Executive Summary

Agriculture is the backbone of the Indian economy and plays a pivotal role in its growth and development, with approximately 17% contribution to the country’s Gross Domestic Product (GDP). Over two third of India’s working population is engaged directly or indirectly with agriculture and allied activities for livelihood. As per the advance estimate of the Ministry of Agriculture and Farmers Welfare released on 26th September 2018, the country was expected to produce 141.59 million tons of food grains, 22.19 million tons of oil seeds, 383.8 million tons of sugarcane and 32.48 million tons of cotton bales in the year 2018-19.

Shrinking acreage is one of the prime challenges to Indian agriculture, which is making the profession less economical for farmers. As per the National Sample Survey Office (NSSO) more than 50% of small and marginal farmers in India are in debt. Small land holdings generate low annual agricultural production and marketable surplus, and eventually trap farmers into a vicious cycle of debt.

Karnataka plays a vital role in the Indian agrarian economy. The state has a total of 4.18 Million hectares of Gross Sown Area and 162 Agricultural Produce Market Committees (APMCs) to facilitate and regulate the marketing of agriculture commodities. The concept of collectivisation of farmers was envisioned to increase farmer’s income, which has resulted in the formation of Farmer Producer Companies (FPCs) in the state.

Performance of FPCs in Karnataka (A Sample Study)

A study was conducted to assess the performance of FPCs in Karnataka, where 90 FPCs were selected across different districts. These FPCs were categorised into four categories based on their performance on different parameters. Based on a cumulative score, a 2 X 2 matrix was created and FPCs were categorised into different quadrants of the 2 X 2 matrix.

1. Visionary Leaders (VL): This quadrant has 18 FPCs which are performing good as per the factual parameters and their perception amongst members is also good.
2. Emerging Companies (EC): 16 FPCs in this quadrant are perceived to be good by farmer members, however, their performance is not that good as indicated through factual parameters.
3. Progressive Companies (PC): This quadrant has 23 FPCs that are doing well on factual parameter but are not perceived good under perceptual parameters.
4. Weak Companies (WC): This quadrant has 33 FPCs that are performing low on both the factual and perceptual parameters.

From the analysis, it has been derived that FPCs in all the four categories have achieved milestones in one or other parameters considered for assessment. Category VL FPCs are classified as top ranked FPCs in the study because of their overall better performance on a maximum number of parameters considered for evaluation. Category EC & PC’s FPCs are performing well on some of the parameters and category WC’s FPCs have marked a composite performance because of weaker performance on few criteria. However, the category WC FPC has also performed equally or better than category VL, EC and PC in a few parameters. Though, overall WC category FPCs need to strengthen governance structure and business model.

Strategic Roadmap for FPCs

It can be understood that FPCs are trying to drive farmers into commercial agri business and creating more awareness about collectivisation concept and its benefits. Among the 90 FPCs that have been surveyed, all the FPCs have some or other strength or weakness, and there is a need for specific attention to each category of FPC to support them in different aspects for improvement in business performance.

During the course of this study, it was found that the major challenge to FPCs is less participation of members in business activities of FPCs, because shareholder members expect short term returns over their investment. The failure of FPCs in meeting these expectations leads to the disinterest of members in FPC’s activities. Another challenge is finding compatible staff for running FPCs who possess understanding about compliances, networking and leadership skills for business development.

Therefore, an Incubation Support system for developing capacities of FPCs and providing other support aspects could assist the FPCs in achieving their financial and developmental goals. Incubation support center should work on detailed plan based on different aspects. Broadly, the scope for proposed Incubation Support Centre can be as under:

Incubation centre should have professionals from the development sector, corporate sector, agriculture policy makers and agriculture statisticians to ensure FPCs get end to end solutions for constraints facing in the management of Producer Company (PC).

1. Introduction and Project Background

Agriculture is the backbone of the Indian economy and plays a pivotal role in its growth and development contributing approximately 17 per cent to the country’s GDP. Over two third of the country’s working population is engaged directly or indirectly with agriculture and allied activities for livelihood. As per the 1st advance estimate of the Ministry of Agriculture and Farmers’ Welfare released on 26th September 2018, India is expected to produce 141.59 million tons of food grains, 22.19 million tons of oil seeds, 383.8 Million Tons of Sugarcane and 32.48 Million Tons of Cotton bales in the year of 2018-19.

1.1 Introduction

Agriculture is the backbone of the Indian economy and plays a pivotal role in its growth and development contributing approximately 17 per cent to the country’s GDP. Over two third of the country’s working population is engaged directly or indirectly with agriculture and allied activities for livelihood. As per the 1st advance estimate of the Ministry of Agriculture and Farmers’ Welfare released on 26th September 2018, India is expected to produce 141.59 million tons of food grains, 22.19 million tons of oil seeds, 383.8 Million Tons of Sugarcane and 32.48 Million Tons of Cotton bales in the year of 2018-19.

