Farmer Producer Company: A Model for Boosting Kerala’s Rural Economy

Abstract

Farmers own and run Farmer Producer Companies (FPCs), a rapidly growing companies in India that was established under the section 465(1) of the Companies Act, 2013. Agriculture continues to be the backbone of the Indian economy, employing 42% of the labour force and contributing 20% of the country’s GDP. 86.6% of India’s small and marginal farmers depend on farming as their main source of income. Small and marginal farmers, in particular, play a significant role as shareholders in FPCs, which bring people together from all walks of life to learn more about the issue’s existence at the local level and help solve it. The FPC is the best institutional structure for addressing a range of agricultural issues, including marketing, financing (forward linkages), input, technology (backward linkages), compact technology for small lands, proper marketing linkage, capacity building, training program on value-added products, financial inclusion program, village storage facilities, timely crop insurance, agriculture extension services, and the benefits of informatics. In order to increase income and subsequently promote more equitable growth, the study investigates how FPC addresses local food and nutrition security, the development of climate-resilient agriculture systems, input shortages, unemployment, and the integration of small and marginal farmers into agricultural markets.

1. Introduction

1.1 FPO’s role in ensuring food security and achieving sustainable development goals

The following ratios demonstrate how small and marginal farmers have increased in number in India: Small and marginal holdings (0.00–2.00 ha) made up 86.08 percent of all holdings, although only 46.94 percent of the operated area comprised these holdings. Semi-medium and medium holdings made up only 13.35 percent of the working holdings (2.00–10.00 ha), with 43.99 percent of the area being in use. Only 0.57 percent of all ownership and 9.07 percent of the operating area in 2015–2016 came from large holdings (10.00 ha and above) [1, 2]. Small and marginal farmers confront greater difficulties than any other group, such as a lack of financial and commercial connections, restricted access to technology and an inability to negotiate for their goods. As a result, Kerala faced formidable obstacles in verifying the full productivity of such small and marginal farmers. Since the return from agriculture was minimal, farmers today find it challenging to raise enough resources to meet their needs. The farmers’ dismal situation is confirmed by the rising cost of farming and declining agricultural income. Since they have no other options, the farmers are compelled to carry on with their agricultural pursuits. Due to rising labour and production costs, agriculture and farming enterprises are typically not profitable in Kerala. Higher input costs and lower prices for farmers’ produce are the end results, endangering the agriculture sector’s ability to survive economically. As a result, the Indian government is attempting to build farmer-producer cooperatives and organise small and marginal farmers in each region. FPOs are essential to achieving Goal 1 (No Poverty), Goal 2 (End Poverty) and Goal 8 in each village or district as well as other sustainable development goals (Decent work and sustainable economic growth) [3].

1.2 Objectives of FPC’s

• Promoting group activities, financial assistances, welfare programs and insurance for their products.

• Providing assistance to members in the areas of production, harvesting, procurement, grading, pooling, handling, marketing, selling and the preparation of value-added products.

• Providing training and consulting to its members through KVK’s Krishi Bhavan, Agriculture Department.

• Arrange inputs to be used locally so that bulk transportation costs are reduced, hence increasing net value emanated to farmers.

• Farmers’ produce can be aggregated in a way that brings merchants, processors and retailers to the farm gate, primarily benefiting FPC members.

• Arrange for machineries or consumables to be distributed primarily to its members.

2. The challenges faced by FPOs in Kerala

Farmer producer organisations (FPOs) have been promoted by the Indian government through nodal agencies such as the National Bank for Agriculture and Rural Development (NABARD), the Small Farmers’ Agri-Business Consortium (SFAC), the National Cooperative Development Corporation (NCDC) and various state governments and non-governmental organisations (NGOs) [4]. Currently, there are about 7374 FPOs across the country, with membership ranging from hundreds to thousands. In February 2021, the Indian government announced a new Central Sector Scheme with the purpose of creating and developing 10,000 FPOs. According to the revised guideline, the FPO needed a minimum membership of 300 members in plain areas and 100 members in the North-Eastern and Hilly zones (as well as other UT features). Under the new structure, members of FPOs can now make use of new perks like the Credit Guarantee Fund and consultancy services from the Cluster-Based Business Organisation (CBBO) and the National Project Management Agency (NPMA) [5]. In Kerala, 120 farmer-producer cooperatives with a total membership of 7600 persons are in operation in various districts.

