CASE STUDY

OF
DHARANI FARMER PRODUCER
ORGANISATION

By Sarika Singh
November 2019
APMAS, Hyderabad
INDEX:

List of tables....................................................................................................2
List of figures...................................................................................................2
List of abbreviations........................................................................................3
Executive Summery.........................................................................................4

Section – 1........................................................................................................5
Objective..........................................................................................................5
Introduction.....................................................................................................5
Life journey of Dharani...................................................................................6
Social Mobilization Network of Dharani........................................................9
Farmer Development Centre...........................................................................9
Timeline of Dharani FPO’s Journey..............................................................12
Strength of Farmer’s Institutions: Dharani Cooperative...............................15
Organisation structure of Dharani FPO........................................................16
Business Profile of Dharani FPO...................................................................17
Main Challenges faced in the process of setting up Dharani and key
learnings.........................................................................................................20

Section – 2.....................................................................................................22
ECO-System of Dharani................................................................................22
Annexure: 1 Mahila Abhivruddhi Society (APMAS).....................................24
Annexure: 2 A comparison of policy incentives for co-operatives and PCs..26

1
List of Tables:

S.NO Title Page

1 Basic Profile of Dharani 15-16

2 Strength of Farmers' Institution - Dharani Cooperative 17

3 Rythu Sanghams and Financial Status as on December 2018 19

4 Farm equipment in the CHC 23

5 Business Performance Farmer service centre, Dharani Profit and 24

Loss Details for theFinancial year 2019-20

6 Revenue from fertilizers and pesticides for the year 2019-20 24

7 Profile of membership of Dharani 25

8 Performance on benefits to farmer members by Dharani Farmers’ 27

Cooperative

List of Figures:

S. No Title Page
1 Social Mobilisation network of Dharani 9
2 Farmer Development Centre 12
3 Milestones of Dharani MACs society 14
4 Organizational structure of Dharani FPO 20

2
List of Abbreviations:

AGM Annual General Meeting

APMAS Mahila Abhivuruddhi Society
CEO Chief Executive Officer
CHC Custom Hiring Centre
DPR Detailed Project Report
GAP Good Agricultural Practices
GST Goods and Services Tax
FPO Farmer Producer Organization
FDC Farmer Development Centre
FFS Farm Field School
MACS Mutually Aided Co-operative Society
MARKFED State Agricultural Co-operative Marketing Federation
NABARD National Bank for Agriculture and Rural Development
NBFC Non-Banking Financial Company
PoP Package of Practices
POPI Producer Organization Promoting Institution
PAN Permanent Account Number
PPC Primary Processing Centre
RBI Reserve Bank of India
RM Rythu Mithra
RF Reliance Foundation
SHG Self Help Group
SFAC Small Farmer Agri-Business Consortium
SOC Sector own control
SNU Swayam Niyanthrana Udyamam

3
 EXECUTIVE SUMMARY
Agriculture is a mainstay of the Indian economy and plays an important role in its growth and
development. Over two-thirds of the Indian population is directly or indirectly dependent upon
agriculture and its allied activities. Small and marginal farmers constitute the large group of
cultivators (85%) in Indian agriculture. They have low accessibility to the technology, agriculture
extension, information, credit and markets. On the other hand, the food industry finds it difficult to
procure agriculture produce directly from the farmers because of the high transaction costs. This
makes the supply chains inefficient and creates concerns of food safety, lack of transparency and
traceability. If the increasing number of agricultural suicides is any indication, these farmers are
struggling to survive. While indebtedness is often cited as the immediate reason for their distress,
deeper issues are involved in this phenomenon such as low scale of operations, lack of information,
poor communication linkages with the wider market etc. Alongside, these associated factors, the
farmers also experience extreme exploitation by the intermediaries in procuring inputs and
marketing their produce.

This situation calls for major structural reforms and transformational initiatives towards the
revitalisation of agriculture both, by way of stepping up investments for productivity enhancement
as well as reforms in agricultural marketing and post-harvest logistics for boosting agricultural
growth at micro, meso and macro levels. Several organisational prototypes are emerging to integrate
Farmers into the value chain. One such initiative is Farmer Producer organizations (FPOs) which
aim to help farmers reap benefits of economies of scale via collectivisation and aggregation.

