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GS Paper: GS3

  • Need for national security shield in FDI

     

    Relaxation on Chinese FDI

    • Last April, India had subjected all Chinese FDI to mandatory government screening.
    • The aim was to curb opportunistic takeovers of Indian companies, a concern fuelled by sharp corrections in equity markets in March 2020.
    • Several economies including the US, Australia, Canada and Germany faced similar concerns.
    • They blocked specific takeover attempts, using special laws for national security screening of inward FDI.
    •  In the absence of similar legislation, India did not differentiate between investments which raised genuine national security concerns and those that did not.
    • This is a crucial shortcoming.
    • With market indices now hovering at their peaks, reportedly India may allow Chinese FDI up to 25 per cent in equity under the automatic route.

    Regulation of FDI and issues with it

    • India regulates foreign investments primarily through FEMA.
    • FEMA clearly provides two specific macro-prudential objectives — facilitating external trade and payments; and promoting orderly development and maintenance of foreign exchange markets in India.
    • Accordingly, it empowers the central government and the RBI, acting in consultation with each other, to regulate capital account transactions.
    • These regulations determine who can invest through the FDI route, in which sector and how much.
    • In practice, however, FEMA regulations have often responded to concerns not strictly related to macro-prudential objectives.
    • One such concern has been national security.

    Need for the law to scrutinise FDI from national security angle

    • Shortcoming of FEMA underscores the need for India to emulates its western peers and enact a statute specifically designed for national security screening of strategic FDI.
    • Unlike FEMA, this new statute must explicitly lay down legal principles for determining when a foreign acquisition of an Indian company poses genuine national security threats.
    • In this regard, a policy paper published by the Peterson Institute for International Economics three types of legitimate threats from foreign acquisitions.

    3 Types of threat from foreign acquisitions

    1) Dependency on foreign supplier

    • The first threat arises if a foreign acquisition renders India dependent on a foreign-controlled supplier of goods or services crucial to the functioning of the Indian economy.
    • For this threat to be credible, it needs to be further established that the industry in which the acquisition is supposed to take place is tightly concentrated, the number of close substitutes limited, and the switching costs are high.

    2) Technology transfer

    • The second threat emanates from a proposed acquisition transferring a technology or an expertise to a foreign-controlled entity that might be deployed by that entity or a foreign government in a manner harmful to India’s national interests.
    • The credibility of this threat again depends on whether the market for such technology or expertise is tightly concentrated or if they are readily available elsewhere.

    3) Threat of infiltration, surveillance or sabotage

    • The third threat arises if a proposed acquisition allows insertion of some potential capability for infiltration, surveillance or sabotage via human or non-human agents into the provision of goods or services crucial to the functioning of Indian economy.
    • This threat is particularly credible when the target company supplies crucial goods or services to the Indian government, its military or even critical infrastructure units and the switching costs are high.

    Way forward

    • The above stated 3 types of threats could provide conceptual clarity in the new statute could make national security assessments objective, transparent and amenable to the rule of law.
    • On procedure, the statute must empower only the finance minister to reject certain strategic foreign acquisitions on national security grounds.
    • Both the power and accountability mechanisms should be hardcoded into the statute itself, as is the case in some mature parliamentary democracies.
    • For instance, the Australian Foreign Acquisitions and Takeovers Act, 1975 empowers the treasurer to block certain foreign acquisitions on national security grounds.
    • Similarly, the Investment Canada Act, 1985 empowers a minister to reject certain foreign acquisitions.

    Consider the question “India needs to recognise the national security threat emanating from strategic FDI. This requires identifying threats. In lights of this, examine the types of threats and suggest the ways to deal with it.” 

    Conclusion

    Overall, India’s tryst with Chinese FDI underscores the importance of identifying specific national security threats emanating from strategic FDI and addressing them objectively. This is too sensitive a matter to be left to capital controls under FEMA. A dedicated statute for national security screening of inward FDI would be best suited for handling such issues.

