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FPO’s Can Revitalize Indian Agriculture Using New Agri Reforms
Agricultural reforms have been a major focus area for economic revival in India post COVID pandemic induced slowdown. In particular, agricultural supply chain and marketing are the focus areas of these reforms.
Major steps taken in this regard are:
- New features on e-NAMfor farm produce sales without visiting mandis
- Warehouse based trading module using e-NWR(Negotiable Warehouse Receipts)
- FPO(farmer producer organizations) trading module to enable them sell produce at their collection centres rather than going to APMC’s
- Direct buying facility for bulk buyersoutside APMC’s
- Farm ordinances:
- Farmers Produce Trade and Commerce Ordinance: Enables freedom of marketing to farmers where they can sell their produce anywhere permitting interstate and intrastate trade.
- Farmers Agreement on Price Assurance and Farm Services Ordinance: To enable contract farming. This ensures predictable sale and incomes from produce.
- Scheme for setting up 10000 FPO’s by 2023-24with motto of “One district, One product”(ODOP)
FPO as an enabler:
FPO’s are registered cooperative institutions with farmers as shareholders. They have immense potential in Indian agricultural supply chain and marketing. Following trends in Indian agriculture shows need of FPO’s
- Nearly 86% of Indian farms are small and marginal with average landholding of 0.58 hectares
- Small and marginal farmers face challenges of:
- Access to inputs: Technology, finances, quality seed, fertilizers, pesticides
- Marketing and supply chainas they have a small amount of produce. Transportation, grading, sorting etc will be more costly per unit of produce
In such a scenario, FPO can provide economies of scale by aggregating input purchases and farm produce collection supply chain. FPO can then become part of an integrated value chain that links small and marginal farmers to markets.
Recognizing this, there are about 7000 FPO’s being promoted by various agencies like NABARD. Government has announced a new scheme to set up 10000 FPO’s by 2023-24.
Operational guidelines under 10000 FPOs scheme are:
- Minimum of 300 farmer members and 50 percent of them should be small, marginal and landless tenant farmers with maximum possible representation from women farmers. In hilly areas and north eastern states, 100 members is the minimum limit.
- Financial grants for formation, equity and administrative expenses. Financial support till 2027-28.
- Credit Guarantee Funds(CGF) to be setup by NABARD and NCDC(National Cooperative Development Corporation)
- Agri-Market Infrastructure Fund can be used for assisting FPO’s in creating marketing and farm level value addition infrastructure.
- 10% limit on maximum shareholding by a single member to prevent capture of profits by rich farmers.
These guidelines can aid in formation of sustainable FPO’s.
Other steps which can enable creation of sustainable FPO’s:
- Linking FPO’s to CBBO’s(cluster based business organizations) and KVKs(Krishi Vikas Kendras). CBBOs can promote administrative expertise whereas KVK can provide technical assistance to FPO.
- FPO members from contiguous areas: This enables better cohesiveness and regular meetings which are important for success of FPO
- Federating FPO’s: Creating umbrella institutions at district or mandal level ensures that scalability is achieved. Further it promotes backward and forward linkages as well as ODOP vision.
- Standardization of farm produce by FPOs: Uniform size, color, taste, quality is needed for better price realization in markets and exports. FPO’s must evolve such standards for vegetables, fruits, cereals for better marketability.
- End to end supply chain managementby FPO for identified crops in their area.
- FPO’s must be output centricfor identified crops in their area..
- Shareholding must be equitableto prevent cornering of profits by a few.
- Aggregation of inputs and farm produce: This is yet to be done by many existing FPO’s. Support must be provided to enable aggregation and use of FPO trading module on e-NAM for price discovery.
- North eastern region(NER) must be developed as a single market to enable growth. Current production in NER is primarily for local demand. Hence FPOs there must focus on crops which are in demand in the region.
FPOs have the potential to transform subsistence farming of small and marginal farmers into commercial farming. Implementation of FPO scheme must be effective to realize this objective. In addition, other reforms related to land and tenancy must be enacted to promote commercial agriculture.
- FPO’s are vital for Indian agri produce supply chain. Comment? What steps must be taken to enable FPO’s in India? [15 marks, 250 words]