Board of India (ABI)

The proposed Arecanut Board

of India (ABI) and its

organizational structure and

essential divisions of board are

illustrated in Figure 12. The

proposed ABI, consist of five

divisions with executive director

as administrative head along

with a chairperson to the board

for overall functioning. A joint

stakeholder’s funding pattern is

proposed viz., Government of

India (Gol) - 40 percent; Government of Karnataka (GoK) - 50 percent and Co-operatives - 10

percent. The formula of 40:50:10 funding pattern may be modified in consultation with

Government Bodies and stakeholders of the sector. The proposed funding pattern may give

an autonomy and performance of stakeholders to achieve sustainability of the board in

near future.

Functions and Objectives of ABI

The major objectives of proposed ABI are advising the Government on policy matters such

as fixing quotas for exports, entering into trade agreements with foreign countries. In

addition, it takes promotional activities of healthy and nourishment based products, trade

fairs, and conducting market survey to focus on features of future requirement of areca

products across the globe. The board also promotes commodity specific activities and also

resolves all problems relating to issues in their jurisdiction.

In the context of research and development, a major focus on improvement of quality,

pharmaceutical development, global quality standards etc., with a limited resource

Arecanut Board of India (ABI): Arecanut sector is an important and critical component of Indian economy, particularly to the State of Karnataka. Indian arecanut is exported to 40 countries and export of arecanut product from Indian has almost triple in a span of 20 years since 1991. In this context, detail for establishment of a state-of-the-art of ABI to promote livelihood, business venture, healthy lifestyle, nourishing value added product and export potential for the benefit of small & medium producers as well as to create a joint business partnership between Farmer Producers’ Organizations (FPO) of S&M and Co-operatives for overall sustainability of the areca commodity sector in the country. The existing co-operatives such as CAMPCO, MAMCO, TUMCOS, APSCOS, TCSS, TAPCMS etc. may coordinate with FPOs for processing of arecanut, value addition, domestic market and export orientation. The proposed areca boards status bringing in either under industrial or agriculture sector may be examined thoroughly before taking a final decision on areca commodity under industrial vs agricultural sector. Under the above scenario, the existing industrial sector commodity such as Rubber is re-working to convert rubber from existing industrial sector into agriculture due to maximum benefit to small scale rubber growing community.

63

allocations to be provided to the existing Central and State research institutes and

organizations (CPCRI, Directorate of Arecanut Board, IIP etc.,) located in the country.

Besides, the major role of board will be to facilitate the formation of FPOs, society, Co-

operatives, companies, Entrepreneurship, Areca-business Clinic for location specific problem

solving. It was suggested for the formation of an arecanut specific, KVK for imparting

training to the stakeholders. The other divisions of ABIs such as Extension, Market

Development & Export Promotion, Finance and Licensing & Enforcement may serve similar

pattern of the existing boards of India. However, the major focus of ABI should concentrate

on export and promotion, to enhance foreign earning in a similar line with and pattern of

Spices Board of India (SBI).

Figure 12: Establishment of the State-of-the-Art Arecanut Board of India (ABI)

Source: IIPM 2017

64

Formation of Areca Board and its link to FPOs and Co-ops:

As indicated earlier, formation of cluster-led-FPOs/Co-ops and its network have emerged as

a strategic producers’ participatory management approach to promote multifunctional

interest of homogenous Arecanut commodity group, society/cooperative, federation and

company. It is necessary that facilitating organization/NGO/development departments may

give an adequate time for the promotion of popular participation of members to

understand a core objective of cluster while forming 4M stages of FPOs/Co-op. In addition,

care should also be taken with the basic principles, functional and structural dimensions of

producers’ organization. The process of formation of FPO/Co-op cluster and its approach

must focus on M4 dimensions i.e. ‘Micro (M1)’, ‘Meso (M2)’, ‘Macro (M3)’ and ‘Mega (M4)’

levels. Existing traditional community structures and organizations are effectively utilized to

