They can prove a vital interface between the farmers and markets and might help in reducing the dependence on MSP.
Why FPCs?
Effective price realisation has eluded India’s farmers for long, despite increasing production levels and massive outputs (275 million tonnes in 2017).
This indicates that the fault might lies not in our production output, but our market ecosystem, which is highly regulated.
The recent re-jig for doubling farmers’ income has thrown light on the importance of sound market institutions for agriculture.
Institutionalisation - In this context, Farmer Producer Companies (FPC), a relatively new institutional architecture is gaining traction.
These are institutions that are both farmer-led and farmer owned and is fast becoming an effective interface between farmers and markets.
Many FPCs have been created under the Companies Act of 2002, and this has led to the mobilisation of over 2 million farmers under the umbrella.
Presently, over 3,000 FPCs have been registered and are supported by agencies like NABARD, Small Farmers Agribusiness Consortium (SFAC).
Many other resource institutions also support the initiatives to organise farmers arrange themselves into this new co-operative order.
What is the modus operandi of FPCs?
The foremost requirement to set up a FPC is having a compelling business model, a process that is organically driven by local leadership from farmers.
FPCs are ‘for-profit’ enterprises fully owned by farmers, and they have successfully experimented with institutional and market led innovations.
They’ve also demonstrated a positive impact on price realisation, cost saving, and local employment and are of great support to small farmers.
Such institutions will help in facilitating farmers to own, greater parts of the agricultural value chain rather than just their farm produce.
These organisations are hence a crossover between market and a social function, and the collective is ultimately fairly independent of the state.
However, challenges in tackling forward markets and access to credit have been serious challenges for budding FPCs.
Nonetheless, many FPCs have been trading measurable quantities for hedging, which are contributing to 15-20% higher prices owing to lesser uncertainty.
What are the key structural aspects of FPCs?
Despite its effectiveness FPCs are not an alternative to APMC due to their limited reach and scale.
Clearly, these institutions demand a specific kind of incubation support that facilitates collective businesses.
The nature of state support for viable FPCs is being deliberated on multiple forum — access to capital, organisational governance, and technical training.
While support from public corpuses is enough for starting an FPC, their long-term competitiveness depends on their ability to raise capital from markets.
Provisions for limited shares (up to 24%) to private entities will give FPCs access to private capital without compromising on collective ownership.
Further, these firms can integrate into the post-harvest segments of the value chain, and gain favourable economies of scale.
While the start-up culture is presently an urban phenomenon, through FPCs start-ups will move rural and help the village level entrepreneurial landscape.
How does the future look?
FPCs as decentralised ventures can nucleate creation of new jobs at the intersection of agriculture and industry.
Such connectors for ‘agro-industrialisation’ counter the problem of local unemployment, at least in part.
Policy discourses around FPCs need to move away from being mere sub-sets of the existing Cooperative Societies and take up more comprehensive forms.