According to the agriculture census of 2010-11 (Phase-II) released by the Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW), total operational landholdings in India were estimated as 138.35 Million Hectares, with the average landholding size at 1.15 Hectare. The Gross Cropped Area (GCA) was estimated to be 193.76 Million Hectares.

Source: Agriculture Census 2010-11(Phase-II) Report, Agriculture Cooperation & Farmers Welfare

The prime challenge for agriculture is shrinking land holdings, making the farming profession less viable for farmers. As per the National Sample Survey Office (NSSO) more than 50% of small and marginal farmers in India are in debt. Small land holdings generate low annual agricultural production and marketable surplus, and eventually trap farmers into vicious cycle of debt.

Honorable Prime Minister of India’s vision on doubling of farmer’s income by the year 2022 has got laudable attention in the country. Prominent strategies have been adopted by policy makers, agriculture economists and other supporting departments of the Government of India (GoI) on this agenda. Following are the strategies for growth in income of farmers:

1. Development initiatives including infrastructure

2. Technology

3. Policies

4. Institution Building

Under the Institution Building, GoI is keenly promoting the concept of collective marketing through the aggregation of farmer’s marketable produce and leveraging the bulk quantity for a higher market price. FPC is one such legal institution which works on the same principle. On a larger perspective, now GoI is planning to project FPC as one stop solution for all the queries and agribusiness requirement of farmers like information centre, input supply centre, market linkages, credit facilitation centre, and moreover disseminate all the agriculture schemes through FPCs in the future.

1.2 Genesis of FPCs in India

Historical events in India have led to the formation of co-operatives for promoting welfare of rural communities during the Independence era. Post-independence, co-operatives have served as an established channel for government programs, functioning with substantial government funds and personnel. Government funding eventually led to the bureaucratisation and political interference in cooperatives, making them unable and unfit to compete in market or serve their member’s interest. To address these challenges, high level committee was formed on 21st December 1999 at New Delhi under the chairmanship of Dr. Y.K Alagh, which submitted its report on 6th March 2000. After review of the report, Honorable Minister of Law, Justice and Company affairs entitled the Bill as, “Companies (Amendment) Bill, 2000” which seeks to amend the Companies Act 1956 with additional part “Part IXA” on 6th February 2002, concerning the formation of PCs. The Companies Act offers a statutory and regulatory framework that allows for an equal footing with other forms of enterprises.

PC is a hybrid model between private companies and cooperative societies, aiming to combine efficiency of a company with the spirit of traditional cooperatives. The PC intends to integrate small and marginal farmers into modern supply chain networks minimising operational cost, while benefitting from the economies of scale. Profit of the company is largely distributed on the basis of “Patronage”, which acts as reward for members contributing to the business. Major areas where FPCs provide service and assistance are:

• Marketing services of surplus produce of farmer members

• Input supply services at comparatively lower rate than market

• Technical assitance on Package of Practices (POPs) and in agriculture and allied activities

• Dissemination of information on different government schemes to farmer members

• Logistics for transportation of farmer’s produce

1.3 FPCs in Karnataka

The Ministry of Agriculture and Farmers’ Welfare is extending all the necessary support to strengthen the FPCs. One of the key support areas is providing financial as well as technical support to meet the objective of boosting the income of the farmers, which is based on the principle of aggregation to leverage economies of scale for a higher price. Members of FPC also have enormous hopes of getting more price for their produce as well as the betterment of livelihood by becoming a member of FPCs. However, not all FPCs have proved productive to their member farmers. Some of the key reasons behind FPCs not being able to achieve the expected output are:

• The foremost reason is the weak foundation of FPC laid by RI during the mobilisation process. The thought behind the formation and functioning of FPC was not detailed out among the members, due to which farmers developed a wrong notion of getting benefits from FPC by just paying the share money and are not aware of their patronage and responsibilities with FPC. Eventually, the situation has led to a lack of ownership of FPC among the shareholders.

• After the mobilisation process is completed and FPC is incorporated, activities like AGM and cluster meetings have been skipped to avoid expenditure in order to save money which could be utilised in business activities. It weakens the base of hierarchical structure of FPC and farmers lose their confidence in the company.

• Leadership plays a vital role in the success of FPCs. After incorporation, proper SOP is either not developed by RI for FPC or they are unable to implement it. Proper structured road map for training and meeting is not prepared, lack of which leads to feeble leadership among the BoD members and CEO.

• The CEO fulfills only the basic criteria of eligibility but lacks the required skills to accomplish the set target and run the FPC.

• Insufficient funds to kick start the business activity pulls the FPC backwards from doing business easily, as FPC needs seed fund to procure raw material from farmers and then must bear other costs like labor charges, transportation charges and miscellaneous fixed and variable costs.