build trust and confidence of farmers at the micro-level (M1). Mobilization of traditional

leaders and involving them in community group development process is essential. At the

same time, community based self-help structures are to be introduced and developed from

the base up. Both participation and mainstreaming are taken as essential components for

building internal development and networking. Producers’ cluster at the meso-level (M2)

would help the community to reach the second level of development structure and external

support systems for market network. The third component of cluster process at macro-(M3)

level, facilitates the development activities as a federation to link with scale of marketing,

government liaison, commodity board linkage and other associated stakeholder. The final

mega (M4) segment, as part of company act facilitate overall marketing aspects of FPOs.

The decision of merging multi-cluster group into areca produces society or areca

cooperative society should left with decision of the producers, as a whole. The above

groups (FPO/Co-op) may link with producers’ company or co-ops to market their product

based on the price realization with quality parameters.

Hence, producers’ collective development programme at the grassroots must practically

plan and develop a cluster of M4 as micro, meso, macro and mega levels in different phases

and how to merge them together with Arecanut sector. For effective functioning of the

board, integration of existing arecanut co-operatives, small & medium producers and other

associated organizations need to be integrated in the form of arecanut FPOs/Co-ops.

Moreover, the objective of meso-level, represents formation of federation for collective

65

information sharing, scale of production, processing and marketing. The final link of M1, M2

and M3 will lead to scale of marketing of value added products through M4 mega level to

achieve at the end a scale of pricing for cluster. The critical component for sustaining cluster

approach is nomination, nurturing and developing rural leaders for sustainable functioning

of cluster approach. The leadership role in the cluster approach should enhance dynamism

in mobilizing popular participation amongst the members of cluster/community. Nurturing

of leader through effective communication, extending the required financial & non-financial

support, rural leadership skill and linking with multi-stakeholders role is essential to make

them as dynamic rural leaders.

The interface and the involved actors between the micro, meso, macro and mega levels

need to integrate the visioning, felt-needs identification, articulation and prioritization of

cluster. The bottom-up development network at the micro-level needs flexibility that shall

be provided through multi-sectoral and pluralistic development for the sector. The existing

co-operatives such as CAMPCO, MAMCO, TUMCOS, APSCOS, TCSS, TAPCMS etc. may

coordinate with FPOs for processing of arecanut, value addition, domestic market and

export orientation.

Small and marginal producers of arecanut in India have been vulnerable to risks up in the

value chain i.e. from production to marketing and ultimate to customers. Several arecanut-

led organizational prototypes are emerging to integrate into a dominant value chain with

the objectives of enhancing incomes and reduction in transaction costs. Programme

concludes the potential of FPOs/Co-ops as a collective institution to link with proposed

state-of-the-art-of ABIs, as a case analysis. The main challenge, however, is on the mode

of sharing capital cost for the formation of new ABI. Finally, programme discussed on the

implications of the proposed ABI to arecanut sector.

8.5 Sustainable Management of FPOs for Horticulture Business Management: A

programme focused on Sustainable Management of FPOs for Horticulture Business

Management has been scheduled between 21st and 22nd February 2018 for the benefit of

Horticulture FPOs.

66

A session on Consumer Driven Production

and Post-Harvest Handling for

Maintaining Quality and Demand

emphasised a need to develop a long

term plan & strategy with a minimum

period of 5 years and understand &

analyse situations or factors affecting

price fluctuations in the market. FPOs

should focus on ‘consumer-driven’

production rather than ‘market-driven’ production. FPOs need to consider agriculture as

agri-business, as the dimension of agriculture has changed tremendously as compared to

traditional agriculture. Farmers need to focus on what consumer wants; product to be

available at affordable price with proper packaging & labelling. FPOs need to maintain

quality of the produce, analyse export market and focus on demand chain management

backed with supply chain management. Focus is required on precision farming,

plasticulture, hydroponics, aquaponics, vegetable cultivation in sealed environment, bio-

technology application, robotics & Unmanned Aerial Vehicle (UAV), etc. Appropriate

infrastructure facilities (viz. transport, storage, warehouse, etc.) with support of

Government are required for smooth farming.