  • Curbing Benzene Emission

    A joint committee appointed by the National Green Tribunal (NGT) to study air pollution in Kerala has pointed out that petrol refuelling stations were a major source of benzene emissions and volatile organic compounds (VOCs).

    Why such a move?

    • Benzene is a major constituent of evaporative emission due to its high volatility.

    Try this PYQ:

    Q.Consider the following:

    1. Carbon monoxide
    2. Methane
    3. Ozone
    4. Sulphur dioxide

    Which of the above are released into atmosphere due to the burning of crop/biomass residue?

    (a) 1 and 2 only

    (b) 2, 3 and 4 only

    (c) 1 and 4 only

    (d) 1, 2, 3 and 4

    What is Benzene?

    • Benzene is a chemical that is a colourless or light yellow liquid at room temperature. It has a sweet odour and is highly flammable.
    • It evaporates into the air very quickly. Its vapour is heavier than air and may sink into low-lying areas.
    • It dissolves only slightly in water and will float on top of the water.

    Its formation and uses

    Benzene is formed from both natural processes and human activities.

    • Natural sources of benzene include volcanoes and forest fires. Benzene is also a natural part of crude oil, gasoline, and cigarette smoke.
    • Some industries use benzene to make other chemicals that are used to make plastics, resins, and nylon and synthetic fibres.
    • It is also used to make some types of lubricants, rubbers, dyes, detergents, drugs, and pesticides.

    Benzene emission

    • The major sources of benzene exposure are tobacco smoke, automobile service stations, exhaust from motor vehicles, and industrial emissions.
    • Benzene is present in both exhaust and evaporative emissions. Motor vehicles account for approximately 85% of the total benzene emissions.
    • However, ingestion and dermal absorption of benzene can also occur through contact with contaminated water.

  • 2001 FO32: the largest asteroid passing by Earth

    On March 21, the largest asteroid predicted to pass by Earth in 2021 will be at its closest. It is called 2001 FO32.

    Try this PYQ:

    Q.Which of the following is/are cited by the scientists as evidence/evidence for the continued expansion of the universe?

    1. Detection of microwaves in space
    2. Observation of redshirt phenomenon in space
    3. Movement of asteroids in space
    4. Occurrence of supernova explosions in space

    Codes:

    (a) 1 and 2 only

    (b) 2 only

    (c) 1, 3 and 4

    (d) None of the above can be cited as evidence.

    2001 FO32

    • There is no threat of a collision with our planet now or for centuries to come.
    • Scientists know its orbital path around the Sun very accurately since it was discovered 20 years ago and has been tracked ever since.
    • It won’t come closer than 2 million km to Earth, but it will present a valuable scientific opportunity for astronomers who can get a good look at a rocky relic that formed at the dawn of our Solar System.

    Proximity to Earth

    • For comparison, when it is at its closest, the distance of 2 million km is equal to 5¼ times the distance from Earth to the Moon.
    • Still, that distance is close in astronomical terms, which is why 2001 FO32 has been designated a “potentially hazardous asteroid”.
    • The reason for the asteroid’s unusually speedy close approach is its highly eccentric orbit around the Sun, an orbit that is tilted 39° to Earth’s orbital plane.
    • This orbit takes the asteroid closer to the Sun than Mercury, and twice as far from the Sun as Mars.
    • Later, the asteroid slows after being flung back out into deep space and swinging back toward the Sun. It completes one orbit every 810 days (about 2¼ years).

    Studying the visitor

    • This asteroid will provide an opportunity for astronomers to get a more precise understanding of the asteroid’s size and albedo (i.e. how bright, or reflective, its surface is), and a rough idea of its composition.
    • When sunlight hits an asteroid’s surface, minerals in the rock absorb some wavelengths while reflecting others.
    • By studying the spectrum of light reflecting off the surface, astronomers can measure the chemical “fingerprints” of the minerals on the surface of the asteroid.

  • Seabuckthorn plantations in Himachal Pradesh

    The Himachal Pradesh government has decided to start planting Seabuckthorn in the cold desert areas.

