"Where the poor participate as subjects and not as objects of the development process, it is possible to generate growth, human development, and equity, not as mutually exclusive trade-offs but as complementary elements in the same process." --- Meeting the challenge, Report of the Independent South Asian Commission on Poverty Alleviation, 1992.
The problem with the modern outlook of business education is to view rural/urban citizens as target consumers. Instead, if we enable them as producers, that will surely boost the economy and well-being of our producers. Most of the producers are caught in the vicious circle of poverty and even fully dependent on the monsoon for a good harvest. The government has reworked its strategy of helping marginal and small producers in breaking out of the cycle of poverty by organizing them into producer groups. The concept of Producer Group has been lifted from the cooperative societies. This concept is based on voluntary cooperation as the rural ecosystem has limited resources and infrastructure.
Why Producer Group? The main aim of the producer group is to stop the practice of ‘distress selling’. I will give three reasons for pitching Producer Groups. 1) Creditworthiness is directly related to income, farm size, age of farmers, and level of formal education of farmers. Hence, the marginal farmer is always caught with a lack of credit. 2) Marginal farmers as rural producers always suffer from an imbalance of bargaining power in market transactions. 3) Small farmers always dispose their produce at the nearest mandi at a through-away price. The size of the market for agri-related commodities is always good but highly price volatile in India. I have written more on this topic: Market Failure and Primary Producers.
A producer Group generally consists of 30 to 150 producers [depending upon nature of the Livelihood Activity] involved in a common activity. Producers groups should be formed preferably at the village level or at the GP level for tribal areas where the size of the village is very small. Producers Group may be registered under the Self Help Cooperative Act, 2001 of the Government of Odisha (Depending on the state) or The Companies Act of India in the future. As per new NRLM guidelines, a minimum of 50% of the total members should be from the BPL category. That is a good strategy for poor and vulnerable households.
There will be service charges taken from the members for purchase and maintenance of common assets like mattresses, Chairs, Lock, Box and Weighing machines. There will be the engagement of a professional resource person called LSP (Livelihood Support Person). LSP will help them in procurement, processing, value addition, and market linkages. However, the cost of LSP will be borne by the government for initial two years depending on the honorarium decided by the Producer group. There is a provision of financial (Loan for working capital @7 % & Grant for capacity building through training) for producer group.
Generally, Indian farmers have a highly unorganized and individual approach to cultivation. Organizing the unorganized through mobilizing the whole community is the most time taking part of the formation of the Producer Group. The first step within business planning is to identify the business opportunity. This is decided by members Producer group itself only. Ensuring regular meetings and interaction from a government official is a way to sustain the producer group. With enhanced collective bargaining power, Producer groups are obtaining good prices for their produce in the market. Still, there are many practical difficulties in the whole approach. That will be taken later in a new blog post.