In comparison to other states, the FPO is a relatively new idea in Kerala, where farmers are slowly coming around to it. Most FPOs were established in 2013 and began operations in 2014. FPOs confront a variety of challenges, including selection of board of directors, company administration and procurement of farmers’ produce, as well as inconsistencies in supply, market access and the understanding of government efforts and a lack of timely financial assistance.

NABARD would advise the new FPO on legal and administrative aspects of company management as a nodal organisation promoting the FPO agenda and its associated POPIs. The majority of FPOs were established in 2013, and the rural economy has been damaged by the fallout from two natural disasters in 2018 and 2019, as well as COVID-19. As a result of the floods, most farmers lost crops, causing supply chain disruptions [6].

3. Material and method

Based on secondary data accessible on the NABARD website, a list of farmer-producer companies was identified. Based on the data acquired, two districts in Kerala, Wayanad and Palakkad, were purposefully chosen for the study based on the study’s criteria. Respondents, Office Bearers and Board of Directors from each FPC were selected for the proposed study using proportionate random selection based on this information, and their interviews and data were recorded. The study solely relied on primary information acquired from the chosen FPC from Palakkad and Wayanad. These data came from the company’s annual reports and financial statements [6, 7]. The data from 2016 to 2017 to 2019–2021 had been taken for analysis. It was clear from the analysis that the company was in the phase of growth stage from that of introductory stage.

3.1 Selection of FPCs

The program structure was created with the main goal of this project in mind. Its goal is to discover FPCs that need to be critically acknowledged. During the first 2 weeks of the program, the relationship management team at payAgri and NABARD DDMs spent time shortlisting the deserving FPCs. The districts of Wayanad and Palakkad in Kerala were chosen for this program because payAgri operated successfully in these areas, and the relationship management team believed that the FPCs in these areas may expand with the right support.

Out of the more than 50 FPCs that exist in the region, the DDMs of the respective region have selected 18 FPCs. With the help of the stakeholders, 14 FPCs were selected as part of the process, and I chose three of them for my research. The payAgri 2020 initiative, which I oversee as program manager at payAgri Innovations pvt ltd IITM, Research park, Chennai, was created with the goal of scaling up the operations of NABARD sponsored FPC’s by facilitating improved access to quality inputs, technology, formal loans and markets. In the districts of Palakkad and Wayanad, we are keeping track of and assessing every FPC (Figure 1).

Figure 1.

Meeting of FPC AT WAYANAD [1].

4. Case study of Kerala FPOs

4.1 Case study-I

The Sreekrishnapuram Organic Farmers Producer Company Ltd. (SOFPC Ltd) has 270 members and is based at Katampazhipuram, Palakkad. On their modest and marginal land holdings, the group’s farmers rely on rainfed agriculture (Table 1). Farmers from three blocks, comprising nine panchayaths, are the members, with the entire family involved in agricultural and related activities. The total number of shareholders was 270, with 168 JLG groups (each group of four persons owning one share) growing banana, elephant yam (Chena), coconut, vegetables and rice. Farmers would be more socially empowered if they banded together.

Name of the Producer Company	Sreekrishnapuram Organic Farmers Producer Company Ltd (SOFPC LTD)
Address	Sreekrishnapuram Organic Farmers Producer Company Ltd, Katampazhipuram, Palakkad,678633
Date of registration & Registration No	16-03-2017; U74999KL2017PTCO48575
No of share holders	270
Board of Directors	10
Proposed area	Covering 3 Blocks
	(Sreekrishnapuram, Palakkad, Ottapalam)
	Covering 9 Panchayaths (Katamppazhipuram, Kongad, Karkuressey, Kaimpuzha, Vellunezhi, Cherpulassery, Thrikideeri, Pookottukalikavu, Ambalapara)
Products	Vegetables and Value-added products
Licence obtained	Panchayath, FSSAI

Table 1.

Details of Sreekrishnapuram organic farmers producer company Ltd. [2].

