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A Farmer Producer Organization (FPO) is a type of Producer Organisation (PO) where farmers are its members. The PO is an organisation of any produce, such as non-farm products, agricultural, artisan products, etc., by producers. The Small Farmers’ Agribusiness Consortium (SFAC) provides support for FPOs promotion.
The aggregation of marginal, small and landless farmers as FPOs has helped increase market linkages to improve farmers’ income and economic strength. It provides end-to-end services and support to the small farmers and covers marketing, technical services, processing, marketing and other aspects of cultivation inputs.
The idea behind the FPOs is that the farmers who are the producers of agricultural products can form groups and register themselves under the Companies Act, 2013.
The goal of FPOs is to increase farmers’ advantage in emerging market opportunities and their competitiveness. The primary operations of the FPOs include the supply of seed, market linkages and fertiliser, machinery, training, financial, networking and technical advice.
The main aim of the FPOs is to increase the income for the producers through an organisation of their own. A small producer does not have the volume to take advantage of economies of scale. A chain of intermediaries in agricultural marketing often works non-transparently, leading to a situation where the producer receives only a small portion of the value that the ultimate consumer pays. The FPOs will help to eliminate the chain of intermediaries in agricultural marketing.
The primary producers can benefit from the economies of scale through accumulation. The farmers’ producers have good bargaining power in the form of bulk suppliers of inputs and buyers of produce.
Declining average land-holding size: The small and marginal farmers share increased from 70% in 1980-81 to 86% in 2015-16. The FPOs can engage farmers in addressing productivity issues, collective farming and emanating from small farm sizes. It may also result in additional employment generation because of the increased intensity of farming.
Negotiating with corporates: The FPOs can benefit farmers to compete with large corporate enterprises in bargaining. It allows farmer members to negotiate as a group and help small farmers in both output and input markets.
Economics of aggregation: The FPOs can provide quality and low-cost inputs to member farmers such as the purchase of machinery, loans for crops, input agri-inputs (pesticides, fertilisers, etc.) and direct marketing after agricultural produce procurement. It will enable members to save time, distress sales, transaction costs, price fluctuations, quality maintenance, transportation, etc.
Social impact: Social capital will develop in FPOs, improving women farmers’ decision-making and gender relations in the FPOs. It will enhance food, reduce social conflicts and nutritional values in the community.
Since 2011, the government has intensively promoted the FPOs under the NABARD, SFAC, NGOs and state governments. There was an announcement of measures for supporting the FPOs in Budget 2018-19, including a five-year tax exemption. The Budget 2019-20 talked of setting up additional 10,000 FPOs in the next five years.
The ongoing support for the FPOs is mainly in the form of a grant of matching equity, i.e. cash infusion of up to Rs.10 lakh to registered FPOs, and providing credit guarantee cover to lending institutions, i.e. maximum guarantee cover 85% of loans not exceeding Rs.100 lakh).
The Ministry of Agriculture and Farmers Welfare stated that the FPOs are developed under ‘One District One Product’ production clusters, where the horticultural produce and agriculture are cultivated or grown to improve market access for members and leverage economies of scale.
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