DRAFT FOR DISCUSSION

Bharat Kisan Producer Company Ltd.

Is it time to promote a national level producer company to give viable scale to FPOs?

With two major announcements aimed at boosting the activities of farmer producer

organisations (FPOs), the Budget Speech of the Union Finance Minister in the Lok Sabha

on 28th February 2013 helped to mainstream the idea of FPOs as a mechanism to enhance

the income of farmers and reduce some of the risks of agriculture. Even as the facility for

matching equity investments in FPOs and the establishment of a Credit Guarantee Fund to

incentivize banks to lend to FPOs comes on stream in the next few months, several

challenges facing FPOs in seeking greater access to fair markets remain to be addressed.

In particular, managing a viable scale of operations to leverage collective bargaining

power in the market remains a formidable hurdle. Aggregating raw produce at a cluster of

several hundred or even a few thousand farmers seems to be a necessary, but not sufficient

condition to deal with market players from a position of strength. More often than not,

local level intermediaries are replaced with regional/state level intermediaries, with more

or less unsatisfactory outcomes in terms of price realization and terms of trade. The ability

to influence the value chain in a significant manner remains an elusive goal for the

majority of FPOs (with the possible exception of those focused on dairy activities, where

the demand-supply imbalance helps to derive better terms from the market).

Recent experience in the promotion of FPOs reveals that individual anxieties and

misgivings about the role of collectives in extracting better terms from the market do not

abate merely by acquiring membership of these bodies: it is the ability of these collectives

to deliver a better outcome in all segments of the agriculture value chain, from input supply

to marketing, that is key to sustained member interest and participation. The example of

Amul also continues to teach that building scale and addressing a pan-India market is an

essential pre-requisite of achieving sustained returns to primary producers of agricultural

commodities, besides meeting the necessary management costs of the value chain.

The time may have come, therefore, to talk of replicating what Amul did with milk for a

larger basket of agricultural commodities, notably cereals, pulses, oilseeds and fresh

produce (which includes fruits, vegetables, poultry, animal and fish products). However,

the institutional model that Amul created, in the form of a vertically integrated cooperative

institution, is not necessarily the only route available today to link producers to the market.

It is possible to preserve the autonomy and independence of the basic producer body at the

grassroots, while using their collective buying and selling power to leverage opportunities

in aggregation.

The core idea is to promote a national level farmer producer company, tentatively named

“BHARAT KISAN PRODCUER COMPANY LTD –BKPCL” which would own a

unique “Bharat Kisan” brand, offering a full range of support services to FPOs and helping

them to market basic, semi-processed and processed agri products.

The broad contours of the idea are as follows:

Leveraging the present interest and policy support to promote farmer collectives at the

national level, SFAC submits a plan, prepared in collaboration with an alliance of civil

society partners, to float BKPCL as a national level FPC.

An initial corpus of Rs. 100 crores is sought from GOI as a one-time matching equity grant

to launch BKPCL.

1000 FPOs (including producer companies, SHG federations, and other non-dairy producer

bodies) are targeted for membership of BKPCL, with a primary membership base of at

least 100 lakh farmers.

Rs. 100 crores is raised from the membership base of the member FPOs, giving BKPCL

significant financial clout from the beginning. Member equity can be brought in over an

extended period to attract the maximum numbers.

BKPCL functions as an independent FPC based out of the NCR, with state level FPOs

hosting regional/state offices.

SFAC provides administrative support for the first 3 years to promote the activities of

BKPCL, but the entire management is independent of the government and controlled by a

strong board, with professional managers hired from the market/on deputation from partner

civil society partners.

BKPCL prepares business plans for various value chains and implements them by

leveraging member strength in different regions for specific crops/commodities. It deals

with input suppliers for sourcing quality inputs for members, ties up with financial

institutions for credit, insurance, savings, cash transfer and other services, and finally

explores market opportunities to maximize returns to producers in the membership

network. It targets export markets from the beginning to play on commodity groups where

India enjoys significant competitive advantage.

BKPCL leverages its strength to influence policy reform at various levels, from the local to

the national, in key areas such as marketing, licensing, standards, exports and subsidies.

Shareholding of FPOs in BKPCL does not in any way make them administratively

subservient to the national level producer company: rather, BKPCL is seen as a FPO-

owned service and marketing support entity, responding to member-FPO needs on

demand. It is driven only by the demand and needs of the FPOs and does not set its own

agenda independently. Thus, BKPCL is not a federation of FPOs of the Amul model; in

fact, it is envisaged as an independent business enterprise floated by FPOs with joint

equity, to provide higher scale services which are not possible to leverage at every

individual FPO level.

A diagrammatic overview of select BKPCL activities is displayed below:

Some questions that need to be addressed:

Are there other models of aggregation on a large scale that we could examine as

alternatives to the BKPCL idea? Would a statutory board on the lines of NDDB be more

effective in promoting the interests of FPOs?

Should we wait for grassroots FPOs to mature before floating BKPCL? Or would the new

entity accelerate the growth, viability and scale of operations of widely dispersed FPOs? In

short, will BKPCK hasten or hinder the process of FPO maturity?

Given the diversity of the agriculture produce basket, is it practical to pitch BKPCL as a

single company handling a diverse set of value chains? Is the market too specialized now

to be handled by one enterprise alone? Should we promote BKPCL modules along

different commodity value chains?

Please send us your responses on the concept note at: abusfac@sfac.in

SFAC reserves the right to edit and to upload.