    What is Seabuckthorn?

    • It’s a shrub that produces an orange-yellow coloured edible berry.
    • In India, it is found above the tree line in the Himalayan region, generally in dry areas such as the cold deserts of Ladakh and Spiti.
    • In Himachal Pradesh, it is locally called Himalayan chharma and grows in the wild in Lahaul and Spiti and parts of Kinnaur.
    • According to the Seabuckthorn Association of India, around 15,000 hectares in Himachal, Ladakh, Uttarakhand, Sikkim and Arunachal Pradesh are covered by this plant.

    Try this PYQ from CSP 2019:

    Q.Recently, there was a growing awareness in our country about the importance of Himalayan nettle (Girardinia diversifolia) because it is found to be a sustainable source of

    (a) anti-malarial drug

    (b) biodiesel

    (c) pulp for paper industry

    (d) textile fibre

    Benefits of the Seabuckthorn plant

    (1) Medicinal benefits

    • As a folk medicine, Seabuckthorn has been widely used for treating stomach, heart and skin problems.
    • In the last few decades, scientific research worldwide has backed many of its traditional uses.
    • Its fruit and leaves are rich in vitamins, carotenoids and omega fatty acids, among other substances, and it can help troops in acclimatizing to high-altitude.

    (2) Ecological benefits

    • Besides being an important source of fuelwood and fodder, Seabuckthorn is a soil-binding plant that prevents soil-erosion, checks siltation in rivers and helps preserve floral biodiversity.
    • In the Lahaul valley, where willow trees are dying in large numbers due to pest attack, this hardy shrub is a good alternative for protecting the local ecology.

    (3) Commercial benefits

    • Seabuckthorn also has commercial value, as it is used in making juices, jams, nutritional capsules etc.
    • But wild Seabuckthorn cannot sustainably supply raw material to the industry, and the plant needs to be cultivated on a large scale as is being done in China.

    What is the latest project?

    • The Seabuckthorn association wants the forest departments of various Himalayan states/UTs to plant Seabuckthorn on arid and marginal lands using compensatory afforestation or CAMPA funds.
    • Recently, the union ministry of environment, forest and climate change asked these states to submit proposals for taking up such plantations.
    • This is in the light of reduced water flow from Himalayan glaciers and their impact on ecology.

  • Working towards climate justice in a non-ideal world

    The new U.S. administration has renewed its commitment to climate actions by reconvening the Major Economies Forum. This has several implications for India and the developing countries. The article deals with this issue.

    Reconvening MEF and its implications for developing countries

    • The election of Joe Biden as U.S. President has catapulted climate change to the top of the global agenda.
    • Interestingly, the U.S. is not just striding back to the Obama signature achievement of the Paris Accord with its voluntary commitments but also to the Bush days [which was not necessarily voluntary].
    • This change is best evidenced by the presidential call to reconvene the Major Economies Forum (MEF).
    • The MEF, which was first convened in March 2009, originated in the Bush-era U.S. efforts to rope in major emitters.
    • It was also to push a way forward on climate change without heed to the principle of differentiated responsibilities and recognition of historical responsibilities.
    • These two are hallowed principles of the climate discourse given the decades of staying power of greenhouse gases (GHGs) in the atmosphere.

    Changing approach implications for India

    • All countries have been told to commit to net zero (GHG emissions) by 2050 with credible plans to ensure meeting this domestic target.
    • Taking a cue from the new U.S. Administration, the UN Secretary-General has even called on countries to declare national climate emergencies apart from building a coalition for a carbon-neutral world by 2050.
    • As of today, countries representing around 65% of global CO2 emissions have already agreed to this.
    • These plans and their implementation will, undoubtedly, be subject to international reviews and verification.
    • Historical responsibilities and differentiation have no place in this discourse; but neither does the level of development.
    • India can easily be in the crosshairs of such a discourse no matter its extraordinarily small carbon footprint in per-capita terms and huge development imperatives.

