Tuesday, January 13, 2015

FPO: Public Policy & Value Chain Development

A basic concept can be read here:2014 - Year of Farmer Producer Organizations (FPOs) before going further ahead in this topic.

Public Policy: There is always so much talk on FDI in retail, so it seems good state channel the same money for farmers’ producers’ cooperatives and ensure they get good margins and market access. Government of India (GoI) already invest Rs 275,000 crore on agricultural subsidy budget that is constantly touted needs to be unpacked. Who is the real beneficiary of these subsidies, farmers, or seeds’, fertilizer’ manufacturers and agricultural banks ? That is where a good public policy comes into the play.

Government of India (GoI) is promoting concept of Farmer Producer Organizations going in a right step to engage and adapt agriculture to market system. The primary objective of collective mobilization of farmers into FPOs, is to enhance production, productivity and profitability of especially small farmers in the country. FPO will be positioned as a gateway agency between the farmers and markets. The complete Policy and Process Guidelines for Farmer Producer Organizations; is a good framework. FPO policy will give auxiliary advantages like women’s empowerment.

Policy guidelines are the first step but we need awareness on this novel concept among a diverse range of stakeholders: the farming community, State Governments, Banks and other financial institutions, Civil society organizations, the media and elected representatives of the people. Policies that impede the growth of FPOs, such as APMC laws, tenancy provisions, cold storage, etc. must be amended with changing times.

Value Chain Development : With the below diagram, we see that how Value Chain is different from Supply Chain.


 Value chain development interventions focus on improving business operations and relationship (even contractual) at the level of primary producers, processors and other actors in the chain. Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce comes under the scope of value chain. It can also include preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members.

Value chain analysis starts with mapping the volume of products, number of people engaged in, geographical flow of products, value at different levels of value chains, The supply and demand side of business can be understood with the result of analysis only. Only then, we can start with the business planning of the enterprise. All the members of FPO are primarily farmers only but we need to build their capacities on trading, accounting and hoarding practices over time. Farmer Producer Organizations can only result in more sustainable and better-performing business plans when farmers has good understanding of a value chain systems.

FPOs are nee steps towards organization having higher financial autonomy and lesser government subsidy. Possibly the biggest failure of GoI is the promotion and formation of good organization in agriculture sector. Let us look for the big question in the livelihood sector: Is a full-fledged value chain development project through FPO is the best way to bring about development ?If not, then what is an alternate !

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