Compiled responses to the concept note on

“BHARAT KISAN PRODUCER COMPANY LTD”

1) Amar KJR Nayak- Xavier Institute of Management Bhubaneswar (XIMB)

Dated: 8th

March, 2013

Greetings! Thank you again for thinking on how to mitigate the market risk for the small

producers/farmers. I wonder if looking at the following questions will help develop the

concept.

i. How would this national level organization, help increase the net incomes to the small

producers/farmers spread all around the country?

ii. How formation of such an organization, change the transaction costs for the small

producers and retail consumers?

iii. How to time the formation of such a national level FPO; after some level of vibrancy at the

FPOs that are being formed or even before that? Should formation of state level FPOs

precede the formation of national level FPO?

iv. To what level of market distance should/can the Government try to control the market risks

for the FPOs?

Please take them as some quick thoughts.

2) Ajit Kanitkar- Ford Foundation

Dated: 8th

March, 2013

In my view, till the primaries (meaning individual FPOs) are profitable and sustainable, we

should never think of any apex structure. That will certainly kill the primary. That has been

the experience of cooperatives where PACs and District structures have sunk and the apex

are in 10 story buildings and continue to exist for no reason.

Unless the FPOs feel the need and that is clearly articulated, super structures need not

evolve. If they evolve, they have to fend for themselves and not at the cost of their

membership.

My limited knowledge of AMUL (milk model) tells that till GCMMF, the state structure,

its need was felt and thus they thrived but attempts to set up and run a NCDFI did not

succeed much beyond a certain limit. Today GCMMF is a success story, NCDFI is not.

Till there is such time for a national Apex to emerge, there could be need based informal

voluntary forums/meetings/conveners. If the FPOs find them useful, they will survive! If

not, then why give birth to them?

Let me also suggest that we use this opportunity to get some concrete facts on individual

FPOs. I had the opportunity to visit three FPOs in MP last month. From what I observed,

Each of them had about 1200 members. They were able to raise Rs 500 to Rs 1000 as

equity. In the third year, they were able to do a business of 3 to 7 cores (largely cotton,

soya aggregated marketing and seed fertilizer buying). The equity was not at all sufficient

for them to borrow money largely for their working capital needs. The banks are reluctant

given the week balance sheets of the FPOs. The members wanted the FPO to do more

business (seed production, chilly procurement etc.). The FPOs had good staff but needed to

be trained and supported. There are no courses available for them to learn and get trained.

The FPO staff salaries were still partly paid by the promoting organization.

Though, the business volumes were large, the profit margins were still not reasonable

enough to fully absorb staff and other costs. The operational issues such as TIN, DIN,

taxes etc. are yet to be completely resolved. In all, in my observation, they would still be

capital deficit and not yet a completely self-sufficient business entity.

However, I thought that if there were at least 300 to 500 such decentralized entries, each

responsive to its member needs and is able to provide both cost saving and better price

realization to its 1000 odd members, it was a great achievement. So coming back to you

point, I would suggest to emphasize on the FPO level sustainability for at least coming two

to three years and simultaneously think (but not hurry!) the thought of adding another

layer.

3) Mehmood Khan – Mewat FPO promoter

Dated: 8th

March, 2013

Let us make this happen. The concept note is good starting point. We should meet and

agree to start this enterprise.

4) Kaushlendra- Kaushalya Foundation

Dated: 8th

March, 2013

First reaction: Brilliant Idea. It would give all FPOs a national level platform for where

they can zoom to whole world for exploration of possibilities for more income, better

productivity and better infrastructure. We should all meet and make this happen.

5) Aloysius P. Fernandez - (former Director Myrada) Chairman, NABFINS, Bangalore

Dated: 9th

March, 2013

I agree with A.Kanitkar on this one.… This has been the strategy that Myrada has followed

for over 2o years (the mission: To Build poor people‟s institutions)…The Community

Managed Resource centres CMRCs (Federations of 100-120 SHGs and CBOs) are

managed by the SHGs and CBOs; the latter decide on the CMRC functions and roles.

Curiously the SHS and CBOs decided not to give the function of financial intermediary to

the CMRCs since they felt it would provide them with a power base which they will use to

control the SHGs/CBOs.

May I suggest a two pronged strategy:

a) Within a State --not necessarily at State level (where there will be one

Apex Body).. If there are several FPOs in one State, could they not decide

which of them should come together (which SFAC will have to support) and

decide to have an Apex Body or a Federation and how it will be constituted

its roles and functions etc.etc. Other FPOs as they emerge in the State

could be taken in. In this model there could be several Apex Bodies in one

State. My concern with starting out with a State Level Body is that no FPO

will really take ownership and as Pravesh says there is a great deal of

diversity regards commodities etc.

b) If few Federations of FPOs emerge within a State emerge, these could be

brought together and given the option to form an Apex Body at national

level. We need not wait for federations to be set up in all States to have

this national body.

c) As I pointed out in my earlier mail to you ...the FPOs need financial

support (grants) to help them reach viability, plus training of staff for

which grants are required. But more importantly what comes thru is that

there is lack of ownership from the producers...this must be strengthened if

the FPO is to survive and this ownership cannot come from on an apex body ontop. What

is also e merging is the need for a team to go out and help these

FPOs to strengthen their organisational base...the TINs and DINS included.

6) Liby Jhonson

Dated: 9th

March, 2013

What does it mean by a national farmer producer company when "farmer" itself is a

contested term? Cereals, pulses, oilseeds, fresh produce - each of these operate within its

own production-distribution-consumption economics and here is an attempt to bring them

all under one brand, citing the success of milk. Some of these products are substitutes to

each other in the market and how is producer interest going to be protected?

Some require such huge working capital, while others require huge start-up capital - how is

this producer company going to raise and deploy resources and share amongst its

members? As such we find that producer collectives promoted elsewhere struggling to get

independent of the promoting "good entity". Now here is a national level promoter with

scale ambitions beyond anything seen so far. With the forthcoming innovative and

substantial financial

support from the Government for producer organizations, I think the need is to ensure

viable fund flows to these entities in a decentralized manner. Why are we not thinking of

an interest subvention through mainstream banks for financing these organizations? This,

in addition to the equity participation that Government is assuring should lead to good

leverage for the FPOs. I am not sure the suggested BKPCL model will help resolve the

market access problems that farmers face. We know for sure that the market access

problem is not one of finding buyers for the goods, but issues of intermediate

infrastructure, sub-optimal productivity and inadequate finances.