This case study attempts to document the journey of Dharani Agricultural Producers Mutually
Aided Cooperation Federation Ltd. (Dharani FPO) registered in February 2018 under MACS Act
1995, and in the process, identify the key challenges, learnings at various stages of this FPO’s
journey and harnessing this knowledge for developing a set of guidelines for future reference in the
development of FPOs.
Dharani is currently having 715 Farmer members. It is established to help its member farmers
sustainably increase their income, enhance the capacities of farmers and their institutions to manage
their own affairs effectively, promote improved production practices, introduce collective
procurement of inputs & marketing, network with farmer institutions and other NGOs to make
collective representations to policy makers on farmers rights and entitlements. APMAS (Andhra
Pradesh Mahila Abhivruddi Society) is the promoter of this farmer producer organisation under the
project ‘Sector Own Control’ supported by DGRV, Germany in Sadhasiva Nagar Mandal of
Kamareddy District. This case study takes a deeper look in the step by step process adopted by
APMAS in promoting Dharani FPO from its inception stage to becoming fully functional. This also
throws light on the FPO’s structural aspects and financial status. The case study is divided into two
sections-the first section covers the process followed in formation of the FPO and the second
section covers more about the ecosystem in which the FPO exists, concluding with the key
challenges and learning picked up in the process of its formation, and the current intuitional
interventions needed and recommendations going forward.

4
Section -1

Objective:
This case study is an attempt to understand and explore the journey that DHARANI Farmers
Producers Organisation (FPO) undertook from its date of inception to reaching maturity and the
various developments it underwent throughout this journey. This case study has been crafted to
assist in placing a set of guidelines that can facilitate the creation of designs for the future FPOs
based on the successes and learnings from the case of Dharani FPO.

Introduction:
Sadashivanagar is a Mandal in Kamareddy district of Telangana. It is spread over an area of 3,651
square kilometer. The average size of land holding is 1.53acres and around 91% of the farmers in
the area are small and marginal farmers. The soil here is either red loamy soil, medium black soils
or deep black soil. The soil quality in the area is poor and lacks micro-nutrients. The main
sources of irrigation are the canals followed by water tanks. Major crops grown in the area are
paddy, soybean, sugarcane, cotton and maize. The deficiency in the micronutrients is widespread
and has resulted in limited crop yields. The farmers there also face issues of pest and wild
animals attacking the crops. Due to varied problems, farmers in the area were slowly losing
interest in the agriculture and were migrating to nearby cities in search of livelihood.

APMAS is a not-for-profit national level resource organization working for the empowerment
of people’s institutions such as women’s Self-Help Groups (SHGs),SHG Federations and
Farmer Producer Organizations (FPOs)in the area for last 18 years. APMAS with technical and
financial support from DGRV has been making effort to consolidate and up-scale Sector Own
Control (SOC)/ Swayam Niyanthrana Udyamam (SNU) in to the fabric of people’s
organizations. SOC is essential for the sustainable progress and survival of these organizations.
(Check Annexure-1for more information about APMAS)

In the Kamareddy region, farmers are primarily production oriented instead of being market
oriented. This has put farmers in a disadvantageous position as they are not engaged in the entire
agriculture value-chain which leads to middlemen taking over their profit share. It has been
revealed from the value chain studies conducted by APMAS in Kamareddy district that farmers
are not united in resolving their issues. Unlike self-help groups and their federations, farmers
lack proper institutions to come together and take up issues related to farming (pre-production,
production & post-production).

In recent times, the government of India has also focussed its efforts on promoting and
strengthening of Farmer Producer Organisations (FPOs). Reliance Foundation is actively
promoting and guiding FPOs in the nearby areas but Sadashivnagar was left out of picture. Due
to the past good work that APMAS has done in the area with SHG/SHG Federations, the
District Collector of Kamareddy district requested APMAS to collectivize the farmers in the
Mandal in to a FPO.

5
DHARANI literally means ‘mother earth’. The FPO’s journey beganin January 2017.It has been
promoted by APMAS and funded by DGRV Germany with the main objective of promoting
and strengthening self-reliant Farmer Producer Organisation in Telangana state to engage in
agriculture value-chains. APMAS has assistedDharani FPO every stage- mobilizing, registration,
business planning and operations. However, ownership control is always with farmer-members
and management of the FPO is done through the representatives of the members.

A key challenge for APMAS is to act as catalysts and bring out the self-organising capacities of
farmers in the most locally relevant and useful way. It is critical that there is affinity amongst the
members for the group to sustain and benefit in the long run along with the concept of Sector
Own Control woven in to the very fabric of Dharani. The following section provides a quick
overview of the journey of the Dharani FPO.

