National policy on Farmer Producer Organisations (FPOs) proposed
Kartavya Desk Staff
Syllabus: Agriculture
Source: Department of Agriculture & Farmers Welfare
Context: The draft National Policy on Farmer Producer Organisations (FPOs) has been put for public comment by the Ministry of Agriculture and Farmers Welfare
Who are Farmer Producer Organisations (FPOs)?
Farmer Producer Organisations (FPOs) are voluntary collective entities formed by farmers to enhance their bargaining power and access to inputs, markets, and technology. They enable small and marginal farmers to pool resources, share risks, and collectively undertake farming and marketing activities. Currently, 5000 FPOs have been registered on the Open Network for Digital Commerce portal for selling the produce online.
The key objectives of the proposed policy include:
• Promoting Formation: To consolidate existing FPOs and establish 50,000 new FPOs, benefiting 2.50 crore farmers.
• Assessment: Assessment of all schemes, including the 2021 Central sector scheme ‘Formation and promotion of 10,000 FPOs’.
• Capacity Building: Emulation of the AMUL model with a 3-tier structure emphasizing collective business goals, capacity building, and professional management.
• Market Linkages: End-to-end value chain approach to boost farmers’ income from production to marketing.
• Financial Support: Offering financial assistance and incentives to FPOs to strengthen their operational capabilities and sustainability.
• Policy Framework: Developing a supportive policy framework at national, state, and local levels to create an enabling environment for the growth and success of FPOs.
• Technology Adoption: Promoting the adoption of modern agricultural technologies and practices through FPOs to enhance productivity and efficiency.
Details of the Policy:
• FPO Eligibility: Minimum 300 members (100 in North East/hilly/UTs). Registered as a legal entity under Companies Act 2013 or Cooperative Society Act. Must register with the FPO Registry Portal maintained by the Central Government.
• Minimum 300 members (100 in North East/hilly/UTs).
• Registered as a legal entity under Companies Act 2013 or Cooperative Society Act.
• Must register with the FPO Registry Portal maintained by the Central Government.
• Central Nodal Department (CND) Role (Department of Agriculture and Farmers’ Welfare (DA&FW)): Allocate funds for FPO development through convergence of central government schemes; Facilitate institutional loans to FPOs at subsidized interest rates.
• Central Nodal Agency: Small Farmers’ Agribusiness Consortium, New Delhi (under DA&FW).
The potential of FPOs to transform Indian agriculture.
• Reducing the cost and increasing the income – FPOs can help farmers reduce costs through bulk purchases of inputs, marketing of their farm products, Aggregation of produce, and bulk transport.
• Modernization of agriculture – 86% of Indian farmers are small and marginal farmers who don’t have enough money to access modern equipment. Since FPOs collectively use modern farm equipment, they will promote the modernization of agriculture.
• Collective farming – Present Average land holding size is 1.08 hectares in 2015-16, FPOs can engage farmers in collective farming and address productivity issues emanating from small farm sizes.
• Compete with large enterprises – It has the potential of enhancing the farmers’ bargaining power and income levels so they can compete with large corporate enterprises.
• Access to technology – Access to modern technologies, credit, facilitation of capacity building, extension and training on production technologies, and ensuring traceability of agricultural produce.
• Easy access to credit – Easy access to funds and other support services by the government/donors/service providers.
• Eliminating intermediaries – In agricultural marketing, the presence of a large number of intermediaries who work non-transparently leads to lower incomes for farmers. FPOs are going to eliminate these intermediaries.
• Value addition – Post-harvest losses will be minimized through value addition and efficient management of value chain facilities provided by FPOs.
• Collective strength – FPOs help in the collectivization of such small, marginal, and landless farmers to give them the collective strength to deal with issues like crop failure, and access to the market.
• 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.
Issues facing FPOs.
• Lack of/ Inadequate Professional Management – Trained manpower is presently not available in the rural space to manage and supervise FPO business professionally.
• Weak Financials – FPOs are mostly represented by Small and marginal farmers with poor resource bases hence, initially they are not financially strong enough to deliver vibrant products and services.
• Lack of Risk Mitigation Mechanism – Presently, while the risks related to production at the farmers’ level are partly covered under the existing crop/livestock / other insurance schemes, there is no provision to cover the business risks of FPOs.
• Inadequate Access to Market – Lack of linkage with Industry/ other market players, and large retailers by the FPOs.
• Inadequate Access to Infrastructure – Like transport facilities, storage, value addition (cleaning, grading, sorting, etc.) and processing, brand building, and marketing.
• Lack of technical Skills/ Awareness – Inadequate awareness among the farmers about the potential benefits of collectivization & non-availability of competent agencies for providing handholding support.
Government steps to address these issues.
• Equity Grant Fund Scheme for Enhancing viability, sustainability of FPOs and Increasing credit worthiness of FPCs.
• Credit Guarantee Fund Scheme to provide collateral-free credit to FPOs.
• Scheme for the Creation of Backward and Forward Linkages to bridge the gaps in the supply chain in terms of the availability of raw materials and linkages with the market.
• Operation Greens (TOP to TOTAL) will promote FPOs, agri-logistics, processing facilities, and professional management.
• 100% tax deduction for FPOs with an annual turnover of up to Rs. 100 crores.
Success Stories of Farmer Producer Organisations (FPOs):
• Oriental FPO: Developed cold chain infrastructure and launched a branded product called ‘Safe N Fresh’ in Jammu and Kashmir UTs.
• Prayag Raj Farmer Producer Company Limited: Established input retail outlets benefiting farmers and consumers in Uttar Pradesh.
• Rameshwar Farmer Producer Company Limited: Established wholesale counters for vegetable sales, providing more remunerative channels for farmers in Uttar Pradesh.
• Rampur FPO: Collaborated with the district administration for the “Aahaar Se Upchar Tak” campaign, supplying nutrition-rich products to Anganwadi Kendra and improving nutritive outcomes in Uttar Pradesh.
Way forward:
To further scale up and strengthen FPOs, there is a need for suitable amendments in the APMC Act, the creation of farm-level infrastructure at the FPO level, procurement of agricultural commodities directly through FPOs under the MSP scheme, promotion of private investors to strengthen the financials of FPOs, extending Equity Grant & Credit Guarantee Fund schemes of SFAC to all forms of FPOs, appropriate flexible policy by states and GOI to scale up FPO promotion and strengthen them, and mass awareness building among rural farmers.
Conclusion:
FPOs have the potential to change the face of Indian agriculture by empowering farmers, increasing productivity, reducing costs, and improving access to markets, infrastructure, and technology. The government and other stakeholders must work together to further.
Insta Links:
• Farmer Producer Organizations
Mains Links:
• “In the villages itself, no form of credit organization will be suitable except the cooperative society.” – All Indian rural credit survey. Discuss this statement in the background of agriculture finance in India. What constraints and challenges do financial institutions supply agricultural finances? How can technology be used to better reach and serve rural clients? (UPSC 2014)
Prelims links:
Which one of the following best describes the concept of ‘Small Farmer Large Field’? (UPSC 2023)
(a) Resettlement of a large number of people, uprooted from their them a large cultivable land which they cultivable land which they cultivate collectively and share the produce.
(b) Many marginal farmers in an are organize themselves into groups and synchronize and harmonize selected agricultural operations.
(c) Many marginal farmers in an area together make a contract with a corporate body and surrender their land to the corporate body for a fixed term for which the corporate body makes a payment of agreed amount to the farmers.
(d) A company extends loans, technical knowledge and material inputs to a number of small farmers in an area so that they produce the agricultural commodity required by the company for its manufacturing process and commercial Production.
Ans: (b)