Farmers have formal loans, inputs and information available to them. Furthermore, cooperative risk-pooling through joint liability can improve the creditworthiness of the borrower. Short-term shocks, such as price volatility, and long-term calamities, such as those caused by climate change, are better handled by groups than by individuals [8]. As a result, working together provides better opportunities than working alone.

Farmers here provide market connection for local products produced by farmers, notably women JLG and SHG members. SOFPC has created a rural mart outlet at 300 sq.ft. space of Katamppazhipuram Bus stop. In urban marketplaces, products branded under a common brand – Thaninadan – equipped with brand equity to household communities are highly valued. Rural mart has taken on new dimensions as a result of its trust in unadulterated food and handcrafted products.

The major products are coconut, vegetables, arrowroot, tapioca, Colocasia esculenta (chembu), kudampuli (malabar tamarind), ginger, pepper and turmeric. The store promotes value-added products like cut mango pickle, tender mango pickle, garlic pickle,

mango-ginger pickle, mixveg pickel, lemon pickle, bitter guard pickle, carrot pickle, mushroom pickle, special onion chamandhi (chattini), squash, mix fruit jam, jackfruit jam, tapioca vattal, long beans vattal, bitter guard vattal, chilli vattals, ladies’ finger vattals, chamndhi (dry chattini) turmeric powder, arrowroot powder, pepper powder, banana powder (kurukku kaya powder), mushroom powder, tamarind, coconut oil and virgin oil (seasonal change), dried ginger (chukka), dried turmeric (varattumanjall), honey, rice flakes (avil), dried banana (kurukku kaya), dried kunnan kaya and wine. The goal of the rural mart is to give unadulterated food to the urban population, develop employment for rural youth and support the weakest part and SHG and JLG members.

Vegetable and paddy farming are the primary activities of the JLG groups. Each JLG has four members and owns two acres of land. To support their efforts, the main bank is offering an agriculture loan of up to 2 lakhs. Tomato, cabbage, chilli, bitter gourd, lady finger, cauliflower, radish, chilli, cucumber, pumpkin, and brinjal are among the vegetables grown by all 168 JLGs.

The SOFPC established the Farmers Service Centre to provide members with information on agricultural financing, interest rates, debt relief programs, insurance, and other information based on their specific needs. By facilitating access to better inputs, land preparations, providing quality seeds, plants, organic manures, organic insecticides, pseudomonas, improving market access for smallholder farmers and related goods, as well as sharing experience and information with others. Aiding JLGs and SHGs, as well as gathering and promoting organic goods. Farmers can use the tools and knowledge to transition from a subsistence to a commercial farming system, earn a living, and improve nutrition and food security.

The availability of labour has not been a problem for JLG’s operations because the labourers are members themselves. Because the members are mostly within a ward, the fields are frequently relatively close to their homes. This is aided by the fact that more than 90% of cultivated fields fall into the one-hectare category, making field operations very simple and controllable. Farmers are forced to sell to local traders at low rates due to a lack of viable local marketplaces and the higher expense of travel for small quantities. Small farmers have little bargaining power when purchasing inputs and selling their products because of low volume. This is due to the fact that perishable commodity marketing opportunities and other storage facilities are limited at this time. Farmers in rural areas face hurdles that prohibit them from accessing major markets. In order to promote vegetables, they collaborate with Milma Regional Office in Calicut and Horti crop, creating a reliable supply chain and offering operational and administrative support. Additionally, they have solid relationships with the supermarkets in Thrissur and Palakkad.

Other high-demand value-added items included Animal feed (kalitheeta), fish feed, poultry feed, and Trichoderma fertilizer. Thani Nadan (Village Products) is a brand created by the marketing department of SOFPC (which specializes in value-added products) (Figure 2).

Figure 2.

Products from SOFPCO [2, 3].