Life journey of Dharani FPO:

Stage One: Pre-Project Implementation/ Incubation Stage
Means of
Key Activities Deliverables
verification
This stage involved conducting
a baseline study on volumes,
value and market access, Submitted DPR,
Detailed project report (DPR).
centrality analysis,
identification of product Meeting minutes
List of product specific clusters
1 specific clusters, feasibility and photographs of
identification,
Analysis- Break even estimates, meeting,
and creation of project
Database on farmers prepared
implementation plan including Inception report.
procurement, input, storage
and marketing.

APMAS has been working actively with SHG/SHG federations in Sadashivanagar for over 10
years in strengthening and institutionalizing self-regulatory and supervisory systems in them.
Thereby, its team had access to lot of on-ground realities of its agrarian system and distressed
face by them. All this information came in handy when decision to form a FPO (DHARANI)
was made. In spite of APMAS proximity with the local people it faced some resistance from the
farmers when the decision to form them into formal groups and later into FPO was taken up,
due to their past experiences with other organisations which never delivered on their promises.
APMAS organised and mobilized farmers and awareness meetings held in 10 villages of
Sadashivanagar Mandal. On the technical front, APMAS conducted soil testing in the area in
order to determine the soil health. The test was done for around 262 farmers in all the nine
villages. Within a month of conducting these tests, APMAS shared the lab reports with the
farmers, generating faith about its intentions.

6
Stage Two: Enhancing capacity and Implementing of Surplus farm production
Plan (Mobilisation phase)

Key Activities Deliverables Means of verification

Local resource Persons
-Village meetings- identify potential List of Raithu
interviewed and selected
farmers, identify opinion leaders Sangams.
(Raithu Mithras.)
Identification and formation of FIG( List of Raithu Mithra
Formation of FIGs Raithu
farmer interest Groups) who are trained and
Aangams-a cluster of 10 -
ready for deployment.
15 farmers
Hand holding support for
productivity increase Training curriculum,
Imparting necessary
training reports and
training on improved
Explaining the logic of participants list
agriculture practices to
collectivization the value proposition
FIGs through (Raitu
for setting up FPO List of farmers
Polam Badi) Farm Fields
adopting package of
School-FFS
Organising exposure visit of farmers practices
and opinion leaders.
Farmers realized benefits in
Number of farmers
terms of increased yield
supported by FPO.
and less expenditure.

7
At this stage, APMAS was faced with twin challenges. On one hand, it had to convince farmers
about the viability of FPO in terms of giving them better life socially and economically. On other
hand, due to presence of FPOs promoted by Reliance Foundation in the surrounding villages,
farmers had unrealistic expectations about the availability of funds with the NGO.

RPs Training at APMAS Bihar Team Exposure Member Education

office Kamareddy visit Training at Village

The biggest differentiation between FPOs promoted by Reliance Foundation and APMAS is in
the approach and the structure of the collectives. APMAS has a more hands-on approach with
the pool of knowledge bank available at its disposal due to its long standing association with the
SHGs and SHG federations in the Area. This information has helped APMAS in identifying the
potential interventions required and understanding the specific project implementation context.
On the structural front, premises are rooted in the principal of sustainability and self-reliance.
APMAS and its team worked hard and relentlessly to enlighten to the farmers, the key benefits
of collective action such as the possibility of sharing knowledge and learning for the stakeholders
who take part in the collective initiatives.

APMAS also created awareness about FPOs by showing movies on the successes of existing
formal collective organisation like Mulkanoor Cooperative Society, Green Foundation,
Bangalore, and CCD in Ananthapur, Jai Sardar FPC, Jeevan Sangini women FPC in Maikapur
Maharashtra. A cooperation approach relies heavily on the local knowledge of stakeholders and
on the possibilities to integrate this knowledge into the decision-making process. Thus, collective
action increases the credibility and legitimacy of decision-making, and also allows the collecting
and sharing of information at lower costs compared to the individual approaches Another
important benefit of collective action is the possibility of efficiently tackling local issues.

Polam Badi/Farmer Field School (FFS): FFS is basically a virtual school

where the farmers are given hands-on training on various productivity
enhancement technologies with primary focus on learning by doing. It
includes on-farm raitu trials and demonstrations etc. The objective here is to
expose farmers on various agriculture technologies, test and validate them
under their own management condition so as to improve adoption of
technologies by farmers.

