Govt must support FPCs

Farmer Producer Companies can lift farm incomes through cost reduction, value-addition and efficient marketing

The pace at which the Farmer Producer Companies (FPCs) are proliferating is a clear indication of the farmers’ trust in these organisations, especially in their ability to boost their earnings. From a mere 70 in 2010, the FPC count has surged to around 1,050, marking an impressive compound annual growth of over 44 per cent. About half of these tiny companies are concentrated in four states — Uttar Pradesh, Madhya Pradesh, Karnataka and Maharashtra. Elsewhere, including some agriculturally progressive states, the FPC movement is yet to gain momentum though their numbers are gradually growing there as well.  

The FPCs’ main function is to conduct business on behalf of the member farmers, taking advantage of scale and skilled management. As organised bodies, they have better bargaining power to procure inputs and services at lower prices, reduce transaction costs and tap high-end markets. They are better equipped to enter partnerships with other private or public sector enterprises. The FPCs are active in almost all areas of agriculture and its allied sectors like horticulture, plantations, dairy, poultry, fisheries and others. Significantly, about 25 per cent of them are engaged in post-harvest processing and value-enhancement of the produce to ensure better returns for the growers. Some of them deal with organic products which fetch premium prices in the market.

The emergence of these innovative institutions does not mean beginning of corporatisation of Indian agriculture though it certainly reflects introduction of corporate culture and professional management in the farm sector. Conceptually, FPCs are hybrids of cooperatives and private companies, imbibing the merits and leaving out the demerits of both of these. While the participation, organisation and membership pattern is more or less similar to that of cooperatives, the business outlook and day-to-day functioning of these entities is akin to private companies.

However, the FPCs do not have any private or government equity holding. Nor are their shares traded on the stock markets. So they cannot become public or public limited companies. They also face no danger of being taken over by other business houses by way of equity acquisition. The Companies Act, 1956, was amended in 2002 by adding a new ‘section- IX A’ to provide for the creation of such a new category of farmers’ companies and allow their registration under this statute.

The FPCs are being supported by agencies like the Small Farmers’ Agribusiness Consortium and the National Bank for Agriculture and Rural Development. The Centre and some state governments, too, have been trying to create the policy environment conducive for the growth of FPCs. However, much more still needs to be done for an effective handholding of these grass-roots level farmers’ organisations.

As pointed out in a review article by Anirban Mukherjee and four others in the August 2018 issue of the Indian Journal of Agricultural Sciences, these organisations are not treated on par with cooperatives in many respects. Many kinds of concessions, tax exemptions, subsidies and other benefits provided to cooperative societies have not been extended to the FPCs. Only recently has the fertiliser ministry advised fertiliser manufacturers to grant their dealerships to the FPCs on the same terms as applicable to the cooperatives. The FPCs face problems also in raising working capital from financial institutions as they do not have assets to serve as collaterals. Their share capital, too, is usually small. Though their share-holding members are entitled to concessional bank loans as farmers, but similar interest subvention is not available to the FPCs formed by them. Worse, many of the government sops meant for the startups in other sectors are denied to farm sector FPCs.

Such discrimination against the farmers’ bodies is, obviously, untenable. It can endanger the sustainability of these enterprises in a competitive market. Given the role these bodies can potentially play in lifting farm incomes through cost reduction, value-addition and efficient marketing, the FPCs deserve unreserved support from the government. The FPCs, indeed, hold the key to modernise agriculture, restore its profitability edge and alleviate farm distress.

surinder.sud@gmail.com