Key challenges faced by farmer producer companies in the agricultural ecosystem
Every business, every company starts small. It is through strategic decisions, continuous assessment of the environment, and successful seizing of opportunities that one succeeds, while others eventually fail. Often, the baby steps taken by small businesses deviate from the right direction; most of the time, situations are not in favour of small businesses, casting them into an ocean of uncertainties. Businesses that can overcome such situations thrive, while others perish.
Similarly, in an agricultural set-up, a farmer producer company, commonly known as “FPC,” is also a special kind of organisation aimed at achieving complex objectives beyond the profit motive. The role of an FPC is critical in bringing growth and well-being amongst the agricultural fraternity. In FPCs, all the farmers enjoy single voting rights irrespective of their shareholdings, and there is no single ownership of the company.
Usually, in case of FPCs, resources are allocated for business promotion, but there is inadequate focus on building the organisation within the company. Common narratives around FPC promotion suggest that a good and profitable business proposition to the shareholders will ensure participation and volume generation. All FPCs need to do is aggregate and establish forward linkages, which becomes a gap in reality. Also, as a new entrant, it is challenging for an FPC to find a market niche. Consequently, it is nearly impossible for a new FPC to present attractive business propositions to farmers in the initial days, making it difficult to acquire shareholders.
How FPCs lose the battle
Acquiring shareholders is the primary condition for any FPC to embark on the path of success. Therefore, the FPC faces rejectionfrom all quarters. It starts with the farmers’ denial to do business. As a consequence, it fails to keep promises in the market and its credibility as a good business partner dwindles. Most of the FPCs lose the battle at this stage.
The FPCs that somehow win over the initial hurdles, come across many such crisis situations before they find a strong base. Another such formidable hurdle is the cash flow crisis. Cash flow crisis arise mainly because of credit sales. Many a time, pending amounts require write-offs, where small businesses like that of FPCs, face a tough challenges to pay off the money owed to the farmers. The failure to pay on time or missing payments can doom the business for good. Often farmers turn to the FPC when the market rate is below expectations and turn away when market conditions are favourable.
Fundamental strength
Quality assurance is another major problem for new FPCs. Being relatively inexperienced and lacking robust systems and processes, these FPCs often struggle to maintain the promised quality, which can render them undesirable business partners. Marginal farmers, especially women, who have historically been excluded from commerce, find it difficult to trust and feel motivated by a purely business proposition. Such challenges can further expand the list, once the nature of these challenges is understood, the next question that emerges is how to address them.
A community-based farmer producer company’s fundamental strength lies in the community from which it has originated. The stronger the community mobilisation, the stronger the FPC becomes. This mobilisation may not necessarily be based solely on a promising financial proposition. In fact, such a narrow approach is more likely to fail than succeed in mobilising members. The big picture should be comprehensive, attractive, yet focussed on the business. By investing in the leadership and true community engagement of FPCs, we can empower these organisations to thrive, transforming challenges into opportunities. As we reflect on the importance of this soul, let us recognise that building genuine connections and understanding the intrinsic motivations of farmers can create a vibrant ecosystem where FPCs can flourish, ensuring a brighter future for all involved.
The author is Team Co-ordinator, PRADAN