Role of FPOs in developing vegetable production clusters in India

India's agricultural landscape is distinctively defined by its small and marginal farmers86 percent of all farmers belong to this category.

The small land holding of majority Indian farmers puts them at a disadvantage - low produce volumes, disincentive to transport to remunerative markets (often far away), unviable to adopt mechanised farming/warehousing.

The inefficient supply chain due to inadequate infrastructure, transportation issues, and poor market linkages, result in significant post-harvest losses for vegetable growers and leave them to the mercy of prices set by a few local agents and intermediaries.

Farmers typically receive a small fraction of the final market price of their produce due to the long chain of intermediaries and low bargaining power. Moreover, price volatility and demand-supply fluctuations further impact farmers' incomes and livelihoods. The intermediaries also insulate the farmer from real-time information on market demand -supply, and pricing leaving farmers with delayed information on market demand and pricing.

A farmer/ vegetable grower often hears of an increase in price or demand for his produce much after a significant portion of his produce is already sold to a trader/intermediary. The end consumer is also subjected to vagaries of the market as supply is controlled by intermediaries.

Recent RBI working papers focused on the value chains of vegetables - Tomato, Onion and Potato (TOP crops) suggest that farmers get a share in the range of 31-43 per cent of the consumers' rupee. And during periods of higher inflation, intermediaries/agents capture the major share of consumer rupee- thus the major beneficiary.