• Tedious documentation process for getting loans for business activities constrains FPC from accomplishing their targets in a timely manner. The harvesting and marketing of raw produce of farmer is a time bound activity, however, untimely availability of loan amount hinders the target achievement.

• Timely completion of statutory compliances is mandatory for all the FPCs. However, FPCs have scarce knowledge of compliances which levies heavy penalty on FPCs, reducing the hard-earned profits.

• Most of the organised buyers prefer to work with existing commodity suppliers or traders, who are consistent on quantity and timeliness of supply. Inconsistent supplies hinder FPCs in tapping the potential business from organised buyers. Also, engaging with organised players requires supply of specific quality of material. Currently, FPCs stand behind in cleaning and grading activities.

• Most of the FPC’s equity value is found low because of which other funding agency restrict extending any grant to them.

• Caste and social dynamics of the region also impacts FPC’s functioning and success in village areas. Few FPCs do not organise the AGMs and BoD meetings, because of heterogeneity in caste, which leads to difficulty in gathering and finally poor governance of FPC.

Given this background, a study was required to understand the problems, assess the capabilities, gauge the gaps, map the possibilities and suggest the best strategy to build the capacity of FPCs for future operations. The study was also required to identify the variations in capacities and vulnerabilities of the FPCs from the point of view of various parameters such as demography, organisation, strategy, services, governance, marketing, operations, financials and impact on farmers.

1.4 Objective of the Study

The broad objective of the study is to assess 90 FPCs in Karnataka, with a view to identify their capacity building needs. The specific objectives of the study are provided below:

• To assess the status based on various parameters such as governance, organisation and administration, strategy, marketing, operations, finance, services, impact among others

• To develop an assessment tool and categorise 90 FPCs

• To design a state level action plan for different categories of FPCs, for better and efficient management of the FPCs.

2. Approach and Methodology

This FPC assessment report is based on the survey of 90 FPCs operational in 28 districts of Karnataka. The following section provides the methodology used to assess these FPCs:

2.1 Secondary Research and Desk Review

Secondary research and desk review were done to understand the mechanism of FPC functioning at national and state level. The general idea of FPC functioning, the aim of its formation, its role in farmers growth, guiding principles etc. were reviewed from secondary research.

2.2 Primary Research

The various steps involved for conducting primary research are given hereunder:

2.2.1 Sampling

2.2.2 Development of Survey Tools

Structured questionnaires were used for collection of data from primary sources. Various questions were framed to understand the details of FPC processes and other areas of information requirement from CEO, BoD and farmer members of FPC.

2.2.3 Data Collection

For information gathering, primary interactions involved in-depth interviews as well as Focus Group Discussions (FGDs). In-depth interviews were conducted with CEOs of each FPC, while FGDs were conducted separately with BoD as well as a group of member farmers / FIGs in each FPC. The FGDs were involved in discussions with 3-4 BoDs and 6-7 FIGs/member farmers. In the survey questionnaire, both open-ended and close-ended questions were used.

2.3 Scoring, Ranking and Categorisation of FPCs

The set of questions covered three broad categories, namely (1) Factual Data, which covered business and financial performance of FPC and their approach to activities (2) Perceptual Data, which captured the impact of FPC on members based on the perception of members. The aim of this activity was to improve the predictive performance of the classification process by means of bundling multiple data into clusters by use of excel.

2.4 Developing Strategic Action Plan

Based on information gathered during the process of the primary survey, collective profiling, scoring, ranking, and categorisation of FPCs and their descriptive analysis, strategic action plan was developed for all the four categories of FPCs.

A diagrammatic representation of approach and methodology is given below.

3. Status of FPCs in Karnataka

3.1 Support Agencies

The support agencies / RIs mainly provide financial support to FPCs for a certain initial period, mainly apportioned into two chunks. The first is for FPC’s administrative and operational cost, which is disbursed quarterly / half-yearly into FPC’s bank account and second is the cost for providing technical assistance and support to FPCs in their management and development activities.

NABARD is an apex development financial institution in India which broadly focuses on the empowerment and financial inclusion for communities in rural India. NABARD has promoted a total of 2081 FPCs across the nation in 29 states and 473 districts with a base of 6.64 lakh shareholders till October 2018. In Karnataka, NABARD has promoted 187 Farmer Producer Organisations (FPOs) in 30 districts. The key areas of support include assistance in market linkage, capacity building interventions and schemes for FPC members and leaders, credit facilitation etc.

Small Farmers’ Agribusiness Consortium (SFAC) is an exclusive society focusing on increasing farmer’s income by working on principle of aggregation and economies of scale. It has pioneered the formation and advancement of FPCs. SFAC has registered 773 FPCs throughout India in 29 states. It has a base of 7.52 lakh mobilised farmers. SFAC also provides financial assistance to FPCs and RIs for undertaking administrative and operational activities. In addition to that, it also provides support for Matching Equity Grant Scheme to encourage FPC in raising equity, member’s participation and enrolment in company, eventually increasing the farmer base and strengthening their bargaining power. SFAC also provides Venture Capital Assistance to the FPCs, in order to promote new business activity.

