Institutional design for market participation and livelihood security of farmers: Case study of an agricultural marketing cooperative

Guide(s)

Naik, Gopal

Department

Economics

Area

Economics

University

Indian Institute of Management Bangalore

Place

Bangalore

Publication Date

3-31-2023

Year Awarded

March 2023

Year Completed

March 2023

Year Registered

June 2017

Abstract

Indian agricultural sector presents a paradoxical scenario: significant gains made in agricultural production, productivity, trade, and infrastructure co-exist with poor livelihood conditions for a large majority of agricultural producers. Persistent distress and non-remunerative returns to smallholder farmers have led policy and academic circles in the country to raise concerns about the viability of agriculture as a livelihood source (Dev, 2018; NITI Aayog, 2015). Discontent of the farming community is manifested in several forms such as agitations and protests, sometimes even farmer suicides. Globally, there is a resurgent interest in agriculture-led development as it is identified to be more effective in inclusive development and poverty reduction (Christiaensen et al., 2011; World Bank, 2007). A significant element of the agriculture-for-development agenda is improving smallholder agriculture through productivity enhancement and better market linkages. Alluding to this idea, a series of policy-led institutional solutions were introduced in India in the past two decades with explicit emphasis on enabling greater market participation of farmers. Farmers’ welfare has explicitly been stated as a policy agenda. Yet, smallholders remain as a vulnerable group, faced with multiple risks and structural constraints. They face higher poverty level (NCEUS, 2008) and dis-savings (Dev, 2012). Recent estimates suggest that market-oriented reforms did not have any positive impact on real farm incomes (Basu & Misra, 2022). There is ample evidence to show that traditionally marketing arrangements in India have generated skewed benefits, biased against smallholder farmers (Chatterjee & Kapur, 2016; Goyal, 2010) and there is a general tendency to exclude them (Singh, 2012). The policy focus in the Indian context for improving farmers’ welfare has largely been on enhancing farm income. In addition to the net income from agriculture, the livelihood conditions of farmer households depend on idiosyncratic, and covariate risks they face. As farmers become more commercial, they tend to face greater risks. The risks can arise from not only within agriculture but also outside it from facets relevant to farmer households with cascading effects. Increasingly, there is a recognition that farmers’ risk behaviour is better understood by analyzing risks at household level instead of a narrow view at farm level (Wauters et al., 2015). Furthermore, gainful market participation is a knowledge-intensive activity as the farmers must seek, gather, process, and act on information in input and output markets. Smallholders, unlike their large landholding counterparts, lack capabilities to effectively participate in such markets. For smallholders, the aggregate risk compared to their risk bearing ability is much larger. Predisposition of market-linkage institutional designs with enhancing farm income make them unsuccessful to adequately address stability of income, seasonality and degrees of risks faced by farmer households. Therefore, there is merit in revisiting the design of market-linkage institutions for achieving the desired outcomes. In this context, the motivation for this dissertation stems from the broad concern of farmers’ welfare and the gap in our understanding of the design of market linkage institutions for improving it. Much of the policy focus in the Indian context for improving farmers’ welfare has been on enhancing farm income. Deviating from this conventional focus, we are concerned with livelihood security of farmer households. The discourse on household livelihood security is dominated by diversification strategies (Barrett et al., 2001; Ellis, 1998, 2000; Ellis & Freeman, 2004) that advocate moving away from agriculture. We seek the possibility of promoting livelihood security of farmer households by dropping the anchor in agriculture. The central question that this study engages with is “what are the key elements in the design of a market-linkage institution that are essential to promote livelihood security of smallholder farmers?”. This dissertation pivots on designing market linkage institutions for farmers to promote their livelihood security through gainful market participation. To explicate the context, we trace the evolution of policies and institutions in the realm of Indian agriculture over a seven-decade period between 1950 and 2020. Specific focus is on agricultural output marketing. We pose two questions: a) How did the policies and institutions evolve over time? and b) How did it affect farmers’ welfare? Based on the major policy shifts, we identify five distinct phases. Farmers’ welfare explicitly became a policy priority in the fifth phase, though there was recognition in the previous phases of the need for improving their conditions. Drawing insights from the existing political economy literature on agricultural development in India and a range of secondary sources of data, we develop four arguments: (a) the motivating theory for state intervention moved from state control dirigisme to neo-classical approach; (b) concerns of price stabilization and protecting consumer interests subdued price discovery