How Farmer Producer Companies change lives and livelihood

Chellappa is a shareholder-farmer of Valanadu FPC and is from Ilayavanthapuram near Mayiladuthurai. Past two years have been good for him as he sells his organically cultivated paddy he harvests from his two-acre property to the FPC (Farmer Producer Company). His profit margin is 15-20% since there is no load men or logistics expenses involved. Of all the benefits, “I am really happy with the meticulous weighing of the bags and the price the FPC pays,” says Chellappa.        

The FPC market

Since 2013, Valanadu Sustainable Agriculture Producer Company, Sirkazhi, a municipal town in Mayiladuthurai district, founded to establish a sustainable platform for paddy-farmers, and handholding them by supplying inputs, procurement, and marketing of the produce has been serving farmers in 6 blocks, 56 village panchayats in Mayiladuthurai and Nagapattinam districts. Slowly as customer needs grew, the FPC brought in 102 women shareholders from 6 villages surrounding Sirkazhi.    

“Our customer reach is half-and-half- 50% is through wholesale and another 50% retailed through Pavai, our brand outlet in Vaitheeswaran Koil. Our total turnover is ₹1.3 crores out of which direct sale to customers is ₹78 lakhs,” says Subhashini Sridharan, Valanadu FPC.

Farmer Producer Companies are nearly twenty-four years old in India. In 2019, the Government of India gave a fresh lease of life to the outfits. With a budgetary provision of ₹6,865 crore, the plan was to launch 10,000 FPOs by 2024.

As the supply chain network got disrupted by COVID and demand for direct-to-home deliveries rose, several tech companies joined hands to front-end FPCs, working out the logistics so that fresh farmer produce reached needy customers without any roadblocks.

According to the Tata Cornell Institute for Agriculture and Nutrition, 65 percent of FPCs were registered after 2019. As of now, six states viz Bihar, Odisha, Tamil Nadu, West Bengal, and Uttar Pradesh account for two-thirds while Maharashtra accounts for one-third of registered FPCs. 

FPC focus-areas:

Dattaguru Farms, the FPC in Kalamnuri in Maharashtra started with only single-commodity marketing with soyabean. Suryaji Shinde, Director, Dattaguru Farmer-Producer Company says that the farmers’ awareness is very low in terms of fair prices for produce and this blocks their growth. “We make it a point to keep our 398 farmer-shareholders informed of the market prices, along with the day-to-day variations,” he tells us.

Though these FPCs have a growing portfolio of products, market penetration and sustained presence is possible only if there is a comprehensive agronomy service that fills the gaps wherever middle-men come in.  

With agri-advisories, input division, weather station to give region-specific data, an active R and D to bring in climate-resilient crop varieties, in-house labs to test water and soil quality to help them make better decisions, Pune-based Sahyadri Farms guides the 800 farmer-shareholders and 25,000 registered through different product lines towards better sustainability goals via technology, via intervention and getting better value for their produce through efficient marketing.

Even then, says Azhar Tambuwala, Director, Sahyadri Farms, “In order for the ecosystem to run successfully, all stakeholders in the agri value-chain, such as vendors, suppliers, transporters, shipping, agents, labour, employees - and everyone in between must benefit, whilst at the core, it would be the farmer.”

The agri-tech value-add:

Small or big, FPCs have invested in a lot of infrastructure for processing and product value-additions, making quality-checks and analytics to measure their branding. From dehydrators, powdering machinery, polishers, automatic harvestors to freeze-dryers, closed-network apps to interact and software to analyse users-data, agri-tech has already made significant inroads into these FPCs’ operations.

But the real farmer empowerment lies in wider reach. Though B2B sales and collaboration with other FPCs provides a buffer, all FPCs aim for the coveted D2C, with a wide retail presence. “Today, 40% of Sahyadri’s turnover is from the domestic market but through indirect selling. Appx 70% of the Kissan branded Ketchups, squashes, jams and pastes are manufactured at our place.  Coca-Cola brands of Maaza and MinuteMaid contain our direct-from-farm processed fruit purees and concentrates,” says Tambuwala.

Market odds:

Supermarkets kill our reach, says Subhashini. Controlling 60-70% of sales, they take the lion’s share and run counter to the equitable development of other players. So more than size and market share, small-sized regional FPCs like Valanadu are left to fight for market-stability and viability. From rice to pulses, Valanadu FPC’s has expanded product range to include farm fresh milk, handmade palm baskets and jute and paper bags. “Lack of working capital at a lower rate of interest for procurement of produce has kept us from scaling up,” says Subhashini.

Price volatility is another formidable challenge. When a particular produce is in demand, all farmers cultivate the same crop creating a glut, leading to price fall.

The collective entrepreneurship:

While public-private partnership initiatives remain an explorable alternative for periodical scale-ups, for sustainable growth, FPCs need their own brand identity and market space. For that to happen, brands, consumers, farmers, and government should work with the vision to spread more awareness regarding quality and exclusivity of the farmer produce.  

Sahyadri Farms are the largest grape exporters from India and largest growers and processors of tomatoes, turning over $200 million last season. Even after raising €40 million through Series A Impact Funds last year, Sahyadri has not stopped building capacities and expanding across new avenues. “Indian farmer collectives should be made more of the norm, which gives farmers more independence and control over their produce resulting in better incomes and parity and thus access to a better standard of life. The urban-rural divide should be bridged to make this a bigger reality,” says Tambuwala.

For farmers to continue to enjoy a collective benefit, says Shinde, “The FPC should be ready with a go-to-market strategy for any/all kinds of produce in the region.”