3.2 Resource Institution (RI) & Producer Organisation Promoting Institutions (POPIs)

Support agencies channelise the financial aids and technical assistance to FPCs though RI or POPI. RIs conduct study to identify potential villages where farmers are willing to form FPC after inducting them about FPC and its benefits. Once the identification process is completed, RIs prepare feasibility plan and business plan of FPC and submit it to the support agency along with supporting documents. Once it gets approved from support agencies, RI receives the first installment of the grant. Thereafter, RIs start mobilising farmers into small groups named FIG, collect share money from each member and deposit into FIG’s bank account. On the other side, RIs complete all the other documentation work of FPC formation like selection of BoD members, incorporation of the company, supporting FPC in conducting AGM, and other technical assistance. As per the guidelines, RI can do handholding of FPC for two or three years.

Role of RI or POPI can be assigned to the following institutions: Non-Governmental Organisations (NGOs), Trusts, Corporates, State Govternment Departments, NABARD-promoted subsidiaries, Krishi Vigyan Kendra (KVK), Big Farmer Producer Companies, Farmers Federations, Commodity Board/ Federations/ Exchanges, Co-op Milk Unions and other experienced institutions meeting the eligibility criteria.

The Name of the Key Resource Institutions / POPIs supporting 90 FPCs selected for study in Karnataka state has been given below.

3.3 Number of Villages Covered by FPCs

On an average, the support agencies mandatorily prefer minimum of 500 members in an FPC, so that the equity money can be utilised for business purpose as a kick-start fund. To cover that voluminous base of members, FPCs must explore different villages. The below figure depicts percentage of FPCs working in a different range of operational village areas. It exhibits that out of 90 FPCs, majority of FPCs operate in between 1 to 15 villages, while only 8% of FPCs operates in more than 46 to 60 villages.

3.4 Memberships

Farmer members are the foundation pillars of the FPCs. FPCs have a varied range of farmer members. The below figure illustrates FPC falling under different categories based on farmer members strength. Majority of FPCs have a member strength of 751 to 1000, while only 1% of surveyed FPCs have a member strength of 1000 to 1250.

3.5 Land Holding Pattern of Members

3.6 Caste of FPCs Members

3.7 Irrigation Pattern

The major sources of irrigation in the villages are borewells. Open wells, canals and ponds are the other available sources of irrigation.

3.8 Source of Livelihood

Agriculture is the major source of livelihood for the member farmers. Other than agriculture, horticulture and allied activities of agriculture, including dairy, goat rearing, and poultry also form different sources of livelihood to the member farmers.

3.9 Age Profile of FPC Members

3.10 Education Profile of CEO/Managing Director

3.11 Education Profile of BoD

3.12 Responsibility of FPC Formation

FPCs are formed with support of RI at initial stage of formation and later FPC management is run by BoD and CEO. However, RIs facilitate the decision-making process of FPCs, including the use of farmers data and preparation of operational plan for FPCs.

3.13 Board Meetings

3.14 Business Activities of FPCs

FPC formation also aims to provide a one stop solution to farmers. Currently, it is challenging for FPC to market produce of every member because of lack of market linkage and stringent quality parameters of organised buyers.

Of the surveyed FPCs, 71% provide agricultural inputs to farmers, while 40% FPCs provide output marketing services. The contribution of FPCs in providing advisory service was found to be low, with only 10% FPCs providing these services to farmers. Primary value addition facilities like sorting and grading machinery can provide better prices to farmers for their produce and FPC can also earn service charge from it. Presently, 165 of FPC provide primary value addition services to farmers.

3.15 Annual Turnover and Net Profit

4.Categorisation of FPCs

4.1 Defining Parameters for Categorisation

The categorisation of FPCs were done considering the various parameters that determine the performance of FPCs. The parameters including business performance, FPC’s approach to business activities and impact of FPCs on their members was considered for categorisation of  FPCs.

4.2 Scoring

FPCs have been classified into VL, EC, PC and WC category based on the scoring in the above three parameters. The

following approach was followed for scoring of FPCs.

4.2.1 Normalisation of Absolute Values

The five sub-parameters namely number of equity shareholders, number of general members, paid-up share capital, number of BoD meetings and number of permanent staff are absolute values which were converted to a rating of 1 to 5 for negating the anomalies arising from absolute data. The method of normalisation is provided in Annexure 2.

4.2.2 Assigning Weightage to Parameters

Some of the key sub-parameters have more significance than others for indicating the performance of FPCs, therefore different weightages were assigned to different parameters while scoring. For this purpose, 80% weightage has been assigned to turn-over, net profit/loss, paid-up share capital and number of shareholder members, while 20% weightage was assigned to remaining parameters.