A discussion on operational &

sustainability of FPOs and it

needs within 4M perspectives

viz. Micro (M1), Meso (M2),

Macro (M3) and Mega (M4)

levels were analyzed. It was

emphasized that, more value

to be given at M1 level

(grassroots level) as selection

of homogenous group forms

the basis for developing a strong cluster, structure and network. Subsequently, Horticulture

Producers Cluster (HPClr) needs to be modified into Horticulture Producers Society (HPS) at

Horticulture Producers Society (HPS): Formation of 4M structure of FPO such as Micro, Meso, Macro and Mega framework shared with participants to facilitate scale of popular participation, production and marketing scenario. The concept of India’s Planters Business Management School (PBMS) based on the principles of FAO’s Farm Business School (FBS) is re-designed to strengthen the capacity of small horticulture growers by facilitating them to acquire the knowledge and skills needed to engage in commercialized, market-led and profitable horticultural farming. The author reviewed the existing programs of a similar nature viz., India’s Krishi Vigyan Kendra (KVK), Farmers Training Institutes (FTI), FAO’s Farm Business Schools (FBS) and other associated units through review of literatures. It is proposed to design a unique Horticulture Kisan Business School (HKBS) for Karnataka Horticulture growers to create a value from post-harvest to marketing until its branding to fetch price realization on continuous basis.

67

M2 level, followed by Horticulture Producers Federation (HPF) and finally Horticulture

Producers Company (HPC). To form all above four levels, one para-professional (facilitator)

would be required to take care of group problems at each level, as it takes more time to

form all four levels. A conceptual framework for designing horticulture based M1 to M4

organization is depicted in the following frame:

Figure 13: Horticulture FPO: Production to Profitability

8-10 OPFs jointly

H P Federation

HHPPGG 1100

HPS **

HPF *

M1 Entrepreneu

r

HPS ** HPS ** HPS **

HPS ** HPS ** M2

H P Federation H P Federation

• Export • Domestic • Horticulture Retail / Outlet • horNutraceuticals • Warehouse • Horticulture Tourism • Others a) Designer / Lifestyle

Horticulture

b) Horticulture Pharmaceutical

d)

• Govt. Agencies • Research • Extension • Promotion Councils

Association

Horticulture Producers Society

(HPS)

** IInntteerrnnaall FFaacciilliittaattoorr ((oorr)) GGrroouupp PPrroobblleemm ssoollvveerr

HPG – Horticulture Producers’ Group

HPF – Horticulture Producers ’Facilitator

HPS – Horticulture Producers’ Society (or

Cooperative)

120-150 from OPC

Private Company

KVK/ KBS

M4

Market-ing

HHPPGG

4400--110000 **

** HHPPGG **

112200

HHPPGG

8899 **

HH PPGG **

7755

HHPPGG 2200 ** HHPPGG

336600 **

HHPPGG ** 111100

HHPPGG

4455 ** HHPPGG **

7755

Entrepreneur HHPPGG 3355

HHPPGG

111100

HHPPGG 4400

Horticulture Producers/Community

(20,000 members)

M3

68

Farmers Business School (KBS) for the Benefit of FPOs: A concept of Farmers Business

School (FBS) was introduced for the benefit of horticulture producers as Kisan Business

School (KBS). The aim of KBS is to convert ‘green gold’ into ‘gold’ for the benefit of the

farmers. The role of FBS begins after production/post-harvesting with a focus on managerial

role for effective market potential. FBS also aims to build farmers knowledge & skills to

make their farms more profitable and the farmers learn about business in their own local

environment. FBS acts as a ‘forum’ that brings together a group of like-mind farmers

together to carry out collective and collaborative enquiry to address business and marketing

problems & opportunities. Unlike other training programmes, FBS focuses on content, not

on training facilities and the methodology is not lecture-based, but exchange of information

& knowledge among farmers gained through experience. It is necessary to upgrade

agriculture to agri-business by focusing on consumer driven market, market linkages,

positioning of products, value chain and business plan.

