Richer harvest: Ensuring better prices for farmers

Published: December 5, 2018 2:00 AM

Digital communication tools and CBOs will help boost farmers’ bargaining power.

These CBOs can aggregate the produce of small and marginal farmers to form well-designed, commodity-based integrated value chains connecting consumers, retailers, processors and exporters.

By Sudhir Kumar Goel  

The widening gap between farm and fork due to multiple layers of middlemen has led to lower realisation for farmers for their produce, despite the spend by urban consumers on produce increasing. While the issue has been there for decades, little progress has been made to narrow this gap. However, technology has now come to the rescue by offering cheaper solutions to build community-based organisations (CBOs) on the lines of farmer producer organisations (FPOs), primary agricultural credit societies, and fruits & vegetable producer organisations.

Digital-age communication tools (smartphones, cheap internet and a rich ecosystem of apps) have been instrumental in bringing growers together under CBOs seamlessly. These CBOs can aggregate the produce of small and marginal farmers to form well-designed, commodity-based integrated value chains connecting consumers, retailers, processors and exporters.

Constraints for farmers include their marginal holding limit, inability to invest in new yield-enhancing technologies, and lack of bargaining power due to lack of scale that also impacts the purchase price for seeds/fertiliser. Needless to say, small farmers end up buying farm inputs at higher prices and receive lower prices for their harvest, effectively making lower profits than large farmers or even incurring losses. Their condition is also reflected in the challenges they face in transporting their produce over long distances, despite knowing that prices are more remunerative in metros and other large but distant markets.

New-age communication tools have been the gamer-changer as CBOs are empowering small farmers with the same benefits as large farmers, and bringing both on a par. The collective effort of farmers in selling their output in large cities as also for exports is something that Nashik-based Sahyadri FPO has successfully demonstrated. The success of the collective effort is not restricted to cutting input costs and ensuring higher realisation, but also cutting down on waste. India has a dubious record on wastage of agriculture produce, estimated to be `92,000 crore at 2011 prices annually, due to inadequate processing capacity and poor handling practices. These are now being overcome through good practices followed by CBOs, including setting up of storage facilities such as cooling chambers to ensure that the life of perishable produce is enhanced.

While consumption of perishable produce like fruits and vegetables is on the rise compared to cereals or pulses, largely due to rising health consciousness among consumers, farmers have been unable to capture the increase in prices due to volatility in the market. The price delta in this segment is as high as 50% between the peak and non-peak periods. More often, farmers end up missing peak prices and end up selling during a glut period. The scenario is changing fast as CBOs are playing a crucial role in storage and facilitating average prices as a group so that farmers can safely avoid the lowest prices.

While there are a few successful FPOs like Sahyadri for grape farmers in Maharashtra, their share in the overall agri-business remains tiny. The country need thousands of FPOs to streamline the value chain as organised retail is expanding in the country. CBOs can play a crucial role in bridging the gap between farm-gate and retail prices. Retail chains cater to several thousands of consumers everyday, but it is not feasible for them to procure commodities like onion or tomato from thousands of farmers. Hence, there is the need for an aggregator in the form of CBOs, to deliver bulk harvest with certain quality parameters throughout the year.

Taking a step towards mitigating risk, some FPOs have even entered into hedging their prices on commodity exchanges like the National Commodity and Derivatives Exchange (NCDEX). They can play a crucial role in not only enhancing farmers’ realisation, but also in curbing unnecessary speculation in the futures market, as FPOs are in a position to deliver goods at the expiry of futures contracts. Exchanges have also given concessions to FPOs in terms of margin money for such contracts. Earlier this year, some FPOs even got cattle-feed from NCDEX as it was available cheaper on the exchange platform. It just shows that CBOs can empower marginal farmers on various fronts.

With the right policy push from the government, CBOs are the right format to stop the exploitation of farmers by middle-men and provide a feasible alternative to the Agricultural Produce Market Committees (APMCs), on the lines of the cooperative movement in milk that boosted farmers’ incomes. We are going to witness a paradigm shift as CBOs change the way farmers produce and sell commodities, and ensure higher income for farmers without putting pressure on consumers’ wallet.

The World Bank-aided project, in sync with the Maharashtra Village Social Transformation Foundation (MVSTF), Maharashtra State Rural Livelihoods Mission (MSRLM), and Maharashtra Agricultural Competitiveness Project (MACP), intends to collaboratively formulate and implement the State of Maharashtra’s Agribusiness and Rural Transformation—SMART—Livelihood Project for Rural Maharashtra. This would supplement the state government’s cumulative efforts and resources through various central and state government schemes, programmes and projects for development and transformation of agriculture and rural sectors.

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