4.2.3 Summation of Scores

Cumulative scores for each FPC in each parameter were obtained by adding the individual ratings of sub-parameters in each category.

4.3 Results

Based on a cumulative score, a mid-range value of 22.4 and 4.9 were obtained for factual and perceptual data set, respectively, on which a 2X2 matrix has been created. Based on the mid-range value, FPCs were grouped into four different categories named as quadrants.

• First quadrant or Visionary Leaders (VL): This quadrant has 18 FPCs which are performing good as per the factual parameters and their perception amongst members is also good.

• The second quadrant or Emerging Companies (EC): This quadrant has 16 FPCs which are perceived to be good by farmer members, however, their performance is not that good as indicated through factual parameters.

• Third quadrant or Progressive Companies (PC): This quadrant has 23 FPCs that are doing well on factual parameter but are not perceived good under perceptual parameters.

• Fourth quadrant or Weak Companies (WC): This quadrant has 33 FPCs that are performing low on both the factual and perceptual parameters.

5. Comparison of Different Categories of FPCs

5.1 Membership and Governance

5.1.1 Membership Campaign

The diagram characterises that in the VL category FPCs, 61% FPCs use formal campaign, publicity material and provide recognition for existing members to add new members. A significant portion of FPCs, i.e. 67% in WC category also have formal campaign, use publicity material and provide recognition for existing members to add new members.

5.1.2 Fee Collection

In the majority of FPCs, share fee was collected with formal records and receipt was issued to shareholder members to ensure transparency. In very few cases, the fee was collected, however, the receipt was not issued. For VL and PC category FPCs, the fee collection process was followed more rigorously, as compared to the FPCs of WC and EC category.

5.1.3 Board Meetings

Regular BoD meetings and active participation of members is the key factor in successful management of the FPC. Approximately 78% of VL category FPCs conduct regular BoD meetings with more than 80% participation of directors. On the other hand, approximately 55% of FPCs in WC category conduct regular BoD meetings.

5.1.4 Annual General Meeting (AGM)

AGM is a common platform where shareholders interact with BoD members and FIG. The balance sheet as well as profit and loss statement of the FPC is also presented in AGM. The FPCs who have a formal agenda for conducting AGM and prepare minutes of meeting symbolises a process oriented FPC. Based on field interactions, it was observed that most of the FPCs from VL category conduct AGM with proper agenda and ensure a high participation of members in the AGM.

5.1.5 External Audit

This section highlights different categories of FPCs and their audit compliances. The external audits were conducted in majority of FPCs from VL category, where approximately in 83% of FPCs from this category, external audits were conducted by registered auditors, supervised by audit committee and the results were shared with shareholders / members. The same process was followed by a smaller number of FPCs from other categories.

5.1.6 Record Keeping

Keeping updated record of all the account books and activity is one of the key elements in growth of FPCs and ensures transparency in management. A significant number of FPCs from VL category have deployed IT software for keeping the records of account.

5.1.7 Use of Data for Business Planning and Forecasting

Updated and compiled data of FPC activities is an essential component for productive decision making. Nearly 44% of FPCs in category VL have detailed MIS data backup used in business planning and forecasting. On the other hand, category EC has only 12% FPCs which are using a data management system for business planning and forecasting purpose.

5.1.8 Quality Management Process

Quality is one of the key parameters for determining the marketability of the produce, and for maintaining quality, a formal process of quality assurance is of utmost importance. Therefore, SOPs for maintaining quality and training to the FPC staff for following these SOPs becomes integral.

It can be observed that most of the FPCs in all the categories have no quality control mechanism and trained staff for quality management. Category VL has the highest percentage of FPCs who conduct a formal quality inspection with proper SoPs and trained staff, along with trainings to members on quality.

5.1.9 Feedback Mechanism

This section mainly focuses on feedback mechanism of FPCs on the kind of service offerings to their members. Majorly, for all FPCs there is feedback solicitation and response process through formal and informal means. Interestingly, the WC category FPCs have performed slightly better than other category FPCs in terms of adopting formal process for feedback solicitation, with proper feedback form, record and response to their members.

5.2 Member’s Perception about FPCs

The perception of members about the respective FPCs was captured to understand whether the members get the expected benefits of FPCs membership. For this purpose, interactions were conducted with 4-5 members /FIGs of the surveyed FPCs to identify the areas where FPCs have been able to benefit their members. The following parameters indicate the impact of FPCs on the members:

5.2.1 Impact on Income

The major impact in income due to membership of FPC was reported by members of VL category FPC. Members of 78% of FPC from VL category reported increase income between 30 to 50%. While for other category FPCs, majority of members reported up to 10% increase in income. The increase in income can be majorly attributed to increase in marketable surplus and better price realisation.