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Social mobilisation network of DHARANI

Dharani
Mandal level FPO

Panchayat level Grama Rythu Grame Rythu

Sangams Sangams
(10-15)

Village level (10- Rythu Rythu Rythu

15) Sangams Sangams Sangams

Stage-3: Emerging and Growing Stage

Means of
Key Activities Deliverables
verification
-Gram Raithu Sangams meeting and
orientation started for FPO scoping, vision
building &exposure visits initiated. Business plan drafted
and shared with Raithu Gram Raithu
-Generate crop-wise household sangam members Sangams meeting
information with surplus, deficit and gap registers and
exists Started collecting share shareholders list
money. prepared.
-Initiation of Statutory process required for
formation of DHARNI. Institutional FPO Bank Account
Arrangements for Statement.
-Finalizing list of farmers willing to join Market
FPO and start share money collection.
Access and input supply
-Framing of Bye Laws/MoA/AoA, agreement placed with e- PAN Card received.
incorporation of FPOs Fresh ,MARKFED.

FARMER DEVELOPMENT CENTRE- FDC

APMAS collaborated with Agribusiness solution provider e-Fresh for the establishment of
FDC which is owned and managed by DHARANI FPO. These are physical centres established
in villages and towns where crops are grown by partnering with Farmers Producer Organizations
(FPOs). FDCs act as all-time reliable knowledge one-stop shop centre which enables local
farming communities to access knowledge, technology, inputs, financial & risk mitigation
services, farm machinery hiring services (CHC) , value chain integrations and market information
and linkages etc. FDC also promotes Good Agricultural Practices (GAP).
The FDC conducts regular farmer’s field schools called ‘Polam Badi’ on maize crop for the
farmers of Dharani FPO. Model farms have also been set up for teaching and demonstrating

9
GAPs. In this, some farmers are selected as model farmers who will be supported with the
advisory services, scientific methods and technology interventions. These model farmers act as
brand ambassadors for showcasing the best practices to other farmers. Along with this, farmers
are given training in preparation of Ghana Jeevamrutham (organic pesticide) and vermi compost.
Rythu Mithras are also given training in creating Kharif action plan. Linkages have been
established with agriculture universities and research stations to train the farmers and facilitate
extension of successful technologies and demonstrations in the village. Farmer Development
Centre provides inputs to the farmers.
As a commercial entity, the FPO has to submit GST to auditor on a monthly basis. In first
month of GST submission Dharani faced many problems as they were not equipped with the
skills and knowledge on FDC inputs and GST. With continuous handholding and inputs for
three months by APMAS team, the FPO started submitting GST to the auditor accurately

Schematic of Farmer Development Centre

10
Stage 4: FPO establishment and Stabilization phase:

Key Activities Deliverables Means of verification

Regulatory approvals for
FPO activities.
Office, Custom Hiring
Physical establishment of centre, outlets for supply of
Farmer Field Book
FPO various inputs established.

Increased business turnover

Implementation of business Obtaining necessary statutory
of FPO reflected in Balance
plan of FPO Clearance needed to carry out
Sheet.
business activities.
GST applied.

As Dharani FPO started taking up business activities, the farmers got benefitted through the
services offered by the FPO. The non-member farmers also come forward to pay the share
capital and become members of the FPO as they have witnessed the benefits of being a member.
During the season of Kharif 2018, Dharani FPO received procurement acceptance letter
from MARKFED and Dharani started procurement. For this, a business committee was also
formed to oversee the business activities of the FPO. However, the committee was not
completely involved and the activity was done by APMAS team due to which the farmers had to
face issues in procurement like delay in procurement and in receiving amount from MARKFED.

Dharani FPO maize procurement operation was one of its kind in the history of
Telangana state. It was initiated to undertake Maize procurement under Minimum Support
Price (MSP). The Maize Procurement Centre was on the behalf of TS MARKFED under the
Minimum Support Price (MSP) to support farmers to sell their produce at their Mandal level
at common place. Special staff and Sub-Committee were formed and necessary training was
given to them on the procurement systems to be maintained in the process and to ensure the
quality, systems, bookkeeping, labour, transportation, gunny bags, submission of reports
regularly etc. The operations led by the BoDmade it a success story in the district.

The Quantity procured in Rabi was 1219 quintals and the service charge earned by FPO was
Rs. 12,230 and the quantity procured for the second time i.e., in Kharif was 7400 quintal and
the turnover was Rs.1,25,00,000 and Service charge(@ 1%) earned by FPO is Rs.1,25,800
and the outreach of Farmers was around 300 members.

Maize procurement centrebenefitted the farmers by reducing their transport costs,

restricted misappropriation in the weight calculation, and timely payments were received
directly by farmers in their bank account with in 48 hrs of procurement from MARKFED.
They no longer had labour issues as well, as the whole process was time saving.

