Optimal Institutional Architecture of Farmer Producer Organizations for Sustainable Value Creation for Small and Marginal Farmers

Abstract

This article argues that the assumptions for an industrial model of value addition on size, scope, technology, management, ownership, market landscape and governance structure are different to agriculture models for sustainability of small and marginal farmers. It has been based on a pan-India survey of over 250 producer organizations and case studies of 20 producer organizations across India during 2011–2014. In addition, the findings and suggestions of this paper are informed by an action research on developing a sustainable producer organization for over 8 years (2008–2017). Product-specific value chain as in industrial production system has its own dynamics and complexities. This approach makes a producer company a product company over a period of time and loses the focus of the producer. With greater value addition, it becomes financier centric owing to the technology-capital-ownership lock-up effect. Unlike in industrial products, high-value addition in agricultural produce can lead to value destruction in terms of the nutritional value of whole grain pulses versus polished pulses. Further, instead of selling in distant markets with high transaction costs, an FPO, selling surplus produce in the local market ensures better net price to the small farmers.