5.2.2 Impact on Availability of Market Information

Majority of FPCs in category VL and EC have been enabler in dissemination of prices of commodities in nearby mandis. Such information has been helpful for farmers in taking decision for marketing their surplus produce. 78% FPCs of category VL have reported a moderate improvement in availability of information, while the farmers of PC and WC category FPCs did not report any improvement in access to market information.

5.2.3 Impact on Access to Credit

The member’s access to credit has not much improved across all categories. Only 11% FPCs of category VL mentioned to have good improvement in access to credit which was even low in the case of EC category FPCs, while no improvement was reported by the members of PC and WC category FPCs.

6. Success Stories on FPCs

This section highlights some of the FPCs from Karnataka as well as from other states who have shown good performance on business activities and overall management. The success stories of such FPCs have been presented in this section as case studies.

6.1 Sahyadri FPC Ltd., Nashik, Maharashtra

The Sahyadri Farms, the FPC was set up in the year 2011. The company was set up with the aim to ensure a fair return to the farmers. The company worked on the philosophy of providing the best infrastructure and adequate production and processing facilities to the farmers who could not secure a good produce due to the frugality of resource and operations.

The company also considered developing branded traceable products that would promote sustained growth and could cater to the demands of end consumer by offering them quality products at fair prices, while achieving economies of scale and costs to the growers. This was driven on Farmer Producer Model that would play an ever- increasing role in the rural economy, providing employment to large numbers of farmers.

The company has set up modern infrastructure facilities including Cold Storage for fast moving products, Cold Storage for frozen products, Pre-Cooling Chambers, Ripening Chambers, Fresh Fruits & Vegetables Packing Facility, Aseptic Processing Facility, Frozen Processing Facility, IQF Processing Facility, and Vacuum Pre-Cooling Facility for Leafy Vegetables for value addition and post-harvest management of fruits and vegetables.

Sahyadri FPC has excelled in a short span of time. It has leveraged its presence in the total value chain by involving itself in all the activities of the supply chain including processing and export. The primary objective of the company was to provide the best of infrastructure and adequate production and processing facilities to the farmers to make them participate in the value chain. Majority of the farmers working with the FPC are small and marginal farmers. The members of the company are involved in cultivation of high value crops. The bulk of income of the company comes from export of grapes to countries like United States of America (USA), Europe and West Asian Countries. The company is also involved in processing activities covering a wide range of products such as fruit juice, ketchup, jam and jelly.

Currently, the company has grown to become the largest FPC in the country, with a membership of 8,000 farmers and a turnover of Rs 300 Crore. It is also the largest grape exporting company of India and has revolutionised the fruits and vegetables farming. The company has also developed forward linkages with large food retailers of the country, such as Big Bazaar for supplying fruits and vegetables.

6.2 Jaithari FPC Limited, Annupur, Madhya Pradesh

The FPC is involved in sale of agri-inputs, production of Wheat, Gram and Paddy seeds and value addition activities like cleaning, sorting, grading, packaging and tagging of farm produce. Average annual turnover of the FPC in FY 2017-18 was Rs 1.41 Crore. The company is promoted by the RI named Action for Social Advancement (ASA).

The FPC is successfully carrying out the business of input as well as output marketing. The company started the trading of fertilisers and seed and sold agri-inputs worth Rs 87 lakhs in 2017-18 to more than 500 members. The FPC works with 4-5 buyers to supply them approximately 700 MT of staples including paddy, soybean and gram.

Around 6-7 BoDs actively participate in activities of the FPC. Regular meetings of BoDs are organised on a monthly basis and registers and books of accounts are being verified at regular intervals. The BoDs have a detailed knowledge about the statutory compliances of the company.

The timely and professional approach of FPO towards institutional networking has resulted in its linkage with KVK Department, Shahdol. The members of FPC received trainings on modern techniques of cultivation from KVK. For financial and technical support, Ananya Finance and Samunnati Value Chain Finance have been linked to members.

6.3 COFE Producer Company Limited, Chhindwara, Madhya Pradesh

The FPC is involved in production of vermi-compost and selling to their members; Processing of custard apple, and aggregation & marketing of farm produce. The company recorded a turnover of Rs. 10 Lakh in FY 2017-18. The company has established a central processing unit with all necessary infrastructures such as cool chambers with a capacity of 350 Kg of pulp every day and enabling processing of 1200 Kg of raw custard apple. The company has operated successfully and performed well, therefore other FPOs are showing interest in conducting exposure visit to it.

The key business activities undertaken by the company are as follows:

• The company received Rs.10 lakhs financial support from RI for the purchase of machinery

• The company has signed memorandum of understanding (MoU) with nearby cold storage facilities to store processed custard apple

• The company also procures organic cotton from farmers and involved in the production of vermi- compost which are being sold to members

• The company also operates a full-fledged fruit processing unit and supplies pulp to various big players such as Dinshaws Ice Cream, Top N Town Ice Cream, and Venkatesh Naturals, among others.

