Context: In 2019, the government of India set a target of creating 10,000 Farmer Producer Company FPCs by 2024. It also introduced the concept of cluster-based business organization (CBBO) to provide hand-holding support to farmers in forming FPCs. However these FPCs are mostly controlled by a few large companies, defeating the whole purpose of its creation.

About Farmer Producer Companies (FPCs)

FPCs are registered companies owned and operated by farmers. Their purpose is to achieve economies of scale, improve farm-level efficiency, and enhance farmers’ ability to negotiate prices in the market.

Role of Cluster-Based Business Organizations (CBBOs)

• CBBOs were introduced in the Union Budget 2019-20.
• They engage along the entire value chain, from mobilizing farmers to providing market access for FPCs.
• They establish crucial links with implementing agencies and FPOs (Farmer Producer Organizations).
• CBBOs aim to secure cheap raw materials for FPCs.

Problems Between FPCs and CBBOs:

• FPCs formed by big companies acting as CBBOs often lack independence in decision-making.
• Tax savings benefit CBBOs when purchasing produce from FPCs.
• FPCs may become a captive market for goods produced or marketed by their CBBOs.
• Lack of farmer knowledge and rights within FPCs is a common issue.
• FPCs may not gain better bargaining power, as CBBOs often dictate where to sell farm produce, sometimes to their own companies under different names.
• Funds from central schemes meant to support FPCs are rarely accessible; only a small percentage of FPCs receive grants or benefits.

Case Study

ITC Limited’s FPCs

• ITC Limited facilitated the creation of 78 FPCs in just 4 months, a remarkable achievement.
• However, these FPCs are likely to sell their produce to ITC, which can influence their decisions due to providing seeds and inputs.
• FPCs may find it difficult to refuse requests from ITC.

Molasar Sarvodaya Kisan Samruddhi Producer Company Ltd

• Experience in Rajasthan with CBBO Indian Grameen Services (IGS) was unpleasant.
• IGS appointed its own CEO and drew salaries.
• Agreements with other companies were signed without farmer-members’ consent.
• Government grants intended for FPCs were not used appropriately, leading to legal action.

Bina Krishak Producer Company Limited:

• Experience in Madhya Pradesh with Grant Thornton Bharat LLP as a consultant.
• Financial and marketing troubles were faced by the FPC.
• Tie-ups with big firms increased the FPC’s turnover but it also led to a loss in negotiation power.
• Farmers faced difficulties in negotiating with corporations.

Way Forward

Involvement of local and national non-profits in the creation and promotion of FPOs. FPCs should be on design from a local, community-owned food system perspective, rather than a commodity-oriented approach. FPCs should be independent from corporations for the procurement of seeds and synthetic inputs. Provision of free ecosystem services (e.g., soil formation, pollination, predation) can support FPC success. These issues highlight the need for reform and greater independence for FPCs in India to ensure they serve the interests of farmers effectively.

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