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.

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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.