11
 Timeline of Dharani FPO’s Journey:

7th Janurary 2017

December 2019
Identification of
Farmers service centre
villages for formation
at Kalwaral
of FPO

24th January 2017 November 2017

Conducting meetings at Formation of Dharani February 2018
village level & selection of FPO Registration of Dharani
Raithu Mithras FPO

May 2017
March 2017 Grama Raithu Sangham
Raithu sangham formation and share
formation capital mobilization

Enrolment of Farmers in M-Kisan Raithu Mitra’s meeting

12
 RS Leaders Training Dharani FPO fertilizer supply in Thimanapally

Farmers prepang organic fertilizer DGRV Team visit to FDC at Padmajiwada

FPO Board Meeting Demo plot at Thirmanpally

13
Basic profile of Dharani FPO:

Total members 720

Date of registration Feb -20018
Share capital 1000Rs each (in lakhs) 720000Rs
Main promoter APMAS
Women member of the FPO 25% 180
No. of directors 15
RythuMithra 1 in each village paid by DGRV 10

No. of employees paid by APMAS 1

 - Accountant( Project Associate)
 - Capacity builder/non-technical 1
 - Agriculture Officer
1

Table 1: Basic profile of Dharani FPO

Female Farmers collecting soil samples

14
 Strength of Farmers' Institution - Dharani Cooperative
FACTORS OBSERVATIONS

Farmer members are the owners Farmer claim the ownership and any member
of the FPO can put forth their views on its business via their
representatives.

Farmer members on their own Dharani is managed by professional paid staff

OWNERSHIP manage the FPO with help of the resource institution(APMAS)

Frequency of attendance in More than 80% attendance in sangam meetings

meetings is witnessed as per records

The business decisions and profit statements are

Accountability
shared with members.

Members are aware of FPOs Farmers are aware of the structure, role and
structure responsibility of BODs but not completely in
AWARENESSO tune with the management of the FPO.
N ROLE AND
FUNCTIONS
OF FPOs Farmer members understand Farmers consider their responsibility to produce
their role in running the FPO. organic and sell it to the FPO.

High satisfaction, based on high returns on

Satisfaction amongst farmer
SATISFACTION investments and support in newer technologies
members
of doing farming.

PROCESSES Maintenance of records, bye All Records of attendance ,input transaction,

AND laws and its effective crops procurement and business are duly
PROTOCOLS implementation maintained

All the produce by member farmers are sold to

% of produce sold to the FPO by
the FPO expect for milk and vegetables which
farmer member
are currently not procured by FPO.

CAPITAL
AVAILABLE Physical capital Dharani has FDC with operational CHC

Dharani has not yet taken loan from formal

Financial capital financial institutions but took one voluntary
financial help from Mr. Papi Reddy.

Table 2: Strength of Farmer’s institutions: Dharani FPO

15
 Village No. of No. of No. of No. of Amount of Share
Groups members women Bank Savings capital
formed in groups in groups accounts (Rs) in RS
opened Groups
1. Modegam 15 194 31 15 180000 89000
2. Thimmojiwadi 9 111 47 9 113380 111000
3. Kalwaral 5 57 14 5 55800 57000
4. Thukkojiwadi 13 155 31 13 138550 130000
5. Padmajiwadi 17 191 35 17 162750 131000
6. Mallupet 03 32 06 03 9600 0
7. Kuprial 04 53 02 4 9600 0
8. Thirmanpally 07 80 01 07 55100 41000
9. Dharmaraopet 04 49 07 4 3400 0
TOTAL: 77 922 174 77 728180 559000
Table 3: Rythusanghams and Financial Status as on December 2018

Organizational structure of Dharani FPO:

Board of Directors
Administrative role
Financial role
Statutory role

CEO APMAS

Production Monitoring Manager

Committee Committee Finance

RythuMithr
a*
Service Providers

Farmer Beneficiary Members

16
Rythu Mithra (RM)*

There are 10 RMs, one each at village level. Rythu Mitras (RMs) maintain books at village level.
RMs collect information from the member farmers about their need for seeds and fertilizer in
there Rabi and Kharif action plan and communicate the same to the governing body in their
monthly review meeting. On the basis of this report, FDC makes arrangements for the purchase
of seeds and fertilizers to be dispensed at its store to the member farmer.

APMAS**
APMAS facilitate GRS to conduct Annual General Board Meetings. It facilitates them to prepare
their annual reports, internal audit reports, yearly action plan & budgets. It also supports them in
mobilising funds from banks or other financial institutions. APMAS personnel also inform the
FPO members about various government schemes and programmes benefitting them. APMAS
works in every way to make the farmers self-reliant.

