Emergence of Producer Companies As Innovative Institutions for Agriculture Development in India: Issues and Challenges
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Asian Journal of Agriculture and Development Volume 17 | Number 2 | 79 Emergence of Producer Companies as Innovative Institutions for Agriculture Development in India: Issues and Challenges S K Shilpa Indian Institute of Plantation Management, Jnana Bharathi Campus, Bengaluru, Karnataka, India, [email protected] Check the complete lineup ABSTRACT of the Asian Journal of Agriculture and Development (AJAD) 17.2 Small and marginal farmers encounter several challenges in managing their farms, Foreign Labor Shortages in the the major being limited investment capacity, access to inputs, water, power, and Malaysian Palm Oil Industry: credit. In India, the Ministry of Agriculture recognized the collectivization of these Impacts and Recommendations Megan Zellers Crowley farmers into producer organizations (POs) as the most appropriate institutional Rice Value Chain Analysis form to leverage farmers’ production and marketing capacities. The study aims in the Philippines: Value Addition, to understand the characteristics of producer companies (PCs) and identify the Constraints, and Upgrading Strategies issues and challenges in the emergence of PCs through a quantitative study of all Alice B. Mataia, Jesusa C. Beltran, PCs registered in the country using secondary data and a qualitative study based Rowena G. Manalili, Betzaida M. Catudan, Nefriend M. Francisco, on interviews with 192 PC directors, members, and 11 promoting institutions. The and Adrielle C. Flores formation and development of PCs are being actively undertaken by government Sustaining Rice Productivity, and their agencies with major financial support from the Small Farmers Agri-Business Soil Fertility, and Income from Prawn-Rice Joint Culture in the Consortium (SFAC) and the National Bank for Agriculture and Rural Development Gher System in Bangladesh (NABARD), with technical support from resource support agencies. A total of 7,381 Basanta Kumar Barmon and Sanzidur Rahman PCs were registered by March 2019, across 33 states and union territories, and 2,749 Impact of Climate Change PCs were active as of March 2018. PCs face numerous challenges, the major being on Paddy Production: shortage of investment and working capital, compliance-related problems, lack Evidence from Nepal Niranjan Devkota and Nirash Paija of vision and direction from the board and poor professional management. From Emergence of Producer the perspective of the producer organization promoting institutions or POPIs, the Companies as Innovative major issues were attitude of farmers, limited number of members, poor equity Institutions for Agriculture Development in India: Issues base, subsidy driven process, and non-result-oriented approach of the PCs. and Challenges S K Shilpa Keywords: producer organization, producer companies, India Upland Rice: Cultural Keystone Species in a Philippine Traditional Agroecosystem JEL Classification: Q01, Q13, Q18 Florence L. Zapico, Josefina T. Dizon, Edwino S. Fernando, Teresita H. Borromeo, Kenneth L. McNally, and Jose E. Hernandez Non-timber Forest Products Value Chain Toward Sustainable Livelihood: Exploring Linkages and Trends Using Visual Optimization Network Analysis Ravi Sharma and Nisha Bharti Contact S K Shilpa [email protected] https://doi.org/10.37801/ajad2020.17.2.5 80 | S K Shilpa INTRODUCTION other constraints, such as poor market information, high transaction costs, no access to credits, and griculture and allied sector activities high indebtedness, leading to low production (Gill support livelihoods of 54.6 percent of 2004; Mondal 2010; Bhattacharjee 2010). India’s rural population and accounts Community institutions in agriculture offer for 17.1 percent of the Gross Value small farmers an opportunity to increase their AAdded for the year 2017–2018 (DAC&FW 2018). productivity, income, and resource efficiencies. A macro level examination of the agriculture A study by FAO (2014) reveals that various sector shows that small and marginal farmers institutional arrangements have empowered below 2-ha land per household account for the small-scale producers socially, economically, and majority of farms in India, comprising 86 percent politically as they overcome market constraints, of all farmers and contributing 47 percent of the build their skills, and improve access to information crop area. Most of these farmers still work for and technologies. Primary producer organizations subsistence farming (DAC&FW 2019). (POs) or collectives are being considered to protect Small and marginal farmers face several small farmers from the impact of globalization, challenges in managing their farms, the major and help them take part productively in the ones being lack of