    Possibility of carbon border levies

    • Adding to the challenges is the distinct possibility of the EU imposing carbon border levies on those who do not take on high carbon cut-down targets and do so unilaterally if there is no global agreement.
    • While as of now the U.S. Administration appears ambivalent on these border levies, the possibility of their coming around cannot be ruled out.
    • In such a scenario, World Trade Organization rules that presently exclude the use of tariffs on environmental grounds will certainly get modified.

    A fund pay-in idea

    • To deal with the issue of climate finance, Raghuram Rajan has recently put forward a proposal for India to consider.
    • The proposal calls on countries to pay into a global fund amounts based on their carbon emissions over and above the global per-capita average of five tons.
    • This obviously disincentives coal in a big way while incentivising renewables.
    • Those above the global average would pay, while those below would receive the monies.
    • While this would suggest a certain equity, it may be unacceptable to the developed countries even though Mr. Rajan has gone along with the drumbeat to forget historical responsibility.
    • For India, such a proposal may appear attractive as India today has per capita CO2 emission of only 2 tons and is a global record setter in pushing renewables.
    • The long-term implications of such a proposal require examination in detail, quite apart from factoring in the twists and turns that negotiations could give to such an idea.
    • And then, of course, there are alternatives such as emission trading. 

    Implications for developing countries

    • The proposal of fund pay-in allows practical considerations to trump fairness by not only giving a short shrift to historical responsibility but also denying priority access to the remaining carbon space for developing countries.
    • In that sense, it double penalises them while giving developed countries a certain free pass.
    • Here it bears noting that more than 75% of the carbon space available to humankind to keep global temperature rises to 1.5° C has already been taken up by the developed world and China.

    Consider the question “As the world seeks to tackle the climate change through climate action, delivering climate justice should also be the priority. In light of this, discuss the challenges faced by the developing countries in this regard.”

    Conclusion

    Climate justice is an imperative for India, which needs to leverage its green and pro-nature commitment to ensure carbon and policy space for its developmental and global aspirations. India’s diplomatic and negotiating efforts must be quickly geared to that end.

  • India as a factory for the Quad

    The article highlights how India could offer the solution to the tactical issue faced by the Quad: matching China’s manufacturing capacity.

    Strategic case for the Quad

    • The strategic case for the Quadrilateral Security Dialogue, better known as the Quad, has always been sound.
    • A rising China, with its authoritarian one-party system, is a challenge to the democratic order.
    • The strategic case for the Quad has, however, always faced a tactical hurdle.
    • China was the factory of the world.
    • It had become an almost indispensable cog in the global supply chain owing to its low-cost manufacturing prowess at a mass scale.
    • How could any grouping hope to challenge China’s power-play dynamics while at the same time being dependent on its factories to sustain its economies?

    Two recent development that changed the dynamic

    • Two recent developments have completely changed the dynamic.
    • First, Australia returned to the Malabar Naval exercises in 2020, after 13 years.
    • Second, on March 12, the first summit-level meet of the Quad — comprising the US, India, Japan and Australia — is scheduled to take place.

    Rise in India’s manufacturing ability

    • What has changed between 2007 and 2020 that Quad 2.0 has become viable is the globally visible rise in India’s manufacturing ability.
    • Consider the following examples.

    1) PPE Kit manufacturing

    • First, the success in PPE kits.
    • At the beginning of the COVID-19 pandemic, India was manufacturing zero PPE kits.
    • India not just created an overnight world-class manufacturing capacity to meet its own needs but also started exporting PPE kits.

    2) Vaccine Maitri

    • Second, the soft power of Vaccine Maitri.
    • The developed countries are scrambling to secure vaccines for their domestic population.
    • India is not only vaccinating its own people faster than any other country but is also exporting millions of vaccines to countries in need.
    • From Canada to Pakistan and from the Caribbean Islands to Brazil — Made in India vaccines have been a life vest across the globe.

