Reforming Agriculture sector through FPOs

Reforming Agriculture sector through FPOs

The FPO scheme has been launched for the overall development of the farming sector by providing market access to farmers through organizing them into groups. Farmers would get additional income which they would not get otherwise under the prevailing marketing system.

Reform Agriculture sector

Reforming agriculture for the 21st century is a challenge that India faces in its attempt to lift its farmers out of poverty and to double their income by 2022.

India’s government has unveiled several pieces of legislation to reform the country’s agriculture sector and create a transparent system for trading farm goods. The reforms aim to reduce middlemen and mercantile profits, while increasing farmer’s incomes.

End of MSP: This is not surprising given the troubled financial condition of Indian agriculture and the need for major reforms to revive it. Farmers are particularly worried about a possible withdrawal of the minimum support price (MSP) as well as disinvestment in public procurement.

Promote corporate control: Once control over procurement is given to the corporate sector, chances are high that they will go for maximum production of commodities like rice, wheat, and pulses.

What are the issues in present Agri. Market structure?

The present market structure of the Agricultural Sector in India i.e., MSP System, Mandi system, and APMC Market is responsible for deficiency in Indian Agri. Sector. Present MSP System which is supposed to be a price support is not benefiting any farmers as it has been fixed by the government after taking into account various factors like input cost, profit margin, etc. But the major problem here is that farmers are not getting the actual support price from these government interventions even if they are producing them at a much lower cost/cost of production because they have to sell their produce at Mandi at market price.

The CRIER-OECD study, which was released a few months ago, finds out that from the year 2000-01 to 2016-17, India’s agriculture was by and large implicitly taxed to the tune of almost 14% of its value. What does this mean? It means that in India, the smallholder farmers have actually not received 14% of the value of their produce growing in their farms. It means that we have been taxing agriculture today in one form or the other. Further, there is a system of implicit taxation; subsidies exist for their convenience.

The next issue is related to the procurement system and MSP mechanism. While the way in which the procurement system is operated on the one hand, and the MSP mechanism on the other, are beneficial particularly for rich farmers of Punjab and Haryana, they also have negative consequences such as over-exploitation of groundwater for irrigation that eventually leads to its depletion.

One of the major issue also concerns public investment in agriculture. There is an urgent need for enhancing public expenditure in agriculture. This should be backed by investments in irrigation facilities and innovative and scientific land-use technologies.

What are FPOs?

FPOs are voluntary organizations controlled by their farmer-members who actively participate in setting their policies and making decisions.

They are open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

FPOs operatives provide education and training for their farmer-members, elected representatives, managers, and employees so that they can contribute effectively to the development of their FPOs.

FPOs in Gujarat, Maharashtra and Madhya Pradesh, Rajasthan and some other states have shown encouraging results and have been able to realise higher returns for their produce.

How FPOs can be helpful for small and marginal farmers?

It may be noted that in India, 86 percent of farmers are small and marginal (less than 2 ha) who do not get the benefit of the MSP system. The government has initiated various schemes for the improvement of agricultural practices and livelihood security of the farmworkers.

The formation of the small and marginal farmers’ producer organizations (FPOs) at the village level, consisting of small farmers, supplemented by the mechanism of new farm laws will benefit them. Through the FPO, an individual farmer will be able to ensure a continuous supply of inputs like seeds, fertilizers, and agro-chemicals on credit through Government operated procurement centers.

By implementing these schemes and programs, the government can not only ensuring the farmers’ participation in the growth process, but also uplift their overall quality of life. By proposing to set up more than 10,000 farm producer organizations (FPOs) and an agri-infra fund of Rs. 1 lakh crore, a long-term strategy has been put in place for agriculture and rural development.

How government can eliminate the fears of agitating farmers?

The government needs to assure farmers in writing that the new laws discontinue APMC and MSP system and direct private traders to sell grains as per availability and price.

Farmers should be helped by the government to organize effective marketing cooperatives at the district level, just like we have milk cooperatives. The revenue loss to Government will be recovered from higher productivity and higher income of farmers.

Not only the agriculture ministry but also the Indian government needs to clarify about the contract farming that that the contract will be for the product, not the farmer's land.

There are a number of other methods to deal with farmer agitations. A farmer can take disputes to the district courts. Other methods include taking the matter to the police stations or to the local authorities.

The government should make a substantial investment in infrastructure to improve its procurement operations. Government can also approve 25,000 Crore alternate fund under the Price Stabilization Scheme to support market prices in a case when prices fall below 10 percent the MSP