BoDs actively participate in day-to-day activities of the FPC. Members of FPO participate in interface meetings held with suppliers and buyers. BoDs meetings are on quarterly basis and they verify registers and books of accounts at regular intervals.

The professional approach of FPC towards institutional networking has resulted in its linkage with KVK Chhindwara and ATMA, Mohkhed, which provide trainings to the members of FPCs. RI has facilitated linkage of FPC with Ghoomar FPC of Rajasthan for technical and financial support.

6.4 Pragatimitra North Kanara FPC Ltd., Uttara Kannada

The Pragatimitra North Kanara FPC Ltd is registered under companies’ act 2013. The company operates in all parts of Uttara Kannada district with special emphasis on Paddy and Areca nuts. Vegetables and Coconut are the other commodities associated with the company. In the area of its operation, the farmers face certain challenges, such as:

• The farmers with land holdings are mostly small and marginal farmers, which has resulted in migration of young family members in search of employment to faraway places and only the aged members are looking after the farm/agriculture activities.

• Non-availability of land holding and lack of agriculture work throughout the year causes results in involvement of landless labor community in non-agri sector. This has resulted in scarcity of labor for agriculture practices.

To overcome these challenges associated with the producers, the company has designed the following products:

• Purchase of indigenous and hybrid variety of paddy at farmers’ doorstep to ensure the best rates for their produce. The company has procured over 100 quintals of paddy from its members.

• Providing the skilled labor support to the farmer for harvesting of Areca Nut. This is a limited service provided to farmers who face scarcity of skilled labor. This is amalgamated with the processing product of the company where the member can ensure the timely harvest and processing of Areca Nut.

• Processing of Areca Nut where the producer can bring the raw produce into the common processing center of the company and get back the processed produce.

• De-husking Machine for de-husking of Areca Nut at the farmer’s doorstep. This product is proposed to reduce the cost of de-husking by at least 40% in comparison with manual peeling through labour.

The company has been also supplying labours like tree climbers, rope holders, Areca Nut collectors and vehicle support to Areca Nut farmers. The key benefits to the farmers from these initiatives have been reported as reduction in problem of labour shortage.

6.5 Sri Chennambika Horticulture FPC Ltd., Hassan, Karnataka

Registered in December 2016 and based out at Mosalehosahalli, Hassan (Karnataka), the FPC covers 28 villages and has 1000 farmer members at present. It has 85% members from landless, marginal or small farmers category, of which nearly one fourth are women. The company is run by 10 BoD, out of which three are female. Other than these board members, there are four permanent employees helping the company in day-to- day activities. The company has formed sales, finance and documentation committees, for special focus in these areas. The last AGM was held in September 2018, in presence of nine of the designated board members and 300 members of the FPC.

The company reported a turnover of Rs. 10 lakh in 2016-17, which increased to Rs. 5 Crore in 2017-18. The company also recorded a profit-margin of Rs. 10 lakh in the year 2017-18. The major business areas of company include sale of agri-input, forward marketing linkages, agricultural advisory and farm machinery rental services. The company majorly markets potato procured from farmers and also provides rental services for tractor, grass cutter, seed drill, coconut sheller etc.

7. Recommendations and Strategic Action Plan

Karnataka is one of the prominent states which is extensively focusing on agriculture development. The state has been also emphasising on promotion of FPCs and has set good examples of FPCs with significant success stories. In chapter 4, factual and perceptional data has been analysed from survey of 90 FPCs and these FPCs have been categorised into four broad categories (VL, EC, PC & WC). Characteristics of these FPCs have also been described along with analysis of various external and internal factors influencing FPC’s performance. Based on the outcome of analysis, in this chapter, specific recommendations have been made for each category of FPCs for further improvement and accordingly a State Level Strategic Action Plan has been proposed.

7.1 Recommendations

From the analysis it has been derived that FPCs in all the four categories have achieved milestones in one or other parameters considered for assessment. Category VL FPCs are classified as top ranked FPCs in the study because of their overall better performance on maximum number of parameters considered for evaluation. Category EC & PC FPCs are performing good on some of the parameters and category WC FPCs have marked a composite performance because of weaker performance on a few criteria. However, the category WC FPC have also performed equally or better than category VL, EC and PC in few parameters. Though, overall WC category FPCs need to strengthen governance structure and business model.

Recommendations mentioned above are based on findings of survey conducted for 90 FPCs and are broad-based in nature. However, for taking-up task of supporting these FPCs and implementation of these recommendations, customised interventions can be identified for each FPC based on diagnostic study of each of the FPC.

7.2 Strategic Action Plan

It can be understood that FPCs are trying to drive farmers into commercial agri business and creating more awareness about collectivisation concept and its benefits. Among the 90 FPCs that have been surveyed, all the FPCs have certain strengths, weaknesses and challenges which are key to determine their growth and success in future. Based on the study, customised strategic action plan has been designed to overcome the challenges faced by all categories of FPCs.

