An Economic Analysis of FPOs in the State of Andhra Pradesh: A Comparative Study Based on Business Strategy

Abstract

Farmer producer organizations (FPOs) are institutional models that allow farmers to organize themselves as collectives and perform activities to reap large scale economies. However, the impact is constrained by factors such as capacities, capital, business focus and other dynamics. The present study taken up in the state of Andhra Pradesh aims to understand the impact of business approach adopted by FPOs on economic benefits realized by FPO member farmers. The total sample size of FPOs, FPO member and non-member farmers accounted for 15, 150 and 150, respectively. Dummy variable regression results indicated that farmer members of production-centric FPOs did not differ significantly from non-FPO farmers in terms of key outcome variables: average net farm income (ANFI), average net savings in input cost (ANSIC), and average net savings in marketing cost (ANSMC) computed on a per-acre-per-annum basis. However, farmer members of market-centric FPOs showed significant advantages. They saved ₹ 62.15 for every ₹100 spent by non-FPO farmers on marketing and earned ₹ 14.54 more for every ₹ 100 earned by non-FPO farmers. These findings underscore the potential benefits of adopting a market-centric approach for both upcoming and existing production-centric FPOs. To maximize these benefits, FPOs are encouraged to align their strategies with the dynamics of the agri value chain, recognizing the importance of downstream activities in achieving sustainable success for their member farmers.