104
S
tate
of
I
ndia
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s
L
ivelihoods
R
eport
2015
down norms, the release of funds is delayed
even beyond a year. This apart from delay-
ing the business plans of PCs, also affects
the morale and trust of members in PC
mechanism. Timely release of funds even
for capacity building trainings has been a
major problem. To make the government
release funds requires continuous follow up
and rapport building, which many POPIs
find as tiresome. POPIs opine that project
financing of PCs is increasingly becoming
a number game. A POPI working in Uttar
Pradesh mentions “In the initial set of PCs
six months were spent in mobilisation and
PCs are strong; then government asked us
to speed up to form 90 more. This speed
undermines the quality”.
Overall, POPIs indicate that there is little
funding for capacity building of POPI staff
and for undertaking field visits for monitor-
ing of PCs. POPIs also find that the funders
assume that the organisation works with
captive farmers, which is not always the case
andmobilisation time varies; strict timelines
for registering PC is leading to compromises
being made on mobilisation. PCs need a
longer termsupport than the three-year time
frame being considered by funders. Due to
lack of funding some of the POPIs withdraw
after three years with half the job done.
SFAC, NABARD and other funders
need to carry out a field-based evaluation
on results achieved by the second year; if
the results are satisfactory then they should
extend flexible need-based support to POPIs
for a longer term to ensure sustainability
of PCs. If SFAC has funded for three years
and the initiative is showing results, then
NABARD should provide further support
to stabilise the agribusiness of PCs. Funding
institutions can specialise in early stage,
post start-up stage and mature stage PCs
so that the differing needs of PCs in these
different stages are adequately and appro-
priately addressed. There is a need for better
co-ordination between funders to ensure
whatever has been initiated is consolidated
and PCs reach their full potential so that the
producers reap substantial benefits.
Financial position of PCs
Overall availability of share capital and
reserves with PCs are limited. On account
of their infancy and low profitability, PCs
are unable to raise their net worth. Raising
share capital from members who are poor
is a problem and other options need to be
explored. Mobilising grants from interna-
tional agencies, corporates and foundations
is one option. Some of them like CCD float
special purpose vehicle inwhich social inves-
tors and PC co-invest for value addition.
Some POPIs have mobilised grants for
purchase of machinery and equipment used
by PCs; POPIs intend to transfer these assets
in the name of the PC once they are mature.
For the present PCs remain dependent on
donors for grants not only for investments,
but also for their operational expenditure.
Unless concerted efforts are taken to mobil-
ise equity, enhance membership, introduce
easier business lines, such as input supply
that can earn a surplus, the PCs will take
a long time to become financially strong.
The state/donor support should require a
significant equity mobilisation effort from
members as otherwise member ownership
might weaken. Financial position of the
PCs will determine access to loan funds
and the ability to expand, outreach and
turnover. Despite the potential for business
having been established through member
mobilisation, the further steps for realis-
ing the potential are not forthcoming. A
critical shortcoming is that the POPIs also
struggle with the institutional form where
non-producers cannot invest in equity of
the PC. Alternative means of non-producer
contribution to capital funds such as special
class of quasi-equity instruments can also
be issued though this option doesn’t find
favour with PCs and POPIs.
Loan fund mobilisation
Banks are not warming up to financing of
PCs andmuch of POPIs time and efforts are
spent in mobilising working capital. This is
also corroborated by the Access data which
shows that out of 64 FPOs, only 11 FPOs