information, lower scale of competitive markets (Trebbin and Hassler 2012). operation, poor communication linkages with Therefore, government and practitioners are the wider markets, and consequent exploitation promoting producer collectives for improving the by intermediaries in procuring inputs and socioeconomic condition of small farmers. The marketing (Dev 2005). Shortage of capital, collectives are expected to decrease transaction adequate information, and lack of education costs, offer scale advantages from bulk purchase of (Gulati et al. 2007) lead to the use of obsolete inputs, exchange of information and knowledge harvesting practices, impacting productivity and, among members, cost efficiencies in marketing consequentially, 25–30 percent of the produce and value-addition, better price realization, and gets wasted (Desai and Joshi 2014). Singh (2012) reduction of risk (Kanitkar 2016; NABARD 2019; adds that in the present economic scenario, Indian Singh 2008). farmers have less bargaining power in input and Kirsten and Sartorius (2002) observed that output marketing because of the risks associated in the absence of a collective approach, the small- with weather uncertainties, uneven access to scale operations of the farmers will significantly technologies and natural resources, unreliable reduce their bargaining power in procuring input supplies, stressed infrastructure in power and inputs as well as in marketing of output. Against irrigation, and uncertain marketing arrangements. this backdrop, the government of India has Even though smallholder farmers have better been promoting a new form of collective called understanding of local agriculture and employ “farmers producer organization” (FPO) to enable family labor, they often face the issue of high costs the access of small farmers, notably, to technology, for non-labor transactions (Poulton, Dorward, and inputs, finance, and markets (Hellin, Lundy, and Kydd 2010). Meijer 2009; Department of Agriculture and Difficulty in accessing insurance and Cooperation 2013). credit services and susceptibility to weather The FPO aims to create a connection eccentricities further obscure the condition of between farmers and market, present access to smallholder farmers in general (World Bank 2007; capital for farmers, set standards in the market, with import competition adding to the problems manage risk for farmers, offer more competitive (Desai and Joshi 2014). In India, about 80 percent market conditions, and promote social equality of the farmers are small farmers whose income at the grassroots level (Singh and Singh 2013). is less than their consumption expenditure. This According to Stockbridge, Dorward, and Kydd condition is due to drought, failure of crops and (2003), farmer organizations shape up trust in Asian Journal of Agriculture and Development Volume 17 | Number 2 | 81 relationships during market access linkages, thus, areas. However, there lies a gap in understanding defending farmer interest and improving their the characteristics of PCs across India in terms market participation. Farmer organizations have of their number, geographical spread, number of the prospective to contribute to the espousal of members, capital structure, and active companies. sustainable and prolific management practices Understanding the characteristics of PCs is (Meinzen-Dick et al. 2004) and augment the necessary for policy decision-making. Data on incomes of the members (Aku et al. 2018). all PCs is not available even after 17 years of Traditionally, POs functioned as cooperatives. the Producer Companies Act 2002. Moreover, Recently however, the cooperatives have been there are concerns related to the promotion and criticized in terms of their financial performance operations of PCs, as many PCs are struggling to be as they have not developed into self-sustainable profitable business ventures without the support of organizations (Shah 2016). This has led to poor government. The above concerns led to this study commitment of the members (Trebbin and Hassler of PCs in India with two objectives, to understand 2012) and overdependence on government the characteristics of PCs in India, and to know funds, political intrusion, and corruption (GOI the issues and challenges in the emergence of PCs. 2000). Shah (2016) cited political interference in cooperative elections to be the prime reason for failures of cooperatives in India. These factors have METHODOLOGY encouraged the emergence of producer companies (PCs) as innovative institutions for agriculture The study consist of two parts: a brief development. PCs are considered as hybrid model quantitative analysis of data on all PCs registered of private companies and cooperative businesses. in the country, based on the Ministry of Corporate PCs as a new institutional framework will Affairs Corporate Data Management