CDP has the potential to benefit farmers; however, asymmetric power relations can make farmer-producer organisations captive markets for the goods produced and marketed by big companies

A fair institutional setup can ensure farmers’ profitability by helping them augment decision-making and bargaining powers.

The Union Government’s cluster development programme (CDP) is launched as an initiative to reform agriculture markets. However, it needs to be analysed from the perspective of power asymmetry among the important stakeholders in the framework.

Under CDP, the government has allowed five firms to undertake cluster farming of specific horticulture crops in a bid to boost farmers’ income and make Indian produce globally competitive.

The cluster-based approach in horticulture crops will facilitate production, post-harvest management, marketing and branding of crops. It will reduce post-harvest losses and ensure better price realisation for the farmers. CDP intends to aggregate small and marginal farmers, which will scale up the level of agriculture activities in the region with many forward and backward linkages and spill-over effects for the local economy.

The National Horticulture Board (NHB) is the nodal agency for implementation of CDP — a component of the central sector scheme of NHB with an outlay of Rs 2,400 crore in 2023-24 budget estimates.

A cluster development agency is appointed for each identified cluster, and implementing agencies (IA) for different verticals of the clusters: Pre-production and production; post-harvest management; value addition and logistics; marketing and branding.

These IAs can be private companies, farmer-producer organisations (FPO), farmer-producer companies (FPCs), federations, cooperatives, societies, partnership firms, proprietorship firms, state agriculture and marketing boards, as well as other public sector entities.

The Ministry of Agriculture and Farmers’ Welfare has identified 55 horticulture clusters, of which 12 have been selected for the pilot launch of the Programme. This recent announcement is a first move in this direction and the applications for seven other pilot clusters, namely mango for Kutch and Lucknow, pomegranate for Solapur and Chitradurga, banana for Theni, apple for Kinnaur and pineapple for Sepahijala, are under process.

The Centre will give financial assistance of up to Rs 100 crore depending on the size of the project. Going forward, CDP has been initiated in about 50,000 hectares of land on a pilot basis entailing an investment of Rs 750 crore.

Five companies, which will be the implementing agencies, have been selected through the bidding process. They will develop the cluster for banana, apple, grapes, turmeric and mango crops in a period of four years.

Power asymmetry

The very idea of cluster farming may bring positive outcomes. But the approach to implementation needs to be critically examined from the lens of asymmetric power relations and community participation in the decision-making process.

Earlier experiences of private ventures into agriculture through contract farming have indicated the exploitation of farmers at the hands of big corporate giants. The farmers have very little say in such institutional arrangements where big private companies play the dominant role. Such arrangements impact farmers’ bargaining power, making them unable to negotiate with the companies.

The collectivisation of farmers through FPOs can help address the situation by enhancing their bargaining power. However, a recent article published in Down to Earth suggested otherwise.

Cluster-Based Business Organisations (CBBO), which aggregate, register and provide professional hand-holding support to FPOs, are mainly big companies like ITC Limited, Grand Thorton Bharat LLP, etc, it pointed out.

Before the concept of CBBOs was devised in 2019, any local and national non-profits would aid the creation and formation of FPOs.

However, the guidelines for forming the CBBOs allow only those organisations with a minimum average annual turnover of Rs 2 crore in the plains and Rs 1 crore in the Himalayan and Northeastern regions. This has debarred smaller companies and non-profits from participation and led to the loss of autonomy of FPOs, who are obliged to buy inputs and sell their output to these big companies.

Hence, FPOs may become captive markets for the goods produced and marketed by these CBBOs. Thus, the very idea of creating an FPO, which is the empowerment of farmers, is lost.

The firms selected as IAs in the CDP are mainly private firms and the one FPC, Sahyadri Farms, started a new private company — Sahyadri Farms Post Harvest Care Limited. The company raised Rs 310 crore growth capital from Belgium-based Incofin, Netherlands-based FMO and France-based Proparcosee in 2022, making it India’s first FPC to do so (as reported by The Hindu).

This indicates the growth and expansion of private businesses even in the FPCs. Thus, CDP, which has allowed mainly private firms to take up the pilot project, might end up with the same fate if the farmers are not given equal chances of decision-making and holding strong bargaining power.

Dr Nivedita Sharma is an assistant professor at the Council for Social Development. Dr Gurpreet Singh works with CBGA.