What is Farmer Producer Organization in India?

Introduction

New guidelines for Farmer Producer Organizations (FPOs) were published by the Ministry of Agriculture and Farmers Welfare as part of a plan to create and promote 10,000 Farmer Producer Organizations (FPOs). According to the updated rules, FPOs can be registered under the Companies Act 2013 or the State Cooperative Societies Act, with management responsibilities required for five years of hand-holding. All the new guidelines and formation of FPO (Farmer Producer Organization) are summarized in this article.

What is FPO?

The farmer Producer Organization (FPO) is a legal body established in the year 2013 under the Companies Act or the Cooperative Societies Act for the collective use of the economy in the production and sale of agricultural and allied industries by the respective states.

Creation of FPO (Farmer Producer Organization) Scheme

The objectives of forming an FPO under the FPO scheme are as follows.

• To create 10,000 new FPOs with a fully supportive environment to help develop healthy and sustainable income-oriented agriculture.
• Guiding and supporting new FPOs for five years after the year of creation in all aspects of management of FPOs, inputs, production, processing and value addition, market links, credit links and use of technology, among others.
• Increasing productivity through cost-effective and sustainable use of resources and releasing higher returns through better financing and market access for their production.

Benefit to farmers through Farmer Producer Organizations

Farmers will have better access to high-quality inputs and technologies through the development of FPOs due to their collective power. In addition, the farmer will be able to exploit better economic and marketing opportunities because of economies of scale, which will improve income.

What Activities are carried out by FPOs?

Following are the significant services and activities performed by the Farmer Producer Organization for development under the new rules:

• FPOs can provide high-quality production inputs, such as seeds, fertilizers and pesticides, at affordable wholesale prices.
• To reduce cost per unit of production, FPOs can provide members with custom-hired production, post-production machinery and equipment based on requirements.
• FPOs can invest in valuation processes such as cleaning, grading, packing and farm-level processing facilities at low cost on a user-fee basis.
• FPOs can provide storage and transportation facilities to its members.
• FPOs should invest in higher paying jobs including mushroom farming, beekeeping and seed production.
• FPOs should combine and add value to small lots to make the produce of its farmer members more marketable.
• Facilitate logistic services including loading and unloading, transportation and storage at shared cost.
• FPOs are better suited to promote joint production with higher margins and more continuous interaction with customers.

Cluster-Based Business Organizations (CBBOs)

Cluster-based business organizations will be formed in states by allocating clusters to implementing agencies through the Department of Agriculture and Farmers Welfare. These Cluster-Based Business Organizations (CBBOs) will be used to develop and promote FPOs, providing a platform for comprehensive knowledge of all FPO promotion-related concerns. CBBO will have five categories of experts, including

• Cultivation of crops
• Agrimarketing or processing and value addition
• Social Participation
• Law and Accountancy
• IT/MIS.

What is the Equity for Farmer Producer Organization?

The government is giving equity grants to FPOs to help them build their financial base and make it easier for them to borrow funds from financial institutions for the working capital they need for projects and company expansion. The objectives of equity grants given to FPOs are as follows:

• Improving sustainability and viability of FPOs.
• Improving the credibility of FPOs.
• To increase equity of members to increase FPO ownership and participation.

What are the Eligibility Requirements of Farmer Producer Organization?

The following requirements are eligible to apply for Equity Grant under the Formation and Promotion of 10,000 Farmer Producer Organization (FPO) Scheme.

• FPO should be a legal entity.
• The FPO has acquired equity from its members as per its articles of association/bye-laws.
• At least 50% of the shareholders of the FPO should be small, marginal and landless tenant farmers, with preference given to women farmers.
• The maximum shareholding by members cannot exceed 10% of the total stock of the FPO.

Summary

On 29 February 2020, Prime Minister Narendra Modi launched 10,000 FPOs across India from Chitrakoot. A farmer producer business can be established by 10 or more producers working together, as well as two or more producer agencies. A National Conference of Cluster-Based Business Organizations (CBBOs) was organized by the Ministry of Agriculture and Farmers Welfare as part of the Farmers Producers Association.