India developed the concept of farmer producer organisations (FPO) in early 2000s to help small farmers gain economies of scale and improve their market standing by negotiating collectively.
What are FPOs?
- It is a collective of farmers (and non-farmers) who are the primary producers of a product (an agricultural produce or a manufactured product).
- It is an organisation of farmer-producers that provide support to small farmers with end-to-end services covering almost all aspects of cultivation from inputs, technical services to processing and marketing.
- FPOs can be a registered company (farmer producer company or FPC) or a cooperative, among others.
- In 2019, the Government of India launched a scheme, Formation and Promotion of 10,000 Farmer Produce Organisations, to form and promote 10,000 new FPOs in the country by 2024, with a budgetary provision of Rs 6,865 crore.
Under this scheme, the formation and Promotion of FPOs is to be done through nine implementing agencies, such as:
- Small Farmers Agri-Business Consortium (SFAC),
- National Cooperative Development Corporation (NCDC) and
- National Bank for Agriculture and Rural Development (NABARD).
Implementing agencies will engage cluster-based business organisations (CBBOs), introduced under the scheme, to aggregate, register and provide professional hand-holding support to FPOs for a period of five years.
- CBBOs will be the platform for an end-to-end knowledge for all issues related to FPO promotion.
- Any legal entity registered in India and in existence for past three years is eligible to be a CBBO.
- The agency should have a minimum average turnover / utilisation of funds of at least Rs 2 crore for the plains and Rs 1 crore for Himalayan and northeastern region during the past three years, with a positive net worth.
- The business plan helps the FPOs to diversify and scale up their business activities in a well-planned manner.
- Currently, majority of the FPOs lack such business plan, and therefore they limit their activity to merely bulk buying and selling of the inputs and/or farm produce
- FPOs are being recognized on various platforms for procurement by private companies.
- Private companies find FPOs as a better source for procurement of vegetables and high value crops which helps them cut down the procurement cost and ensure quality to a greater extent.
- However, for long-term sustainability of the FPOs, there is a need of strong market linkage for the farm produce or its value-added products.
- The above issues such as working capital, marketing, infrastructure have to be addressed while scaling up FPOs.
- Banks must have structured products for lending to FPOs.
SOURCE: THE HINDU, THE ECONOMIC TIMES, PIB