Farmer Producer Organisation (FPO)

Why in news?

The role of Farmer Producer Organisation (FPO) as engines of agri innovation has made the Eastern Uttar Pradesh a hub of vegetable and fruit exports.

What is FPOs?

• An FPO is a legal entity that is owned and managed by farmers, including cultivators, dairy producers, fishers, plantation owners, and others engaged in primary production in the agriculture sector.
• FPO is a generic name, which includes farmer producers’ organization incorporated for the purpose of leveraging collectives through economies of scale in production and marketing of agricultural and allied sector.
• They are incorporated/registered either under
  • Part IXA of Companies Act or
  • Co-operative Societies Act of the concerned States

Sahyadri Farms is India’s largest farmer producer company with over 8,000 farmer shareholders.

Lokhit Bahuuddeshiya Krishi Producer Company is a women-led FPO that cultivates organic cotton and sells it to global brands.

Activities involved

•  Supply quality production inputs like seed, fertilizer, pesticides and such other inputs at reasonably lower wholesale rates.
• Make available need based machinery on custom hiring basis for members to reduce the per unit production cost.
• Undertake higher income generating activities like seed production, bee keeping, mushroom cultivation etc.
• Undertake aggregation of smaller lots of farmer-members’ produce; add value to make them more marketable.
• Facilitate market information about the produce for judicious decision in production and marketing.
• Facilitate logistics services such as storage, transportation, loading/un-loading etc. on shared cost basis.
• Market the aggregated produce with better negotiation strength to the buyers offering better and remunerative prices.

What are the advantages of FPO?

• Economics of aggregation- They can provide low-cost and quality inputs to member farmers.
• Social capital- They will increase women participation in agriculture and reduce social conflicts and improved food and nutritional values in the commodity.
• Better price discovery- They can increase the income of farmers by selling their produce collectively and negotiating better prices with buyers or government agencies.
• Bargaining power- FPOs can help farmers compete with large corporate enterprises in bargaining as it allows members to negotiate as a group.
• Capacity building- They can provide training and education to farmers on new technologies, best practices, and market opportunities.
• Foster investment- FPOs are also a type of Initial Public Offering, where a company offers its shares to the public for the first time.
• Investors may benefit from investing in FPOs because they are more familiar with the company, its performance, and its business practices.
• Transparency- It create a more transparent agri-market, and they need to be nurtured to their full potential.

What are the challenges faced by FPOs?

• Fund deficit- One of the biggest is raising the capital required to buy members’ produce or for performing activities such as value addition.
• Issue with cropping pattern- If monoculture is the dominant practice, then it can take multiple procurement cycles to get more people to join the FPO.
• Lack of skill- It is difficult to attract and retain skilled professionals to take care of the administration other managerial responsibilities.
• Non-profitable – FPOs may become non-profitable due to poor inventory management, lack of skills for developing feasible business plans and managing the business.
• Defunct FPOs- There has been a sharp rise in the number of FPOs but a lot of them struggle to function, and many have gone defunct.
• Governance- Low capacity for governance is due to the low level of literacy among farmers, limited awareness on how to run an FPO, and lack of time.
• Policy paralysis- There are disparities regarding credit availability, the price at which fertilisers can be procured, and minimum support price (MSP) availability.

What lies ahead?

• FPOs can integrate resilient income and sustainable farming practices which will double the farmers income as recommended by Ashok Dalwai committee.
• FPOs need to scale capital and foster value addition which would improve agriculture, the lifeline of Indian economy.

References

1. Indian Express- FPO’s are the agents of prosperity
2. PIB- Set up Farmer Producer Organisations