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2 Disclaimer This document has been prepared by Bankers Institute of Rural Development, Lucknow (BIRD) based on the field study by a team comprising Shri Maheswar Sahoo and Shri K I Shariff, Faculty Members. The views expressed in the report are that of the study team. It does not necessarily represent or reflect the policy or view of BIRD or NABARD (National Bank for Agriculture & Rural Development). BIRD/ NABARD accept no financial liability or any other liability whatsoever to anyone who uses this report as also for the accuracy of facts and figures quoted in the report.

3 Acknowledgements The Study Team of Bankers Institute of Rural Development (BIRD) gratefully acknowledges the cooperation received from the following officials/agencies in the conduct of the study on Transformation of Farmers Club to Producer Organization : Farmers of Bilaspur and Mungeli districts The Board of Directors of Baigababa Krishak Mahasangh and Maa Narmada Krishak Mahasangh in Bilaspur district The Board of Directors of Jai Mitan Krishak Mahasangh in Mungeli district The Office Bearers of Kisaan Beej Cooperative Society (a Producer Organization) Kiosk Operators (BCs of SBI) at Kenda, Kota, Pendra and Lormi The Chief Executive Officer, Zilla Panchayat, Bilaspur The DGM and the AGM of SBI at Bilaspur 2. We record our sincere thanks to the Director and the Joint Director, BIRD for encouraging and providing guidance from time to time. 3. Cooperation of locals in giving information, perspectives and suggestions is also gratefully acknowledged. 4. Last but not the least, we gratefully acknowledge the special assistance and cooperation extended by Shri Kamal Pattnaik, DDM, NABARD, Bilaspur for the successful conduct of the study in Bilaspur and Mungeli districts. The Chief General Manager, NABARD Chhattisgarh Regional Office and many other officers of the RO also extended necessary support in collating perspectives, experiences and other useful information for the study which we thankfully acknowledge. Shri Maheswar Sahoo and Shri K I Shariff Faculty Members of BIRD Lucknow (The Study Team)

4 Index Sl.No Particulars Page No 1 Executive Summary i to iii 2 Chapter 1- Introduction 1 to 6 3 Chapter 2 - Study Objectives & Methodology 7 to 11 4 Chapter 3 - Transformation Process 12 to 29 5 Chapter 4 - Policy Issues 30 to 37 6 Chapter 5 - Summary & Conclusions 38 to 43 7 List of Annexure I Districts with SBI as Lead Bank 44 to 46 9 References 47

5 Executive Summary Executive Summary Executive Summary 1. NABARD launched the Farmers Club Programme in November 1982 (till 2005, it was called Vikas Volunteer Vahini ) for propagating the principle of development through credit, technology transfer, awareness and capacity building. More than 1.43 lakh farmers clubs have so far been launched. Some of them have become dormant and some are defunct. Federating the farmers provides an opportunity to reinvigorate the programme. There are 106 federations of farmers clubs in the country. Federating about 50 farmers clubs in contiguous blocks will generate membership of near 1000 farmer which will make the federations sustainable. These federations can undertake economic activities to derive benefits of economies of scale. 2. In Bilaspur district of Chhattisgarh, one federation of farmers clubs has set up a producer organisation (Kisan Beej) for procuring, processing and retailing seed. One more federation in the same district and another in the neighbouring Mungeli district are in the process of establishing producer organisation. A study was undertaken to understand the model and to examine the scope of replicating the model in other parts of the country. 3. There are 300 farmers clubs in Bilaspur and Mungeli districts, of which 201 have been affiliated to these three federations. Rest of the clubs have become defunct. The federations have established 16 Business Correspondent (BC) kiosks of State Bank of India. These kiosks are being utilised by Kisan Beej to sell seeds and pesticides to farmers. There is a revenue sharing agreement between the kiosk operators and the federations. Similarly, Kisan Beej pays commission to the kiosks on sales. Fees received from the bank towards BC services and commission from sales of agricultural inputs have made the kiosks sustainable. With a regular stream of income from kiosks, the federations also have become very effective in ensuring involvement of farmers in all its activities. 4. The federations have collaborated with Agriculture Department for demonstration plots of crops, seed distribution and agricultural extension work. They have facilitated seed production license for the members. Licenses for vending seeds and pesticide, by the kiosks also have been obtained by the federations. Establishment of federations has helped in broad-based interaction with government agencies, banks, pesticides wholesalers and host of other institutions. This has created the eco-system for promotion of the producer organisation (kisan beej) dealing primarily with seed. Collaboration of federations with various government departments will also ensure better access to multitude of government services, thus benefitting the farmer-members. DDM, NABARD can facilitate such collaborations. III