    3) India’s private industry

    • Third, the enterprise of India’s private industry — a hallmark of the deepening manufacturing base.
    • As a recent New York Times report noted, when it came to syringes — without which the vaccines were useless — the global scramble again led to Indian manufactures.
    • Hindustan Syringes alone has ramped up its manufacturing capacity to almost 6,000 syringes a minute.

    4) Precision high-end manufacturing

    • The PLI scheme launched for electronics’ manufacturing evinced unprecedented global interest with 22 top companies, including the top manufactures for Apple and Samsung mobile phones.
    • Over the next five years, a manufacturing capacity of over $150 billion and exports of $100 billion have been tied up through this scheme.

    5) Figher plane manufacturing

    • Fifth, the success of India’s fourth-generation fighter jet programme and the orders placed by the Indian Air Force for 83 Tejas jets.
    • India’s success is one more milestone in its journey towards emerging as a global manufacturing destination.

    Policy changes to make India manufacturing destination

    • Concurrently, India has been reforming its economic policies to make it even more attractive as a manufacturing destination.
    • India has the lowest tax rate anywhere in the world — 15 per cent for new manufacturing units.
    • FDI norms have been relaxed across the board and automatic approval processes instituted for FDI even up to 100 per cent.
    • Privatisation of PSUs is now an established process.
    • Labour laws have been finally reformed and compliance burdens significantly eased.
    • Taxation is now faceless, thus ending the spectre of rent-seeking.
    • A well-functioning, world-class bankruptcy law is in place. Interest rates are low.
    • And India’s digital infrastructure rivals the best in the world and in many cases beats it.

    Consider the question “India’s growing prowess as the manufacturing hub could provide the Quad tactical basis by replacing China. Comment.“

    Conclusion

    The only arrow that was missing in the quiver of the Quad has now been attained. The strategic case for the Quad was never in doubt. The dependence on China’s factories is what kept the grouping of democracies from emerging. India has raised its hand to solve that problem.

  • Genome Mapping of the Indian Ocean

    A team of scientists and researchers from the National Institute of Oceanography (NIO) onboard its research vessel Sindhu Sadhana will work on a research project to reveal the internal working of the body of the ocean at a cellular level.

    Genome Mapping of the Indian Ocean

    • The first-of-its-kind research project in the country is aimed at understanding the biochemistry and the response of the ocean to climate change, nutrient stress and increasing pollution.
    • The researchers will collect samples from various stretches of the ocean at an average depth of about 5 km.
    • Just like gene mapping is carried out on blood samples collected from humans, the scientists will map these in the bacteria, microbes found in the ocean.
    • The mapping of the Deoxyribonucleic acid (DNA) and Ribonucleic acid (RNA) will show the nutrients present in them, and also those lacking in different parts of the ocean.

    Objectives of the mission

    • This project will help scientists understand the internal working of the ecosystem of the Indian Ocean.
    • The research will enable scientists to identify the factors controlling the changes in RNA, DNA in the oceans, and various stressors impacting them.
    • The ocean has several micronutrients like nitrates, sulphates and silicates, minerals like iron ore and zinc, and trace metals like cadmium or copper.
    • The genome mapping will show the presence of which these microbes have adapted to, in addition to their reaction to atmospheric carbon dioxide.
    • This will help in identifying which part of the ocean has a greater concentration of which mineral or element.
    • Scientists will then use these as tracers to tackle the causative factors for excess or lack of a certain mineral or element and suggest possible solutions for their mitigation.
    • In addition, the large pool of RNA, DNA library of the oceans will be utilized for using the Indian Ocean for human benefit in the future.

    Studying the interactions of trace metals

    • Trace metals are the metals subset of trace elements; that is, metals normally present in small but measurable amounts in animal and plant cells.
    • Trace metals like cadmium or copper are supplied to oceans via continental run-offs, atmospheric deposition, hydrothermal activities and continental shelf interaction.
    • They are essential for ocean productivity for having a holistic understanding of nutrient cycling and productivity of the oceans.
    • Isotopic forms of trace metals can be utilized to track the movement of water masses responsible for ocean circulation and as tools to study the biological, geochemical and ecosystem processes and food web analyses.