Business of Dharani FPO:

For smooth functioning and sharing of responsibilities, there are three sub-committees to
manage the whole gamut of business. The decision of the sub committees is accepted by board
unless otherwise it requires any further review. Dharani management has applied and
successfully secured licenses to supply:

Pesticide, Bio- pesticide

Seed license to carry on business of a dealer .

Fertilizer, Micro-Nutrients, Bio-Fertilizers.

The main business of FPO is agricultural input supply to its members. The input supply through
FDC included fertilizer, seed, bio-inputs and pesticide. The FPO has license for sale of various
inputs and charges a nominal amount of Rs 10-15 on each bag of seeds and 8-10% margin on
pesticide for nearly 1500 members. Its member avail all these inputs 85% less cost on the market
price. Non-member farmers also avail these services. This number could increase if FPO offers
credit sales but currently its only sells on cash and carry basis.
Dharani FPO also has a Farmer Service Centre since 30th December 2017 at Kalwaral village
from where it sells inputs, rents farm equipment, extended fund for the purchase of all the Farm
machinery at the Custom Hiring Centre (CHC). The farmer service centre provides essential
services like land preparation, seeding, weeding and others by renting out its machinery through
its CHC

17
The main crops grown in the area are Maize, Paddy, Cotton, Soya bean. The FPO is involved in
procurement of maize with support from TS Marked and establishment of farmer service centre
Other than these activities FPO also provides small farm equipment’s for farmers. To meet the
demand for sprayers, FPO supplies sprayers to the member farmers at 30% lesser price
compared to the market. Non-member business forms 83% of their business turnover. The FPO
did not get any grants or bank loans but have had market linkages with some success. The
member patronage and satisfaction level is fairly high.

S. No Item Name Charges Per Quantity Revenue

Hour
1 Power Weeder 500 2 400000
2 Power Tiller 500 2 320000
3 Rotovator 1000 1 400000
4 Brush cutter 200 2 160000
5 Maize sheller 1000 1 300000
6 Tractor 700 1 350000
FSC Equipment’s: 9 1930000
Total
Table 4: Farm equipment in the CHC

Farmer service centre, Dharani Profit and Loss Details for the financial year 2019-20

Year (2019-20)
Turnover (Rs. Lakh) 51,39,524*
Profit(Loss)in Rs. 1,68,781

Table 5: Business Performance of the FPO

Revenue from fertilizers and pesticides for the year 2019-20

s.no Item name Year 2019-20
1 Fertilizers 2013440
2 Pesticides 1192334
Total Revenue 32,05,774
Table 6: Turnover comprises of Revenue from Equipment, Farm Implements, Fertilizers
and Pesticides

Parameters
Total users 1320
-Members 720
-Non members 600
% of total business from non-members 83%
Avg. size of holding of member (range)in Ha 1.5-2Ha

Table 7: Profile of membership of Dharani

18
An incident in the evolution of Dharani FPO warrants a special mention. Dharani FPO prepared its
Kharif action plan for the season 2019 i.e. input requirement (seeds), utilization of agri-machinery
estimate of fund requirement was around Rs 15 lakhs. The FPO could mobilize only 5 lakhs on its own.
They decided to approach banks and financial instantiations to get a loan of Rs. 10 lakhs to bridge the
gap. They prepared a detail project report for the proposal and submitted it to Andhra Bank in
Kamareddy, Telangana State Cooperative Apex Bank (TSCAB) and Stree Nidhi, state level federation
promoted by SHG federations in Hyderabad for providing supplementary loans to SHGs. But they could
not succeed in securing a loan. The procedures needed to be followed by banks were voluminous and
needed lot of paper work following which would have meant lapsing the sowing season. This would have
amounted in to huge losses for the farmers. During the same time FPO conducted its board meeting
which Mr. Papi Reddy (CEO, Sadhikaratha Foundation) attended as a formality to be inducted in to
the formal structure of APMAS. When he recognized the farmers’ plight and studied their detailed
project report, he could see lot of potential in their proposal and agreed to lend the amount of Rs 10
lakhs immediately. His timely action saved the farmers from suffering huge loss. The farmers proved him
right in his assessment of their capability to return his money but they also make a profit of 1.5 lakhs on
their total investment. Today not only farmers have returned the principal mount in full to Mr. Reddy
but they also paid him additional token amount as gratitude for his believe in them and the help extended
when it was most needed.