6 Executive Summary 5. The federations have been provided financial assistance by NABARD to conduct financial literacy campaigns in the schools and villages with active involvement of farmers clubs. Such assignments helped in building the capacity and confidence of the institutions. Many of the development programmes of NABARD can be channelized through the federations. They may be actively engaged by NABARD in stabilising the farmers club programme. Reviving dormant clubs, opening new clubs only in un-covered villages, conducting meet-with-expert programme for farmers etc., may be done through financial assistance to the federations (and not to the clubs). The preferential partner status should shift from the NGOs to the farmers federations at least in these districts. 6 Experience in the study area indicates that a federation requires support for about three years to work as a sustainable producer organisation. The first activity they undertook is to work as BC to State Bank of India in the kiosk model. Next, they started using the kiosk outlets for vending seeds sourced from their own producer organisation, and pesticides sourced in bulk from the wholesalers. Of the three federations, only one has started procurement, processing and selling of seeds (Kisan Beej is the producer organisation). The other two presently source the seeds from Kisan Beej. They are in the process of establishing their own producer organisation for seed processing. It is possible to replicate this model in other areas. DDM, NABARD in the district must take active part to transform the farmers federations to producers organisations. This will require sincere efforts for institutional coordination, motivation and hand-holding of the federation leaders, and may be for accessing finance either from NABARD or from banks. 7. Establishment of BC kiosks has been an important and visible milestone to rally the farmers around the federal institution. In close to 70 districts in the country, the State Bank of India has lead bank responsibility. Many more districts will have a Regional Office of the bank. Efforts may be focussed to establish BC kiosks by the farmer federations in these districts. On achieving a critical mass, it will be easier to convince other banks to do so. Kiosks are essential for channelizing seeds and pesticides by the producer organisation. These are also focal points for interaction among members and federation leaders. As and when, additional activities are taken up by the federations and/or producer organisation, the kiosks can expand by taking additional space on rent. 8. The producers organisations promoted by farmers federations will not have any collateral security to offer for accessing bank finance. They can only mobilise margin contribution through membership fees, income from kiosks, and miscellaneous income. Lenders on the other hand will be hesitant to provide loans to such start-ups without some form of comfort. Credit guarantee cover for farmer producers organisation is presently available from SFAC only when these are registered as Producer Company. Since the formalities of registering a producer company was found to be very cumbersome, the federations have opted to register the producers organisation under III

7 Executive Summary Autonomous Cooperative Society Act. Once they gain experience in governance and reach a noticeable scale of operations, they will find it useful to come under the Companies Act. 9. Use of good quality seed alone enhances productivity by 10 to 20%. Therefore, availability of good quality seed is essential to make small farms viable. Production and processing of seeds locally will improve seed replacement rate, besides boosting crop productivity. Many state governments procure seeds from outside the state to cater to the needs of its farmers. With appropriate policy support, local seed production for such crops can be enlarged very fast through the farmer federations, who can set up seed processing facility in quick time with financial assistance from banks and/or NAB- ARD. 10. There may be some states where the State Seed Corporation is the only channel for seed processing and distribution. Everywhere, state governments provide some subsidy to the seed growers and to the seed vendors, so that seed is available to the farmers at reasonable rate. For major cereals and pulses, price of seed is often regulated. In Chhatisgarh, the state government changed the policy and now institutions other than the Seed Corporation are eligible to receive seed processing and distribution subsidy. Seed production subsidy is paid to the seed-growers through the seed processing agency. In states, where such enabling provision is not there, dialogue with state government may help in modifying the policy. ***************** III

8 Chapter 1 Introduction Chapter 1 Introduction 1.1 The share of agriculture in gross domestic product (GDP) is declining over the years (13.9% in ) as a concomitant of growth process. However, it still continues to account for a huge share of total employment (54.6% as per 2011 Census) despite substantial decline in the number of cultivators (from crore in 2001 to crore in 2011). Besides, a structural change within agriculture is observed with diversification into horticulture, livestock, and fisheries. 1.2 Given the limitations in expanding area under cultivation, increased productivity holds the key to future growth in agriculture. Moreover, the productivity increase will have to come largely from small and marginal farmers holding less than 2 ha area. The average size of farm holding has declined from 1.33 ha in to 1.16 ha in Sixty-seven percent holdings are less than 1 ha in size. Eighty-five percent of holdings are less than 2 ha in size accounting for 44.31% of area. Besides, the number of tenants, oral lessees and share-croppers has been increasing at fast pace over the years. Pressure on land will further increase in future leading to still smaller holdings. Generating remunerative income from small farms is the key challenge. Table 1.1: Agricultural holdings in India ( ) Class of farmer Size class (ha) No. of holding (lakh) Area operated (lakh ha) Av size of holding (ha) No. of holding as % to total Area operated as % to total Marginal < to Total Small 1 to Semi Medium 2 to Medium 4 to Large > All classes Source: Ministry of Agriculture (as in indiastat.com) 1

9 Chapter 1 Introduction 1.3 Maintaining sustainable growth in agriculture requires research in innovative technologies for conservation and management of limited natural resources. The emerging needs in the agriculture sector require adoption of location specific models of farmers groups to promote greater value addition of the produce, forge new partnerships with technology providers to realize financial sustainability and compete in the national and international market. ICAR has developed new crop varieties that improve yield and nutritional quality along with resistance to various biotic and abiotic stresses. Adoption of such improved crop varieties and better crop management techniques has resulted in record production of cereals, pulses, and other crops in recent years. Last mile connectivity of agricultural extension services have not been adequately addressed to meet the emerging technological and knowledge needs of farmers. Research has shown that peer to peer transmission of knowledge is a better method for propagation of agricultural innovations compared to state sponsored model. 1.4 Capital formation in agriculture has been declining over the years. Gross capital formation in Agriculture and Allied Sector was a mere 7.1% of total capital formation in the economy during , despite the sector contributing 13.9% to the GDP. Also, GCF in agriculture was 21.2% of agricultural GDP during the same year, while it was about 40% of GDP for the overall economy. Table 1.2: Gross Capital Formation in Agriculture (as % to GDP) Year Share of agriculture in total GCF (%) GCF in agriculture as % to agricultural GDP Public sector Pvt sector Total Source: Economic Survey and NABARD Annual Report Role of public sector in capital formation in agriculture has been continuously declining reaching 3.1% during in comparison to the contribution of 18% by private sector in agriculture during the same period. While the level of capital formation in 2

