NAFPO State of FPO

The book is anchored by Dr Gouri Krishna who was former CEO and MD of BASIX Consulting and Technology Services Ltd. and has experience of working with Co-operatives, Self Help Groups, and Farmer Producer Organisations.

Published Summer 2022

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Some interesting excerpts

From Chapter 1 “Journey of FPOs: Understanding Typology and Evolution – An Overview” by MS Sriram (Faculty member, Centre for Public Policy, Indian Institute of Management Bangalore. Email: mssriram@pm.me)

“The other aspect is about the nature of engagement with the organisation and its impact on the sense of ownership. Unlike capital- centric organisations, where there is some element of equity capital invested which can provide the glue to monitor and worry about the fate of the enterprise, in the case of collectives, the engagement with the enterprise is by definition transactional. The enterprise is structured to benefit people who transact more through a better price or bonus. Loyalty and stickiness to an organisation can develop only when these transactions are regular and repeated (as in dairy co-operatives). There is a good scope for members to exhibit strategic behaviour where they may continue membership but do an occasional transaction outside of the collective because it turns out to be lucrative. In such a situation, the collective will have to devise incentive systems that reward the stickiness of transactions. Given the nature of engagement, apart from time, there also has to be an inclination to get into the governance of the organisation. Invariably, we find that in very good collectives it is the manager who devises the rules of engagements that keep the members loyal. It is a peculiar conundrum where the employee of a set-up finds that it is in her long-term employment interests to safeguard the interest of the members rather than the member-owners. The engagement of the employee is much more relationship-based and sticky than the members’ transactional relationship.”

From Chapter 2 “Farmer Producer Organisations” by Anish Kumar and Aneesha Bali (NAFPO) and some intel from Chapter 4 “Ecosystem Development: Strengthening of FPOs”

Total budget allocation for promoting 10,000 FPOs over 9 years (2019/20 to 2027/28) is 6,624 crore INR or ~$828mn. It breaks down to the following:

1. FPO Formation and Incubation incl CBBO costs (38%): Rs 2.5 million/ FPO for 5 years.

2. FPO Management Cost (27%): Rs 1.8 million/ FPO for 3 years. “This covers the salary of the CEO and registration FPO office establishment cost.”

3. Equity grants (23%): Rs 1.5 million/FPO: “matching equity grant up to Rs 2,000 per farmer member of FPO, with a limit of Rs 1.50 million per FPO. Equity Grant is aimed at strengthening the financial base of the FPO, enabling it to get credit from financial institutions.”

4. Credit Guarantee Fund (11%): up to Rs 20 million project loans per FPO from the eligible lending institution to ensure institutional credit accessibility to FPOs.

5. Monitoring and data management/MIS Portal (less than 1%)

6. Capacity Building through Specialized Training institutes (less than 0.5%). Institutions like Bankers Institute of Rural Development (BIRD), Lucknow and Laxmanrao Inamdar National Academy for Co-operative Research & Development (LINAC), Gurugram have been chosen as the lead training institutes for capacity development and training of FPOs. Training and skill development modules have been developed to further strengthen the FPOs.

   1. See p. 88 to 96 for a list of existing capacity building programs

So far, Rs 2,491 million INR or ~$31mn has been released to all IAs (as of summer 2022)

From Chapter 3 “Typology of FPOs: Mapping the Evolutionary Journey”

1. Promoted under programmes/schemes of the government: SFAC, NABARD, NRLM/MKSP, ODOP (the 10k FPO initiative announced May 2020 fits under here)

2. Promoted by organisations with sector focused competencies: NSPDT (Poultry), NDS (Dairy), Spices Board, Coconut Development Board,

3. Promoted by NGOs, social enterprises: PRADAN, Srijan, etc.

4. Promoted by corporates: Reliance Foundation, Ambuja Cement

5. Promoted by philanthropic organisations: Deshpande, Mann Deshi, Harsha Trust, etc.

6. Promoted by farmers: Sahyadri, IOFPCL in Kerala (2500 primary producers, organic and Fairtrade certified)

From Chapter 4 “Ecosystem Development: Strengthening of FPOs”

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The following are the broad types of credit requirements:

1. Finance for input purchase and supply to members and non- members, typically on a cash and carry basis; could range from 30 to 60 days.

2. Trade finance for fulfilling buyer orders for produce by paying farmer suppliers upfront and receiving payment from the buyer in due course; a cycle that could vary from a week to 60 to 90 days.

3. On-lending to FPO members by borrowing from higher-level agencies and being a pass-through institution.

4. Borrowing for establishing infrastructure and asset financing which could be as simple as a small transport van to an integrated processing facility; requires a term loan.

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