MD, SFAC’s Response to all the above comments: Thanks to all who have responded so

far, my thoughts are also in the nature of a continuing dialogue, there is nothing final

about anything yet.

The origin of this idea is in the experience of promoting and supporting FPOs in the past

two years. While there are some impressive numbers (500+ and growing) of the grassroots

bodies, with a combined membership of a million plus farmers, the ability to leverage these

numbers for bargains in input buying or marketing is limited. The 8 state level informal

networks we have established are also struggling with issues of scale, aggregating

demand, laying down supply lines, coordinating production plans. Given the variety of

produce which FPOs deal with, this is understandable, hence the example of Amul is not a

model.

So the basic question we are confronted with is: will the individual FPOs ever acquire

scale, viability, profitability, management expertise as isolated clusters of farmers? Or will

there be a need to support them through a second tier, where resources, skills, ideas,

technology etc. can be embedded with the sole purpose of backward integration with the

individual FPOs? That is the core of the thought behind BKPCL.

I agree that we can continue to invest in the state level networks, which we will in any

case, but how does the Maharashtra or Gujarat state network crack the NCR market for

fresh produce? Will it need a supporting mechanism or should each network attempt to do

it in its own way, reinventing the wheel each time and making mistakes which others may

have made in isolation?

Thank you again for your thoughts, we will no doubt continue to engage over this in the

coming weeks.

7) Arijit Dutta - Samriddhi Finance Ltd. (A BASIX enterprise)

Dated: 9th

March 2013

Now that you've clearly mentioned the actual issue of FPOs, facilitated by SFAC - let me

express my views:

If I understand correctly (from your two mails), SFAC is trying to figure out 2 issues:

Institutional Arrangements, as well as, Institutional Environment.

Institutional arrangements have been initiated at state level - FPOs are formed

Institutional environment at the National level is now SFAC's concern

To me, there is no doubt that, there is the requirement for a National Level Institution. This

is because; all will agree with me that, for economic development / livelihood

improvement of the FPO members, they need to trade between larger communities, as well

as, wider national and international economies. This would require institutional

environments and institutional arrangements in the form of BKPCL or any other. Now, I

would think on how to do:

The smallest operational unit of SFAC initiative is the Farmers Organisations (FO - made

up of 10 - 20 members of a village). FOs combine to form Farmer Producer Organisations

(FPO - member base of around 3k to 4k farmers of FOs, from 8 - 10 villages). FPOs shall

form State Level Farmers Organisation, which will be governed by geographical locations.

FPOs are farmers owned managed by farmers. These State Level Farmer

Organisations will form the National Level Farmer Organisations

State Level Org. to provide management and operational support to FPOs in terms of

production, marketing, farmers development, etc., which will in turn to be supported by

National Level Org.

FOs, FPOs are to be viewed to be "Business Entities", which exist to improve the socio-

economic standing of its members through commercial services, which address the

constraints to its members. National Level Org. shall not attempt to provide all the services

that members need, but rather will facilitate links to other service providers. SFAC could

initiate for the facilitation of the Promotion of National Level Farmers Org.

Review the FOs as well as FPOs, which are being formed as per the SFAC - FPO process

guidelines. Designs how to assess these org. complete the assessment of

these organisations - I'm sure we will have good no. of such org. from each states, since

reputed Organisations are involved with the promotion / formation of these.

Finalise the roles & responsibilities of the National Level Org. - I differ with the activities

of BKPCL mentioned. It should be for the management support for the State Level Org. -

no direct involvement of the business for the farmers

Outsource (through open bidding) to reputed organisation (who are not part of FPO

promotion with SFAC), which will come out with a detailed process, assessment of FOs.

FPOs, how to build State level Org., National Level Org., etc.

But, while going for this - I agree with Ajit, but in a different way - let's first understand,

whether FOs and FPOs promoted are ready for this and also, how far these org. have

institutionalised the following basic concepts of institutional development i.e. Organizing;

Formalizing; Systems development; Business planning (there are not new and already

described in the SFAC manual, which are part of deliverables)

8) Shashidharan Enarth - The Livelihood School

Dated: 9th

March, 2013

We may have a debate on hand, over the exact design, scale and scope for a national level

body that is mandated to create an enabling environment for the large number of local

FPCs that are in pipeline today. That we need such a body is perhaps less debatable. Even

at the formative stages, these FPCs have discovered that access to capital and to

transparent, competitive markets require concerted efforts at a higher level (not necessarily

for scale, but certainly for leverage). Just ask the fledgling FPCs and the

NGOs/Departments that are promoting these FPCs and we will get ample reasons to have

one.

Taking cue from past experiences, particularly in the diary sector (the unique nature of the

commodity not withstanding), there are some design features that will be essential for the

national level body to be able to deliver the goods -- (i) It must seek and fiercely preserve a

high degree of autonomy in its governing structure (ii) must be allowed to raise resources

unhindered by irrational public policies (iii) attract result oriented professionals working

on compelling incentives and yet have a mechanism where they are accountable to the

primary producers. These are doable design parameters with precedents in our country. Am

sure there are more important parameters that can be built into the institution design. If

SFAC can successfully spearhead this venture, I believe that it will yield healthier

dividends than many other state-sponsored initiatives for farmers.

We have already heard some very valid critiques and more are required. Despite the

anxieties, the venture will break the familiar staid old programs centred around subsidies

delivered by unaccountable public agencies. If the new institution can be designed to avoid

becoming one of them, it is worth the effort.