    Also read

    https://www.civilsdaily.com/news/explained-indias-deep-ocean-mission/

  • Lunar Polar Exploration (LUPEX) Mission

    India and Japan are working together on a joint lunar polar exploration (LUPEX) mission that aims to send a lander and rover to the Moon’s the South Pole around 2024.

    Try this PYQ from CSP 2020:

    Q.The experiment will employ a trio of spacecraft flying in formation in the shape of an equilateral triangle that has sides one million km long, with lasers shining between the craft.” the experiment in the question refers to?

    (a) Voyager-2

    (b) New horizons

    (c) LISA pathfinder

    (d) Evolved LISA

    LUPEX Mission

    • The LUPEX is a robotic lunar mission concept by the Indian Space Research Organisation (ISRO) and Japan Aerospace Exploration Agency (JAXA).
    • It would send a lunar rover and lander to explore the South Pole region of the Moon in 2024.
    • JAXA is likely to provide the under-development H3 launch vehicle and the rover, while ISRO would be responsible for the lander.
    • The mission concept has not yet been formally proposed for funding and planning.
    • The Lunar Polar Exploration mission would demonstrate new surface exploration technologies related to vehicular transport and lunar night survival for sustainable lunar exploration in Polar Regions.

  • A case for a revamped, need-based PDS

    The article highlights the factors governing the food subsidy bill and suggests ways to reduce it.

    Growing food subsidy bill

    • The Economic Survey, tabled in Parliament in January, rightly flagged the issue of a growing food subsidy bill.
    • During 2016-17 to 2019-20, the subsidy amount, clubbed with loans taken by the Food Corporation of India (FCI) under the National Small Savings Fund (NSSF) towards food subsidy, was in the range of ₹1.65-lakh crore to ₹2.2-lakh crore.
    • In future, the annual subsidy bill of the Centre is expected to be about ₹2.5-lakh crore.
    • During the three years, the quantity of food grains drawn by States (annually) hovered around 60 million tonnes to 66 million tonnes.
    • The National Food Security Act (NFSA) 2013, covered two-thirds of the country’s population, this naturally pushed up the States’ drawal.
    • Based on an improved version of the targeted Public Distribution System (PDS), the law requires the authorities to provide to each beneficiary 5 kg of rice or wheat per month.

    How politics influenced the issue price

    • Economic Survey has hinted at an increase in the Central Issue Price (CIP).
    • Central Issue Price has remained at ₹2 per kg for wheat and ₹3 per kg for rice for years, though the NFSA, even in 2013, envisaged a price revision after three years.
    • What makes the subject more complex is the variation in the retail issue prices of rice and wheat, from nil in States such as Karnataka and West Bengal for Priority Households (PHH) and Antyodaya Anna Yojana (AAY) ration card holders.
    • In Tamil Nadu, rice is given free of cost for all categories; this includes non-PHH.
    • A mere increase in the CIPs of rice and wheat without a corresponding rise in the issue prices by the State governments would only increase the burden of States.
    • Political compulsions are perceived to be coming in the way of the Centre and the States increasing the prices.

    Relook at food subsidy system

    • An official committee in January 2015 called for decreasing the quantum of coverage under the law, from the present 67% to around 40%.
    • For all ration cardholders drawing food grains, a “give-up” option, as done in the case of cooking gas cylinders, can be made available.
    •  Even though States have been allowed to frame criteria for the identification of PHH cardholders, the Centre can nudge states into pruning the number of such beneficiaries.
    • As for the prices, the existing arrangement of flat rates should be replaced with a slab system.
    • Barring the needy, other beneficiaries can be made to pay a little more for a higher quantum of food grains.

    Consider the question “There is a pressing need for revamping the food subsidy system. In light of this, suggest the measures to improve the system.”

