FARMER ORGANIZATIONS WITH ITS BUSINESS AS USUAL MAY NOT BE THE MAGIC SOLUTION TO COVID-19 RECOVERY

BY RUCHIRA BOSS, MAMATA PRADHAN AND DEVESH ROY

Farmer Producer Organizations (FPOs) are important rural institutions in India. The government has affirmed that they can play an important role in linking farmers with agri-food markets during COVID-19 lockdown. Ruchira Boss, Devesh Roy and Mamata Pradhan explore the new opportunities for FPOs and argue that the FPOs need to be revamped to realize their potentials.  Given the pandemic frame of reference, FPOs must adapt to the new situation and pay more attention to attributes like product differentiations and food safety. Shahidur Rashid, series co-editor and Director, International Food Policy Research Institute, South Asia
 

Prayagra, Uttar Pradesh: Farmers harvest wheat crop in the field during a nationwide lockdown to contain COVID 19. Shutterstock/Prabhat Kumar Verma

Introduction

India is on a 40-day lockdown till May 3 to contain the spread of COVID-19. Though agriculture sector is probably the least affected by the COVID-19 pandemic in terms of production, markets have been inordinately affected, particularly for perishables such as fruits, vegetables and animal source food like dairy. Several markets were on a complete lockdown, especially in the initial weeks, including hefty movement restrictions across state borders. These large-scale supply chain disruptions, leading to fickleness in prices and problems of farmers in accessing inputs like seeds, fertilizers, pesticides and technical inputs through extension services, could put the incomes and livelihoods of small farmers at risk. Some of these issues are not novel in what most smallholders in India experience regularly, but the problems are more intense during COVID-19.

Yet, the nature of this pandemic is such that it offers new opportunities for growth in agriculture where small farmers and Farmer Producer Organizations/Companies (FPOs/FPCs) play an important role in supporting the food systems in the country. However, the origination and functioning of FPOs must adapt to the pandemic, utilize the openings in the food sector to benefit from delivering on safety and health, and get organized with greater working capital.

In this post, we assess the role of FPOs from that perspective, i.e., in benefiting from the opportunities spawned by COVID-19 and being able to play a part in recovery. Our main argument is that given the history and organizational structure of FPOs, fundamental changes are needed, and business as usual for FPOs will undermine their ability to benefit from the situation. FPOs need to function differently from the long-standing norms where they have not been delivering on attributes like safety, health and other forms of product differentiation. Branding and accessing the market, based on health and safety attributes and adoption of management and marketing practices, have not existed in the scheme of things. Awareness and implementation of health practices and delivering on non-price attributes will be required. The lockdown and resultant supply chain disruptions offer entry points to introspect on issues faced by FPOs that can aid them in realizing their unachieved goals of creating value and enhancing distribution that favor farmers. The changes that we advocate now could have durable implications for FPOs, even after COVID-19 subsides.

The strength of collectivization: FPOs in India

FPOs have traditionally been formed to reap scale economies for small farmers. Yet, beyond scale economies, there are factors related to value creation and idiosyncrasies related to COVID 19 that would matter for the outcomes. Collectivization has every bit been conceived as an institutional solution for improving the lot of small farmers for over a few decades now, and these current times of COVID-19 is no different. Indeed, in responding to COVID 19, government is trying to leverage FPOs toward restoring supply chains and ensuring livelihood security. The credence of an FPO is reflected in Prof. M. S. Swaminathan’s remarks regarding agri-policies for COVID 19, “there is a need for farmers to get together and work collectively, in whatever institutional form, whether cooperatives or farmer companies, to realize the benefits of scale. Farmers organizations are key, whether for community harvesting, storage, marketing, or processing.” There are at least 5,000 FPCs registered in India under Small Farmers’ Agribusiness Consortium (SFAC), National Bank for Agriculture and Rural Development (NABARD), and state government projects.

2014 was declared as the year of FPOs, and there have been rigorous attempts since then to establish more FPOs and expand their latitude. Currently, there are about 7,374 FPOs in the country and in the last budget, a target of forming an additional 10,000 FPOs by 2024 was set, admittedly with less clarity on funds and policy design.

