Grouping of farmers is necessary to organize them, reduce transaction costs and enable members to share information and make collective decisions
Agricultural and related activities continue to be the backbone of the Indian economy, supporting the livelihoods of 60 percent of the population and contributing 1 / 6th of the GDP. It represented more than half of the GDP in 1951.
Half of the arable area continues to depend on the monsoon for irrigation. The ratio of gross irrigated area to total cultivated area could drop from 31 percent in 1984-85 to just 45 percent, according to the 2010-11 agricultural census. 11 to 15.8 crore hectares in 2015-16.
As the succession is not based on primogeniture, the population explosion has resulted in the fragmentation of land holdings. Total operating assets increased from 13.8 crore in 2010-11 to 14.6 crore in 2015-16. The average size of an operational farm decreased to 1.08 hectares in 2015-16, from 1.15 hectares in 2010-11.
Small and marginal farmers suffer from a lack of economies of scale, access to information and their inability to participate in the price discovery mechanism. Their participation is limited by weak vertical and horizontal links, limited market access and poor information flow throughout the value chain. The challenge now is to maximize the benefits through effective and efficient means of aggregation models.
The grouping of farmers is gaining importance due to the evolution of Indian agriculture towards high value products due to the growing importance of the agri-food market caused by liberalization, globalization, improving the power of purchase, demand for safe and quality food and the expansion of niche markets.
The integration of small farmers into agricultural markets is a big challenge. Many forms of agricultural producer organizations have been experimented with, such as cooperatives, self-help groups, agricultural producer societies and commodity interest groups to bring farmers together to help them benefit economies of scale and link them to markets.
Contract farming and direct marketing are other institutional interventions that can be undertaken by organized groups of farmers. I’ve even come across Whatsapp groups used to connect farmers and consumers, bypassing middlemen and getting better prices for farmers. A peasant production enterprise (CFP) seems to be the most useful for grouping small farmers. FPCs offer more advantages over other aggregation formats. Its members are able to leverage their collective strength and bargaining power to access financial and non-financial inputs and services and appropriate technologies leading to reduced transaction costs. They can tap into high value-added markets and enter into partnerships with private entities on fair terms.
The performance of cooperatives has been generally poor, with the exception of cooperative sugar factories and dairy cooperatives in Maharashtra and Gujarat. Amalsad Society for sapota cooperative and Gambhira agricultural cooperative in Gujarat, MAHAGRAPES in Maharashtra, HOPCOMS and CAMPCO in Karnataka, Mulkanoor women’s cooperative groups in Andhra Pradesh combined, etc. have achieved good results. These successful models could not be emulated elsewhere in the country. In the 2019-2020 budget, the government announced new central sectoral programs to facilitate the formation and promotion of 10,000 new agricultural producer organizations (OPAs) and the management of each OPP for five years from its aggregation and its formation.
The rainfall deficit, the rains out of season, the floods are natural and permanent risks. Agricultural production has increased but productivity is generally lower than international benchmarks. The efficiency of water use is particularly low. Some progressive farmers are taking their risks into their own hands by diversifying their production. However, many relatively well-off farmers continue to grow energy-intensive crops like rice and sugar cane in water-poor areas. How to encourage farmers to get out of the overproduction of cereals (especially rice and wheat)? How to proceed with agricultural diversification to boost the production of oilseeds, proteins and fruits / vegetables? These are political challenges.
The rejuvenation of our agricultural sector requires appropriate diversification and added value and a relaxation of outdated controls on agricultural markets. It is hoped that protests against agricultural laws – misguided or malicious or in part both – will soon subside and that wise peasant leadership will endeavor to put farmers in contact with the OPF. Farmers’ apprehensions about entering large companies can be allayed if they become members of FPOs.
(The author is a former Special Secretary of the Ministry of Trade and Industry, GOI. The views expressed are personal.)