About 1,762 Farmer Producer Organisations (FPO) have come into existence under the Union government’s ambitious plan to form 10,000 FPOs with Uttar Pradesh establishing the highest (188) number of FPOs followed by Karnataka (145), Madhya Pradesh ( 136), Maharashtra (136), and Tamil Nadu (125). However, experts express concerns over the formation of new FPOs without any concrete roadmap.

In 2020 the Union government launched the Central Sector Scheme for “Formation and Promotion of 10,000 FPOs” with a total budgetary outlay of ₹6,865 crore. The scheme makes provision of handholding support for five years to each new FPO and financial assistance to the tune of ₹18 lakh to each FPO under the scheme towards management cost for 3 years.

“New FPOs must leverage economies of scale and help farmers to reduce the cost of production, create a market chain and multiply farmers’ incomes. There must be a concrete long-term plan to help farmers and make agriculture a profitable venture,” says Vilas Shinde, Sahyadri Farms MD and Chairman. He insisted that FPOs/ FPCs must create logistic services like cold storage and transportation and increase the bargaining power of its members.

Challenges before FPOs

The new model of aggregation in form of FPC, registered under the Companies Act, 1956 has emerged as an effective FPO in States like Maharashtra.

One of the directors of the Beed-based FPC admitted that many FPCs are coming up to reap the benefits of the government schemes and many are just stuck in basic tasks like procurement for government agencies.

“Even as the government is promoting new FPOs, many existing FPOs and FPCs are just on paper. These aggregations are not different from self-help groups. There is a lack of understanding and planning. FPCs are becoming just another organisations” he said.

Many FPCs are involved in basic works like cleaning, assaying, sorting, grading, packing. Very few are involved in farm-level processing facilities. FPCs are supposed to market the aggregated produce with better negotiation strength to the buyers and in the marketing channels offering better and remunerative prices.

“The government must guide FPC members and also train them. It is a fact that many FPCs are not aware of what to do" he admitted. The government provides matching equity grant upto ₹2,000 per farmer member of FPO with a limit of ₹15 lakh per FPO and a credit guarantee facility upto ₹2 crore of project loan per FPO from eligible lending institutions is given to ensure institutional credit accessibility to FPOs.

FPO Ecosystem

The share of agriculture and allied sectors in Gross Value Added (GVA) at current prices has increased from ₹33.94 lakh crore in 2019-20 to ₹36.16 lakh crore in 2020-21 which is an increase from 18.4 per cent to 20.2 per cent.

Pramod Rajebhosale, CEO – FPC Incubation Center for Horticulture, Sahyadri Farms said that the Union government has taken the right step in promoting FPOs, and now it’s time to develop an ecosystem where farmers could reap benefits in the long term.