INDIAN INSTITUTE OF PLANTATION MANAGEMENT, BENGALURU

(An Autonomous Organization promoted by Ministry of Commerce and Industry)

COURSE TITLE
Organizational Behavioural Development
(OBD)

TITLE OF THE PAPER

“Midterm Assignment for Trimester III”

SUBMITTED TO
Dr. ARCHANA THULASEEDHARAN Mam
ASSISTANT PROFESSOR
IIPM, BENGALURU

SUBMITTED BY
K.V.L. DEEPAK
19PGDM-ABPM13
OCTOBER 05,2020
CASE STUDY: FPO’S A VIABLE INVESTMENT

Introduction:

Producer organization (PO) is a legal entity formed by the primary producers (farmers,
fishermen, rural artisans). Farmer Producer Organizations (FPOs) are a type of PO where the
members are farmers. Farmer Producer Company (FPCs) are form of FPOs established under
Section 8 of Indian Companies Act 1956 (NABARD 2015).

Farmers’ Producer Organizations (FPOs) are farmers' collectives with membership mainly
comprising small/marginal farmers (around 70 to 80%). Presently, around 6000 FPOs
(including FPCs) are in existence in the country, which were formed under various initiatives
of the Govt. of India (including SFAC), State Governments, NABARD and other
organizations over the last 8-10 years. Of these, around 3200 FPOs are registered as Producer
Companies and the remaining as Cooperatives/ Societies, etc.

Majority of these FPOs are in the nascent stage of their operations with shareholder
membership ranging from 100 to over 1000 farmers and require not only technical
handholding support but also adequate capital and infrastructure facilities, including market
linkages for sustaining their business operations.

Background of the study:

Agriculture in India is predominantly production- oriented confined in large number of

fragmented small holdings and plays a pivotal role in the Indian economy. It provides
employment to around 56 per cent of the Country’s workforce, contributes to overall growth
of the economy and reduces poverty by providing employment and food security to the
majority of the population. However, due to highly fragmented, scattered and heterogeneous
landholdings, rising cost of cultivation and limited access of small/marginal farmers (SF/MF)
to public resources and markets, etc., the small holding-based agriculture has gradually
become unviable.

Low marketable surplus, lack of farmers’ access to public resources; lack of access to quality
inputs, credit facility, modern technologies, etc. and frequent crop failures, lack of assured
market, income safety, lengthy and fragmented supply chain, etc., have resulted in high
dependency of farmers on the exploitative intermediaries and local money-lenders. Small and
marginal farmers constitute around 85% of the total land holdings and hold around 44% of
the land under cultivation. Major concerns relating to small farm holders include:
  Inadequate farming and extension services and low level of technology adoption
 Lack of capital and poor business skills
 Low income due to poor infrastructure and low market efficiency

The above situation calls for major structural reforms and transformational initiatives towards
the revitalisation of Indian agriculture both by way of stepping up investments for
productivity enhancement as also reforms in agricultural marketing and postharvest agri
logistics for boosting agricultural growth. In this context, a sustainable solution lies in
collectivisation of agricultural produce and value addition/ marketing by achieving the
economy of scale and creating commodity-specific agri value chains with participation of
agri entrepreneurs and primary producers on the equitable terms.

Ecosystem of Farmer Producer Organization:

A congenial ecosystem is a must for development of Farmer Producer Organizations (FPOs)

because they have to deal with the most vulnerable part of agri-value chain, which starts from
the farm and goes on till processing and the far-away markets. The critical ecosystem services
include emergency credit, consumption credit, production credit, retail services of inputs for
agriculture and other agricultural production services required by the small and marginal
farmers. Unless these services are provided by a FPO, it cannot divert the surplus produce
from the local trader to the producer organization.

In addition, a FPO can take up other services related to facilitating linkage with the banks and
line departments for ensuring access to the required infrastructure for the business. In order to
build a sustainable FPO favourable ecosystem is needed, besides certain policy reforms
particularly in the agricultural marketing systems. Some of the critical ecosystems include:

(a) Policy environment-production, market and price risk mitigation, licensing, Agri logistics,
infrastructure arrangements, contract farming, compliances, etc.

