Common Facility Centre: A rallying point for SHG-FPO convergence

There is much to gain for FPOs if they converge with local SHGs. Nothing is more amenable for SHGs than delegating the responsibility of building and operating CFCs on behalf of FPOs.

By Ch Radhika Rani, R Divakar
Published: Thursday 14 May 2020

While farmer producer organisations (FPOs) are gaining momentum in all fronts related to value chain development endeavours of their focused commodities, self-help groups (SHGs) are reaching the next orbit of livelihoods development programs through cluster-based approach.

But these two important developmental initiatives are taking place in isolation like two alien entities in the rural socio-economic eco-system.

The binary approach is mostly because of the watertight operations of two-line departments monitoring the two different important development activities:

  • Ministry of Rural Development (MoRD)-National Rural Livelihood Mission (NRLM) operating through respective state Rural Livelihood Mission (SRLMs) for SHGs
  • Ministry of Agriculture and Farmers' Welfare (MoA & FW)-Small Farmers’ Agribusiness Consortium (SFAC) and National Bank for Agriculture and Rural Development (NABARD) for FPOs

FPO landscape

FPOs in India are emerging slowly and steadily with NABARD and SFAC spearheading the movement of farmer’s collectives. Nearly 7,000 FPOs are registered in the country, most of them under Farmers Producers Companies Act, 2013.

There was a  big policy push for FPOs in 2013-14, with the  circulation of National Policy and Process guidelines for FPOs, the launch of ‘Equity Grant and Credit Guarantee Fund Scheme’ (2014) of SFAC, creation of Producer Organization Development Fund (PODF) of NABARD.

Based on the experiences gained so far and to catalyse the FPO movement in the country, the Union government recently announced promotion of additional 10,000 FPOs through SFAC, NABARD and NAFED. The FPOs, being a meeting point of cooperative spirit and corporate governance, have quickly attracted farmers across almost all states. Bankers are now not hesitant to support viable value chain development projects to FPOs.

Convergence with divergent stakeholders is the heart and soul of these FPOs. The Ministry of Agriculture and Farmers’ Welfare ensures resource push through SFAC backed-up by government-sponsored agriculture development schemes such as Rashtriya Krishi Vikas Yojana and Integrated Mission for Horticulture Development.

On the other hand, the Union Ministry of Rural Development is giving a big push to women-based collectives ie producer groups to federate into producer enterprises in the form of producer companies that  are purely women-based. 

Gender perspectives

Women are the backbone of Indian agriculture. Many studies have given empirical evidence to support the fact that women’s contribution to agriculture, both in terms of labor and managerial efficiency, are on par with men. In a way, it is impossible to imagine Indian agriculture without substantial stake and contribution from women.

The National Rural Livelihood Mission-supported SHGs are purely women-based, and women-centric savings and credit movement has its roots in gender empowerment. SHGs have been the entry points for source of micro-loans and livelihood investment in rural households.

The SHGs of women and their federations have access to bank loans to the tune of Rs 5 lakh to Rs 10 lakh without any collateral. These loans are being operated at 99 per cent recovery levels, becoming the most favoured priority sector lending activity for banks.

The government is also dovetailing many of their welfare programmes to SHGs to better the quality life indicators of women members and their households. Interestingly, some of the SHG members who are active leaders in their own groups and federations have also been motivated to buy shares from the FPOs in their villages.

In fact, SFAC has mandated that there must be at least one lady director in the board of FPC to make the FPO eligible for SFAC equity grant support scheme which is to the tune of Rs 15 lakhs per FPO.

Can FPOs be a point of convergence for SHG-based livelihoods clusters?

Value chain-centric FPO activities envisage tasks encompassing pre-production to consumption. They include seed procurement, nurseries, organic method of cultivation, post-harvest processing and marketing. Having a common facility centre (CFC) by an FPO boosts its economic activities by way of

  • Ensuring faith of the farmer members in investing in the equity
  • Handling the primary processing and grading activities of the commodities and
  • Storing the inputs that are required for their farmer members

However, investing on common facility centre by the FPOs from their equity mobilised initially will lead to the ‘egg or chick first dilemma’. The Andhra Pradesh government recently announced that a CFC for value chain development activities shall be developed through SHGs in each mandal or cluster.

The proposed CFC shall have financial support from banks and government grants. The CFC can be tool for a symbiotic growth model wherein women groups contribute to post-production value chain development and FPOs focusing on production-related challenges.

To actualise the strong convergence of FPOs with SHGs for potential use of existing social infrastructure of women groups, the following suggestions were made:

  • Enroll SHG members as shareholders of FPOs and involve them in the governance and management in letter and spirit right from beginning
  • Make plans in such a way that a win-win eco-system is developed between FPO and SHG social infrastructure
  • Operate the business plans of FPOs to full potentiality, making use of SHG Bank linkages that can provide much needed financial resources
  • Leverage government sponsored programmes which are much easier available through NRLM for the benefit of FPOs
  • Never undertake risky businesses involving SHG women like stocking in speculation of price rise, which may jeopardise the entire partnership

There is much to gain for FPOs if they converge with local SHGs and nothing is more amenable for SHGs than delegating the responsibility of building and operating CFCs on behalf of FPOs.

Success stories in this front are emerging and a supportive policy framework can further deepen and widen this win-win convergence.

Ch Radhika Rani is an associate professor and head, Centre for Agrarian Studies, National Institute of Rural Development and Panchayati Raj (NIRDPR), Hyderabad

R Divakar is  Lead Technical, FPO, Centre for Agrarian Studies, National Institute of Rural Development and Panchayati Raj (NIRDPR), Hyderabad

Views expressed are the authors’ own and don’t necessarily reflect those of Down To Earth


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