Ajit's feedback from the ground up gives the discussion a good reality-check. And his

narrative could well be from any FPO across the country. Capacity issues are holding the

FPOs back from improving efficiencies which in turn will at least partially address

financial viability issues. Even a cursory evaluation of a Rs.3 corers-FPO will reveal

many operational inefficiencies that cut into profit margins.

Theoretically, it is easy to show that a 3 corers turnover for a 1000 member FPO give

sample room for generating profits. The problems is that while doing the maths, there are

unrealistic assumptions made -- availability of affordable line of credit, minimal wastage

during handling, transparent markets, no rent seeking from regulators, no leakages and

pilferage by FPO staff etc etc. Experience has shown that many of these assumptions shave

to be revisited. Some of them can be addressed through building capacity of the

professionals who run the operations. Governance issues need to be addressed by

designing accountability and transparency mechanisms within the FPO. That will still

leave some problems that are external to the FPOs. NGOs normally try and find fixes for it,

often not an enduring fix.

These concerns will certainly weigh heavily on financial institutions when they are

approached for funds. So we cannot fault the bank's for sticking to their risk management

strategy, though they can be faulted for not doing enough to run that extra mile while

dealing with borrowers who have less-than-adequate capacity. All these concerns have

been discussed over and over with no real answers.

I am pondering over two points that Ajit is raising: (i) timing the launch of an apex

structure vis-a-vis FPOs growth trajectory (ii) the positioning of the apex at state Vs

national level. There are merits and demerits for any approach we take. One argument

for parallel launch (FPO and apex) is that each reinforces the mandate of the other and

therefore mutual co-existence is necessary. In other words, the existence of an apex

structure in itself aid and abet faster growth of FPOs and in turn generate demand for

leveraging services from the apex. That would mean that the apex organization must play

an enabling role even during the FPO formation stage. They cannot wait for the FPO to

arrive; they have to run with them. The problem Ajit raises about apex becoming a self-

serving ten storied office will happen again if their existence is either subsidized

perpetually or if their business model has no connection with FPOs (state oilseeds is an

example). If the Apex‟s governance is such that their accountability is towards the FPOs

(one way is to tag their revenue with FPO's business they handle), there is a higher

likelihood that the relationship will be sustainable.

Regarding the state Vs National level apex structure (a la GCMMF Vs NCDFI), there

seems to be a strong case for making it state wide or at the most region wide. The techno-

economic dynamics of the two options are beyond my comprehension, so someone else

can work on that.

9) Ramaseshan - MD, NCDEX

Dated: 11th

March, 2013

Conceptually, a good idea. There is a requirement for such an organisation. And of

course, it has to operate on commercial lines. A government company is no answer. It has

to be seeded by government but be run by a strong Board, with a professional management

team.

In fact, I am toying on something similar for Karnataka, my state. But the key question

dogging is - while the need is certainly there, such an organisation is not effective, if the

ground level producer companies are not active. And one central organisation cannot

populate the country/state with producer companies.

Producer companies will require evangelism. Government cannot be one; maybe good

NGOs can. Or farmer groups (we did this in Gulbarga in 2010). What is the right

approach - maybe each location requires a different strategy.

Why not you get people with commitment to this cause together? We can and should

deliberate!

10) Ashish Mondal - Action for Social Advancement (ASA)

Dated: 11th

March, 2013

Thanks. as discussed the idea is worth pursuing. We can have a discussion on 2nd.April

when we meet. This is an idea which cannot be validated without 3-5 years of hard work.

So what we really need to look at is the design and if convinced then going ahead.

11) Radhagopalan

In the context of ensuring sustainability at the primary and grassroots level of farmers'

collectives I'd like to emphasize that the only way this will happen is through

decentralisation in production, procurement and markets. Experience in India and the

world over including recommendations from the UN Special Rapporteur on Right to Food,

experiences from Cuba, Brazil and farmers' markets tells us that we need to re-think this

idea of scale. The kind of support that FPOs and farmers' collectives need at the primary

level can be provided through extension services - for technology, credit, and other inputs.

In addition, support for exchange of experiences through exposure visits, pilot efforts

(NABARD has experience with that through the farmers' clubs - though that needs more

work) can be provided by the Government. Rather than jump ahead to a federated structure

without consolidating the grass root level entities.

12) Prof KV Raju - IRMA

Dated: 11th

March, 2013

As some have mentioned the limitations of BKPL - as articulated in the concept note. I for

one feel that - an umbrella body to support organisations like - NDDB for milk producers -

etc for example Poultry or for fruits and vegetables etc- is required - Many promotional

bodies like Horticulture Mission and or commodity boards - do not have the vision as well

as where with all to support business entities -like producers organisations with a

comprehensive package - funding that can leverage finance, technology and training

support to build infrastructure and use it profitably, and management performance support.

Many of the existing FPOs are - promoted - not with a comprehensive exercise of

analysing resource conditions, demand conditions, industry and institutional conditions to

evolve a business model - with built economies of scale, scope and integration and hence

do not have the steam to go beyond - as what Tushaar may labels as with low design

potential models - . Analysis of the conditions will inform the number of FPOs or

federations of them or unitary structure with decentralised strategic business units will -

make sense across sectors or sub sectors.

My submission is BKPL - need to conceptualised as Bharatiya Kisan Promotion body -

with a scope to - support NDDB (of Operation Flood -1 vintage or of Manthan vintage -).

We should not underestimate the effort required to address the complex issues the farmers

are facing - and offer solutions with low aims.

