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Farmer Producer Organisation (FPO)

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October 25, 2023

Why in news?

The role of Farmer Producer Organisation (FPO) as engines of agri innovation has made the Eastern Uttar Pradesh a hub of vegetable and fruit exports.

What is FPOs?

  • An FPO is a legal entity that is owned and managed by farmers, including cultivators, dairy producers, fishers, plantation owners, and others engaged in primary production in the agriculture sector.
  • FPO is a generic name, which includes farmer producers’ organization incorporated for the purpose of leveraging collectives through economies of scale in production and marketing of agricultural and allied sector.
  • They are incorporated/registered either under
    • Part IXA of Companies Act or
    • Co-operative Societies Act of the concerned States

Sahyadri Farms is India’s largest farmer producer company with over 8,000 farmer shareholders.

Lokhit Bahuuddeshiya Krishi Producer Company is a women-led FPO that cultivates organic cotton and sells it to global brands.

fpo

Activities involved

  •  Supply quality production inputs like seed, fertilizer, pesticides and such other inputs at reasonably lower wholesale rates.
  • Make available need based machinery on custom hiring basis for members to reduce the per unit production cost.
  • Undertake higher income generating activities like seed production, bee keeping, mushroom cultivation etc.
  • Undertake aggregation of smaller lots of farmer-members’ produce; add value to make them more marketable.
  • Facilitate market information about the produce for judicious decision in production and marketing.
  • Facilitate logistics services such as storage, transportation, loading/un-loading etc. on shared cost basis.
  • Market the aggregated produce with better negotiation strength to the buyers offering better and remunerative prices.

What are the advantages of FPO?

  • Economics of aggregation- They can provide low-cost and quality inputs to member farmers.
  • Social capital- They will increase women participation in agriculture and reduce social conflicts and improved food and nutritional values in the commodity.
  • Better price discovery- They can increase the income of farmers by selling their produce collectively and negotiating better prices with buyers or government agencies.
  • Bargaining power- FPOs can help farmers compete with large corporate enterprises in bargaining as it allows members to negotiate as a group.
  • Capacity building- They can provide training and education to farmers on new technologies, best practices, and market opportunities.
  • Foster investment- FPOs are also a type of Initial Public Offering, where a company offers its shares to the public for the first time.
  • Investors may benefit from investing in FPOs because they are more familiar with the company, its performance, and its business practices.
  • Transparency- It create a more transparent agri-market, and they need to be nurtured to their full potential.

What are the challenges faced by FPOs?

  • Fund deficit- One of the biggest is raising the capital required to buy members’ produce or for performing activities such as value addition.
  • Issue with cropping pattern- If monoculture is the dominant practice, then it can take multiple procurement cycles to get more people to join the FPO.
  • Lack of skill- It is difficult to attract and retain skilled professionals to take care of the administration other managerial responsibilities.
  • Non-profitable – FPOs may become non-profitable due to poor inventory management, lack of skills for developing feasible business plans and managing the business.
  • Defunct FPOs- There has been a sharp rise in the number of FPOs but a lot of them struggle to function, and many have gone defunct.
  • Governance- Low capacity for governance is due to the low level of literacy among farmers, limited awareness on how to run an FPO, and lack of time.
  • Policy paralysis- There are disparities regarding credit availability, the price at which fertilisers can be procured, and minimum support price (MSP) availability.

Steps taken by the Government to promote FPOs

  • Formation & promotion of new 10,000 FPOs - It is a Central Sector Scheme launched in 2020 to provided financial assistance up to Rs 18 lakh per FPO for a period of 3 years
  • Honey FPO Programme- Agriculture Ministry launched 5 FPOs for producing honey that would be set up with the help of National Agriculture Cooperative Marketing Federation of India (NAFED).
  • Agriculture Infrastructure Fund- It will provide interest subvention of 3% for credit extended to develop post-harvest infrastructure to FPOs.
  • Deendayal Antyodaya Yojana- National Rural Livelihood Mission (DAY-NRLM)- It promotes FPOs by mobilizing farmers, building market linkages through a value chain development approach for farm based livelihood is an important strategy being pursued.
  • Venture Capital Assistance program- Launched by Small Farmer’s Agri-Business Consortium (SFAC), it works for the betterment of farmer-entrepreneur to evolve their agri-based business.
  • Mission for Integrated Development of Horticulture (MIDH)- It is a centrally sponsored scheme that aims to encourage the aggregation of farmers into groups such as FPOs to facilitate the economy of scale and scope.
  • FPO cell- A dedicated FPO cell was launched by Ministry of Agriculture to meet the objectives of FPOs.
  • One Nation One District Product- It is included in the "PM Formalisation of Micro food processing Enterprises (PMFME) Scheme" for providing financial, technical and business support for upgradation of existing micro food processing enterprises.

What lies ahead?

  • FPOs can integrate resilient income and sustainable farming practices which will double the farmers income as recommended by Ashok Dalwai committee.
  • FPOs need to scale capital and foster value addition which would improve agriculture, the lifeline of Indian economy.

 

References

  1. Indian Express- FPO’s are the agents of prosperity
  2. PIB- Set up Farmer Producer Organisations
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