10 Chapter 1 Introduction agriculture needs to be enhanced substantially to ensure food security, growth and sustainable income levels for the small holders, bulk of the requirement would have to come from the private sector, essentially from the financial institutions. 1.5 For adopting new technology, better inputs and farm mechanisation etc., capital investment has to be made by the farmers which would mainly come from institutional sources. Credit flow for agriculture has increased substantially over the years, mainly for working capital needs, which does not add to capital formation. Agricultural term loan which forms the main component in capital formation by private sector has lagged behind. While banks are weary of dealing with multitude of small borrowers, vagaries of nature bestow huge uncertainties for agricultural activities and thus on the resultant income stream. Availability of timely and adequate credit both for production and investment for technology is essential for sustaining agricultural growth. Simultaneously, instilling financial discipline among the farmers will encourage banks to lend more for agriculture. Organising farmers is essential to address these key challenges. Table 1.3: Ground Level Credit for Agriculture Sector (Rs crore) Year Production credit Investment credit Total Growth rate of total GLC (%) Growth rate of Term loan (%) Average Growth Rate Source: NABARD Annual Reports 1.6 Farmer s Club Programme of NABARD 1.6 Realising the complex issues and challenges that beset the rural sector, NABARD, soon after its formation, launched the Vikas Volunteer Vahini (VVV) programme in November 1982 to propagate the philosophy of Development through Credit enunciating five principles (Pancha Sutras) among farmers : 3

11 Chapter 1 Introduction The five principles are: Credit must be used in accordance with the most suitable methods of science and technology. The terms and conditions of credit must be fully respected. Work must be done with skill so as to increase production and productivity. A part of the additional income created by credit must be saved. Loan instalments must be repaid in time and regularly so as to recycle credit The VVV Programme was rechristened as Farmers Club (FC) Programme in 2005 by revisiting its earlier mission. Even after 32 years, the objective of the programme i.e. Development through credit, technology transfer, awareness and capacity building appears to be more relevant than ever. Throughout the long journey, farmers clubs have been contributing their bit both, to the farmer community and also to the Bank Branches. A few important benefits achieved by the farmers clubs formed by NABARD are enumerated below:- The Clubs lead to better Banker-Borrower relationship in the area and helped in mobilisation of deposits. Played a catalytic role in increasing credit flow and diversification of lending and generation of new business avenues. Facilitated recoveries and contributed to decline in the non-performing assets. Created awareness about government programmes, new technologies and marketing avenues for the farmers. Were instrumental in socio economic development of the village through certain social welfare measures like free Eye Check-up Camp, Animal Health Care Camp, Mass Vaccination camp, community works like road, check-dams, afforestation, etc. Enhanced bargaining power through bulk purchase of inputs and marketing of their produce in the open market Since 1982, large number of farmers clubs were supported by NABARD through various banks and voluntary organizations. As on 31 March, 2014 there were about 1.43.lakh farmers clubs in the country. Farmers exposure visits, meet with expert programmes, meetings, discussions, collaborations etc., have helped in adoption of technology, availing of credit from banks, convergence with government departments etc,. NABARD also has been felicitating the best performing farmer s clubs with a view 4

12 Chapter 1 Introduction to encouraging them in supporting the farming community. Table 1.4: State-wise and Year-wise Status of Formation of Farmers Clubs (FC) Sl State/UT FC formed during the year Total no. No of FC as on Andaman & 16 Nicobar Andhra Pradesh Arunachal Pradesh Assam Bihar Chhattisgarh Delhi Goa Gujarat Haryana Himachal Pradesh J & K Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh Uttarakhand West Bengal Total : Source: NABARD, FSDD, Head Office Mumbai 5

13 Chapter 1 Introduction During , 16,279 new Farmers Clubs (FCs), were formed taking the total number of Farmers Clubs across the country to 1.43 lakh, with membership in the range of 15 to 20 per club. Apart from facilitating farmers in accessing credit, extension services, technology and markets, some Farmers ' Clubs function as Self Help Promoting Institutions (SHPIs) and Business Facilitators/ Business Correspondents. There have been attempts to upgrade the Farmers Clubs into Farmers Federations and further upgrade them into Producers Organization Despite the tremendous positive impact, the stand-alone farmers groups face many constraints and challenges limiting their service capacity, bargaining power and even hindering and/or endangering their sustainability. In some parts of the country Farmers Clubs, with the support of NGOs, began organizing themselves into multilevel institutions like Farmers Club Federations (FCF) at block, district and state level. As on 31 March, 2014, there were 106 Federations of Farmers Clubs formed in 14 States Most of the federations of Farmers Clubs are in the nascent stage of development. Many of them are still in a process of identifying their role. However, some federations have already developed to successful institutions as producer s organization. Developing producer s organizations in good numbers is also a thrust area for NABARD. Research has shown that productivity of small farms can be substantially increased through use of technology, mechanization and better support systems. Focus should be on cropping systems and on aggregation of small and marginal farmers through development of farmer producer organizations, creating value chain and providing market linkages. Existing institutions of farmers like the farmers clubs and federations of farmers club can be leveraged to establish producer organizations in noticeable scale It has been established that due to continuous fragmentation, the farm holdings are not economically viable. They are also unable to realize good value from their marketable surplus by individually selling their produce. In many areas of the country it is observed that at the peak cultivation season there is a shortage of inputs and similarly at the harvesting time there is fall in prices, affecting the profitability. Through better collectives, farmers can utilize economy of scale to procure inputs at a lower price, and gain more selling power for their produce/product. Forming a producer organization can also provide access to timely and adequate finance, build capacity and provide linkages to markets. Keeping this in view to support the producers NABARD set up a separate fund titled "Producer Organization Development Fund" (PODF) to tackle the issues of non-availability of timely credit, capacity building of producers & strengthening of the Producer Organizations and market tie-ups. 6

