Agri Business

Centre wants 10,000 FPOs set up by 2024; where do we stand now?

Rajalakshmi Nirmal BL Research Bureau | Updated on January 27, 2020

There are very few Farmer Producer Organisations today; the ecosystem to develop them does not exist in most States, lament experts


In her Budget presentation last year, Finance Minister Nirmala Sitharaman chalked out a plan to form 10,000 Farmer Producer Organisations (FPOs) over five years. However, she did not allocate any funds for the initiative or frame a policy conducive to the setting up of these farmer groups.

The Finance Minister is expected to chalk out a plan for the FPOs in the upcoming Budget.

The market buzz is that the Budget may announce direct as well as indirect capital support of ₹7,000-10,000 crore to create the 10,000 farmer producers organisations. Further, it is expected that the stipulation that a minimum of 500 farmers must be members of a farmer producer company (FPC, registered under the Companies Act) for it to receive the Central grant may be reduced to 250 members.

NABARD, Small Farmers Agri-Business Consortium (SFAC) and National Cooperative Development Corporation are likely to be given the responsibility to execute the programme to form the targeted number of FPOs.

However, given that there are very few FPOs in existence now despite several efforts by the government in the last 10 years, it will be interesting to see how this is achieved, say experts.

Since 2011, when the Government of India launched a pilot programme to promote FPOs under various schemes and programmes of the Centre as well as the State and other agencies, around 5,000 of these institutions have come up. Of these, while 902 are under the Small Farmers’ Agri-Business Consortium (SFAC), 2,086 are under NABARD; the rest are under different programmes of State governments and other foundations/trusts.

It must, however, be noted here that of these 5,000 FPOs, many are not doing well. An industry estimate (as reported in the Strategy Paper for Promotion of 10,000 FPOs by SFAC) is that while 50 per cent of the 5,000 FPOs in existence are in the phase of mobilisation of funds and business planning, 20 per cent, i.e., 1000 of them are struggling to survive.

When farmers come together and operate as a producer company, there are many advantages — they can buy inputs at the wholesale price, benefit from reduced marketing costs because of aggregation of produce and bulk transportation to the market, and also get better access to funding and institutional credit. They will also have the financial muscle to invest in storage facilities and store their produce and not sell it all immediately post-harvest.

Not just about funding

The reason many FPOs are struggling today is in not only because of lack of funding. It is also the lack of policy support and handholding in managing the company. Given that all the shareholders of the FPO/FPC are farmers and lack the skills needed to run a business, there are umpteen challenges they face on a day to day basis, says Yogesh Throat, Managing Director of MAHA FPC.

The ecosystem to develop an FPO doesn’t exist now in most States, lament experts.

There is need for constant support to FPOs from States, which should appoint a mentor for each FPO and guide them in their day-to-day operations, says Yogesh Kumar Dwivedi, CEO, Madhya Bharat Consortium of Farmers Producer Company Ltd. “In every State a steering committee should be established with representatives of the State as also the SFAC and professionals from the agri-business space. It should have continuous interaction with the FPO and monitor progress on a monthly basis…”

With a year already gone since the policy was announced, the Centre should get its act together quickly to reach the targeted number of 10,000 FPOs in the next four years.

Published on January 27, 2020

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