Farmers Producers Organisation - FPO

FPO stands for Farmers Producers Organisation. 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.

FPO is an important topic with regards to different competitive exams. Questions based on Farmers Producers Organisation may be framed under the general awareness section of various Government exams

Key points like what is Farmers Producers organisation, functions of FPO, principles, government institutions supporting FPO etc. have all been discussed further below in this article. Candidates preparing for the upcoming IAS Exam must know all the facts of farmers Producers Organisation for Prelims and GS III of UPSC.

Aspiring to ace a government exam in the first attempt? Get assistance for comprehensive preparation from the following links-

What is the Farmers Producers Organisation?

FPO is one type of Producers Organisation where the members of the organisation are the farmers. These are also known as farmers’ producer companies (FPC). 

It is imperative to understand about the Producers Organisation in order to understand about the Farmers Producers Organisation- FPO. 

What is a Producer Organisation?

  1. A Producer Organisation (PO) is a legal entity formed by primary producers that are farmers, milk producers, fishermen, weavers, rural artisans, craftsmen, etc.. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.
  2. A Producer Organisation can be a producer company, a cooperative society or any other legal form which provides for sharing of profits or benefits among the members. In some forms of producer companies, institutions of primary producers can also become members of PO. These are basically the hybrids of cooperatives and private companies.
  3. The participation, organisation and membership pattern of these companies are more or less similar to the cooperatives. But their day-to-day functioning and business models resemble those of the professionally-run private companies. 
  4. The Companies Act was amended by incorporating Section-IX A in it to allow creation and registration of FPOs under it.

Concept of FPO 

The concept behind Farmer Producer Organizations is that farmers, who are the producers of agricultural products, can form groups and register themselves under the Indian Companies Act. To facilitate this process, the Small Farmers’ Agribusiness Consortium (SFAC) was mandated by the Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India, to support the State Governments in the formation of Farmer Producer Organizations (FPOs). The aim is to enhance farmers’ competitiveness and increase their advantage in emerging market opportunities.

The FPO’s major operations will include the supply of seed, fertilizer and machinery, market linkages, training and networking and financial and technical advice.

Also, read about APMC-Agricultural Produce Market Committee on the link given here.

Farmers Producers Organisation – Key Points

  1. Farmers Producers Organisations will be formed and promoted through Cluster-Based Business Organizations (CBBOs) engaged at the State/Cluster level by implementing agencies.
  2. FPOs will be promoted under “One District One Product” cluster to promote specialization and better processing, marketing, branding & export by FPOs.
  3. Initially, the minimum number of members in FPO will be 300 in plain areas and 100 in North East & hilly areas.
  4. There will be a National Project Management Agency (NPMA) at SFAC for providing overall project guidance, data compilation, and maintenance through integrated portal and Information management and monitoring.
  5. States/UTs will be allowed to avail loan at prescribed concessional rate of interest under Agri-Market Infrastructure Fund (AMIF) approved for setting up in NABARD for developing agriculture marketing and allied infrastructure.
  6. Adequate training and handholding will be provided to FPOs. CBBOs will provide initial training. 
  7. Priority will be given for the formation of FPOs in aspirational districts with at least one FPO in each block of aspirational districts. Know more on Aspirational districts on the linked page. 

Candidates preparing for government exams can check related schemes for the development of agriculture and farmers benefit-

Aspirants preparing for any government exams can visit the link provided to prepare even better for the examination-

What is the Need of an FPO for Farmers?

Farmers in India face tremendous hardships which include the following – 

  1. Small Size of landholdings. Nearly 86% of farmers are small and marginal with average land holdings in the country being less than 1.1 hectares.
  2. Good quality seeds are out of reach of small and marginal farmers mainly because of exorbitant prices of better seeds. 
  3. Depletion and exhaustion of soils resulting in the low productivity demand good fertilizers, manures, biocides etc.
  4. Lack of proper irrigation facilities.
  5. Less or no accessibility to large scale mechanisation of agriculture.
  6. Challenges in marketing their products due to lack of economic strength. In the absence of sound agricultural marketing facilities, the farmers have to depend upon local traders and middlemen for selling their farm produce which is disposed of at an extremely low price. 
  7. Scarcity of capital for agricultural activity forces farmers to borrow money for stimulating the production. 

FPOs help in the collectivization of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues.

Aim of Farmer Producers Organisation

  • The main aim of FPO is to ensure better income for the producers through an organization of their own. 
  • Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. 
  • 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. 

Concerns to an FPO

Many of the problems accrue to FPOs remain untapped which includes a few mentioned below-

  1. 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.
  2. They are forced to raise their working capital at very high-interest rates.
  3. 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.
  4. Lack of legal recognition under the contract farming regulations.
  5. 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.
  6. Moreover, many other concessions, tax exemptions, subsidies and benefits provided to cooperatives, startups and the like have not been extended to the FPOs.

All these issues need to be addressed expeditiously to enable the FPOs to perform to their full potential for the benefit of the farmers.

Also, read how New Crop Insurance Scheme will benefit farmers on the linked page. 

Government’s Support to Farmers Producers Organisation

The government has launched a new dedicated Central Sector Scheme titled “Formation and Promotion of Farmer Producer Organizations (FPOs)” with a clear strategy and committed resources to form and promote 10,000 new FPOs to ensure economies of scale for farmers over the next five years. Support for each FPO is continued for 5 years from its year of inception.

Initially, there will be three implementing Agencies to form and promote FPOs, namely 

  1. Small Farmers Agri-business Consortium (SFAC)
  2. National Cooperative Development Corporation (NCDC)
  3. National Bank for Agriculture and Rural Development (NABARD). 
  4. States may also if so desire, nominate their Implementing Agency in consultation with DAC&FW.

Department of Agriculture, Cooperation & Farmers Welfare (DAC&FW) will allocate Cluster/States to Implementing Agencies which in turn will form the Cluster-Based Business Organization in the States.

Other Related Links –

To know more about other Government Schemes visit the linked article.

Aspirants preparing for the UPSC exam can check the links given below –

  1. IAS 2021
  2. UPSC Calendar 2021
  3. UPSC Syllabus
  4. Analysis of the Press Information Bureau
  5. Topic-Wise GS 3 Questions of UPSC Mains

You can also check out the preparation strategies for competitive exams to fine-tune your exam prep. 

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