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Policy brief

Enabling Farmer Producer Companies’ Success in Marketing

This policy brief shares recommendations for supporting Farmer Producer Companies (FPCs) in agricultural markets.

In 2019, IDinsight visited six Farmer Producer Companies (FPCs) to study challenges they face in agricultural marketing and identify solutions that could facilitate their success. We worked with the Ministry of Agriculture to make recommendations on steps government agencies can take to support FPCs in agricultural markets.

Focus Group Discussion with FPC members in Tamil Nadu

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What services and/or policies could support FPCs in post-harvest activities? Based on our conversations with CEOs and support organisations working with FPOs, we identified four key steps that the Ministry, SFAC and NABARD can take in their efforts to promote FPCs, to help them tackle the challenges discussed above.

  1. Provide targeted training for FPC management on credit instruments and marketing skills to access better buyers
    Training for FPC management – CEOs and Board of Director members – is largely conducted through RIs. While all CEOs had attended at least one training, these sessions focus heavily on compliance requirements and farmer mobilisation, rather than marketing and business planning. We identified three areas where greater training is required.

    1. Marketing: All CEOs wanted additional training in marketing. To help FPOs form business connections outside local markets, they need training on the needs of different kinds of buyers (for example, quality and quantity requirements, or frequency and timing of purchases), how to meet these needs, and how to initiate conversations with new buyers unfamiliar with FPOs.
    2. Credit Instruments: Few CEOs were aware of different sources of credit. RIs must include alternative sources of finance, especially credit limits on current accounts and warehouse receipt financing, in their trainings for FPC CEOs.
    3. Government Support: Not every CEO knew of central and state government schemes that could help FPCs in marketing and agricultural value addition, such as the credit guarantee scheme offered by SFAC, or farm mechanisation subsidies. These should be an essential part of trainings conducted for FPC management.It is important for training to be conducted by professionals experienced in marketing. Most RIs, however, are non-profit organisations with little experience in business planning or marketing. We recommend bringing in organisations like Nabkisan or NCDEX to conduct some training for FPC CEOs on marketing.
  2. Promote state-level federations of FPCs to facilitate market linkage and provide effective training
    State-level Farmer Producer Companies can play a crucial role in supporting FPCs within the state, especially in market linkage, training and policy advocacy. State FPO federations need greater support from state and central governments, especially higher initial investment to attract experienced management.For example, the Madhya Bharat Consortium in Madhya Pradesh connects FPOs with buyers, procures produce from its member FPOs to aggregate and sell to a large buyer, provides member FPOs with breeder seeds from agricultural universities for seed production, connects members with public schemes, and negotiated a deal with state mandis to provide FPOs with storage space at lower rates. The Consortium also works with state and central governments to advocate for policy change to support FPOs, and is getting certified as a trainer for FPOs. Madhya Bharat has an experienced CEO and board of directors who provide the strategic vision and coordination to build an ecosystem for FPOs in the state.
  3. Prioritise FPCs in government support
    The central government offers many forms of public support to farmers that can be very effective if extended to FPOs. For example, farm mechanisation subsidies can be critical for FPOs, especially in accessing grading and processing machinery for value addition. Clearly prioritising FPOs in scheme guidelines will encourage district and state officials, who are not always aware of FPOs, to spread awareness of the schemes among FPOs and support their applications.In Tamil Nadu, for example, the Mission on Sustainable Dry Land Agriculture scheme explicitly prioritises FPOs in setting up a value addition machinery unit and creating custom hiring centres.

    Other schemes that can more clearly prioritise FPOs include crop diversification efforts under MIDH, storage and seed production subsidies, and public warehousing (through reserving space for FPOs in public warehouses).

  4. Facilitate FPC-buyer interactions to build connections and grow buyer understanding of FPCs
    One factor limiting FPCs’ abilities to connect with new buyers is buyers’ unfamiliarity with FPCs, or lack of willingness to trust new organisations.In this context, ‘buyer-seller meets’ specifically for FPCs organised by state governments could play a major role in helping buyers understand FPCs. These events could also help FPCs understand the requirements of different kinds of buyers, and build professional connections for business transactions.