Producer Groups - Practical Experiences

"I learned very early the difference between knowing the name of something and knowing something."- Richard Feynman; That is why, despite knowing the theoretical concepts on the Producer Groups, there were some practical lessons gained in the field. I had worked with Producer Groups farming Groundnut, Onion, & Pulses (even one group was doing business of NTFP) at Balanagir district, Odisha. I was guided under the able supervision of Kamalendu Paul, Zonal Manager, ORMAS (Orissa Rural Development and Marketing Society). The document Community Enterprise System Manual prepared by Prof. Amar KJR Nayak came helpful during work.

All producer groups were having women members only. No producer group has been registered under any act till now. However, credit was given to them based on mutual trust between the government and Producer Groups. The legal process will be initiated soon. We were also unable to do protect farmers under the crop insurance scheme till this year. Organizing the unorganized was already done by Paul Sir before I arrived at the district. Without the help of local persons, this was not possible. The sign of government (even its vehicle) is a sign of trust in rural areas. That fast-paced our work even by Indian standards in establishing trust with the community. Our companies have usually dumped their substandard products and Chit Fund company had run away with the money of rural people. This historical tendency of companies has made business in rural areas difficult.

 

Practical Experiences:

1) 40-60 is the optimal size of the group. It is necessary for cohesion within and management of the group. Since they are small-scale, it is generally preferred that they are not much dispersed. There is an executive committee and further sub-committees in the Producer group. But, most of the members don't know the power, roles, and responsibilities of this committee. Since NRLM is a new scheme, we have to remind each time about the objective and scope of the mission to the members.

2) Producer groups were more successful in the remote areas of the district. The sense of cooperation is more seen in these regions in comparison to the relatively rich parts of the district. It is a small sample for me to draw conclusions but the poor are more honest and cooperative in nature.

3) For any business, 'budget' is the ultimate tool with which to monitor and keep an eye on the business. The lack of education becomes a major hindrance in the preparation of the annual action plans and budgets. It was easy to make them understand procurement procedures (like inviting more than one quotation) and the necessity of documentation. Since most of the women are part of SHG, they have a basic idea about documenting the meetings and cash book.

4) LSP (Livelihood Support Person) is appointed for their help in marketing linkages and proper documentation. Producer Group is more considered for a good price while the government is more strict on documentation part. An honorarium of LSP is merely 2000 -3000 rs currently. That may appear low but as per my opinion, is sufficient if billed on RS 50 per hour of interaction. Work of LSP is maximum during the post-harvesting season.

5) I have attained lectures, read articles, and even studies courses on leadership. Cooperative Leadership is not just about good communication skills, democracy – it's about sound decision-making by utilizing the capacity of the group. A producer group like any other group is leader-oriented. The trivia is that an exterior person like LSP should enable but should never drive the Producer Group strategy. Since I have been working with women producers and male LSP, this scenario may occur in the future. A leader should be groomed inside the group. Even on the proxy of gender diversity, there was only a single woman among all appointed LSPs.

6) Another difficulty that the producer group or cooperative societies encounter relates to storage facilities. Most of the surplus produce in an area is assembled and sold at the mandi. Infrastructure support is a must for the producer group. Most of the farmers even if organized for the production purpose are reluctant to store for a long time to meet their immediate consumptive need. A low-cost storage facility for multipurpose use at each GP/ village for each producer group is a good solution to the problem. It may appear cheap and effective under Panchayat but the chances of either personal usage by PRI members or no maintenance are more in it.

7) The transport arrangement to market a small volume of produce is not facilitating and rural transport cost is much higher than the urban transport cost. Hence, by combining the total produce, we were able to bring businessmen to the doorstep of farmers.

8) Line departments like Agriculture Department and its extension services support have been minimal till now. Convergence is always missing in between government departments! We are hoping for their help during the training session of producers. The fund supplied for training purposes by the government will be used in the future. The caveat of guidelines in utilizing training funds: Only half of the group will get the training. A sure way of creating a rift between members. It is better to spend less on training per member but to impart training to everyone in the group.

9) There was not much inclusion of banks till now. Without any corpus fund provided as a grant, it was difficult for a bank to provide the loan amount. And, Banks heavily discourage and delay SHG/PG  members making transactions to the respective branches. That is a big issue with multiple perspectives to be debated later.

10) Agri Produce Market is not very quality conscious, but price-sensitive to a certain extent. The credit supplied to PG is used for holding the collective produce for one or two months. In the meantime, there is a definite rise in the prices of produce. We have experience of selling Pulses for a profit of more than Rs 10 per kg by holding the stick for a period of one month.

Failure of Cooperative societies should never be forgotten in the Indian context while pitching support for such groups. Cooperative societies were not harmed much by politics but by the interference of the bureaucracy. Lack of serious attention to value-added agriculture and rural MSMEs is a big task to be handled in the future. How do we make agriculture sustainable and economically viable? That is the big question.

Initiative Taken:

Previously, only office bearers and LSP words were taken for granted in meeting at district-level meetings. Producer Group registers were the only way of checking regular meetings and updates during field visits. I have collected the maximum available mobile phone numbers of members. Hence, I can actually monitor live, whether PG meeting is happening or not from district headquarter through random calls to any member.

- A DPR (Detailed Project Report)was approved by OLM (Odisha Livelihood Mission) last year. There was no provision of a baseline survey. I tried to capture data about household socio-economic conditions so that impact assessment can be made in the coming years.

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 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.