Farmer producer organisation

 FPOs are voluntary organizations controlled by their farmer-members who actively

participate in setting their policies and making decisions.
 They are open to all persons able to use their services and willing to accept the
responsibilities of membership, without gender, social, racial, political or religious
discrimination.
 FPOs operatives provide education and training for their farmer-members, elected
representatives, managers, and employees so that they can contribute effectively to the
development of their FPOs.
 Farmers Producers Organization provides end-to-end support and services to the small
farmers, and cover technical services, marketing, processing, and others aspects of
agriculture inputs.
 Farmer Producer Organization (FPO) is a legal entity incorporated under the
Companies Act or Co-operative Societies Act of the concerned States.
 It is formed to leverage collectives through economies of scale in production and
marketing of agricultural and allied sector
 FPOs help in the collectivization of small, marginal and landless farmers in
order to give them the collective strength through economic independence and
mental support
 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
 Farmer Producer Organisation (FPO) is a legal entity formed by primary producers that
are farmers, milk producers, fishermen, weavers, rural artisans, craftsmen, etc.. FPO is a
generic name for an organization of producers of any produce, e.g., agricultural, non-
farm products, artisan products.

FEATURES OF FPOs

 To facilitate the process, the Small Farmers Agribusiness Consortium (SFAC) was
mandated by the Department of Agriculture and Cooperation, Ministry of Agriculture,
Government of India, to support the State Government in the formation of the Farmer
Producer Organizations (FPOs).
Small Farmers Agribusiness Consortium

 Small Farmers Agribusiness Consortium (SFAC) is an autonomous society promoted by Ministry of Agricu
and Farmers’ Welfare. SFAC is an exclusive society focused on increasing incomes of small and margina
aggregation and development of agribusiness. SFAC is progressing towards establishing an eco system for F
them sustainable and viable in the long run. SFAC is also implementing the National Agriculture Market Ele
Nam) platform.
 The goal is to enhance the farmers competitiveness and to increase their advantage in
emerging the market opportunities.
 The major operations of Farmers Producer Organization (FPO) include the supply of
seed, machinery, market linkages & fertilizer, training, networking, financial and
technical advice.
 The FPOs are promoted and formed through the Cluster-Based Business Organization
(CBBO) and engaged at the cluster or state level by implementing the agencies.
 The FPOs are promoted under the ‘One District One Product’ ( The Ministry of
Agriculture and Farmers Welfare on Tuesday reiterated the importance of
FPOs which are to be developed in production clusters, wherein agricultural
and horticultural produces are grown/cultivated for leveraging economies of
scale and improving market access for members. One District One Product”
cluster will promote specialization and better processing, marketing, branding
and export)

 The FPOs provide hand-holding, adequate training, and the CBBOs give the initial
training.
 Priority is given for the FPO formation in aspirational districts , with a minimum of one
FPO in every block of the aspirational districts.

“FORMATION AND PROMOTION OF 10,000 FARMER PRODUCER

ORGANIZATIONS(FPOS)” SCHEME # IMPORTANT#

 In 2021, The Government 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.

 Under the scheme, the formation and promotion of FPO is based on Produce Cluster
Area approach and specialized commodity based approach.
 While adopting cluster based approach, formation of FPOs will be focussed on “One
District One Product” for development of product specialization.
 Under the scheme, there is a provision for financial support of a maximum of Rs.18.00
lakh per FPO for 3 years as a management cost to make them sustainable and
economically viable.

Objectives of the Scheme

 To provide a holistic and broad-based supportive ecosystem to form new 10,000
FPOs to facilitate the development of vibrant and sustainable income-oriented farming
 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 ensure sustainable development
 To provide landholding ie increase in average area the farmer have, and support to new
FPOs up to 5 years from the year of creation in all aspects of management of FPO,
inputs, production, processing and value addition, market linkages, credit linkages and
use of technology, etc
Activities to be undertaken by FPO

 As per the new guidelines, the FPOs may provide and undertake the following relevant
major services and activities for the development:
 The FPO can supply quality production inputs like seed, fertilizer, pesticides at
reasonably lower wholesale rates.
 FPO give need-based production and post-production machinery and equipment for
members to reduce the unit production cost
 FPO can engage in the process of value addition like cleaning, grading, packing, and
also farm level processing facilities at a user charge basis on a reasonably cheaper rate.
 The FPO can make the facility for storage and transportation for its members
 The FPO must undertake higher income-generating activities like seed production,
beekeeping, mushroom cultivation, etc
 FPO needs to undertake aggregation of smaller lots of farmer-members’ produce; add
value to make them more marketable.
 Facilitate logistics services such as storage, transportation, loading/unloading, etc. on a
shared cost basis.
 FPO can market the aggregated produce with better negotiation strength to the buyers
and in the marketing with better and remunerative prices

How is the government assisting the FPOs?