13) Ashutosh Deshpande - Sr Manager, Agsri Agricultural Services Pvt Ltd, Hyderabad

Dated: 11th

March, 2013

Thank you very much for your very detailed concept note on BKPCL. I have been at the

helm of affairs at a Farmer's Producer Company for some time in my very recent past, and

based on my experience I have my views on the concept. At the outset, I feel there is a

very key role that a proposed institution such as BKPCL can play, but I only hope that

BKPCL does not end up becoming another subsidy or grant program. Neither do I think,

BKPCL should be actively marketing produce of its member producer institutions. In

general I have been party to many discussions around the need to bring markets to

Producer Companies and/or help them market their produce. I am a strong believer in the

fact that a FPO is at the end of day a business. So if a FPO is struggling with markets

(which is its core function), then probably we should ask ourselves a question, is there a

need for the FPO at all. One of the basic logic behind any business is that businesses chase

an opportunity, and build systems to make the most of that opportunity.

Very often, I have seen FPOs and CBOs try to do the opposite. We often build systems to

address a social need and then try to search for an opportunity that will suit our kinds of

system. So, we need to ask the above basic question first - "Is there a need for the FPO in

the first place".

Once that is done, for the successful FPOs, for whom even basic marketing is not a

problem, I feel BKPCL can play a very important supporting role at a national level. I can

see BKPCL acting as kind of NASSCOM of the Producer Company Sector. To start with, I

feel following are some key services that BKPCL can provide its members (at a cost, even

BKPCL has to be a business):-

1) Investments: As rightly pointed out earlier, many FPOs suffer from low equity capital. An

investment in a FPO by BKPCL can help boost the Debt: Equity ratios of most FPOs. But

such investments need to be time bound - the way a Venture Capital Fund invests, but

maybe with lesser return expectations. Alternatively these could be preference shares

and/or Subordinated Debts. Again, stringent appraisals and scrutiny is a must. But it at

least opens options for a FPO to access funds

2) Lobbying: I think BKPCL has a key role in lobbying for FPOs at a national level - both on

the demand side as well as for credit. For instance - a key hindrance for many FPOs has

been access to credit. With no credit, even confirmed orders have to be under-served.

Every public sector bank has a provision for lending to SHGs without collateral (upto a

certain limit), while on the other hand many FPOs have a ready SHG structure through

which they aggregate. I remember, we had tried to take advantage of such SHGs lending

programs of banks to raise credit for our SHGs against the value of produce they sold to

the FPO.

But, while we had the blessings of the HO, we faced lot of resistance from the local

branches in implementing this scheme and were left with no credit that was until we

managed to work out a similar scheme with a NABARD subsidiary and raised loans from

them. The loans did come at a higher interest cost, but they ensured that we did not under-

utilize our full potential to do business. We repaid the loan in time and with proper interest.

I think BKPCL can play an important role here sensitizing bank managements and

structures about such arrangements and or intervene to develop suitable credit products for

FPOs in collaboration with banks. I feel FPOs won't mind paying higher interest rates,

because in the initial period survival and creating a credit history is important. Once an

FPO is well settled, there are ample avenues to raise credit at competitive rates. It is the

initial handholding that is critical.

Similarly, BKPCL can play a key facilitating role with large format retailers and major

buyers, export houses to promote buying from FPOs. What FPOs bring to the table is a

potential for disintermediation. What they need is sustained support, at least for the initial

few cycles. Even if, through the efforts of BKPCL, some FPOs could harness an

opportunity to sell to say a large chain like TATA, and say even if those purchases from

less than 0.5% of TATA's total purchase (it might even come out of say a CSR fund of

TATA), it is a critical start. Again, but opportunities need to be competitive and not a

charity. Let FPOs compete on quality and prices.

3) Training & Advisory Support: BKPCL can plan a critical role here. The need for training

of FPO staff has already been pointed out in these discussions. Many FPOs struggle with

the very basic functions in a supply chain, such as quality management, packaging,

planning of production and delivery schedules etc. Similarly, some also struggle with

aspects of financial management, regulatory compliances etc. If FPOs need training or

advisory services in these areas, BKPCL can provide so, at an affordable cost (not free).

BKPCL thus has a role in bridging the skill gap here.

This forum is open for other ideas and views on what role BKPCL can play. I thought a

nodal body had to play the above three roles to be able to make a difference to Producer

Companies in India. The nodal body essentially has to be a facilitator, but not take over the

basic functions of an FPO.

14) Krishnagopal - ALC India

Dated: 11th

March, 2013

The idea of Bharat Kisan Producer Company (BKPC) is very good one and it needs to be

built on the strength of the State Level Farmers Producer Company. Right now the focus as

suggested by many others also should be on strengthening the FPOs and FAGs. Since we

have made a beginning on the State Level Farmers Producer Company we should

strengthen the same as a federated body. Once the State Federations are in place it becomes

all the more easy to think of promoting a National Level Entity.

Right now my thought is to promote some organization like NDDB for farmers in

Agriculture. We should now think of National Agriculture Farmers Development Board.

This board should follow the few principles which NDDB has consistently followed in its

operations flood -

1. Should be autonomous in nature and away from New Delhi. Should be based at a location

where there are active group of producer companies of agriculture farmers. So that the

knowledge anchoring and identity is closely related to the farmers rather that of ministry.

2. Should have independent mainstream financial resources - money which can be mobilized

through issue of Public Bonds for Agriculture Farmers Development (it could be tax free

bonds can be mobilized using NABARD). It can take World Bank or other loans at low

costs while the government can give one time fund for starting it. The financial resources

should be housed in an independent separate entity. In NDDB IDC - Indian Dairy

Corporation use to finance and promote grass root enterprises while NDDB provided the

technical support.

3. Should not compromise in the quality of human resource. So the best of the human

resource at reasonable remuneration on a mission should be hired.

4. Model of FPOs and their federation should be of reasonable scale. At least Rs 2 to 3 Crore

investment per FPOs and aimed at generated at least Rs 10 - 15 Crores turnover. Which

means we are designing enterprises which can significantly influence the income

parameters of farmers. For NDDB it was always District Level Federation with at least 1

lakh litres processing capacity.