14 Chapter 2 Study Objectives and Methodology Chapter 2 Study Objectives and Methodology 2.1 Introduction Despite existence of farmers clubs since last four decades, (many clubs have done good work on agricultural technology dissemination), no significant economic activities have been undertaken by these clubs. Of late, some of these farmers club federations have ventured into economic activities to derive benefit of economy of scale through aggregation. Few federations have promoted producer organizations. Therefore, it was felt that it is the most opportune time to study the models and processes as to how the federations can possibly transform into producer organizations. The Govt of India has proposed in the budget for the year to promote 2000 Producer organization over a period of next two years. Since few years, SFAC is promoting Farmers Producer Organizations (FPO) mainly through NGOs to ensure profitability to producer collectives. Transformation of farmers club federations into producer organizations will build on the social mobilization of farmers that has already taken place. The federations will thus require less hand-holding support for promoting POs compared to any other interventions. One such successful intervention was supported by NABARD in Bilaspur district of Chhattisgarh. It was felt that there is an opportunity to document the processes, best practices and experiences of such successful institutions. All stakeholders can then learn from these successful models and scale up transformation of Farmers Club federations to Producer Organizations. With this in view, it was decided to take up a study to understand the working of a Farmers Club Federations as Producer Organization in Bilaspur district of Chhattisgarh State. The farmers federations and farmers producer organization was supported by NABARD under its PODF Scheme during to Objectives of the study: The broad objectives of the study were to 1. Understand the process of evolution of Farmers Clubs into Farmers Federations and the Farmers Federation into Producer Organizations; 2. Understanding of Farmers club Federations, their role and functions, their performance and sustainability; 3. Documenting the processes for transforming Farmers Clubs to Producer Organisations; 4. Understanding the key stakeholders' roles and responsibilities, legal, institutional and regulatory framework and support systems necessary for such transformation; 5. Examining appropriate models and developing a case study; 7

15 Chapter 2 Study Objectives and Methodology 2.3 Study Team: The study was undertaken by S/Shri Maheswar Sahoo and K I Shariff DGMs/Faculty Members of Banker s Institute of Rural Development, Lucknow along with substantial inputs from Shri Kamal Kant Pattnaik, District Development Manager, NABARD, Bilaspur district, Chhattisgarh. The field visits were undertaken from 04 to 06 September, 2014 in Bilaspur and Mungeli districts. 2.4 Study Area: In 2001 when Chhattisgarh State was carved out of Madhya Pradesh, Mungeli was a part of Bilaspur district. Subsequently, Bilaspur district was bifurcated in to two districts i.e. Bilaspur and Mungeli. Many of the farmers clubs were formed by banks through the support of NABARD prior to the bifurcation of the district. In the combined Bilaspur district there were 207 farmers clubs. Most of the farmers clubs were formed during 2002 to 2009.However, these clubs were not organized. Chhattisgarh RO, and the DDM Bilaspur of NABARD held a series of discussions with the farmers clubs with a view to organize them. After detailed discussions the clubs were federated into four federations and the federations were further elevated and a Producer Organization was formed. Three Federations were identified for study, two federations from Bilaspur district and one from Mungeli district. Since the study objective was to establish the efficacy of Farmers Federations, the discussions were held mainly with the Federations and Producer Organization. A few focused group discussions were also held with members of the farmers clubs. 2.5 Methodology: Review of literature: Many researchers have studied the impact of farmers club on its members, agricultural productivity and access to finance etc. It has been found that more than half of the members of farmers clubs hold small and marginal farms (Memon et al, 2012). Three-fourth members felt that the forum provided useful training, while the same number communicated with others in the forum on matters relating to agriculture and allied activities (peer to peer knowledge transfer) at least once a week. Thus, farmers clubs have become efficient institutions for agricultural innovation dissemination. A study by IDS observed that the positive impact of farmers clubs has been to include tenant farmers and sharecroppers wherever possible, emphasizing the inclusive role of farmers club (IDS, 2010). Farmers clubs have also generated considerable collateral benefits to farmers like formation of SHGs leading to reducing moneylenders impact and increasing health awareness (Goswami, 2010). While studying the farmers clubs as model of empowerment, Rosenberg found that most of the clubs drifted into inactivity once the three-year handholding support extended by NABARD came to an end (Rosenberg, 2013). She quotes one NGO that, the clubs may be good vehicles for increasing farmers access to information and credit, but do not actively help farmers aggregate produce and consolidate market 8