A session on branding and marketing of horticulture products was discussed to help in

realising better income for both buyer and seller with equal opportunities. FPOs need to

change their mind-set and market products according to consumer preference &

requirement (customer-driven) and create ‘difference’ in the market for their products with

supply of consistent quality products of consumer preference. Branding of products in turn

reduces price uncertainties, volatilities and ensures higher unit value benefitting to all

stakeholders across the value chain. With increasing level of hazards including pesticide

residues in fruits & vegetables, consumers are looking for branded products, in which they

trust and feel safe for consumption. A good brand name should be distinctive, appropriate,

easy to remember, adaptable to new products, appealing image, must be internationally

acceptable and most importantly should be registerable under Indian laws of trademarks

and copyrights. Even though, branding ensures better market, there are some reasons for

not branding fruits & vegetables, viz. cannot physically differentiate and they are perishable

in nature. In addition, responsibility for consistent supply of quality products and rigorous

promotion is required as the product is branded. Hence, branding creates an identity &

ensures better return and consistent market for sellers and consumers, branding helps in

easy identification of goods & services and product quality is trusted throughout.

69

A detailed session on banking, finance procedure & facilities followed by book keeping &

financial management, GST & E-way bill implications on agri-commodity transport and

organic farm certification (IFOAM, JAS, NOP, Euro Standard) including ICT applications

(NAM, Mobile Kisan, Digital Thread, Google Adwords) for FPO business, Innovative and

Value Added Technology in Fruits & Vegetables for horticulture business management were

discussed.

9. Policy Landscape

As mentioned earlier, several initiatives have been taken by the Government, the Apex

financial institutions such as NABARD, private donor organizations, financial institutions and

many other institutions to support the growth of the FPOs and facilitate their emergence as

successful business enterprises. Some of the notable ones are:

SFAC’s initiative, started in 2011-12 under two Central Government Schemes - the

National Vegetable Initiative for Urban Clusters (NVIUC) and the Integrated

Development of 600,000 pulses villages in rain-fed areas – has since expanded its scope,

and includes Special FPO projects being taken up by some State Governments under the

Rashtriya Krishi Vikas Yojana (RKVY) funds and the National Demonstration Projects

under the National Food Security Mission (NFSM). SFAC has been designated as a

central procurement agency to undertake price support operations under the Minimum

Support Price (MSP) programmes for pulses and oilseeds and it will operate only

through FPOs at the farm gate.

The Government has issued the National Policy and Process Guidelines for Farmer

Producer Organizations in March 2013, laying the framework for mobilization of FPOs

with a dedicated source of funding from the RKVY programmes.

It also launched the “Equity Grant and Credit Guarantee Fund Scheme” for FPOs in

January 2014, enabling the FPOs to access a grant up to INR 10.00 lakh to double

members’ equity and seek collateral-free loan up to INR 1.00 crore from banks, which

in turn can seek 85 percent cover from the Credit Guarantee Fund.

All major centrally sponsored schemes of the Department of Agriculture and

Cooperation (DAC) have incorporated special provisions for promotion and

development. The Union Budget, 2014-15 proposed to supplement NABARD’s

70

Producers Organization Development Fund with a sum of INR 200 crore which will be

utilized for building 2,000 FPOs across the country over the next two years.

Accordingly, NABARD launched its INR 2,000 crore Food Processing Fund in November

2014 where FPOs will be one of the recipients

In line with this, the Department of Agriculture and Cooperation announced 2014 as the

“Year of the Farmer Producer Organizations”. Till October 2014, SFAC organized 238,139

farmers into Farmer Interest Groups (FIGs), in turn, to federate into 218 registered FPOs

and 19 more are in the pipeline.