    Conclusion

    These measures, if properly implemented, can have a salutary effect on retail prices in the open market. A revamped, need-based PDS is required not just for cutting down the subsidy bill but also for reducing the scope for leakages. Political will should not be found wanting.

  • Farmers produce organisations (FPOs)

    The article analyses the role farmers produce organisations (FPOs) can play in improving the bargaining power of the small farmers and also suggest ways to improve FPOs.

    Declining size of farm holdings

    • The average farm size in India declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16.
    • The share of small and marginal farmers increased from 70 per cent in 1980-81 to 86 per cent in 2015-16.
    • At the state level, the average size of farm holdings in 2015-16 ranged from 3.62 ha in Punjab, 2.73 in Rajasthan and 2.22 in Haryana to 0.75 in Tamil Nadu, 0.73 in Uttar Pradesh, 0.39 in Bihar and 0.18 in Kerala.

    Encouraging FPOs to help small farmers

    • Small farmers face several challenges in getting access to inputs and marketing facilities.
    • In the last decade, the Centre has encouraged farmer producer organisations (FPOs) to help farmers.
    • Since 2011, it has intensively promoted FPOs under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments and NGOs.
    • The membership of an FPO ranges from 100 to over 1,000 farmers.
    • The ongoing support for FPOs is mainly in the following two forms:
    • 1) A grant of matching equity (cash infusion of up to Rs 10 lakh) to registered FPOs.
    • 2) A credit guarantee cover to lending institutions (maximum guarantee cover 85 per cent of loans not exceeding Rs 100 lakh).
    • The budget for 2018-19 announced supporting measures for FPOs including a five-year tax exemption.
    • The budget for 2019-20 talked of setting up 10,000 more FPOs in the next five years.
    • Some studies show that we need more than one lakh FPOs for a large country like India while we currently have less than 10,000.

    Looking at the performance of FPOs in last decade

    • Experience shows a mixed performance of FPOs in the last decade.
    • Some estimates show that 30 per cent of these are operating viably while 20 per cent are struggling to survive.
    • The remaining 50 per cent are still in the initial phase of mobilisation and business planning.
    • NABARD has undertaken a field study on the benefits of FPOs in Punjab and Madhya Pradesh.
    • The study shows that in nascent FPOs, the proportion of farmer members contributing to FPOs activities is 20-30 per cent while for the emerging and mature FPOs it is higher at about 40-50 per cent.
    • A study by International Food Policy Research Institute (IFPRI) has undertaken a comparative study of FPOs in Maharashtra and Bihar.
    • In Maharashtra, some of the FPOs have organically evolved (OFPOs) when farmers have taken the lead to adopt market-oriented practices, develop cost-effective solutions in production and marketing.
    • In the case of Bihar, almost all FPOs have been promoted (PFPOs).

    Challenges

    • Studies of NABARD show that there are some important challenges for building sustainable FPOs.
    • Some of these are lack of technical skills, inadequate professional management, weak financials, inadequate access to credit, lack of risk mitigation mechanism and inadequate access to market and infrastructure.

    Focusing on 3 issues for the improvement of FPOs

    1) Getting credit

    • Issues such as working capital, marketing, infrastructure have to be addressed while scaling up FPOs.
    • Banks must have structured products for lending to FPOs.
    • These organisations lack professional management and, therefore, need capacity building.

    2) Linking with input companies

    • FPOs have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc.
    • They need a lot of data on markets and prices and other information and competency in information technology.

    3) Augmenting the size of land

    • The FPOs can be used to augment the size of the land by focusing on grouping contiguous tracts of land as far as possible — they should not be a mere grouping of individuals.
    • Women farmers also can be encouraged to group cultivate for getting better returns.
    • FPOs can also encourage consolidation of holdings.

    Consider the question “How FPOs can play an important part in helping the small farmers by improving their bargaining power? What are the challenges faced by the FPOs?”

    Conclusion

    The FPOs have to be encouraged by policy makers and other stakeholders apart from scaling up throughout the country to benefit particularly the small holders.