Friday, November 29, 2013

Producer Groups - Theoretical Concept

"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 modern outlook of business education is to view a rural/urban citizen as target consumers. Instead, if we enable them as producers, that will surely boost economy and well being of our producers. Most of the producers are caught in the vicious circle of poverty and even fully dependent on monsoon for good harvest. Government has reworked on its strategy of helping marginal and small producers in breaking out of the cycle of poverty by organizing them into producer group. Concept of Producer Group has been lifted from the cooperative societies. This concept is based on voluntary cooperation as rural ecosystem has limited resources and infrastructure.

Why Producer Group?The main aim of producer group is to stop the practice of ‘distress selling’ . I will give three reasons for pitching of Producer Groups. 1) Creditworthiness is directly related to income, farm size, age of farmers, and level of formal education of farmers. Hence, marginal farmer is always caught with lack of credit. 2) Marginal farmers as rural producers always suffer from imbalance of bargaining power in market transactions. 3) Small farmers always dispose off their produce at the nearest mandi at a through-away price. 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 group should be formed preferably at village level or at GP level for tribal areas where size of village is very small. Producers Group may be registered under the Self Help Cooperative Act, 2001 of Government of Odisha (Depending on state) or The Companies Act of India in future. As per new NRLM guidelines, minimum 50% of the total members should be from 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 asset like Mattress, Chairs, Lock, Box and Weighing Machine. There will be engagement of professional resource person called as 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 government for initial two years depending on the honorarium decided by Producer group. There is provision of financial (Loan for working capital @7 % & Grant for capacity building through training) for producer group.

Generally, Indian farmers have highly unorganized and individual approach for cultivation. Organizing the unorganized through mobilizing whole community is the most time taking part of the formation of Producer Group. The first step with in business planning is to identify the business opportunity. This is decided by members Producer group itself only. Ensuring regular meetings and interaction from government official is a way to sustain producer group. With enhanced collective bargaining power, Producer groups are obtaining good price 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.

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