During the course of this study, it was found that the major challenges to FPCs is less participation of members in business activities of FPCs, because shareholder members expect short term returns over their investment. Thefailure of FPCs in meeting these expectations leads to disinterest of members in FPC’s activities. Another challenge is finding compatible staff for running FPCs who possess understanding about compliances, networking and leadership skills for business development.

To overcome the challenges to the growth and performance of FPCs, there is a strong requirement of strategy roadmap through building an FPC incubation support system. The incubation support system can be provided by a third-party, or specific incubation center should be set up to serve requirements of FPCs. FPCs which are in category WC should be targeted under short-term plan under the incubation support, while mid-term plan should be targeted for category EC, PC and category VL FPCs. The proposed strategy roadmap for FPCs is provided hereunder.

7.2.1 Short-Term Strategy

The short-term strategy can be implemented between 3 to 6 Months, focusing on the FPCs of categories WC, EC, PC. The key elements of strategy in short-term could be as follows:

• Identifying FPCs with lowest accumulated score of all parameters and are on the verge of shut down.

• Emphasising on FPC’s awareness among members and operational village.

• Community based activity approach to promote participation of members in each activity.

• Developing IEC material for capacity building of stakeholder on legal & statutory compliances.

• Organising exposure visit of members at successfully running FPC.

• Facilitating support for raising capital and networking with the banks / Non-Bank Finance Companies (NBFCs) / other sources.

• Community engagement program should be organised on regular basis to mark FPCs presence in working villages.

• Documentation management and record keeping should be emphasized to keep track of all activity.

7.2.2 Medium-Term Strategy

The medium-term strategy can be implemented between 6 to 18 Months, focusing on the FPCs of VL category. The key elements of strategy in medium-term could be as follows:

• Identifying best performing FPCs based on accumulated score of all parameters and have concrete road map for business development.

• Assistance in making business proposals and pitching institutional buyers of agri commodity or investors in agribusiness venture.

• Networking with industry, potential buyers, importers.

• Legal support for developing contract agreements and other documentation support.

• Facilitating finance / capital for creating infrastructure, value addition facilities / processing etc.

• Community based activity approach to promote participation of members in each activity.

• Strengthening value chain activity of FPC by installing small processing unit of raw agricultural commodities.

• Developing websites and social networking identities of FPC.

As the need of handholding support to FPCs is of critical importance, it is proposed to set up an Incubation Support System for providing handholding support and capacity building of the FPCs of different categories. Incubation support center should work on detailed plan based on different aspects. Broadly, the scope for proposed Incubation Support Centre can be as under:

Incubation support center should work on detailed plan based on different aspects. Broadly, the scope of support through proposed Incubation Support Centre could be in the following areas:

• Support for institution development for FPC

• Support for institution development for FPC

• Networking platform (peer learning, entrepreneurs, investors, business partners, expert

• Organizing capital, through debt / equity or working capital

• Technology identification and adoption

Incubation center should have professionals from development sector, corporate sector, agriculture policy makers and agriculture statisticians to ensure FPCs get end to end solutions for constraints facing in management of producer company.

Annexure

Annexure 1: Normalization, Segmentation and Scoring of Absolute Values
S.No.	Parameter Category	Parameter	Normalisation and Conversion of Value	Scoring and Segmentation
1	FPCs Approach to Activities	Number of equity shareholders	All absolute values Normalised into Percentile against the highest value (i.e. 1250 Shareholders taken as 100 per centile and all the other absolutes values converted into per centile against it)	Number of general members   1 - 0 to 250 members 2- 251 to 500 Members, 3 - 501 to 750, 4 - 751 to 1000 5 - 1001 and above
2		Number of general	All absolute values	Number of general
		members	Normalised into	members
			Percentile against the
			highest value (i.e. 1250	1 - 0 to 250 members
			Shareholders taken as	2- 251 to 500 Members,
			100 per centile and	3 - 501 to 750,
			all the other absolutes	4 - 751 to 1000
			values converted into per	5 - 1001 and above
			centile against it)
3		Paid up Share Capital	All absolute values Normalised into Percentile against the highest value (i.e. 62.50 Share Capital taken as 100 per centile and all the other absolutes values converted into per centile against it)	Paid up Share Capital (in Rs.)   1 - 0 to 2.50 Lakhs 2- 2.51 to 5.00 Lakhs, 3 - 5.01 to 7.50 Lakhs 4 - 7.51 to 10.00 Lakhs 5 - 10.01 Lakhs and above
4		Number of BODs meetings organized during (FY 2017-18)	All absolute values Normalised into Percentile against the highest value (i.e. 43 BOD meetings taken as 100 per centile and all the other absolutes values converted into per centile against it)	Number of BoDs meetings organized during (FY 2017-18)   1 - 1 to 5 2 - 6 to 10 3 - 11 to 15 4 - 16 to 20 5 - 21 and Above