The pandemic frame of reference for FPOs

While using FPOs to address supply chain disruptions makes sense, IFPRI research shows that because of failure to provide attributes like quality, safety and innovations in delivery, the outcomes have been subpar. With FPOs championing the delivery of food during this time, it is important to emphasize on food safety and health, which have not really been the eminency of FPOs in India till now. This seems to be lacking in the blueprint of government for FPO engagements as well. Delivering on safety and health is germane to the context of COVID-19, and failing to meet the requisite safety measures may end up creating more cases of disease amplifiers. Cases in wholesale markets and among food delivery agents emphasize the importance of capacity building for biosecurity. With the right approach in place, FPOs can be the bastion of disease management and conveyance for delivering messages to the rural population.

FPOs as drivers of benefits from improved terms of trade

Due to the relative constraints across sectors, terms of trade (TOT) are likely to move in favor of agriculture during COVID-19. The movement of TOT in favor of agriculture can significantly impact technology adoption and investment (Fan and Hazell 2000). FPOs should seize this opportunity to adopt high-end technologies and practices that have shown to be positively impacted by TOT. IFPRI research shows that most FPOs in India have dealt with basic technologies; high-end technologies and marketing practices have not been embraced, thereby not making significant difference in farmer outcomes.

 Foresights for FPOs: Supply chain innovations for differentiation

During COVID-19, the central government and various state governments have proposed alternate marketing channels that focus on direct-to-home delivery of essential products. This opened opportunities for supply chain innovations that can benefit farmers. Maharashtra, Tamil Nadu and Haryana have taken the lead; governments have promoted FPCs to work as collection centers to directly sell to consumers. About 125 FPCs in Haryana have been registered on the e-NAM portal for online trading of horticultural items. In Tamil Nadu, 100 FPCs (0.23 million farmers) have registered on the National Commodity & Derivatives Exchange (NCDEX) trading platform. The state of Maharashtra, with many robust FPCs, is promoting the sale of customized packets of vegetables directly to consumers.

Notably, many FPCs have voluntarily come together to aggregate produce and supply fruits, vegetables and other essential commodities to the consumers. FPCs in Nilgiris are conducting online sales by collaborating with the delivery app, Zomato. These innovations in delivery bring forth much needed product differentiation for value creation. However, the question that remains is whether these experiments can be at scale. Can most FPCs in the country deliver is the pertinent question?

Some of the problems in FPO are, at least, partly attributable to the policy-induced distortions. Time bound financial support from government that is not linked with performance has often led to the emergence of several FPCs that last for short periods coinciding with the funding cycle. Further, emphasis on numbers, i.e., the number of farmers as members and the number of FPOs itself, is antithetical to FPOs delivering on safety and health. However, to deliver on quality and attributes like safety and health, FPOs require smaller group sizes with monitoring to avoid failures that can be costly.

Is there a blueprint for FPOs to respond to COVID-19?

We do acknowledge that FPOs have an edge over other collectives in handling market challenges such as aggregation and better price discovery, but in times of COVID-19, it is of paramount importance that they adopt to and acquire the quality and safety attributes. FPOs need to ensure non-price attributes like safety, biosecurity, and consumer trust that will transfer higher value to farmers. It is crucial to explore what skills FPOs have in dealing with a crisis such as this, and how can they build their capacity to tackle the outbreak effectively. More so, because in a pandemic like COVID-19, any small deviation from best practices can have irreversible compound effects.

Devesh Roy is a Senior Research Fellow with the CGIAR Research Program on Agriculture for Nutrition and Health (A4NH). Ruchira Boss is a Research Analyst for A4NH. Mamata Pradhan is a Research Collaborator with IFPRI. The analysis and opinions expressed in this piece are solely those of the authors.

This blog has been published as a part of the International Food Policy Research Institute (IFPRI), South Asia, blog series on analyzing the impacts of the COVID-19’s pandemic on the sub-national, national, and regional food and nutrition security, poverty, and development. To read the complete blog series click here