 To motivate more and more farmers to set up FPOs, the government is providing a lot of
assistance:The ongoing support for FPOs is mainly in the form of, one, a grant of matching equity
(cash infusion of up to Rs 10 lakh) to registered FPOs, and two, 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 while the budget for 2019-20 talked of setting up 10,000 more FPOs in the next five
years.

 Equity Grant Scheme

 Credit Guarantee Fund Scheme through SFAC (small farmer agribusiness consortium)
 FPOs can also get help from the government of India for various schemes like marketing
assistance, Venture Capital assistance.
 The mission for Integrated Development of Horticulture (MIDH) Scheme. This scheme
works towards promoting agricultural business activities.
 The farmers is strengthened by SFAC and NABARD that promote the training of the
Board of Directors and their officers of FPOs so that they can function effectively.
 Besides, the Indian Council of Agricultural Research also provided technical support to
FPOs via Krishi Vigyan Kendras established in the respective locations.

Implementing Agencies to Form and Promote FPOs

 The following three implementing Agencies will form and promote Farmer Producer
Organizations
 Small Farmers Agri-business Consortium (SFAC)
 National Cooperative Development Corporation (NCDC)
 National Bank for Agriculture and Rural Development (NABARD
 Cluster-Based Business Organizations (CBBOs)#IMP#
 The Department of Agriculture and Farmer Welfare will allocate Cluster to
Implementing Agencies which in turn will form the Cluster-Based Business
Organization in the States.
 FPOs will be formed and promoted through these Cluster-Based Business Organizations
(CBBOs) and it will be a platform for an end to end knowledge for all issues in FPO
promotion.
 The CBBOs will have five categories of specialists such as,
 The domain of Crop husbandry
 Agri marketing or Value addition and processing
 Social mobilization
 Law & Accounts and
 IT/MIS.
 Under the scheme, CBBOs have been provisioned with the critical role to
engage themselves all along the value chain starting right from the
 Mobilization of farmers,
 Baseline survey,
 Identification of produce clusters, and formation of groups,
 Registration,
 Capacity building to the preparation of the business plan,
 Execution thereof with assurance to provide the market to the FPOS.
 They are also to establish a cardinal link with implementing agencies and FPOS.

Support by the National Project Management Agency (NPMA)

 There will be a National Project Management Agency (NPMA) at SFAC for providing
overall project guidance, data compilation, and maintenance of FPO through
integrated portal and Information management and monitoring.
members of FPO
 FPO with a minimum farmer-members size of 300 shall be eligible under the scheme in
plains, while in North-Eastern and Hilly areas* (including such other areas of UTs), a
size of 100 shall be eligible for equity grant.

Priority for Aspirational Districts FPO

 According to the new guidelines, priority will provide for the formation of FPOs in
Aspirational districts(INITATIVE BY GOV OF INDIA IMPLEMENTED BY NITI Aayog WITH
THE HELP OF VARIOUS STAKEHOLDERS TO IMPROVE THE LIVING STANDARD OF PEOPLE)
in India with at least one FPO in each block of Aspirational districts.
 FPOs will be promoted under the “One District One Product” cluster to promote
specialization and better processing, marketing, branding and export by FPOs.

Equity Grant for FPO

 To strengthen the financial base of FPOs and help them to get credit from financial
institutions for the projects and working capital requirements for business
development, the Government is providing Equity Grant to FPO.
 To strengthen the financial base of FPOs, there is also a provision for a matching equity
grant of a maximum of Rs. 2000/- per member with a ceiling of Rs. 15 lakh /FPO and
Credit Guarantee facility up to a bankable project loan of Rs. 2.00 crore respectively.

Objectives of Equity Grant

 The objectives of providing Equity Grant to FPO are as follows:

 To enhance the viability and sustainability of FPOs.
 To increase the creditworthiness of FPOs.
 To enhance the shareholding of members to increase the ownership and participation
in the FPO.
 Equity Grant Details.
 Equity Grant will be in the form of a matching grant up to Rs. 2000 per farmer member
of FPO subject to a maximum limit of Rs. 15 lakh fixed per FPO