CAPITAL FACTOR OBSERVATIONS

Choice of crop maize ,cotton, soya is done keeping water
Water availability
availability in the region
NATURAL Organic practices promoted by Dharani focuses in
Soil quality
maintaining and nourishing nutrients of soil
Support of regular training and technical expertise is
Knowledge of practice
always available.
HUMAN Weather information,
M-kisan to get information on weather, pest management
Mandi/market price
market locations, dealers and prices.
knowledge
Locally produces manure reduced the costs of inputs,
Increase in income by
also fixing of M.R P for each crop prior to the harvest
reducing costs
helps in security of income.
FINANCIAL
Increase in income by Value addition to the produce and better market linkages
rise in price has lead to higher price offered for the produce.
FDC has custom Hiring Centre- CHC. Through which
Agriculture equipment Dharani is providing equipment to its member along with
PHYSICAL
other agriculture inputs.
About 33 Rythu Sangams formed 26 of them have
financial inclusion
opened bank accounts and are operational.
SOCIAL Networking with farmer institutions and other NGOs to
Enhanced capabilities make collective representations to policy makers on
farmer’s right and entitlements.
Table 8: Performance on benefits to farmer members by Dharani Farmers’ Cooperative

19
Challenges faced in the process of setting up Dharani and key learnings:

Constraints faced

 Mobilization of individual farmers into a formal structured organisation is big task. It

requires very high skills to convince individual producers / growers to form
organizations.
 As organizational development is an innovative activity, the target group is not willing to
pay for services.
 After incorporation of FPO, to raise share capital and develop business plan are
important challenges.
 Legal and technical knowledge about Acts and regulations is crucial; Many times expert
advice is needed.

Solutions:

 It is imperative to provide vision regarding benefits of an organized farmer’s institution

to the farmers. Once they are convinced about benefits of a collective, they are ready to
go extra mile to make the FPO a success.
 Initiate short time financially viable activities with small changes in the existing
production practices such as cluster based approach to determine potential business plan.
 An integrated frame of looking at agriculture from business, environment sustainability
and livelihood of the farmers is making model of Dharani a win-win in all dimensions of
sustainable development.
 Strong awareness, involvement and ownership among farmers, as indicated by regular
attendance, transparency and faith in communities regarding the FPO are an enabler to a
strong institutional foundation for the FPO.

Lessons learned

 Farming communities will support the collective if provided with tangible solutions to
their problems.
 For sustainable development of any community organization, small fund generating
activities are needed to be promoted.
 Through community organizations, encouraging services and infrastructure, supporting
local agriculture, is an added advantage in making the FPO success and sustainable in the
long run.
 FPO capacity building is an incremental approach i.e. taking on different functions
without complicating their working. They should enjoy small success before taking on
more complicated issue for instance-FPO can be a procurement centre and can be
dispensing MSP.
 Value chain development is on-going process- procurement, sorting, grading, value
addition need to have a long term horizon for it to be fruitful. An FPO needs at least 5-7
years of handholding and support to become self-sustainable organically.
 It is imperative to shifting towards making the existing FPOs self-sustainable by building
better business model rather than concentrating purely on scaling up
 There are significant barriers to access to credit and regulatory compliances which are
difficult for nascent FPOs to meet in lieu of the statutory compliances which FPOs are
bound by under their respective registration acts, relief to FPOs from a penal provision
in case of certain non-compliances for the first five years would boost growth.

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Treating FPOs as agri-start-ups will give a great boost to the growth of FPOs. They should thus
be given access to similar benefits as start-ups. Debt is a huge issue for FPOs as most FIs require
collaterals and at least three years of balance sheets for credit assessment. There is a requirement
for designing tailor-made loan products for FPOs which was done in the case of SHG-bank
linkage programme earlier. Lending to FPOs needs to be seen as a business opportunity.

