In 2019, Bhavithra J., a recent agriculture graduate, took a bold step in her career by joining Vilathikulam Pudur Pulses Producer Company Ltd. as its Chief Executive Officer (CEO). This farmer-run company, based in rural Tamil Nadu, had been established in 2016 but was grappling with significant challenges. It had already seen three CEOs come and go, lacked a comprehensive list of its farmer-shareholders, and struggled to stay afloat. To make matters worse, the organization couldn’t even afford to pay Bhavithra a basic salary of ₹25,000 per month, making her entry into the role a tough decision.
Bhavithra’s situation mirrors the struggles of many farmer producer companies (FPCs) across India. FPCs are seen as a solution to empower small farmers, enabling them to pool resources, access better markets, and enhance their negotiating power. However, the path to success is riddled with obstacles, from financial constraints to operational inefficiencies. While some FPCs show promise, the broader question remains—can farmer-run enterprises truly scale and become significant players in India’s agricultural landscape?
The Emergence of Farmer Producer Companies
Farmer Producer Companies were conceptualized in India in 2002, following amendments to the Companies Act of 1956. The intent behind creating FPCs was to provide farmers with a formal structure to tackle challenges like access to markets, finance, and inputs, collectively. An FPC is a hybrid entity, merging the cooperative structure’s welfare focus with the business efficiency of a private limited company. Farmers are the shareholders, and the company is owned and operated by them.
The collective nature of FPCs allows farmers to achieve economies of scale, reduce their operational costs, and secure better deals in the marketplace. FPCs are equipped to negotiate for lower input prices (for items like fertilizers and seeds) and market produce directly, eliminating intermediaries. In theory, FPCs hold the potential to increase the incomes of small and marginal farmers by enabling better access to profitable markets.
Initial Struggles and Operational Challenges
Despite their potential, FPCs face significant hurdles in practice. The early struggles of Vilathikulam Pudur Pulses Producer Company Ltd. highlight the types of challenges these organizations often face. The company’s governance issues, such as frequent leadership changes and disorganized operations, hindered its growth. There was no clear record of its shareholders, and without financial backing, day-to-day operations were a constant struggle.
These challenges are not unique to this particular company. A majority of small FPCs in India face similar operational hurdles. With limited financial resources, they find it difficult to attract professional management and invest in necessary infrastructure. Many are also highly dependent on government grants or subsidies, which are either insufficient or delayed. Additionally, without proper market access, FPCs struggle to sell their produce at competitive prices, limiting their ability to expand.
The Importance of Leadership and Professional Management
Leadership plays a critical role in the success of any FPC. A skilled CEO, like Bhavithra, can have a transformative impact on the company’s fortunes. A professional approach, combined with knowledge of the agricultural sector, can help these companies navigate market challenges, streamline operations, and create long-term strategies for growth. However, most FPCs face significant hurdles in attracting and retaining such talent due to financial limitations.
In Bhavithra’s case, despite the constraints, she accepted the challenge. Her initial efforts focused on organizing the company’s operations, starting with compiling a list of the company’s farmer-shareholders. She also began conducting training sessions to educate farmers on improved cultivation practices, which gradually helped increase yields and improve the quality of their pulses. Furthermore, she worked to establish relationships with buyers, enabling the company to access better markets, slowly but surely improving the company’s financial situation.
Market Access: A Critical Factor
Access to better markets is one of the most crucial elements for the success of FPCs. Many struggle because they are limited to selling in local markets where prices are highly volatile and often unfair. Additionally, FPCs that do not produce at scale cannot meet the requirements of larger buyers like institutional markets, retailers, or export companies.
To overcome this, several FPCs have sought partnerships with private companies or government agencies that can provide them with market access. For instance, some FPCs have entered contracts with food processors, guaranteeing a steady market for their produce. Others have established direct relationships with retailers or have begun selling their products online through e-commerce platforms. These partnerships are vital for FPCs to grow and become sustainable businesses.
Government Support and Policies
Government support has played a significant role in the growth of FPCs. Over the years, both central and state governments have introduced several initiatives to promote the formation and functioning of FPCs. Organizations like the Small Farmers’ Agribusiness Consortium (SFAC) have been instrumental in providing financial aid and technical support to FPCs. These government schemes also emphasize improving market access for small farmers.
However, while government assistance is beneficial, it is often not enough to ensure the long-term viability of FPCs. Many FPCs remain dependent on grants, which can create inefficiencies and limit their ability to innovate. For FPCs to thrive in the long term, they need to move toward sustainable business models that generate revenue and reduce their dependence on subsidies. Developing market linkages, improving operational efficiencies, and investing in infrastructure are essential steps to achieving this goal.
The Road to Success: Can Farmer-Run Firms Scale Up?
The potential for FPCs to transform the agricultural sector in India is immense. By pooling resources, improving access to markets, and empowering small farmers, FPCs have the capacity to raise farmer incomes and improve livelihoods. However, significant hurdles remain that must be addressed if FPCs are to truly scale.
One of the most important elements is strong leadership and professional management. CEOs like Bhavithra, who bring both expertise and a passion for improving the lives of farmers, are critical to the success of FPCs. Without skilled leadership, FPCs are likely to struggle with the operational inefficiencies and market barriers that plague many small businesses.
Market access is another key factor. FPCs need to establish connections with larger buyers to ensure stable, profitable outlets for their produce. Collaborations with private companies, retailers, and e-commerce platforms are crucial for creating these connections.
Finally, while government support will continue to play a role, FPCs must work toward achieving financial independence. This can be done through developing robust, self-sustaining business models, investing in infrastructure, and scaling operations to meet larger market demands.
The challenges for FPCs are numerous, but the successes of companies like Vilathikulam Pudur Pulses Producer Company Ltd. demonstrate that farmer-run enterprises can succeed with the right combination of leadership, market access, and financial stability. If more FPCs can adopt similar strategies and overcome these barriers, they have the potential to become major players in India’s agricultural economy, helping millions of small and marginal farmers improve their livelihoods.
Disclaimer: The thoughts and opinions stated in this article are solely those of the author and do not necessarily reflect the views or positions of any entities represented and we recommend referring to more recent and reliable sources for up-to-date information.