Benefits of FPO

 Declining average land-holding size: The average farm size 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. The FPOs can engage
farmers in addressing productivity issues, collective farming and emanating from small
farm sizes. It may also result in additional employment generation because of the
increased intensity of farming.
 Negotiating with corporates: The FPOs can benefit farmers to compete with large
corporate enterprises in bargaining. It allows farmer members to negotiate as a group
and help small farmers in both output and input markets.
 Economics of aggregation: The FPOs can provide quality and low-cost inputs to
member farmers such as the purchase of machinery, loans for crops, input agri-inputs
(pesticides, fertilizers, etc.) and direct marketing after agricultural produce
procurement. It will enable members to save time, distress sales, transaction costs,
price fluctuations, quality maintenance, transportation, etc.
 Social impact: Social capital will develop in FPOs, improving women farmers’ decision-
making and gender relations in the FPOs. It will enhance food, reduce social conflicts
and nutritional values in the community.
 Aggregating the smallholder into FPOs help to investment, improve the bargaining
capacity and asses to technology and market.
 Integration of small and marginal farmers to explore the emerging opportunities at
domestic and global level
 Besides, in agricultural marketing, there is a long chain of intermediaries who very often
work non-transparently leading to the situation where the producer receives only a
small part of the value that the ultimate consumer pays. This will be eliminated.
 Through aggregation, the primary producers can avail the benefit of economies of scale.
 Farmers Producers will also have better bargaining power in the form of the bulk buyers
of produce and bulk suppliers of inputs.
 Better Efficiency: skill deveolpment and training, knowledge and awareness about
marketing ,procurement of raw material ,delivery of the final product at the ultimate
consumers’ doorstep.
 More Income to Producer: Farmer Producer Company reduce the overall cost of
production by purchase of inputs on bulk and then sell the produce in bulk thus,
fetching better price per unit of produce.
 Equal Voting Rights to Members: The voting rights shall be based on “one vote per
member” and in case of Producer Company consisting only of producer institutions,
then the voting rights shall be based on the participation in the business.
 Limited liability: The liability of the members is limited to the unpaid amount of the
shares held by them. Hence, the private assets of the members are not liable losses
incurred by company.
 Financial Assistance from Company : The Board of Farmer Producer Organization may,
subject to provisions in articles, provide financial assistance to the members of the
Producers company by way of credit facility and loans and advances.
 Platform for Government Initiatives: It can work as a platform to facilitate better access
to government services, like PDS, MNREGA, Scholarships and Pensions, etc. It can liaison
with the Government Departments for convergence of programmes, like drinking
water, sanitation, health and hygiene.
 Entitled for Insurance: The Company can avail insurance for the producers or their
primary produce to indemnify against any risk of losses.
 Education and Technical Services: Producer Company shall help producer in brand
building, Packaging, Labelling, Standardization, Quality control, providing storage facility
and provide such training and services as it may deem fit.
 Export and participating in commodity exchanges : Farmers can export their
agricultural produce as well as can aggregate the produce of its members, and sell it
using the commodity exchanges agricultural produce.
Benefits to Farmers in a nutshell,

 Through the formation of FPOs, farmers will have better collective strength for better
access to quality input and technology.
 The farmer will also avail better credit and better marketing access through economies
of scale for better realization of income.
 Cost of production can be reduced by procuring all necessary inputs in bulk at
wholesale rates
 Aggregation of produce and bulk transport reduces marketing cost, thus, enhancing net
income of the producer
 Building the scale through produce aggregation enables to take advantage of
economies of scale and attracts traders to collect produce at farm gate.
 Post-harvest losses can be minimized through value addition and efficient
management of value chain.
 Regular supply of produce and quality control is possible through proper planning and
management.
 Price fluctuation can be managed; if there are practices like contract farming,
agreements, etc.
 Easy in communication for dissemination of information about price, volume and
other farming related advisories.
 Access to financial resources against the stock, without collaterals.
 Easy access of funds and other support services by the government / donors / service
providers, and
 Improved bargaining power and social capital building.

Performance of FPOs
  Experience shows a mixed performance of FPOs in the last decade. Some estimates
show that30 percent 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 mobilisationand business
planning.
 FPOs in Gujarat, Maharashtra and Madhya Pradesh, Rajasthanand some other states
have been able to realise higher returns for their produce.
 For example, tribal women in the Pali district of Rajasthan formed a producer company
and they are getting higher prices for custard apples.
 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 centwhile for the emerging and mature
FPOs it is higher at about 40-50 percent.
 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.
 Goa, Gujarat, Maharashtra, and Rajasthan are implementing schemes under which 894
produce clusters have been allocated and 563 FPOs registered, more than 1.35 lakh
farmers have been mobilized and about 56,012 farmers have been registered as
shareholders of the FPOs.
 30 women-focused FPOs have been registered. 64 FPOs registered in tribal districts and
85 FPOs registered in aspirational districts

challenges

 Studies of NABARD show that there are some important challenges for building
sustainable FPOs.
 Some of these are:
 Lack of technical skills and awareness, about the potential benefits of collectivization
 Inadequate professional management,ie professional , experienced,trained and

