The concept of entrepreneurship and entrepreneur has evolved from a for-profit business to including social entrepreneurship and from an individual who organises or operates a business to qualities that define a successful business person. A small farmer does manage an agribusiness but may not exhibit qualities generally associated with a successful business person. An entrepreneur is someone who produces for the market and always looks for opportunities to improve and expand his business by taking calculated risks. Farmers, on the other hand, produce keeping in mind their consumption needs and the MSP (Minimum Support price). Only a small percentage of farmers try new crops, adopt alternate technologies and package of practices to make farming profitable.
Majority of Indian farmers are at survival stage more due to compulsion, despite high weather-related risks than their personal choice to practice agriculture and don’t see ever the growth stage. New generation prefers to migrate to nearby cities for alternate livelihoods meeting their aspirations rather than putting laborious efforts in a low profile and less remunerative agriculture. Unlike other businesses, producers benefit least in agriculture as farmers remain dependent on MSP fixed by government agencies that become Maximum Price Fetched (MPF) by them. Government needs to change it’s policy and role to empower farmers to decide prices of agri-produce and replace old inputs based subsidy approach that benefits mainly input suppliers with an output based price incentives directly to farmers.
Lacking entrepreneurial drive
Small farmers possess technical and managerial skills but lack entrepreneurial drive to take calculated risks to overcome agribusiness challenges related to accessing remunerative markets, timely finance, low bargaining power, regulations, appropriate technologies and information, and access to BDS providers.
Recent attempts to organise farmers into FPCs (Farmer Producer Companies) have been facilitated by combined efforts of government agencies and field NGOs primarily to help farmers become agri-preneures to diversify into various agribusiness enterprises related to trading agri tools and equipments, seed production, certification and marketing, agri inputs and trade and value added products. These agribusiness options were available earlier also but small farmers, individually, could never take up these capital and resource intensive enterprising activities. The Producer Company Act allows small and marginal farmers to join hands with other local resourceful farmers to form FPCs to take up agribusiness enterprises and become entrepreneurs.
However, managing farmers’ institutions such as FPCs require entrepreneurial and management skills for managing staff and board members, accounting, managing profit and losses, procurement, inventory management, building partnerships with retailers, traders, private players and government agencies, business and marketing strategies and awareness of rules and regulations of FPCs that small farmers lack currently. Also, government’s efforts to promote FPCs didn’t visualise the needs for building such capacities of farmers to manage FPCs successfully and sustainably. Therefore, these farmers’ institutions find it difficult to break-even and continue to depend on field NGOs even after several years of support.
During my interaction with board of directors of FPCs there emerged a felt need for comprehending and managing various functions of FPCs. It posed an interesting challenge to educate and communicate key agribusiness principles to farmers in a simple and easy to understand language. This prompted me to conceptualise similarity between functions performed by our key body parts and different roles that need to be performed for running a successful FPC. Educating farmers in the areas of agribusiness management, marketing and entrepreneurship would help them see farming more as a profitable enterprise than a last resort. Therefore, it is important to develop FPC relevant business, marketing and entrepreneurship training content and methodologies that could empower farmers to manage FPCs successfully.
In order to run successfully and sustainably FPC needs to perform functions similar to ones done by key body parts to live a healthy and long life.
Head: Marketing strategy – Similar to head in the human body FPC needs to continuously perform key business functions related to thinking, hearing, seeing, feeling, planning etc. by designing and executing effective marketing strategies around seller centric 4Ps (Product, Place, Price, Promotion) and customer centric 4As (Acceptability, Availability, Affordability, Awareness) principles.
Heart: Customer satisfaction – A satisfied customer is central to a well functioning FPC similar to a healthy heart in a well functioning human body. FPC should aim to build loyal customers by fulfilling their changing needs with effective marketing strategies to ensure its long term sustainability.
Arms: Stakeholders engagement – FPC needs to reach out to various existing and potential stakeholders such as local government, private sector companies and distributors, local mandi, IT solution providers, legal, finance and business experts to build effective and sustainable partnerships.
Artery and vein: Financial management – FPC needs to strive to become financially viable as soon as possible to stand on its feet without having to continuously depend on supporting NGO and government agency similar to artery conveying oxygenated blood to body parts (profits) and veins carrying de-oxygenated blood towards heart (losses) for converting into oxygenated blood.
Legs: Governance vigour– For a smooth running of FPC it is important that both FPC staffs (represented by one leg) and Board of Directors (represented by second leg) complement each other. In the initial years NGO representatives manage and run entire operations of FPC that should gradually transform to equal sharing of responsibilities between them wherein vision and leadership should come from BoDs and day-to-day operations and technical aspects should be managed by staffs.
For a healthy and functional FPC it is important for farmers to learn to manage these different functions diligently. FPCs offer a golden opportunity to farmers to transform their destiny to become agribusiness entrepreneurs by graduating from doing a simple farming to businesses that provide them competitive advantage through vertical business integration by moving up in the value chain and as close as possible to final consumers to maximise price realisation within a value chain.
Creating right ecosystem
Farmers need right policy ecosystem and support to flourish and become entrepreneurs. They can become successful entrepreneurs only if barriers outside their control are removed such as enhancing government investment in agriculture, creating web of irrigation infrastructure, supporting laws and regulations, access to timely and adequate finance, access to effective extension and business development services.
In a nutshell, following three broad areas would help in creating a right ecosystem for farmers to become agri-preneurs:
Build business and entrepreneurship skills: Government needs to encourage private agencies and institutions that build marketing, business and entrepreneurial skills of farmers, certify farmers and also extend onsite hand holding services to them.
Create and facilitate modern IT enabled marketing infrastructure: In order to bring transparency and efficiency all APMC mandis need to use electronic weighing machines, grading machines as per Agmark standards and differential prices for graded products. Promote modern warehouses with enhanced capacities, cold storages and incentivise agri processing units.
Policy law and regulations: Innovative laws such as treating FPCs as start ups and extending three year income tax exemption proposed recently for corporate startups companies.
Author: Sanjay Gupta, Agribusiness and Value Chain Specialist