5. Focus should be on creating markets at the local level. Unlike NDDB which depended on

State Capitals as markets and so aggregated milk of district unions at the State Level to sell

in few cities, we have an opportunity to tap all district headquarters as much of market has

changed and now in villages they are willing to pay and buy. So in Mulukanoor Womens

Dairy Union we have only tapped markets which are 100 Kms radius and the dairy is yet

able to sell 70,000 litres per day. Recently Mulukanoor started sales in Villages also

because some of the farmers are opting of maintaining cattle in their homes. So while all

corporate entities are expanding presence in rural areas we should not ignore the trend and

only talk of markets in cities only.

6. Think of setting up a world class finishing school where through just 6 months or 1 year

courses mainstream business management graduates, post graduates from technical fields

like agriculture, horticulture and other courses join and are fully equipped with the skills of

promoting, nurturing and developing FAGs, FPOs and their federations. They will be the

team members for spreading the agriculture movement to next green revolution truly

owned and driven by the small, marginal and tenant farmers of rain-fed areas.

7. Value addition technology like the famous quote of Dr.Kurien which states, it is the milk

powder production technology which powered the growth of AMUL, replicated in the

operational flood, where powder making machines were central machinery in all the

district unions apart from milk pasteurization and standardization, we should have a

minimum level processing infrastructure that has to be created at the FPO level and in their

federations. Without processing infrastructure depending on trading in agriculture

commodities is gambling. Consumer prices are more stable and rising compared to trading

of agriculture commodities. So more than trading value addition should be encouraged.

For all this to happen we need a National Agriculture Farmers Development Board

(NAFDB) before we set up the national level producer company. The National Producer

Company can wait for some time for the State Level Federations to emerge.

Or alternatively if we want to promote the same now then we need to work on the

sequence of activities. I guess right now BKPC should be extending only technical and

financial support to the FPOs and State Level Federations. After some time it can even

start services related to exports, market value addition and other marketing related aspects.

I hope this mail provides some thought to the ongoing discussion.

Philosophically - Ideas are neutral by nature. There are no bad or good ideas. There are no

workable and not so workable solutions. I guess a idea at the beginning is a small thing. A

seed has to be nurtured, protected, guided and nutritiously feed to grow in to a tree which

will live for 100 years. So if assume NAFDB or BKPC have a role for the next 50 years

then on ground improvisation which will make it tick on and impactful.

But for the on ground improvisation to happen we need to have people with great

conviction who sustain and carry the thoughts for long time say 10 - 15 years.

15) Balakrishnan - Vrutti Livelihoods Resource Centre

Dated: 12th

March, 2013

We have looked at this very interesting idea of National Level Farmer Producers Company

-through the following areas – Intent, Instruments, Institutional Framework and Timing.

We have given our very preliminary thoughts on each of these for discussions:

1. Intent: Looks a great intent to establish an institutional mechanism for farmers at the

National Level that can provide them – (a) a scale in which they can operate in the market

and possibly influence it and leverage them for the benefit of the farmers; and (b) to

provide all the key support/ inputs that are required by the farmers and appropriate to their

needs, to access and leverage these benefits (such as credit, etc.).Overall as we see, the

intent is to create an institutional mechanism that can be „sensitive to the needs and

priorities of the farmers and potentially controlled by the farmers to enable them to get

maximum benefits‟. No questions here – a very great intent and very important and critical

need.

2. Instruments (Products, Services): The design is to provide Market linkages, Aggregation,

Own Retail chains, Credit Guarantee, etc. – all that is required to leverage/engage in

markets and provide all related support –Yes. Very relevant and useful.

3. Institutional Framework: This is where we should analyse alternatives, and look at pros

and cons based on our enormous experience of the country in various institutional models.

From what we see, the national level institution should be able to provide the following:

a. Sensitive to the needs and priorities of the FPOs

b. Address all issues that affect their product marketing – as per their needs and priorities

c. Farmers should be able to steer and control with least involvement from bureaucracy,

elected body or otherwise.

Provide a platform for farmers to walk in and be comfortable as their own organisation

While these are very important, the institutional option does not have to be only a

„National Federation of Farmers, owned by Farmers‟. Many options be possible; we have

given some preliminary thoughts on two – federated structure at National level and a

National level Board, for a start.

It could be a Board (such as NDDB; not exactly like this) where farmers‟ institutions can

be majority/ part owners, with civil society, market players, financial institutions,

government reps. It could start off with nominated set of governing body, but over a

period of time, small holder producer organisations (whether they could be promoted by

SFAC, or themselves, or through other organisations) can become members, either a score

members or associates. They could use services (only that) or be owners or governing

body. This Board could be a coordinating body for engaging with other institutions

providing financial support or others.

If it is a federated structure, as we have seen that these need to be built strongly with

ownership from grass-root. While this process is ideal, may not be always practical given

the size, diversity, and huge numbers of organisations/ members that can potentially be a

part of it. Immediate requirement is that we get all the FPOs well capacitated and allow

them to form the next layer of apex bodies (between organisations) and at the state level,

so that these can be great pillars of strength. Starting up from a federated structure at the

early stages may not yield the best results in governance and ownership, and may provide

opportunities for influential individuals to take important positions (we have many

examples in cooperative federations). So it could be better if the FPOs get federated

through process and that leads to formation of the national body as the need arises.

Given the level of diversity, there could be Regional Level apex bodies based on Agro-

ecological Zones, or Commodities, etc. – Given the level of homogeneity required; and

this does not have to be „state-based‟ alone.