16 Chapter 2 Study Objectives and Methodology power. There seems an urgent need to innovate on the structure of farmers club so that this need of farmers is adequately addressed. There is however no published literature on farmers club graduating to Producer organizations which can effectively handle the issue of aggregation and marketing for the farmers Secondary Data: Substantial data is available on farmers club in NABARD Annual Reports. NABARD also publishes report on status of farmers club programme in India. The evaluation undertaken by IIM Lucknow in 2008 had come out with suggestions to initiate dialogue with agribusiness companies so that they can use the forum for marketing inputs and outputs. The study also recommended to create massive awareness and capacity building of the clubs, NGOs, banks and Government department so that the philosophy of development through credit catches popular imagination like the SHG movement. This has been reiterated by another study in 2010 by IDS, Jaipur. Unpublished data collected from the Regional Office of NABARD at Raipur and from the DDM NABARD Bilaspur on farmers club status in the area have been used in finalizing the report Data Collection and Analysis: During field visit, primary data was collected from the farmers club federations, the kiosk operators and the Kisaan Beej Producer organization. There are two farmer club federations in Bilaspur district and one in the neighbouring Mungeli district. The study team visited all the three Federations. Out of 16 kiosks being operated, the study team visited four of them. For obtaining other information, semi-structured interviews with key persons of Farmers Club, Federations and Producer Organizations were conducted. Five Focus Group Discussions were undertaken with members of farmers clubs, kiosk users, federations and producer organizations which yielded useful information on organization and management, processes, members involvement and sharing of benefits. Besides, discussions with the CEO, Zilla Panchayat, the officers of Agriculture Department, Bankers and the Lead District Manager provided useful insight into the institutional mechanism. The outputs from the field visit mainly consisted of information in the nature of impressions and attitudes which cannot be quantified. Therefore, the feedbacks have been used to document the experience and best practices. Quantified data obtained relate to the operations of the kiosks and the producer organization. These have been used in the narrative while documenting the processes About the Districts: Mungeli was a part of Bilaspur district and as such most of the features are similar, a common description is given in the report to make it concise. There were 10 blocks in the erstwhile Bilaspur district. After bifurcation, 7 blocks are in Bilaspur and 3 blocks are in Mungeli district. Bilaspur including Mungeli district is situated between 21º47' and 23º8' north latitudes and 81º14' and 83º15' east latitudes. The district is 9

17 Chapter 2 Study Objectives and Methodology bounded by Koria district on the north, Anuppur District and Dindori District of Madhya Pradesh State on the West, Kawardha district of Chhattisgarh on the southwest, Durg and Raipur of Chhattisgarh on the south and Korba and Janjgir- Champa on the east. Map of India with Chhattisgarh State Map of Chhattisgarh with Bilaspur Dist Climate: The study area receives rainfall mainly from the southwest monsoon. It sets in the 3 rd or 4 th week of June and continues till mid-august/ September with the heaviest showers being in the months of July and August. The average annual rainfall for the district is around 1100 mm. The months of July and August are the heaviest rainfall months and nearly 95% of the annual rainfall is received during June to September months. The district experiences a hot and semi-humid climate. The annual temperature varies from 9.2 C to 42.1 C. The hottest months are May and June and the minimum temperature is observed in the months of December and January Topography: Topographically the study area can be divided into two parts. The first part consists of the high plateau area covering north and central part of the district (Lormi, Kota, Gaurella, Pendra and Marwahi blocks). Around 38.78% of the total area is covered by forest. The southern part of the district is a plain with gentle slopes covering an area of 48% of the total geographical area of the district. The land is very fertile and is mostly used for the agriculture purposes with few surface irrigation facilities. Most of the farmers clubs are located in these fertile areas Soils: In general it can be said that the district is covered by red gravely soils, red sandy soils, lateritic soils, red and yellow soils and black soils. Alfisol soils are fertile 10

18 Chapter 2 Study Objectives and Methodology leached soils found with a thick humus layer. These soils cover maximum area in the northern and central parts of the district and highly suitable for agriculture The district profile of Bilaspur and Mungeli are given in the Table below:- S No Particulars Bilaspur Mungeli 1 Geographical Area in ha Net Cultivated Area in ha (40.32% of Geo. area) (46.5% of Geo. Area) 3 Gross Cultivated Area in ha Net Irrigated area in ha (64.62% of net cultivated area) (57.71% of net cultivated area) 5 Gross Irrigated Area in ha Area under canals in ha. 48% (of net irrigated area) 55.51% (of net irrigated 7 Area under Tube wells 34.0% (of net irrigated area) area) 37.0 % (of net irrigated area) 8 Main Crops Paddy, Wheat, Soya bean, Maize, Pulses Paddy, Wheat, Soya bean, Pulses, 9 Marginal Farmers 80% NA Small Farmers 13% NA 10 No of banks No of Branches No of Kiosks 106 Both in Bilaspur and Mungeli (Source: Dist Report of CGWB, GOI and PLP of Bilaspur & Mungeli districts prepared by NABARD) Irrigation Facilities: There are 3 medium and 117 small irrigation projects in Bilaspur and Mungeli districts. The 3 medium irrigation projects are Khunj, Ghongha and Maniyari. Lormi, Mungeli, Masturi and Bilaspur blocks are the major beneficiaries of these projects. The small projects consist of small reservoirs constructed across the nalas, diversion canals, ponds and lift irrigation systems. Kota block has more small irrigation projects. Nearly 38.65% of the net sown area is irrigated by all sources. Irrigation by surface water covers almost 85.7% of the net irrigated area and parts of Bilaspur, Masturi, Mungeli and Lormi blocks are covered by canal irrigation system. These irrigation facilities supported by bore wells in tail end areas contribute to the development of agriculture and play a major role in the sustainability of the interventions of farmers clubs, their federations and the Producer Organization. 11