5. Case II

The Wayanad Green Tea Producer Company ltd is based in Wayanad, a region where small and marginal tea producers’ control and administer the company. In 2013, 15 small-time Wayanad tea planters banded together to establish the country’s first workers’ tea factory, which is now controlled by 204 small-time tea producers. They collectively own 400 acres of land. The FPO held land and used NABARD subsidy support to set up a Green Tea manufacturing facility in its own land at Karadippara for a cost of 83 lakh (loan assistance of Rs.45.00 lakhs and grant assistance of Rs. 5.46 lakhs from NABARD). The State Industries Department has approved a start-up grant of Rs.8,12,418.00 from the DIC. (35 percent of the capital investment) as part of the ESS program. (Wayanad district is eligible for 35% - general 15%, backward district 10%, food-processing, 10% total 35%, Share Capital assistance of Rs. 42.37 Lakhs). The factory’s construction has been completed, and commercial production began on May 26th, 2018 (Table 2). The money was spent on setting up the processing, logistical, and storage facilities. Out of the 204 stockholders, 19 farmers have received organic certification with the rest awaiting certification. Additionally, each of these gardens engages in internal activities to produce farm inputs like composts, vermicompost, and herbal brew that can be used as pesticides and herbicides. The use of the e-commerce platform to market and advertise organic tea is also becoming more and more common as a way to connect with potential customers (Figure 3).

Name of the Producer Company	Wayanad Green Tea Producer Company Ltd
Address	Wayanad Green Tea Producer Company Ltd. Karadippara (PO) Ambalavayal, Wayanad. Kerala, India −673,593
Date of Registration & Registration No	05-07-2013 &U01132KL2013PTC034463
No of share holders	207
Board of directors	13
	Block: Sulthan Bathery
	Panchayath Covered:Nenmeni, Ambalavayal
Products	Organic Tea and Green Tea
	Packing licence, Fire and safety, Organic certification, Udyog Adhaar, Trademark, Industrial licence, Weight and measurements licence, Factory and boilers licence, Teaboard licence, Panchayat licence, Pollution certificate

Table 2.

Details of WAYANAD green tea producer company Ltd. [2, 3, 4].

Figure 3.

WAYANAD green tea producer company Ltd. [3, 4, 5].

Tea is grown without the use of synthetic chemicals such as pesticides, fungicides or herbicides and instead relies on concentrated organic manures such as cow dung, goat manure, poultry manure and pig manure. The corporation is democratically governed by 13 board members, led by Mr. Jose Sebastian, the CEO. The farmers have taken special efforts to grow organic tea, which has resulted in a unique and clean environment among member farmers.

Wayanad is a low-lying section of the Western Ghats, and the leaf’s simple and traditional flavour and outstanding grade are due to the misty climate that exists throughout the year. For exporting, two leaf one bud green tea is picked by hand, lightly rolled and then steamed or roasted after being plucked. The enterprise has a processing capacity of 800 kg of leaves per day with a 150 kg output, but it is not being used to its full potential. Due to a lack of marketing and branding backward links, it is now only utilising 30% of the total capacity, which has not resulted in financial success for farmers. The FPO branded their organic green tea under the name “Way Green” as part of their agribusiness efforts.

6. Case III

On March 11, 2016, Attappady Farmers Producer Company Ltd. began operations in Agali, Sholayur and Pudur panchayaths. The FPC was created with the objective of integrating 387 indigenous farmers into a collective in order to strengthen their market negotiating power and promote tribal products. 30 SHGs and 40 JLGs are involved in a variety of agricultural activities, including pepper, arecanut, cashew nut, millets, (ragi, cholam) arrowroot, and vegetables. The FPO is supported by POPI (Attappady Social Service Organisation). Attappady is Kerala’s sole tribal block, located in Kerala’s Palakkad district, east of the Silent Valley in the Western Ghats, one of the world’s most prominent biodiversity hotspots. Irulas, Mudugas and Kurumbas are the three main tribal groups in the area. Tribal’s make a variety of expensive handcraft items such as caps, mats, thailam or perfume, necklaces and bangles and baskets and venture oil from the root of Chrysopogonzizanioides, often known as vetiver and khus (Ramacham). A rural mart is where farmers’ products are purchased and sold. Through Canara Bank, FPO is giving Kisan credit cards and agricultural loans to JLG members. FPO offers Kisan credit cards through Canara Bank and agriculture loans through South Indian Bank to JLG members (Table 3) [7, 8].

