Farmer Producer Organisations (FPOs) are a type of Producer Organisation (PO) where the members are farmers. As legal entities, they are primarily formed by producers such as farmers, milk producers, fishermen, weavers, rural artisans, and craftsmen. FPOs have been conceptualized to form an effective alliance of small and marginal producers, especially farmers, to collectively tackle numerous challenges in the agricultural sector.
Benefits and Challenges Associated with FPOs
FPOs provide numerous benefits like improved access to investment, technology, inputs, and markets. Furthermore, they encourage collective farming, enhancing productivity amidst declining average land holding sizes. They also equip member farmers with negotiation capabilities against large corporate enterprises and help reduce costs through the economics of aggregation. However, FPOs face challenges including lack of business and supply chain management skills, multiple intermediaries and levies, poor infrastructure, and limited market choices.
National Government Support for FPOs
The Indian government supports FPOs through the Small Farmers’ Agribusiness Consortium (SFAC) and the National Bank for Agriculture and Rural Development (NABARD). The SFAC has been offering up to a maximum of Rs 15 lakh in two tranches within three years since 2014. However, only 5% of total Producer Companies (PCs) currently registered in the country received these grants as of September 2021. The Central Sector Scheme titled ‘Formation & Promotion of 10,000 FPOs’, launched by the Ministry of Agriculture and Farmers Welfare, also aims to promote FPOs.
The State of India’s Livelihood (SOIL) Report 2021 on FPOs
The SOIL Report 2021, prepared by Access Development Services, stated that only 1-5% of FPOs received funding under central government schemes in the last seven years. The report has primarily analysed Farmer Producer Companies (FPC — FPOs registered under The Companies Act, 2013), since they form a significant majority of the organisations started recently.
Social Impact of FPOs
The formation of FPOs contributes significantly to social capital. It can improve gender relations and enhance the decision-making capabilities of women farmers in FPOs. This can result in reduced social conflicts and improved food and nutritional values in communities.
Challenges Faced by FPOs
Many FPOs struggle due to lack of business skills. Resource Agencies (RAs) that usually provide social mobilization skills often lack business development and marketing skills crucial for FPOs’ success. Also, issues such as missing supply chain operations capabilities, various distortions, limited market choices, and lack of transparency pose significant challenges for FPOs.
The Way Forward for FPOs
FPOs need to secure funding, establish relationships with customers, and set internal governance processes, among other things. To do so, they require capacity building to transition from the start-up phase to growth and eventually maturity. The threshold for eligibility for government programs and equity grants should also be reduced. Furthermore, addressing structural issues like technical skills shortage, inadequate professional management, weak financials, and inadequate access to credit and markets is crucial for their success.
Last Modified: February 14, 2024