'SFAC mobilises farmers at grass-roots'
Sumanta Chaudhuri, Managing Director of SFAC, discusses the unique features of the SFAC model.
Please tell us about the prime objectives of Small Farmers' Agri-Business Consortium (SFAC).
The fundamental objectives of the SFAC are to promote agri-business and catalyse private investment apart from forming and developing farmer producers organisation. Also, the SFAC has now become the implementing authority for the electronic national agriculture marketing (eNAM) platform.
Please explain how the concept of farmers' collectivisation would help in improving the standards of farmers.
The country has experienced a huge success in the dairy sector just because of farmers' collectivisation concept. It's our firm belief that the same level of success can also be achieved in the agriculture sector. Given that farmers grow traditional crops, there is a huge scope in this sector and the concept of formation of Farmer Producer Organisation (FPO) and Farmer Producer Companies (FPC) is a move in this direction.
The FPO formation initiative was kick-started in 2011-12 to give strength and momentum to farming sector in this country. In 2013, the Department of Agriculture had brought out a policy and process guidelines for FPOs which is still the basis for the formation of FPOs by many entities, including the SFAC, which was designated as single window agency for the promotion of FPOs.
Now, the SFAC has been able to promote about 8 lakh smaller and marginal farmers by forming 750 FPOs out of which around 675 are already registered while the remaining would get registered during this financial year.
What are the attractive features of SFAC model?
There are several unique features of the SFAC model and all are not coincidental, but deliberate which has been developed after a well thought out consultation process. In the case of FPOs promoted by SFAC, the minimum number of farmers should be 800 to 1,000. The prime reason behind this feature is that the benefits of economies could only be achieved through aggregation. It's a fact that any dilution to the numbers might lead to the formation of more number of FPOs; but our purpose is not to increase the number of FPOs, we want to make them sustainable and viable and convert them into business entrepreneurs. It's for that reason that we have decided not to compromise on the quality.
There are some FPOs which are being promoted by NABARD, state governments and other entities, but they don't have a minimum number of farmers' criteria in their models.
The other important feature of the FPOs formed by the SFAC is that they are registered under the protection of Companies Act, which means all FPOs are companies. All the FPOs are subject to corporate compliances, proper accounting procedures and they have to constitute a Board of Management. The head of the FPO is known as a CEO, which is of course not equivalent to a CEO of a private company, but the head of the FPO should be a local person with the required knowledge to run a 'company'.
What are the challenges being faced by SFAC in the making FPOs and FPCs a viable entity?
There are several challenges that SFAC is facing in making FPCs a profit-making entity. The three-year handhold period is insufficient to convert FPOs into profiteering body. We start from the grass-roots level, which is difficult as aggregating 800-1,000 people into one common objective by contributing fair capital is a challenge in itself. Given that SFAC has no equity in it, the FPCs are companies owned and contributed by farmers only.
It's the SFAC that mobilises farmers at grass-roots – right from the village level, panchayat level, to block level. We struggle to build consensus among conflicting groups, conflicting interests and conflicting associations. So bringing them to a common platform is a challenge.
Convincing them to form FPOs and assuring them that these FPCs would help in doubling their income, adds to the list of challenges faced by agribusiness consortium.
How would the FPOs help in doubling farmers' income by 2022?
The concept of FPOs is aimed at empowering farmers – socially and financially. It is proving helpful in doubling the income of farmers as FPOs means a group of 800-1,000 farmers, so when they procure seeds and fertilisers collectively, their input cost get reduced and they get better price of their produce.
The other key component of FPOs promoted by SFAC is custom hiring, which is essentially hiring of all farm equipment. In this case, numbers are important as individual farmers cannot afford to hire costly equipment. When an FPC hire a needed equipment, it does two things – it allows all its individual members to use the equipment in terms and after that, the FPC can also rent out the equipment to other farmers who are not members of FPOs and earn some money.
Under this model, the FPCs are empowered to run a retail outlet by themselves and there are many such FPCs which run retail outlet and have huge turnovers.
It's a hard fact that financing institutions don't show much interest in providing loans without any collateral. How is SFAC dealing with finance issue?
The access to finance was really a great challenge, but SFAC offers Equity Grant Scheme (EGS) and Credit Guarantee Scheme (CGS) to FPCs to improve the availability of working capital and development of business activities.
Under the EGS, the SFAC give a matching grant of Rs 10 lakh to the FPCs, which is a part of their share capital and is distributed proportionately among their members. The CGS run by SFAC provides a guarantee cover (up to Rs 1 crore) to financial institutions for lending FPCs without any collateral.
What are the new initiatives taken by the SFAC?
The SFAC has introduced FPOs in the fisheries sector; a pilot project involving the formation of 21 Fish Farmers Producer Organisations (FFPOs) in the major fish producing states has been submitted. For the northeast region, SFAC and Spice Board are working with North Eastern Council (NEC) to form spice-based FPCs in Sikkim and Arunachal Pradesh.
The SFAC has taken several other new initiatives such as advanced training programme for the board of directors and CEOs of FPC; professional handholding of FPCs; strengthening of infrastructure through dovetailing with central/state government programmes; promotion of Fish Farmers Producer Organisations; fertilizer dealership for the FPCs.
We have also collaborated with National Institute of Rural Development (NIRD), Hyderabad; and MANAGE, Hyderabad; for agribusiness. Similarly, we are also tying up with other institutes of similar mandate to meet different requirements of FPOs/FPCs.