For financing products, we should also look at possibilities of creating a vertical within

NABARD/ NABFINS or in SFAC-Ventures, which can come out with „appropriate

financial products/ guarantee schemes‟, but operate under the steering of the „Board/

Federated structure‟ so that there is no need to create new financial streams/ institutional

arrangements

4. Timing: Great to start the thinking on it. But may be the implementation could start a bit

late with the FPOs gaining little more strength and solidarity at the state level before they

become members/owners at a higher level body.

16) Yogesh Dwivedi - ASA, Bhopal

Dated: 11th

March, 2012

I feel (my personal view) that this is the only way to create impacts on market of producer

companies in India. It will also help producers companies for better negotiation with

market, brand development, establishment of their credibility amongst corporate and

industries and also more feasible to corporate, trade and industries to establish business

relationship with producer companies in place of approaching on each and individual

small FPOs. I feel that state federations are must before national level producer

organization to smoothen the formation process of such institution. However both can be

started simultaneously as it could be a dilemma of egg and chicken story, who is first?

Meanwhile I also feel that issues raised by Jaya Ji are also very genuine and need to be

relooked so that prime agenda of small farmer's interest can be protected in long run.

I have listed out my concerns in following points:

It is also true since such producer company will be the federation of producers companies

hence shall be represented by producers only it means they shall be from the BoDs of

producers companies who are representing producer companies working at cluster level/

district or state level. So how their concern shall be addressed in such forum?

Since any producers companies cannot have no. of BoDs more than 15 (including expert

director it could be maximum 18) then how effectively they can truly represent all

producer companies and in this case we may opt to adopt cooperative model of election as

AMUL or other cooperatives like IFFCO or KHRIBHCO follows. But representation of

small farmers (except AMUL) is still a big issue in case of such cooperative federation

then how we will address this issue?

I would also like to draw kind attention of all of u that subsection (b) of article 581-Dsays

that in case where the membership consists a producers institutions only, the voting right

of such member producers institutions shall be determined on the basis of their

participation in the business of the producer company in previous year. During the 1st year

of incorporation, the voting right shall be determined on the basis of shareholding of the

member producer institutions.

In this case there is fear that producers institution who are more involve in collective

trading kind of activity (due to natural opportunity exists) or represented by big farmers

can take advantages of this clauses during decision making process

But it is not applicable in cases where membership consist only individual farmers/

producer or mix of producer and producers institutions which is described in following

section of Part IX-A of COMPANIES (AMENDMENT) ACT, 2002,

Subsection a of 581-D says that In a case where the membership consists solely of

individual members, the voting rights shall be based on a single vote for every Member,

irrespective of his shareholding or patronage of the Producer Company and subsection c

says that (c) In a case where the membership consists of individuals and Producer

institutions, the voting rights shall be computed on the basis of a single vote for every

Member.

Since in a producer company BoD would be sole governing body then what would be the

feasibility for a producer (BoD) to attend monthly or bimonthly meeting at New Delhi.

Although it is not impossible but feasibility is a issue? How it will be addressed?

Is it possible to open regional offices for such producer company so that BoDs kind of

meetings can be done at regional level in rotation basis?

If membership is open then all kind of producers companies can join such federation and

can issues of small farmers can be suppressed. Hence in article of this producer company

qualification of member needs to be clarified very well so that balance between business

development and representation of small farmers can be taken care. So making Bye Laws /

Memorandum and Articles of Association of such institution would be very crucial apart

from addressing plenty of other kinds of operational issues.

17) Dr. S.S. Saini - Sumati Foundation, Kotdwara, Uttarakhand

Dated: 12th

March, 2013

The idea of Bharat Kisan Producer Company (BKPC) is very good one and it needs to be

built on the strength of the State Level Farmers Producer Company. Right now the focus as

suggested by many others also should be on strengthening the FPOs and FIGs. Since we

have made a beginning on the State Level Farmers Producer Company we should

strengthen the same as a federated body. Once the State Federations are in place it becomes

all the more easy to think of promoting a National Level Entity.

Right now my thought is to promote some organization like NBB for farmers in

Agriculture. We should now think of National Small Farmers Development Board. This

board should follow the few principles which NSFDB has consistently followed in its

operations flood –

1. There is need to have a National Small Farmers Development Board to oversee the

development of agriculture/horticulture in the country.

2. Modalities need to be worked out for the formation of NSFDB without any Governmental

recurring costs.

3. The NSFDB could generate a corpus fund with aid from Government, Industry etc.

4. The name of the society NSFDB here in after called as the Board.

5. The Board may establish or promote State Small Farmers Development Board (SSFDB) in

all/major Small Farmers Development States to coordinate the activities of the Board in

respective States.

6. Aims and Objectives of the Board-

i. To organize and promote Small Farmers Development and other products industry in the

country.

ii. To promote and regulate domestic and export market of Agro- Produce and other allied

products.

iii. To maintain close liaison with Government bodies to advise them on issues concerned with

Small Farmers Development.

iv. To see Government assistance to promote its objectives and organize suitable trainings by

RIs.

v. To advice Government, Farmers, and industry on matters relating to trading of Agro-

produce and development of Small Farming.

vi. To assist Small Farmers (existing and new) in raising their Agro- Farms for which

subsidies, grant, soft loans etc. shall be obtained from different government/ Semi-

government and private organizations and disbursed.

vii. To undertake programmes and projects for the promotion of Small Farmers Development

for production of Agro- produce and other Value-added-products and to increase

productivity.

viii. To promote efforts to increase productivity of crops through Bee Planned Pollination.

ix. To promote Cooperative and collective efforts among Small Farmers.

x. To promote remunerative returns to Small Farmers by planning schemes for their

assistance in consultation with RIs.

xi. To establish and manage training and research institution for providing general and

specialized training.

xii. To undertake assist or encourage scientific, technological and economic research in Small

Farming and Agro-produce technology including improvement of Food-Processing, quality

and techniques for Grading and Packaging of Agro-Produce.

