Farmer Producer Organisations (FPOs)

February 7, 2022

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Recently, the Prime Minister of India stated that the Union government is resolved to mobilise small farmers into farmer producer organisations (FPOs) and make them influential market forces in the years to come.

About Farmers Producer Organizations (FPOs)

Farmer Producer Organisation (FPO) is a generic name, which refers to the farmer producers organization incorporated/ registered either under Part IXA of Companies Act or under Co-operative Societies Act of the concerned States.
It is formed for the purpose of leveraging collectives through economies of scale in the production and marketing of the agricultural and allied sectors.
The concept behind Farmer Producer Organizations is that farmers, who are the producers of agricultural products, can form groups.
- To facilitate this process, the Small Farmers’ Agribusiness Consortium (SFAC) was mandated by the Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India, to support the State Governments in the formation of the Farmer Producer Organizations (FPOs).
Objectives of FPOs:

To provide a holistic and broad-based supportive ecosystem to form 10000 new FPOs to facilitate the development of vibrant and sustainable income-oriented farming and for overall socio-economic development and wellbeing of agrarian communities.
To enhance productivity through efficient, cost-effective and sustainable resource use and realize higher returns through better liquidity and market linkages for their produce and become sustainable through collective action.
To provide handholding and support to new FPOs up to five years from the year of its creation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages and use of technology etc.
To provide effective capacity building to FPOs to develop agriculture entrepreneurship skills to become economically viable and self-sustaining beyond the period of support from the government.

Functions:
- It deals with business activities related to the farm produce and it works for the benefit of small, marginal and landless farmers.
- It acts as an aggregator for member farmers including from inputs to output which will enhance the economy of scale and bargaining power of member farmers.

Governments steps :
- The Government of India has approved and launched the Central Sector Scheme of “Formation and Promotion of 10,000 Farmer Producer Organizations(FPOs)” to form and promote 10,000 new FPOs till 2027-28 with a total budgetary outlay of Rs.6865 Cr.
- Under the scheme, the formation and promotion of FPO are based on the Produce Cluster Area approach and the specialized commodity-based approach. While adopting a cluster-based approach, the formation of FPOs will be focussed on “One District One Product” for the development of product specialization.

Need for FPOs

Nearly 86 per cent of farmers are small and marginal with average land holdings in the country being less than 1.1 hectares.
- These small, marginal and landless farmers face tremendous challenges during the agriculture production phase such as access to technology, quality seed, fertilizers and pesticides including requisite finances.
- They also face tremendous challenges in marketing their products due to a lack of economic strength.
FPOs help in the collectivization of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues.
Members of the FPO will manage their activities together in the organization to get better access to technology, input, finance and market for faster enhancement of their income.

Challenges to FPOs

Lack of/ Inadequate Professional Management:
- Farmers’ Organizations are required to be efficiently managed by experienced, trained and professionally qualified CEO and other personnel under the supervision and control of democratically-elected Boards of Directors.
  - However, such trained manpower is presently not available in the rural space to manage the FPO business professionally.
Weak Financials:
- FPOs are mostly represented by SF/MF with a poor resource base and hence, initially, they are not financially strong enough to deliver vibrant products and services to their members and build confidence.
Inadequate Access to credit:
- Lack of access to affordable credit for want of collaterals and credit history is one of the major constraints the FPOs are facing today.

Presently, while the risks related to production at the farmers’ level are partly covered under the existing crop/livestock / other insurance schemes, there is no provision to cover the business risks of FPOs.

Inadequate Access to Infrastructure
- The producers’ collectives have inadequate access to the basic infrastructure required for aggregation like transport facilities, storage, value addition (cleaning, grading, sorting, etc.) and processing, brand building and marketing.
- Further, in most of the commercial farming models, the primary producers are generally excluded from the value chain.
Lack of technical Skills/ Awareness:
- Inadequate awareness among the farmers about the potential benefits of collectivization & non-availability of competent agency for providing handholding support.
- Further, lack of legal and technical knowledge about various Acts and Regulations related to the formation of FPOs and statutory compliances thereafter.

Way Ahead

There is a need to make it easier for FPOs to avail government programmes and schemes for providing equity grants and loans.
- This can be achieved either by reducing the threshold for eligibility or by supporting FPOs to reach the eligibility criteria or both.
Since agriculture will play a key role in the economy, FPOs will have to scale up their operations, adding that every member farmer should have an equitable share in the organisation.
The government should take steps for common branding and standardisation of FPO products. It can utilize the FPOs’ services for procurement of paddy or pulses which can be used for the PDS.

Source: TH