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224 viewsAll GS PapersGS Paper 3
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Approach :

  1. Introduction
  2. Briefly define FPOs.
  3. Discuss the schemes promoting FPOs & their efficacy.
  4. Chart out the measures that should be taken.
  5. Conclusion.

The State of India’s Livelihood (SOIL) Report 2021 has ​​analysed the Farmers Producer Organizations (FPOs) registered under The Companies Act, 2013. The aggregation of small, marginal, and landless farmers in the FPOs has helped to enhance their economic strength & market linkages. But, the report found that just 1-5% of FPOs have received funding under central government schemes in the last 7 years.

What is FPO ? : A Producer Organization (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. The ownership & management of the organization lies with its members. It provides for sharing of profits/benefits among the members. One or more institutions and/or individuals may promote the FPO by way of assisting in mobilization, registration, business planning and operations.

Government schemes promoting FPOs :

  • Equity Grant Scheme : The Scheme is operated by the Small Farmers’ Agri-Business Consortium (SFAC). It aims to extend support to the equity base of Farmer Producer Companies (FPCs) by providing matching equity grants up to a maximum of Rs 15 lakh in two tranches.
  • Performance: Over the past 7 years, only 735 organisations have been given grants which is just 5% of the total FPCs currently registered in the country. Maharashtra has received the highest number of grants sanctioned, followed by Tamil Nadu and Uttar Pradesh.
  • Credit Guarantee Scheme : The scheme provides risk cover to banks that advance collateral-free loans to FPCs up to Rs 1 crore. Only about 1% of registered producer companies have been able to avail the benefits.
  • Central Sector Scheme of Formation and Promotion of 10,000 FPOs : The scheme was launched by the Ministry of Agriculture & Farmers Welfare to form and promote 10,000 new FPOs till 2027-28. The scheme is being implemented by the SFAC, NCDC, NABARD, NAFED among others.
  • Under the scheme, the formation & promotion of FPOs are based on the Produce Cluster Area approach and specialized commodity-based approach. While adopting a cluster-based approach, the formation of FPOs will be focussed on “One District One Product” for the development of product specialization.

Measures for improvement :

  • Make it easier for FPOs to avail government programmes & schemes providing equity grants and loans. This can be achieved either by reducing the threshold for eligibility or by supporting FPOs to reach the eligibility
  • Enhance Capacity building of FPO members to establish relations with customers, establish internal governance processes, etc.
  • The Government should address working capital, marketing, infrastructure issues while making them to economies of scale.
  • Land consolidation for FPOs can overcome the constraint of small farm size.
  • Encourage Women farmers to group cultivate for getting better returns.
  • Banks must frame structured products for lending to FPOs.
  • Link FPOs to various essential service providers like technical service providers, input companies, marketing companies, retailers, etc. This will enable them to access data on markets and prices and other information related to competency in information technology.

Some studies show that a large country like India needs more than one lakh FPOs, but currently, India has less than 10,000. So, India should take active steps to not only promote them, but also take steps to reap their full potential.

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