A study of Farmer Producer Organisations in Bihar show mixed results — some successes but several challenges too
The government has this lofty goal of doubling farmers’ income by 2022. Among the different instruments to achieve this goal, promotion of new and scaling up of existing Farmer Producer Organisations (FPOs) have been given focus.
Given the extremely small landholdings, FPOs, through collectivisation, which leads to economies of scale, are supposed to address the problems and improve the bargaining power of farmers through backward (inputs) and forward linkages (marketing to processors and retailers).
However, numerous questions arise about the delivery on the promises made by FPOs. Have FPOs been successful in reducing input costs and bridging the gap between farm and market prices — a marker of farmers’ bargaining power? Have they been successful in providing more markets and eased credit constraints of group members? These questions beg answers based on data and sound empirical analysis.
Bihar study
To address these questions, the International Food Policy Research Institute (IFPRI) implemented a study of FPOs in Bihar, a State with many smallholders with limited market access. The results show some success but also several challenges.
The farmers seem to have tasted some success in getting information on crops and technology, inputs (seeds, fertilisers and pesticides) at cheaper rates, higher price for their produce, and linking with new markets.
Seventy per cent of the farmers reported getting information about crops, technologies, and inputs (mainly seeds). The figures on the side of reduced input costs are modest (16 per cent farmers reporting decreased input cost while 44 per cent farmers report no change). Approximately, 47 per cent farmers believe their gross income went up but, importantly, an equal percentage report no change in income.
Further, FPOs seem to falter in terms of risk mitigation. Sixty-five per cent FPO farmers rate sudden collapse in market price as their biggest fear.
One of the biggest challenges for FPOs is ineptness in accessing capital (mere 3 per cent farmers reported improved credit access post-membership), notwithstanding the move by some FPOs to convert into Farmer Producer Companies (FPCs), subjecting themselves to the Companies Act with all its formalities and associated costs.
One of the prime motives behind formation of FPO or FPC is to provide capital access. Around 59 per cent FPO farmers reported status quo in access to capital.
The other challenges are lack of proper monitoring, no or incomplete record of farmer members, no penalties for wrongdoers, no incentives for good performance, and other problems like free-riding.
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