Name of the Producer Company	Attappady Farmers Producer Company ltd.
Address	Asso Bhavan, Pakuam, Thavalam P.O, Attappdy, Palakkad, 678582
Date of registration & Registration No	11.03.2016 &. UO1407KL2016
No of Share Holders	387
Board of Directors	10 (5 NO FROM SC/ST)
Highlight	It’s one of the tribal FPOs of Kerala
Proposed area	Block: Attapady; Panchayath Covered: Agali, Sholayur and Pudur
Products	Millets, Product made from Chrysopogon Zizanioides(Ramacham), Honey
Licences Obtained	Panchayth and FSSAI

Table 3.

Details of ATTAPPADY farmers producer company LTD. [3, 4].

Millets such as ragi, chama, thina, honey, pepper and cashew nut are among the goods, each with its own wellness and food branding. There are enough job prospects for packing and value-added products. Farm tourism is a good way to raise visitor awareness of Attappadi, which is home to a varied range of natural food products, as well as to advertise their own products.

Farmers profit from Implications of Geographical Indications for Attappady Aattukombu Dolichos Bean [Attappady Aattukombu Avara] [9, 10]. The GI Tags can be used by JLG groups if they begin farming. The majority of the farmers are from tribal hamlets, and they farm in a natural and organic manner (Figure 4).

Figure 4.

Honey of Attappady farmers producer company [6, 7].

7. Case study-IV

Under the leadership of 105 women dairy farmers from Wayanad, the ‘Bana Agro and Allied Producer Company’ (BAAPCO) was created. The organisations participate in a variety of activities in order to provide their members with a reliable market for their milk and milk products. The firm was formed on December 18, 2013, and is registered with the Registrar of Companies in Ernakulam as a non-govt company. It is backed by Kudumbashree State Mission and has an authorised share capital of Rs 10 lakhs and a paid-up capital of Rs 9.5 lakhs (Table 4).

Name of the Producer Company	‘Bana Agro and Allied Producer Company’ (BAAPCO)
Address	Room No 263, Kudumbasree Office, Padinjarathara P O, Wayanad.
Date of Registration& Registration Number:	18-12-2013; U01403KL2013PTC035700
No of share holders	105 Women
No of board of directors	5
Project area
Block	Kalpetta
Panchayats	Kuppadithara Village
Products	Milk Products Like Ice-Cream, Buttermilk, Ghee, Curd, Sweets etc.
Licence obtained	Panchayath, FSSAI

Table 4.

Details of Bana Agro and allied producer company’ (BAAPCO) [2].

They were capable of managing 100 litres of milk per day gathered from MILMA in 2020–2021, but they are showing signs of decline due to internal management issues. At Kuppadithara village, Vythiri Taluk, Wayanad District, the project has made significant progress in improving livestock husbandry by successfully integrating better technology and management into the traditional small milk holder production system. Once the situation is resolved, it will provide 100 jobs in the hamlet and will play an important role in the lives of tiny, marginal, landless, and agricultural labourer women. BANA has developed a reputation among Kerala customers as a symbol of rural women.

Kudumbashree, in collaboration with the Dairy Development Department of Mannuthy, has provided the necessary training to women groups, as is customary in value-added schemes. Kudumbashree and NABARD have also helped the women’s group financially.

A veterinary doctor, livestock experts, officials and farmers attended the monthly meeting and office for the betterment of livestock. Veterinary doctors conduct routine check-ups and provide high-quality animal health services in the village to boost livestock production and productivity. These services include technical inputs such as animal health care, artificial insemination, vaccination and the provision of balanced cattle feed (Figures 5 and 6).

Figure 5.

Meeting at Bana FPC [6, 7].

Figure 6.

Dairy products from Bana FPC [4, 5].

When women work, they gain control over their own income and education. In a broader sense, the message holds true: if one woman is educated, her entire family is educated, and if the entire family is educated, the entire community is educated [10, 11].

BANA’s establishment also aids in raising milk prices, resulting in higher rural incomes, reducing wastage, ensuring value addition and creating job possibilities. New building is underway, and the management intends to begin all forms of value addition under the supervision of the Veterinary Department of Pookode, Wayanad, which will involve processes such as quality assurance and packing that will extend the shelf life of milk products.

The rapidly expanding population, particularly in rural areas, and the burgeoning urban population will create even more markets and demand for dairy products. This increase in demand for milk and dairy products provides more chances and potentials for milk producers and the development of the dairy industry.