(b) Technology support- Extension and advisory services, value addition, processing &
marketing, etc.

(c) Consumption/ production/ post production credit support- Banks/ financial institutions,
NBFCs, Government institutions, Developmental Agencies, Corporates, etc.
(d) Retail services/ Markets- Quality inputs, retail marketing, spot markets (eNAM, APMC),
future’s trading, linkages with agri corporates, exporters, direct marketing, etc. Graphical
presentation of the Ecosystem requirements is given below

Factors Leading to Success of Farmer Producer Organization:

 Optimizes cost of production by procuring all necessary inputs in bulk at wholesale

rates
 Reduces marketing cost through aggregation of produce and bulk transport and thus,
enhance net income of the producers.
 Produce aggregation enables to take advantage of economies of scale and attracts
traders to collect produce at farm gate Facilitate access to modern technologies,
capacity building, extension and training on production technologies and ensuring
traceability of agricultural produce.
 Minimize post-harvest losses through value addition and efficient management of
value chain
 Enable regular supply of produce and its quality through proper planning and
management
 Manage price fluctuation with practices like contract farming, marketing agreements,
etc.
 Provide access to information about price, volume and other farming related advisories
 Access to financial resources against the stock
 Easy access of funds and other support services extended by the Government / donors
/ service providers
 Help to improve bargaining power and social capital building.

Factors Leading to Failure of FPO’s:

1. Weak Financials: FPOs are mostly represented by small and marginal farmers having
poor resource base and, hence, initially they are not financially strong enough to deliver
vibrant products and services to the members and build their confidence.

2. Inadequate Access to credit: Lack of access to affordable credit for want of collaterals
and lack of credit history are also major constraints the FPOs are facing today. Further, the
credit guarantee cover being offered by SFAC for collateral-free lending is available only to
Producer Companies (other forms of FPOs are not covered) having minimum 500
shareholder membership. Due to this, large number of FPOs, particularly those which are
registered under
other legal statutes as also FPOs with lesser than 500 members are not able to access the
benefits of credit guarantee scheme.

3. Lack of Risk Mitigation Mechanism: Presently, while the risks related to production at
farmers’ level are partly covered under the existing crop / livestock / other insurance
schemes, there is no provision to cover business risks of FPOs.

4. Inadequate Access to Market: Marketing of produce at remunerative prices is the most

critical requirement for the success of FPOs. The input prices are largely fixed by corporate
producers. The cultivators lose through the complex gamut of market processes in the input
and output prices. There are more market opportunities, if FPOs can identify local market
needs of the consumers and have tie-ups for sale of its produce. A linkage with industry/
other market players, large retailers, etc. is necessary for long term sustainability of FPOs.

5. Inadequate Access to Infrastructure: The producers’ collectives have inadequate access

to basic infrastructure required for aggregation such as transport facilities, storage, value
addition (cleaning, sorting, grading, etc.) and processing, brand building and marketing.
Further, in most of the commercial farming models, the primary producers are generally
excluded from the value chain.

 Uncertain demand for Crops

 Problems forming a Group
 Lack of information on markets
 Lack of information on technology
 Lack of qualified workers
 Lack of funding outside the enterprise
 Lack of funding within the enterprise

Factors hampering Team work in FPO’s:

a. Lack of technical Skills/ Awareness: Inadequate awareness among the farmers about the
potential benefits of collectivization & non availability of competent agency for providing
handholding support are the major constraints in the rural areas in promoting strong FPOs.
Further, there is lack of legal and technical knowledge about various Acts and Regulations
related to formation of FPOs and statutory compliances thereunder.

b. Lack of/ Inadequate Professional Management: A Farmers’ Organization is required to

be efficiently managed by experienced, trained and professionally qualified CEO and other
personnel under the supervision and control of democratically-elected Board of Directors.
However, such trained manpower is presently not available in the rural space to manage FPO
business professionally.

c. Group Size: The size of the group is around 500 members. So, managing a Group without
any professional background that to huge number leading to decrease in efficiency.