 qualified personnel as head and directors

 Weak financial, ie small and marginal farmers with poor resources
  Inadequate access to credit,
 Lack of risk mitigation mechanism
 Inadequate asses to market and infrastructure
 Difficulty in securing institutional finance. The banks are usually wary of granting loans
to the FPOs as they do not have assets of their own to serve as collaterals.
Consequently, the FPOs have to rely on loans from non-banking financial companies or
micro-finance companies.
 They are forced to raise their working capital at very high-interest rates.
 Inability to operate in the regular agricultural markets. Farmers Producers Organisation
usually faces difficulties in operating at the regulated Mandis because of the resistance
offered by the licensed traders. It is because these traders have a significant hold over
the markets.
 Lack of legal recognition under the contract farming regulations.
 Even the facility of cheap bank loans with liberal interest subvention by the government
that is available to individual farmers is denied to the FPOs.
 Moreover, many other concessions, tax exemptions, subsidies and benefits provided to
cooperatives, startups and the like have not been extended to the FPOs.

 Way Forward
 Regular capacity building of FPO board members

 To come out with a standardized scoring method of FPO; including financial, management, social
 and environmental score
 Converging rural, agriculture and farmer development policies with FPOs.
 Improvement of risk management systems in FPO
 Suggest capital structure of FPO in different phases, and support it in financial linkages.
 Intra FPO learning and development platform to be started.
 Increase the role of FPO in social development activities.
 Integrating role of FPOs in strengthening the rural entrepreneurial ecosystem.
 Link FPO with nearby agriculture university and management institute

 Issues such as working capital, marketing, infrastructurehave to be addressed while

scaling up FPOs.
 Getting credit is the biggest problem. Banks must have structured products for lending
to FPOs. These organizations lack professional management and, therefore, need
capacity building.
 They have to be linked with input companies, technical service providers,
marketing/processing companies, retailers
 They need a lot of data on marketsand prices and other information and competency
in information technology.
 FPOs can be used to augment the size of the landby 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.
 In order to build a sustainable FPO, favorable ecosystem is needed besides certain
policy reforms particularly in the agricultural marketing systems. Some of the critical
ecosystems include:
 Building of robust FPO movement requires mass awareness creation among farmers/
various other stakeholders and initiating critical reforms to strengthen the FPO
ecosystem, as suggested below:-
 Based on National policy of DAC & FW, State Governments may adopt appropriate
policy to support, and strengthen FPOs so as to make them self-sustaining and
commercially viable business enterprises.
 Strengthening rural agri-marketing infrastructure, promoting unified market for agri
produce and enabling FPOs market their produce directly to the consumers/ bulk-
buyers, without payment of mandi fee.
 FPOs need to be linked to Gramin Agri Markets (GrAMs ) for its operation and
management.
 The system of issuing various licenses required for undertaking business activities by
FPOs may be simplified to make it a single window state-wide license.
 With a view to increasing farmers’ participation in agri exports, APEDA may identify
suitable clusters of production, processing and export of potential crops through FPO
route and provide necessary infrastructure & handholding for ensuring consistency in
quantity, quality and traceability of exportable agricultural commodity.

 Conclusion
 FPO seems to be an important institutional mechanismto organize small and marginal
farmers. Aggregation can overcome the constraint of small size.
 The real hope is in farmer producer organizations (FPOs) that allow members to
negotiate as a groupand can help small farmers in both input and output markets.
 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.
 While small farmers gain greater bargaining power through FPOsin relation to the
purchase of inputs, obtaining credit and selling the produce, the fundamental problem
of the small size of holdings giving only a limited income is not resolved.
 While incomes will rise because of the benefits flowing from FPOs, they may not still be
adequate to give a reasonable incometo small and marginal farmers. That issue has to
be handled separately.
 Since the FPO has been considered to be the way forward for enhanFPO stands for
Farmer Producer Organizations. FPO is an organization, where the members are
farmers itself.
 Farmers Producers Organization provides end-to-end support and services to the small
farmers, and cover technical services, marketing, processing, and others aspects of
agriculture
 Enhancing farmers’ income and boosting agricultural growth, future strategies for
scaling up of FPO promotion by various stakeholders may focus on the following broad
areas of critical support/ effective interventions;
 Mass awareness building.
 Institution development.
 Forging linkages with the ecosystem, and
 Digital monitoring.

 How can FPOs help achieve the target of “Doubling Farmers’

Income”?

 FPOs have the potential to act as a catalyst of change in the economic

system of our country.

 Using this FPO model, farmers are in a position to fix the price of their
production.

 Well-organized FPOs engage in providing a range of assistance to

farmers like imparting better farm practices, collectivisation of input
purchases, transportation, linkage with markets, and better price
realization as they do away with the intermediaries.