Table 5: Functions of FPOs across Agriculture Value Chain (AVC)

Source: Access Development, 2014

Foundation of FPOs only for Market Solutions is not enough

In places where FPOs have been able to enhance income of the farmers, the intervention

has involved across the value chain. In the absence of production end solutions, FPOs fall

short of its expectation. It tends to only serve as replacement of middle-man with a

relatively honest institution but misses the opportunity to incentivize sustainable agriculture

and utilize market instruments at demand end to promote sustainable agriculture practice.

Institutional Strength

1. Farmer members, who own the FPO, need not be managers of the FPO - A strong

institution is built with faith of farmer members instituted with involvement and

ownership of the institution along with balance of good management professionals as

staff, handling the business function of the FPO.

2. Faith in the initiating organization is the key ingredient to success of FPO - Trust in the

agency supporting FPOs usually drives the involvement and ownership in such institution

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3. Farmer members selling their total produce to the FPO indicates strong business. If the

Farmer Producer Company is seen as one of the many vendors/middlemen available in

the market to sell farmers’ produce, it has not capitalized on adding enough value to

incentivize the farmer member to sell his complete produce to the company. In such

cases, FPO is no more than additional middle-men. If the FPO is not able to support

the farmer member to earn better incomes than business-as-usual while managing its

environment; the mandate of FPO is not achieved.

Some recommendations with respect to formation, management and performance

parameters for the FPOs:

1. Financing FPOs – Advocacy with banks and financial institutions is needed to cater to the

credit needs of the FPOs. Interest rates offered by NABARD and other private banks in

the range of 11-15 per cent p.a. as a debt fund. Such interest rates for an FPO that is in

operation for only 0-5 years, is considered too high. There is a need to attract socially

responsible investment towards FPOs.

2. Fiscal Instruments – Tax rates as high as 30 per cent relaxations are unethical on an

organization mandated for enhancing small farmers’ income. The irony here is that if the

company shows lower income on the balance sheet, it indicates poor business

performance and makes it difficult to access credit from banks for operations.

Fiscal instruments should incentivize FPOs that demonstrate organic growth and

performance on identified parameters, by differential tax relaxations, interest rate

reductions, and mandate of public procurement.

3. Partnerships – Partnerships are needed at various levels; with technology partners for

access to new and appropriate choice of technology for production; with experts for

knowledge and support on agriculture production activity and climate and weather

related information; financial institutions for expanding the business; retailers and urban

market chains for identifying markets for produce; network of practitioners and fellow

FPOs for co-learning. Policy should create and nurture such networks for supporting

formation and sustainability of FPOs.

4. Skills and Capacities – Inadequacy of managerial skills to successfully operate FPOs in

their Governing Boards is common to most of the FPOs. The skill-set of most Governing

Boards of Producer Companies substantively lack in managerial, technical and business

72

competencies that are required for running a Farmer Producer Company. The huge skill

gap here is a major concern for long term sustainability of Producer Companies.

5. Performance Benchmarks – Performance of FPO by the funders, resource

organization& financial investors should be evaluated for efficiency and financial

sustainability.

6. Popular Participation to Promote FPO Member’s Centered Development – To

promote popular participation across all levels of FPO i.e. Micro, Meso, Macro and

Mega from production to marketing and until consumption, the decision making

processes should advocate the concept of Deep Democracy for joint decision making

towards sustainability both in the organization and the community as a whole. The

overall, concept of deep democracy facilitate FPO members to see through others’

frames and to recognize one’s own frame for effective decision making.

7. The Capacity Building Programme of IIPM-KAPC – Implies the policy maker to

consider a commodity specific development such as establishment of Arecanut Board

of India (ABI) to promote cooperative movement in Karnataka and promotion of

people-centered leadership role amongst commodity group viz., organic, coconut,

arecanut, and horticulture enterprise etc. to learn on participatory leadership through

establishment of a state-of-art of Karnataka Rural Leadership Program (KRLP) and to

set up an organic park as origin for the promotion and consumption of organic

products in Karnataka.