19 Chapter 3 The Process: Transformation of Farmers Chapter 3 The Process: Transformation of Farmers Genesis: 3.1 Chhattisgarh is among the few states in India that have recorded impressive growth in agriculture in recent years. Development of farmers own institutions catering to various needs of the farmers has also kept pace with the agricultural growth. As on 30 September 2014, the state had 3,679 farmers clubs. In fourteen districts, the number of such clubs exceeds 100. Besides, there are eight federations of farmers clubs in the state; five in Mahasamund, 2 in Bilaspur and one in Mungeli district. Table 3.1: District-wise Farmers Clubs in Chhattisgarh as on 30/09/14 Sl No. District No. of FCs as on 30/09/14 1 Raipur Balodabazar 29 3 Gariyaband 3 4 Mahasamund Dhamtari Durg Balod 19 8 Bemetara 1 9 Rajnandgaon Kawardha Bastar Dantewada Bijapur 1 15 Kondagaon 6 16 Narayanpur Kanker Bilaspur Mungeli Jhanjgir- Champa Korba Raigarh Jashpur Surguja Surajpur 1 26 Koriya 84 Total 3679 (Source: NABARD Chhattisgarh RO) 12

20 Chapter 3 The Process: Transformation of Farmers In Bilaspur and Mungeli districts (the study area), there are 300 FCs, of which 201 are active. Majority of the farmer clubs (129 clubs) were formed by the Regional Rural Bank (Gramina Bank). Other promoting institutions include Chhattisgarh Agricon Samiti (30), CARMDAKSH (12), SBI (12), ARDB (8) and IFFDC (5). While all were active in the initial three years, they slipped into dormancy through inaction and non-availability of handholding support. The clubs did not have any vision or any roadmap for the future. 3.2 The Chhattisgarh R O and DDM Bilaspur were keen to make the farmer clubs a sustainable entity and felt the need to federate the clubs to a higher tier so as to make the entire farmer clubs programme sustainable and the organization a viable model. With this in view, the farmer clubs were federated and four farmer federations were formed in the year All the four farmer federations were registered under Chhattisgarh Society Registrikaran Adhiniyam, 1973 in different months during the year Subsequently the Arpanchal Krishak Mahasangh was merged with Baigababa Krishak Mahasangh as the Mahasangh was not very active and having only a few farmer clubs. There were thus three federations working at the time of field visit. The details of the Mahasangh, area of their operation, number of famers clubs affiliated to each Mahasangh etc., are given in the table below:- Table 3.2: Farmers Club Federations in Bilaspur and Mungeli S No Name of Farmers Club Federation. Baigababa Krishak Mahasngh Arpanchal Krishak Mahasangh Maa Krishak Mahasngh Narmada Jai Mitan Krishak Mahasangh Area of Operation Kota & Takhatpur Blocks of Bilaspur District Bilha & Masturi Blocks of Bilaspur District Pendra, Gourela & Marwahi blocks of Bilaspur Dist Mungeli, Patharia & Lormi blocks of Mungeli District No of Farmers Clubs 71 Registration No. Date of registrati on Feb Apr Feb Mar 12 The team visited all the three Mahasanghs and also one or two Kiosks operated by the 13

21 Chapter 3 The Process: Transformation of Farmers Mahasangh during the visit. The team had detailed discussions with the Farmers clubs, farmer federations and also with the operators of the kiosks and a few beneficiaries who visited the Kiosks. 3.3 Time Line in transformation of Farmers Clubs to Producer Organization: The various events that occurred in the transformation of farmer clubs could be depicted in a graphic as under: 3.4 Financial Literacy Activity: To promote financial literacy among the farmers and the school children, NABARD Chhattisgarh RO engaged the Farmers Club Federations and provided financial assistance. Initially 10 awareness and 20 quiz programmes were sanctioned for Bilaspur and Mungeli districts organized by the Farmers Club Federations (FCF). As the federations and farmers clubs are village level bodies and have local presence and acceptance, they could mobilize children and their parents in good numbers. The programmes on important issue of financial inclusion was organized successfully by the Federations. Looking at the encouraging results, the RO sanctioned more awareness 14

22 Chapter 3 The Process: Transformation of Farmers Financial Literacy Programmes conducted by the Farmers federations and quiz programmes at different times thereafter. The federations were paid Rs.2500/ for organizing a quiz programme in school and Rs.5000/- for conducting an awareness programme in the village. In many of these programmes, Bankers and LDM, DDM NABARD were also in attendance. This provided much needed scope for interaction between the DDM, Farmers Federation, bank official and the government officials which paved the way for furtherance of the task of making the federation s financially sustainable entities. Altogether, 130 programmes were organized by the FCFs with financial support from NABARD. The resource fees so collected from these programmes was retained by the FCFs, and the resource persons handled awareness sessions free of cost. Besides, the FCF collected contribution (membership fee) from the members of farmers clubs which provided the initial corpus to the federations. Scanned Copy of the Certificate issued by the Registrar of Societies to the Federation 15

23 Chapter 3 The Process: Transformation of Farmers 3.5 Agricultural extension: With active support of the Agriculture Department in the district, the federations were involved in establishing field demonstration plots for cultivation of paddy (300 ha), chana (500 ha) and green gram (500 ha). The farmers raising crops in demonstration plots received financial assistance from the Department. Similarly, the Agriculture Department also encouraged the federations to establish input retail outlets for selling inputs like seeds, pesticides and fertilizers by providing them with retail licenses. Agriculture Dept. distributing cheques District Collector Addressing the Farmers 3.6 Business Correspondent of SBI (Kiosk) Due to greater acceptability of the federations in the villages, SBI approved opening of BCs/ Kiosks through federations to achieve financial inclusion. This was facilitated by e NABARD RO, DDM, LDM and the Regional Office of SBI at Bilaspur. Based on the recommendation of the federation, the BC/Kiosk was allotted by SBI in the name of a leader of the federation. As per rules, the BC/Kiosk has to be allotted only to individuals and not to institutions. The federations entered into an agreement with the BC/Kiosk owner/operator for sharing a part of the fee that SBI will pay for services rendered by the BC/Kiosk. The Kiosks were working efficiently as Business Correspondents (BC) of SBI and providing various financial services to the villagers. As on September 2014, there were 16 kiosks working through three farmer federations and another 4 Kiosks were already sanctioned and yet to be opened. SBI is planning to establish, 10 more such Kiosks at other village centres during the next one year. The location of the existing Kiosks are given below:- 16