The BANA Farmers Producer Company is considered as a possible source of driving the rural economy, bringing synergy between industry and agriculture, against the backdrop of self-employment or group employment. FPO’s significant issues include maintaining industry’s.

hygienic and environmental requirements, extending product shelf life, marketing and distribution of milk products, continuous power supply, product uniformity and owning land for its operations.

Farmers were immediately affected by the increase in the price of KS Cow Feed and the availability of dry fodder for Rs 800 per quintal; corn costs Rs 2400 per quintal. Dairy farming is not financially profitable on its own, unlike full-time agriculture. For dairy animals, year-round access to dry straw and green feed is essential.

7.1 Findings

• The ability of the companies to operate is threatened by inadequate training, weak management and people with poor organisational skills.

• Ineffective branding and packaging could cost businesses sales.

• Products are not in the best shape when they reach their destination.

• Storage and value-added facilities are combined to reduce post-harvest losses.

• Joint liability organisations give farmers access to loans without requiring them to put up security, enabling them to start new businesses.

• Ease of communication for sharing data on volume and pricing from different regions and markets.

7.2 Suggestion

• If NABARD establishes a common centre for branding and packaging in each district. For example, in the case of rice, create a common design, brand and packaging with multiple location-specific labels to indicate where the items are derived locally or which FPCs they represent.

• Co-branding is a packaging technique that allows two or more FPCs to use their brand equity to influence behaviour on a product to which each firm contributes value.

• Provide machines for the production of high-value items.

• Provide modern technology, extension services and joint training on Good Agricultural Practices (GAP) and ensure farm produce traceability.

• At rural marts, various FPC products must be displayed.

• More farm connect stores should be opened solely for farmers and producer companies, with good packaging, product quality and shelf life.

8. Future Indian agriculture development must diligently involve FPC

1. Financial Services: The FPCs should offer loans for planting crops, buying tractors and pump sets, digging wells, and building pipelines to avoid risks because they know members well as the farmers are from same location.

2. Input Supply Services: Farmers should have access to the FPOs for low-cost, high-quality inputs made by skilled farmers. The FPC can offer labour through its labour bank as well as pipelines, sprayers, pump sets, accessories, seeds, pesticides and fertilisers. It contributes to the employment, income and livelihood of members and FPC. It helps to conduct local research which is beneficial to land and local farmers.

3. Technology: The FPOs should procure and store agricultural products from farmer members. FPC can brand their products using high-end technology. It is a well-known fact that climate and weather have a significant impact on agricultural production. Latest technologies like soil spectrum, drawn, GIS mapping and Geo tagging are helpful to provide information. Farmers can use more weather service to predict climate change.

4. Marketing: Marketing is challenging for farmers. Farmers can produce and are not able to sell. But FPCs give small and marginal farmers a platform to combine their efforts and sell their products for better price. FPCs give farmers the ability to sell their goods for better price, which can help them boost their income. Farmers are in a position to bargain for higher rates with buyers and snag a bigger piece of the value chain when they sell their goods in bulk through an FPC. It provides farmers with more decision-making power (Figure 7).

Figure 7.

Farm connect store to promote FPC PRODCUTS.

9. Conclusion

FPCs are formed to bring together small and marginal farmers in each panchayath and district to come up with solutions through a variety of schemes and other innovative initiatives targeted at increasing agriculture development and farmers’ socio-economic well-being. Agriculture has become a deficit transaction in today’s environment, with the majority of farmers, particularly the youth, abandoning agriculture as a primary job and moving to other forms of income. Although the farmer producer business model is an effective way for farmers to achieve overall socio-economic progress, it is also an effective way to meet SDGs and enhance the rural economy. The goal of this research is to see how various FPC functions and aggregate members execute various activities that provide money, livelihood and better job prospects at the local level. According to the findings, FPCs assist members in maximising their benefits, building their capacity, providing greater access to agricultural services, increasing knowledge about good agricultural practices, lowering transportation expenses for members and increasing member farmers’ bargaining power. Farmers’ perspectives have a big influence on the findings, which can be used to design appropriate strategies and identify solutions at the local level using indigenous methods. The findings aid in the development of solutions within the groups, resulting in satisfying farmers and a greater demand for FPC’s. In order for FPC’s to reach high performance, other factors must be recognised and addressed.