Various policies have been made to promote FPOs and collective approaches and the key

learning is that Foundation of FPOs only for market solutions is not enough; it has to be

involved across the value chain. The institutional strength of FPOs depends on farmers’

respective role as office bearers, faith in initiating organization and farmers selling their

entire produce to FPOs.

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Box 11: Advancing FPOs - Issues and Challenges

10. Summary and Conclusion

Farmers Producers Organizations (FPO) can help smallholder farmers participate in

emerging high-value markets, such as the export market and the unfolding modern retail

sector in India. As elsewhere in the developing world, in India, small farmers' livelihoods are

being threatened due to the liberalization and privatization of Indian agriculture and the

increasing interest of private capital in the agri-business sector. The withdrawal of the State

from productive and economic functions, and changes in the organization of marketing

channels, present new challenges for small and marginal farmers. In this environment of

Active participation of farmers and the ownership are the two key factors for sustainability and resilience of FPOs. This calls for a bottom-up approach like the Self Help Groups (SHGs) with Farmers Producer Groups (FPGs)/Farmers Interest Groups (FIGs) being robust with the active contribution at the grassroots in building the institutional framework of FPOs/FPCs. In other words, FPGs/FIGs shall be the foundation pillars rather than individual member farmer based approach. It has been recognized that calibrating the growth trajectory of FPCs/FPOs is quite a challenge. A gradual growth path with focus on marketing primary produce followed by a member driven supply and value chain participation of FPOs would facilitate orderly development of FPOs. Technology transfer is also very important to sustain the farmers’ interest in FPCs. Organizing technology based Primary Producer Groups (FPGs / FIGs) and converging them into FPC after a year or two as has been experienced by SKDRDP, Karnataka is worth emulating.

Meeting the credit needs of farmer members of FPC should precede financing the FPC itself and the financing bankers need to appreciate this, as satisfaction of members is paramount to sustain their interest in FPC. In this regard, the approach of Pallavan Grama Bank in extending credit to individual farmers of FPCs through specialized loan products and partnership with collateral management agencies deserve commendations. KCC (Kisan Credit Card) would be an appropriate loan product for individual farmer members for FPOs/FPCs. A package of KCC for farmer members and suitable credit lines for FPOs/FPCs is strongly recommended.

Interest subvention scheme applicable to farmers’ upto Rs.3 Lakhs may be extended to FPC also to the extent of eligible amount calculated on the basis of number of farmer members in the FPC. At State level all FPCs may be federated and the Apex Federation may have core central team to counsel the members on matters relating to finance, technology, procurement, marketing and legal. Inter FPC synergisation for mutual support and growth is very vital. For example, a seed grower company can look upon other FPCs for marketing their seeds. Capacity building of FPOs/FPCs is absolute pre-requisite on several matters – governance and compliance requirements, business planning, accounts and auditing, appropriate technology, connecting to markets etc. So also the other stakeholders including NGOs and bankers and the role of NABARD are paramount along with SFAC to build the requisite expertise for promoting and nurturing FPOs /FPCs. To augment the revenue generation for FPCs, a portion of seed marketing done by National Seed Corporation and State Seed Corporation may be earmarked for FPCs through Govt. regulations. Hence, FPO is the way to go for sustaining Small holder agriculture and more importantly make them resilient in the long run. There should be district level facilitation cum monitoring cell as part of Lead Bank and at the state level at SLBC to connect the FPOs /FPCs with the banking system.

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greater instability and competition, organization and collective action can help to enhance

farmers' competitiveness and increase their advantage in emerging market opportunities.