24 Chapter 3 The Process: Transformation of Farmers Table 3.3: Financial Inclusion Kiosks operated by Federations in Bilaspur and Mungeli S No Name of Farmers Club Federation. Baigababa Krishak Mahasangh Arpanchal Krishak Mahasangh Maa Narmada Krishak Mahasangh Jai Mitan Krishak Mahasangh No of Kiosks 8 Kiosks (Established at Risda, Bhilai Kota, Kenda, Ratnapur, Belthora, Sakri and Takhatpur) 6 Kiosks (established at Gorella, Kodhri, Pendra, Kotmi, Semra and Marwahi) 2 ( Established at Lormi and Mungeli 3.7 The federations have 16 Kiosks all opened by SBI and considering a sample size of 25%, the team visited 4 Kiosks. 2 kiosks, pertaining to Baigababa Krishak Mahasangh and 1 each from Maa Narmada and Jai Mittan Krishak Sangh were visited by the study team. The Kiosks were attached to the nearest branch and worked under the guidance of the concerned Br Manager. The Br Manager supervises and monitors the work of the Kiosk (BC). The Kiosks are in the name of the President or Secretary of the federation. In some cases, where the number of kiosks are more than one, the Kiosks were out sourced to other members of the federation but the control is with the federation. As the norms of the bank, BC is to be in the name of an individual and not in the name of the federations and therefore, licences for the BCs were given in the names of individuals. 3.8 At present, the Kiosks are mainly involved in providing banking services like, opening of savings bank accounts, recurring deposit accounts, acceptance of deposits and payment towards withdrawal. Besides the above, Kiosks are also dispensing old age pensions, student scholarships, MNREGS transactions and other social sector funds on behalf of the government. The present monthly income (Rs 8000 to Rs 14,000) of the Kiosk is mainly from banking services. The expenditure involved was salary to the operator, rent of the premises, interest on the initial investment etc., which is about Rs.8000 to 10,000 (Salary of the operator- Rs.4000 to Rs 5000, Premises rent-about Rs.2000 to Rs 3000). It was also observed that there were delays up to 3 months in payment of commission to the Kiosks/ federation. The payment system needs improvement and payment should be made on monthly basis within the first fortnight. Otherwise, the Kiosk operators, federations will lose interest and the entire system may collapse. 17

25 Chapter 3 The Process: Transformation of Farmers 3.9 The BCs/ Kiosks are working directly with SBI and under the Corporate BC. The commission details of the BCs are given in the table below:- Table 3.4: Banking Transaction Limits in Kiosks Particulars -----> Deposits Withdrawal Opening of SB a/c Opening of RD a/c Commissions ---> 0.85 paise per Rs 1.0 per Rs Rs transaction transaction Limit for account holders Rs 10,000 in one day Rs 10,000 in one day Limit of BC/Kiosk Rs 1,00,000 per day Deposit paid by the Rs. 1,00,000 federation Investment in Rs 50,000 infrastructure- Laptop, Printer, tables & chairs etc., Monthly Income Rs 8,000 to Rs 14,000 depending upon number of accounts and no of transactions Kiosk as Multi Service Centre (MSC) Present level of income from banking services is not sufficient to sustain the Kiosk in the long run. Besides, the farmers need inputs and services preferably from the same outlet. Therefore, the Kiosks are better placed to take up multiple services like input retailing (seed, fertilizer and pesticides), custom hiring, insurance, soil and water testing, and host of e-governance services including online ticketing etc. All the services which are essential to the farming/ village community should be addressed by the Kiosks of the federations and thereby keeping the kiosks viable and the federations active and relevant to members. In short, the Kiosks should become a single window for all the agricultural and banking related services of the members of the FCFs. One federation has already started work in this direction with the establishment of out-lets selling seeds and contemplating to take up selling of fertilizers and pesticides. All the federations will have to obtain retail license for all their kiosks to sell seed, fertilizer and pesticide. 18

26 Chapter 3 The Process: Transformation of Farmers Table 3.5: Scale of Operations of BC Kiosks S No Particulars Baigababa & Arpanchal Krishak Mahasangh Maa Narmada Krishak Mahasangh Jai Mitan Krishak Mahasangh 1 2 Kiosks Visited Kenda Kota Pendra during the study. No of Accounts SB a/c SBa/c SB a/cs RD- 25 RD- 98 RD- a/cs- 105 Lormi SB a/cs RD a/cs Deposits/day Rs 30 to 40,000 Rs 60 to Rs 75 to 80, Withdrawals/ day Rs 50 to Rs 55 to Rs 70 to 85, Charges- Withdrawal- Rs 0.85 for each withdrawal Deposit- Rs for each deposit Opening R D account- Rs 20 Opening SB a/c Rs 20 Rs 45 to50,000 Rs 40 to Schemes where money is routed through Kiosk Other Business activities of the Kiosk Commission Received from seeds sale Av. Monthly income from Banking Services 1.Indira Gandhi Vishesh Vridha Pension 2. Vridha Pension. 3.Vidhwa Pension 4. Samajik Suraksha Pension. 5 Sukhad Sahara 6 MNREGS 7 Scholarships 1. Seeds not yet started. Planning to start seed, fertilizer and pesticide sales 1. Seeds not 1. Seedsyet started. Sold 5207 bags at Planning to a cost of start seed, Rs 23,98,330; fertilizer and Planning to start pesticide sales fertilizer and pesticide sales. 1. Seeds- Sold 800 bags at a cost of Rs 3,68,500. Planning to start fertilizer, general shop & pesticide sales. Nil Nil Rs 96,000 Rs12000 Rs 8000 Rs 10,000 Rs 14,000 Rs