by farmers; (c) clear emphasis was laid on smallholder class, albeit it never resolved their challenges; and (d) most importantly, the market-linkage institutions, by design, have not been conducive for the majority of smallholders. The market-linkage institutions aimed to connect farmers exclusively with agricultural markets. Since the farmers are located at the intersection of multiple markets (Bates, 1981), their livelihood security hinges not only on returns from agricultural markets but also from other markets. Our review suggests that the market-linkage institutions ignored the multiple sources of risks, especially outside agricultural markets, and the factors that affect ability of farmers to access markets. Our inquiry, therefore, in the remaining part of this dissertation is for an institutional design that enables farmers to gain from market participation and that simultaneously ensures their livelihood security. We develop a conceptual model, followed up with an empirical study. The conceptual question is, what ought to be an ideal institutional design to enable gainful market participation and to ensure livelihood security of farmer households? To develop the conceptual model, we draw mainly from three streams of literature: (a) livelihood security (Chambers & Conway, 1992; Ellis, 2000) and agricultural commercialization (Pingali & Rosegrant, 1995; Timmer, 1988) (b) market access (Barrett, 2008; Chamberlin & Jayne, 2013; Goetz, 1992; Key et al., 2000) and role of producer organizations (Markelova et al., 2009; Trebbin & Hassler, 2012; World Bank, 2007), and (c) “design” concepts (Shah, 1995, 1996), longevity (Giagnocavo et al., 2018; Grashuis, 2018) and hybridity (Grashuis & Su, 2019) in cooperatives. An institutional design is ideally pro-farmer if it enables inclusive market participation of farmer households, enhances households’ agency for market participation and mitigates their risks, without compromising the sustainability of the organization orchestrating the design. Our search for institutions with a semblance to the ideal design led us to an agricultural marketing cooperative in India, Totgars’ Cooperative Sales Society (TSS), that provides its members with services to access multiple markets, and a set of livelihood services. It is a 98-year-old cooperative with consistent financial performance. The empirical field study aims to answer two questions: a) how does the design shape market participation and livelihood security of farmer households? b) how does the effect of the design vary among farmer households belonging to different landholding categories? To answer these questions, we undertake in-depth case study of the design orchestrated by TSS following embedded mixed-methods (Creswell & Clark, 2017) research design. For empirical analysis, we rely on primary and secondary sources of data comprising of both qualitative and quantitative types. The research design involves three phases: an exploratory study, followed by collection of qualitative data interspersed with data analysis, and a household survey for collecting quantitative data. Based on the theoretical model and empirical evidence from the field study, we show that ensuring livelihood security of farmer households through market access channel needs an institutional design with a set of functions that enhances households’ agency for market participation and mitigates their risks, integrated on the strength of the value of crop produced. For long-term success of the institutional design, sustainability of the organization orchestrating it is critical. In our model, the organizational form involved is a farmer producer organization, a cooperative. In the next part of the study, we examine how does the cooperative ensure its organizational sustainability? We posit that managing hybridity is at the core of ensuring organizational sustainability of cooperatives. Drawing on the study of TSS and qualitative data, we identify three mechanisms – patronage cohesiveness, internal sources of funds, and portfolio diversification – that helped it manage hybridity and therefore, organizational sustainability. Our study makes contributions to theory, practice, and policy. We present a conceptual model of pro-farmer institutional design for gainful market participation and livelihood security. From a theoretical perspective, we make three specific contributions – agency for market participation, promoting livelihood as central to farmers’ welfare, and the role of hybridity in organizational sustainability of cooperatives. With this, we extend at least two streams of literature – promoting farmers’ welfare through market participation and organizational sustainability of producer organizations. Insights from the empirical study can serve as practical lessons for cooperatives and other forms of producer organizations to reflect on their organizational design and strategy to strengthen their performance. Our contributions to policy are two-fold. First, we suggest a shift in focus from farm income to farmer households’ livelihood security as the central tenet of their welfare. Second, we highlight the importance of designing institutions for promoting livelihood security of farmer households through the market access channel.

Pagination

xvi, 279p.

Copyright

Indian Institute of Management Bangalore

Document Type

Dissertation

DAC Chairperson

Naik, Gopal

DAC Members

Swaminathan, Hema; Kamath, Rajalaxmi

Type of Degree

Ph.D.

Relation

DIS-IIMB-FPM-P23-06

This document is currently not available here.

Share

COinS