The success of FPOs, however, depends on farmers' commitment to the group, integrity and

quality of the leadership, its acceptance within the community, as well as the market

environment. It has to be economically beneficial for the participating farmers to market

their excess production through the FPO. At the same time, appropriate knowledge needs

to be provided to the FPOs/society/Federations/company to generate excess production

from within the community in order to maintain linkages to the target markets. NGOs and

other supporting agencies could play a crucial role in thus Setting up a successful FPO

model is a lengthy and demanding undertaking, which cannot be done on smallholders'

individual initiatives alone. FPOs have the advantage of flexible production methods, they

integrate local knowledge, are locally embedded, they are more sustainable with regard to

the environment and to the livelihoods of the people involved. In this way, they empower

small farmers while giving them the opportunity to deal with contemporary market actors

and to enter high-value markets within the Indian economy and abroad. Hence, FPOs in

agriculture should be actively promoted to aggregate farm land and achieve efficiency.

IIPMB in association with KAPC organized a State-level stakeholders’ participatory workshop

to identify commodity-specific felt needs for designing an appropriate Capacity Building

Programme on Group Approach to Agricultural Marketing in Karnataka. A network of

stakeholders’ had been involved as a knowledge partner of the programme viz., KAPC, GoK

and GoI Development Departments such as Department of Horticulture/Agriculture,

Agricultural Marketing, University of Agricultural Sciences (UAS-Bangalore & Bagalkot),

National Bank for Agriculture & Rural Development (NABARD), Karnataka State Seed

Organic Certification Agency (KSSOCA), Agricultural & processed Food Products Export

Development Authority (APEDA), Coconut Development Board (CDB), Central Food

Technological Research Institute (CFTRI), Central Plantation Crops Research Institute

(CPCRI), Indian Institute of Sciences (IISc), National Institute of Agricultural Marketing

(NIAM), Indian Institute of Horticulture Research (IIHR), Rashtriya E-Market Services,

Syndicate Bank, Indian Institute of packaging (IIP), NGOs and All India Initiatives for

Development Foundation (IDF), Areca Growers Association, CAMPCO, MAMCO, TUMCOs,

75

TSS etc. Based on the discussion during this workshop, it was identified to organize four

Capacity Building Programmes on – i) Organic Agriculture, ii) Coconut, iii) Arecanut and iv)

Horticulture Enterprise.

The organic producers’ cluster should focus beyond production and strengthen organic

business by improving quality, certification, tourism, nutraceutical and other associated

services. In this regard, organic collectivization needs to emphasize on strengthening the

producers’ cluster and its capacity building through organic (local action capability)

leadership. The major role of cluster group should be to ensure sustainability of the sector

and not on perpetuation of external support. Even if the meso-level organizations are not

fully matured, phasing out is not prudent. Rather, support could be provided to them during

their operational period. Importantly, even the most developed organizations need to work

consistently on the process of capacity building of its members and effectiveness of the

system. The most important factors which influence the sustainability of organic producers’

society include – i) personal capacity building of cluster leaders (skill in public speaking,

instinct motivation, identification of community issues, interagency co-ordination), ii)

popular participation and co-operation (ability to co-operate well with members), iii)

commitment for innovativeness, skills related to fund raising and grassroots development

process, iv) level of education, and v) professional contacts for mobilizing inter

organizational activities.

The organic producers of Karnataka, as part of capacity building programme were given an

opportunity to design structural and functional dimensions of building organic cluster to

meet both production and scale of marketing requirements. The producers group

(participants) was divided into three groups to work-out the modalities of framing a

sustainable organic park, organic producers’ society (M4 perspective) and Karnataka Rural

Leadership (KRLP) based on their intuition and knowledge gained from the programme. The

participants had a detailed discussion, dialogue and discourse (3D) as part of group work

and framed the following modules for sustainability of organic farming in Karnataka.

The leadership framework of FPO in Coconut sector was discussed within M4 perspective.