xiii. To educate Small Farmers for the maintaining international requirements of sanitary and

phytosanitary standards, advice on quality of Agro-products for export and domestic

market and to grant certificates/license, subject to such conditions as may be prescribed.

xiv. To coordinate the trade promotion activities of its constituent members and grant

certificates/licenses, as prescribed.

xv. To assist in establishment of appropriate transport, ware housing/storage, cold-storage

facilities in the country.

xvi. To grant awards to Farmers and institutions for outstanding contributions in the furtherance

of the objects of the Board.

xvii. To receive subscriptions and to accept grant of money, securities, endowments and

property of the any kind from the Central and State Government and other public or private

organizations and individuals, as contributions towards the corpus fund or any other funds

of the boards.

xviii. To acquire by donation, gift, purchase, exchange, lease, hire or otherwise howsoever any

property movable or immovable which may be necessary or convenient for the purpose of

the Board and to build, construct, improve, after, demolish and repair such buildings,

works and constructions as may be necessary for carrying out the objects of the Boards.

xix. To create reserve fund, sinking fund, insurance fund, Provident fund or any other special

fund, whether for description or for repairs, improving, extending or maintaining any of the

properties or rights of the Boards and/or for recoupment of wasting of assets and/or

benefits of the employees and for any other purpose for which the Board deans it expedient

or proper to create or maintain any such fund or funds.

7. Member of the Board

a. Founder Members.

b. Corporate members.

c. Resource Institutions, FIGs members and FPOs.

d. Agro-manufactures, wholesalers, traders and packers of Agro-products.

e. Agriculture/Horticulture scientists and Development workers.

18) Ashok Kumar - CEO, Livelihoods & Enterprise Promotion, EDA Rural Systems

Private Ltd

Dated: 12th

March, 2013

I have had a look at the draft concept note attached. A couple of

reflections as below:

From the note, it is a bit difficult to visualise the specifics of the roles to be played by this

national level body in addressing the major constraints limiting these FPOs to become

vibrant and profitable after initial few years of operations. We are generally aware of the

constraints in the FPOs and I am not sure how this proposed national level body propose to

address the most basic constraints.

We need a lot of capacity building efforts and management support at the

level of basic FPOs in addition to trying to ensure FPOs as an institution

of active members. This is the point also raised by Mr Fernandez in his message. If we

look at overall situation about % of non active members in these FPOs and % contribution

of their total produce/commodities (if they are engaged in output business as well) by

overall members to FPOs, they are certainly a cause of worry - this is because of different

reasons.

I agree with Ajit completely that we need to address the sustainability of basic level FPOs

and then make the FPOs capacitated to enable them to serve their members effectively and

to contribute effectively to this national level institution as members.

And lastly, I think all the efforts should lead to an emergence of vibrant groups of FPOs for

each value chains/commodities that can compete with typical market

actors/suppliers/traders for both input and output related services in terms of quality and

quantity on one hand and then making reasonable surpluses at the end of the day for the

FPOs.

19) Kuldeep Solanki: Sajjatta Sangh, Gujarat

Dated: 12th

March, 2013

I see an organization like BKPCL a necessity. I agree with some of the recommendation

made in the document regarding the role of BKPCL. Given below are my views on this:

1. Primary objective of BKPCL should be on marketing the product/produce of FPOs

promoted by small and marginal farmers. For this BKPCL needs to…

a. Support processing/value addition activities of member FPOs.

b. Quality control of value added products through the state level structure of BKPCL.

c. Conduct region specific market research studies.

d. Develop distribution network and establish links for export of products.

e. Should tie up with retail chains spread across India.

f. Financial outlay for branding and advertisement.

g. Many other things need to be done.

2. BKPCL could invest in developing franchise of rural retail chains which is expected to

become popular in a state like Gujarat. Similarly it could invest in other models which

would give market to the value added products of member FPOs.

3. BKPCL can promote its own brand and also market brands of member FPOs. If the

FPO wishes to retain its brand it should be allowed to.

4. Initially BKPCL should only deal with value added/processed products. Only if it is

able to create substantial value to the farmers then only it should deal with raw

commodities eg. export of specific commodities.

5. BKPCL should not indulge in agriculture input business. This business area adds value

only if the products recommended are truly unique products and if it makes substantial

difference to the farmers. Also, this will create additional layer of intermediaries.

6.BKPCL has a direct affiliation to the state level forums created by SFAC. These forums

should be used for policy advocacy and capacity building and not BKPCL. SFAC should

use this opportunity to create a national level committee of FPOs with elected

representatives from SLCFPOs. This would be a sustainable arrangement.

20) Gouri Krishna - The Livelihood School

Dated: 12th

March, 2013

The idea of BKPCL has already engaged many in the discussion and more may join. While

concerns expressed are understandable and should be taken seriously to address, I consider

the idea of having a national level body is justified. The state level FPOs can leverage

support from this body and they will get a better buy in from the states which currently is

one of the constraints they face. The FPOs therefore stands to gain from this initiative

especially SFAC providing admin support in the initial years. Dialogue/discussion of the

design and structure of the organization is what requires deeper debate as it forms the core

for the success of such an entity.

The strengthening of FIGs and FPOs is a continuous process with focus on capacity

enhancement of the stakeholders involved. To postpone setting up a national level body till

FIGs and FPOs are strengthened is therefore not warranted when actually the purpose of

the national level entity is to contribute to the growth and prosperity of its members.

BKPCL should have a business plan in place at least for first five years, asses the market

opportunities, project profit and loss like any other business entity to be

viable.

I would consider that core group of FPOs supported by SFAC should take

lead and will be appropriate to promote BKPCL. Also the other option to be

examined is the state level forums which currently are forming in various

states with larger number of FPOs as its members. These when registered as

FPCs at state level can federate into the national level body. As mentioned, this requires

more thinking.