Research around the performance indicators of FPOs could lead to developing a rating tool for
FPOs. A rating tool would serve the dual purpose of facilitating credit-assessment and further
underwriting. Rating parameters reflecting the state of governance, management, risks
mitigation, and sustainability would prove very beneficial. These scores would help establish
credibility with investors and formal financial institutions

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 SECTION- 2

ECO-System of Dharani FPO

GOVERNMENT – Enabling Policy

& Regulations

Infrastructure
& support
system

Approval, APMAS as
Recognition, Human POPI & RSA*
Licences Resource
Linkages with agri- Development
corporates, direct
marketing

Dharni promotion &

strengthening
Marketing
(FPO)

Services
Retailing (technical)

Finance & Policy

Direct Marketing,
FPO as rural retail points APMAS

RBI, NABARD, NABKISAN & Banks

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*POPI- Producer Organization Promoting Institution

A FPO requires an effective and responsive ecosystem of support to prosper by providing wide-
range of services to their members. FPO will 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 success of an FPO will depend on establishing backward and forward linkages with various
stakeholders such as banks, retail-chains, corporate sector, government agencies, supply chain
management agencies, academic & research institutions, etc. The agriculture value chain required
for the effective functioning of FPOs as business entities cannot be done by one player. It is a
transformative tool which has the potential of achieving the visionary goal of doubling farmers’
income in the coming years. The key staff of FPOs must view themselves as members of a start-
up imbibing the lessons of being lean and nimble so that they could adapt, respond and innovate
in a rapidly changing external environment.

National Bank of Agriculture and Rural Development (NABARD), Small Farmers Agri-business
Consortium (SFAC), state departments, a large number of NGOs, Technical Resource Agencies
and private agencies have been facilitating training programmes for Board of Directors (BoD),
Office Bearers and managerial staff (CEO, technical team) of FPOs. These training programs
will have to be provided over a period as FPOs emerge from a nascent stage to sustainability
phase.

In addition to the continuous capacity building and capability development of FPOs, there is a
need for a strong financial linkage for the FPOs to access required capital for investment and
working capital to effectively develop and implement their business plan. There is a need for a
strong policy from RBI directing banks to finance eligible FPOs as per their business plans.
Other innovative financial instruments like credit guarantee, refinancing, risk management need
to be offered. FPOs require mentoring and incubation support for longer periods of time to
evolve into sustainable business enterprises. Such incubation support shall be provided by
professional agencies that have business orientation and the ability to serve as a sensitive support
system for the FPO development based on the values and principles of the cooperative
enterprises. Such agencies are called Producer Organization Promoting Institutions or POPIs.

FPOs also require necessary infrastructure like Custom Hiring Centre (CHC), Primary
Processing Centre (PPC), Farm Service Centre (FSC), Warehousing facilities, etc. Infrastructure
needed by the FPOs being in the nature of public good, will have to be supported by National &
State Governments through various schemes & programs of the Government (RKVY, MIDH,
etc). Governments will have to recognise the FPOs as legitimate agencies for input supplies to
farmers on behalf of the Government and also as procurement agencies of farm produce for the
Governments under Minimum Support Price (MSP) / Price Support Scheme (PSS).

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ANNEXTURE: 1

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 ANNEXTURE: 2
A comparison of policy incentives for co-operatives and PCs

Parameters Cooperatives PCs

Income tax rebate Section 80P of the Income Tax Act for
All income is taxable @
under Income Tax providing exclusive tax rebate to cooperative
30.2 %
1961 societies.
Income up to Rs. 1 lakh is also free from tax if
Relaxation from
it is earned other than activities mentioned in None
income tax
point no. 1
There are different provisions for distribution
Provision for
of income in different welfare heads which is None
distribution of income
non- taxable
Lease out of Govt. Provision made at Govt. revenue department
None
land for lease out Govt. land at very low rates
Eligible for all Govt. seed production,
Central seed subsidies
distribution and marketing subsidies under PCs are not eligible for
for production &
different schemes like ISOPAM, NFSM, RKVY such subsidies
marketing
etc.
State Govt. is supporting several cooperatives
No such support is
support cells like Beej Maha Sangh providing all
available for PC. In fact
kinds of logistics, production, training and
State support membership of those
marketing support to seed cooperatives; while
federations is not open
MARKFED is another such federation
to PC even if they want.
supporting primary cooperatives
Cooperatives are eligible for fertilizer allocation
It is not available for PC.
through State Marketing Federation
Allotment of MARKFED is not open
(MARKFED) which is the authorized body of
fertilizers for membership to the
state government to get allocation and
PC
distribution through member cooperatives
Allotment of Breeder seed is only made to
Central & State Seed Producer Agencies like
Allotment of Breeder
NSC, State Seed Corporations, and No such provision is
seeds which is
Cooperatives like IFFCO & KRIBHCO and all available.
regulated by Govt.
State Seeds Cooperative through Federations
like Beej Maha Sangh
9State Govt. policy to To some extent in M.P,
Number of policies are available at every state &
support such no other states have any
central level
initiatives policy on PC.
Mandi (APMC) Tax Cooperatives are exempted No such provision

Source: ASA, Bhopal, personal communication.

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