27 Chapter 3 The Process: Transformation of Farmers 3.11 Graduation of Farmers Federations (FCF) to Producers Organization (PO): The FCFs received resource fee for financial literacy programmes from NABARD. They also collected monthly contributions from members. This led to building up of a small corpus of between Rs 1 to 2 lakh with the federations. Continuous engagement with agriculture department (demo plots, seed retailing) encouraged these institutions to seek deeper involvement. Besides, interaction with NABARD, bankers, government officers, LDM and other representative of other important institutions during the literacy programs boosted the confidence of the FCFs to seek more avenues for collaboration. Many of the leaders of the FCFs are also registered individually with Agriculture Department as seed farmers. Each year, they receive foundation seeds to produce certified seeds which is procured by the State Seed Corporation for processing. Agriculture Department then arranges for retailing of certified seeds thorough the FCFs. The FCFs realized that there may be some business sense in establishing their own seed processing facility. This would be a step forward along the seed value chain besides serving the needs of its famer members. Organogram of the Farmers Producer Organization 3.12 With the experience of engaging with the banks, government depts., seed certifying agencies, besides active involvement with its own members who are seed 20

28 Chapter 3 The Process: Transformation of Farmers producers or the users of certified seed, it was natural that the federation should graduate to next level of organization which can work as a business entity on behalf of the farmers. This breakthrough came in the form of Kisaan Beej a Producer Organization formed by a group of farmers from Arpanchal Farmers Club Federation. The PO was registered under Chhattisgarh Autonomous Cooperative Act 1999, which allows the farmers group to work as a business entity and earn profits. The PO is anchoring the programme of producing & marketing of certified seeds in paddy (five varieties), wheat, soya bean, mustard, gram, arhar, mung and tiwda The cropping pattern of the districts indicates that more than 80 percent of the net cultivated area is used for paddy both during Khariff and Rabi. The seed production level in the districts caters to only 35% of the local demand. Besides this, there is also demand from the adjoining districts. Both Bilaspur and Mungeli have assured sources of irrigation (both surface and ground water) besides adequate monsoon rainfall exceeding 1000 mm which takes care of the Khariff crop to a large extent. Considering the potential, the PO is concentrating on cultivation of certified seed of paddy by the members and procuring the seed and after cleaning, grading, packaging and obtaining certification the seed is sold to the farmers for planting. While some members of the FCFs are seed Producers, all of them are users of certified seed. Local production and distribution of certified seed reduced the transportation cost and resulted in reduced cost of cultivation besides saving time During , 39 members of the PO were registered with the Seed Certifying Authority of the State Govt. to produce certified seed (25 farmers in 153 ha during Khariff and 14 farmers in 106 ha during Rabi). The total production of certified seed by these members during the year was 656 MT in the Khariff and 394 MT in Rabi. The Total seed produced by these farmers were procured by the PO at a cost of Rs lakh. The PO also channelized seed subsidy of the state government to the seed growing farmers. Retail price of certified seed is decided by the State Government each year, which is usually less than the MSP for paddy. Therefore, subsidy is provided to seed farmers to encourage them to sell the seed to seed procurement institutions (and not in the mandis). Similarly, to encourage farmers to use certified seeds for planting, the Government provides subsidy to seed processing institutions so that quality seed can be made available to farmers at reasonable rate. For the current year i.e , the PO has a programme to procure certified seed of about 2700 MT from its members. It has so far contracted seed-growing farmers for 380 ha paddy for Khariff and 195 ha paddy for Rabi The PO has established infrastructure facilities for cleaning, grading, packaging, certification and storage of certified seed. The seed is sold through the outlets of farmer federations, established adjoining the BC Kiosks. The Govt of Chhattisgarh has 21

29 Chapter 3 The Process: Transformation of Farmers a policy to provide incentive to the farmer producing seeds; so the farmers are mobilized by the farmer club, federation and the PO to opt for seed production. The seed is procured by the PO. There is no monopoly buyer for seed. The seed-grower may choose to sell the seed to the State Seed Corporation (which is a PSU), if he is not satisfied with the terms and conditions of the PO. In reality, most seed-growers would prefer not to sell their produce to the PSU if there are alternatives. Given the bureaucratic attitude, ham-handed behaviour, arbitrariness in weighment, and delay in payment to seed-growers by the PSU, this attitude is not surprising. The PO has found a niche market for its services among this discontented farmers. Its capacity to handle volume restricts its market potential. Sh.A K Sahoo, CGM, Chhattisgarh RO inaugurating the cleaning and grading unit supported under PODF Processed and Packaged seed and Seed out lets with the Kiosk of federations to sell the seed 3.16 As the farmers need an assurance from the PO for procurement of seeds and similarly the PO also has to have assured supply of seeds, PO provides advance to the farmers for inputs and consumption. To support the PO for on lending to farmers, 22