M1 denotes ‘micro level’, wherein coconut producers cluster, workforce & local

organization come together to form an FPO at grassroots level; M2 denotes ‘meso level’, in

76

which a group of local FPOs come together to form a coconut producers society or

cooperative; M3 represents ‘macro level’, wherein a group of coconut producers society

come together to form a federation; and M4 denotes ‘level of mega’, to form a company for

marketing. A CEO of an FPO organization should adopt diversified leadership style in order

to focus from suppliers to end customers. It was concluded that an effective leader is the

one who understands & assesses the members not based on face value or outer appearance

but with inner strengths &aptitude of the members. Therefore, when an FPO organization is

formed, it is important to select like-minded group of people at the beginning of formation

of M1 level.

Different types of Rural Leadership Programmes already exist around the globe, viz.

Wisconsin Rural Leadership Programme in Madison, WI (USA), Australian Rural Leadership

Programme (ARLP) in Australia, Kellogg Rural Leadership Programme (KRLP) in New Zealand,

Texas Rural Leadership Programme (TRLP), USA, African Leadership Initiatives Programme

(ALIP), etc. However, such programmes do not exist in India, especially in the commodity

sector. There is a need to initiate programmes like Karnataka Rural Leadership Programme

(KRLP). Objectives of KRLP could be; i) gaining new perspective on major issues faced by

Indian society, ii) better understanding of economic, political, cultural, and social structure

within local, state, regional, national, and global context, iii) knowing how to develop

sectoral and multi-dimensional community development task.

In case of coconut, farmers get price for selling a coconut and not for its by-products viz.

coconut oil, value added coconut water in tetra-packs, coconut sweets, coconut cake,

coconut milk, neera, coconut carpets, coconut wood products, desiccated sugar, flower

syrup, coir, virgin oil, coconut sugar etc. Integrated coconut market approach is a must for

coconut industry. In addition, innovation is important to expand the market, for example,

using cocono-oleoceuticals (good molecules from oil) as capsules like omega 3 or omega 6 in

fish. Value addition through virgin coconut oil and growing opportunities for coco-ceuticals

or coco park facilities are the other two important aspects that could be emphasized.

Establishment of Arecanut Board of India (ABI) has been proposed. Board’s funding may be

shared by State and Centre. CAMPCOs President, Vice Presidents and traders of cooperative

77

society could serve as the advisory members of Arecanut Board. Deliberations also focused

on formation and other related modalities of the proposed Arecanut Board. Arecanut being

an international commodity can achieve excellence within 5 to 10 years in promotion of its

value added products globally, as a policy body. It may also create a niche market both at

domestic and global level. It may ensure strategic promotion of Indian origin arecanut

through branding.

The major objectives of proposed ABI could be advising the government on policy matters

such as fixing quotas for exports and entering into trade agreements with other countries. In

addition, it may undertake promotional activities, trade fairs and market survey to focus on

features of future requirement of areca products across the globe. In the context of

research and development, a major focus on improvement of quality, pharmaceutical

development, global quality standards etc., with a limited resource allocations to be

provided to the existing Central and State research institutes and organizations (CPCRI,

Directorate of Arecanut Board, IIP etc., located in the country. Besides, the major role of

board would be to also facilitate the formation of FPOs, society, Co-operatives, companies,

Areca-business Clinic for location specific problem solving.

Consumer driven production and Post-Harvest Handling for maintaining quality needs to be

focused for Sustainable Management of Horticulture Business. This would require

developing a long term plan & strategy with a minimum period of 5 years and analysing

factors affecting price fluctuations in the market. FPOs should focus on ‘consumer-driven’

production rather than ‘market-driven’ production. FPOs need to consider agriculture as

agri-business, as the dimension of agriculture has changed tremendously as compared to

traditional agriculture. Farmers need to focus on what consumer wants; product to be

available at affordable price with proper packaging & labelling. FPOs need to maintain

quality of the produce, analyse export market and focus on demand chain management

backed with supply chain management. Focus is required on precision farming, plasti-

culture, hydroponics, aquaponics, vegetable cultivation in sealed environment, bio-

technology application, robotics & unmanned aerial vehicle (UAV), etc. Also, appropriate

infrastructure facilities (viz. transport, storage, warehouse, etc.) with support of

Government are required for smooth farming.

78

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