Factors fostering the Teamwork:

a. Commitment – Consider this as the foundation of working together. Your team should be
able to commit to the purpose and goals of your organization. As the leader, it will be your
task to be clear about upholding values and making them understand how the vision of the
team supports the company’s goals. To properly align your members’ commitment to your
team, you might need to give them an activity about creating the team’s cohesive mission,
vision and goals. This will ensure that every member of your team is on the same page as to
their commitment to the team’s purpose.

b. Contribution – Proper balance of the factors; inclusion, confidence and empowerment,

will enhance each member’s contribution to the work. If you are having a hard time
convincing your team to take part in the work that your team is doing, all you need to do is
make them feel the sense of belonging, develop their confidence and support their ideas.
Some people will not make the first step unless they are encouraged to do so. Do not wait for
your team members, take the initiative and convince them by working on the three factors
that affects team contribution.

c. Communication – A positive, friendly and open line of communication within your team
nourishes teamwork and cohesiveness. To foster this kind of communication in your team,
you can design a team building activity that will enhance your team’s skills in listening and
responding. There will be a lot of factors that will affect the communication within your
group and helping your members to effectively communicate will break down barriers that
impede your team from having an effective teamwork.

d. Cooperation – This element refers to the interdependence of your team members. The “I”
mentality greatly affects cooperation. What leaders can do to improve the team’s cooperation
is to focus and highlight each member’s strengths. Be clear about the impact of these
strengths
to the team’s productivity. Make sure that you also device action plans as to the improvement
that needs to be done for behaviours that affects the productivity negatively. Make them
understand that whatever they do affects the team’s working dynamics.

e. Conflict Management – Experiencing conflict is an inevitable occurrence if you are

working with a diverse group of thinkers. Working on effectively managing a conflict in the
group will eliminate distrust and other issues. Make sure that you recognize the early onset of
a conflict so that it will not eat on your team’s work relationships. Know how to use effective
techniques such as shifting shoes. By allowing your team to view the conflict in the other
person’s perspective, you’ll be able to make them understand each other.

Communication Channel Fostering Team Work:

 Face to Face Meetings
 Town Hall meetings
 Workshops
 Questions and answers
 Focus Groups
 One to one meeting
 Telecommunication for farm advisory
 Videos
 Instant messaging platforms

Communication channels Hampering Team Work:

 Non-Availability of Regional Language Information for Agri Advisory.
Impact of Leadership on success of Organisation:
1) Character: A good leader has an exemplary character. A leader needs to be trusted and be
known to live their life with honestly and integrity. A good leader “walks the talk” and in
doing so earns the right to have responsibility for others. True authority is born from respect
for the good character and trustworthiness of the person who leads.

2) Communicate: Likewise, if you want your company to reach new benchmarks of

achievement, you must master the art of clear communication. In order to communicate
directives which will drive results, you have to really hear your employees. Leaders respond
to questions, address concerns, and above all, listen with empathy.
3) Direction: Having the vision to break out of the norm and aim for great things —then the
wherewithal to set the steps necessary to get there— is an essential characteristic of good
leadership. By seeing what can be and managing the goals on how to get there, a good leader
can create impressive change.

4) Optimistic: The very best leaders are source of positive energy. They are intrinsically
helpful and genuinely concerned for other people’s welfare. They always seem to have a
solution and always know what to say to inspire and reassure. They avoid personal criticism
and pessimistic thinking, and look for ways to gain consensus and get people to work
together efficiently and effectively as a team.

5) Honesty: Strong leaders treat people how they want to be treated. They are extremely
ethical and believe that honesty, effort, and reliability form the foundation of success. They
embody these values so overtly that no employee doubts their integrity for a minute. They
share information openly and avoid spin control.