What are FPOs?

Farmers Producers Organizations (FPOs) are promoted by small, marginal or landless farmers group to enable them have a collective say on their farming inputs, outputs and sales.
The Central Ministry’s mandate to promote 10,000 Farmer Producer Organizations (FPOs) with sufficient budget is a clear indicator of the Government’s resolve.

How FPOs are formed

Why FPOs?

Around 86% small and marginal farmers with average 1.1 hectares of land holdings face deficient pre harvest farming input, financing, production and marketing of agro produce. FPOs are envisaged to mitigate such difficulties by collective pooling of resources pre and post harvesting.

Objective and Benefits of Producer’s Organizations (POs)

1. Constituents are engaged in farm/non-farm activities.

2. Registered legal entity.

3. Members are shareholders with single vote voting power.

4. Strong business model having specialized product range comfortable with all members.

5. Profit sharing based on individual inputs.

6. Surplus profit is rolled back to the organization’s kitty for business expansion.

Scope and Challenges faced by Producer’s Organizations (POs)

Challenges faced by producer organizations promoting institutions

Rank	Preformation Stage	Formation Stage	Establishment Stage
1	Attitude of farmers.	No. of members and equity base, share capital issue.	Target oriented not result oriented.
2	Building trust among Farmers.	Unavailability of the required documents and development of a business plan.	Subsidies driven process.
3	Problem of group dynamics among members in cluster formation.	Legal and technical knowledge about acts and regulations.	Lack of professional approach by the BOD.
4	Mobilization of individual farmers into a formal structured organization.	Filing of various documents with the registrar of companies.	Poor support for bank loan.

1. Policy

“Doubling of Farmers’ Income” is the clarion call given by States and the Centre. As a policy matter, enabling various financial institutions and civil societies, FPOs are envisaged to play an ever growing role with a sound management, governance and financial capital backbone.

2. Ecosystem

The Government has decided full support on infrastructure, removing bottlenecks on marketing, financial, ease of credit and equitable commodity pricing ecosystem.

3. Structural Challenges and Changes

The “Inside Out Circular Model” will help learning, development and implementation of best management and agricultural practices by the Board. With collection and analyses of data shall make the organization transparent and self-reliant in dealing with various stakeholders – bulk buyers, suppliers, financial institutions, transporters, warehousing etc.
“Inside Out Circular Model”

Step 1: Skill upgradation of FPO Board members and hiring of qualified managers

Most Board members come from backgrounds as diverse as small landholding and landless farmers, village heads or leaders, Gram Panchayat heads etc. Hiring of agriculture graduates with management degree as CEO with independent charges and MIS skillset, devoid from any local political power will strengthen the functioning and growth of the FPO.

Step 2: Implementation of Uniform 4 Point Audit Methodology for FPOs

A uniform 4 Axis Appraisal Standard Template based on Finance, Management, Social and Environmental Impact scores should be implemented. Usually, financial institutions, government agencies, CSR organizations are bereft of a standard auditing methodology. Since FPOs are a blend of commercial and social organization, appraisals based on Balance Sheets only outweighs other strengths of the FPO, leading to non-equitable distribution of resources by the authorities.

Step 3: Integration of rural, agricultural and farmers’ developmental policies with FPOs

Existing policies at the Centre could be integrated with the FPOs. Departments like NABCONS, SFAC and Agriculture can share their expertise in finding solutions relating to arranging resources, clearing bottlenecks, risk elimination etc.

Step 4: Data Bank a must for FPOs

Collection and collation of Field Data for farming activities, marketing, warehousing, transportation, purchases etc. is vital for all FPOs. Government should initiate and approve of a uniform, scientific MIS template so that Auditors and FPO CEOs can guide and keep an eye on mismanagement.

Step 5: Capital Restructuring with Financial Linkages of FPOs during different business cycles

With the passage of time, all organizations require more funding to sustain their growth. To sustain growth, FPOs need to be innovative, product development, capacity utilization, adequate capital and sinking funds to avoid disruption in the event of non-sponsorship by authorities.

Step 6: Intra level Training & Development Programs for FPOs

Local, District and State-level Training Programs are the need of the hour for knowledge and experience sharing by the FPOs.

Step 7: Social interactions and bonding amongst FPO members should be encouraged

There’s a healthy social life beyond work. Bonding together for common social goals helps members emotionally enriched and socially responsive to various challenges FPOs face every now and then.

Step 8: Making FPOs as the base for flowering of rural entrepreneurship

Planting a successful FPO will naturally result in growing of fruits in the form of member’s family entrepreneurial activities, thus strengthening the rural economy. Government and bureaucracy should recognize FPOs as the seeds of rural development.

Step 9: Mutually beneficial Linkage with the Knowledge Institutions

FPOs must be given the opportunity to link up with Agriculture Colleges, R&D and Management Institutes. Two-way dissemination of knowledge, training and field experiences will enhance working ecology.

Centre should initiate and support legislations on Farmer Producer Organizations (FPOs)

Globalization has changed the face of agriculture marketing with India being no exception. The APMC inspired Mandi (middlemen/adityas) system has to make way with cutting edge technology and newer rules. Indian players will seek a larger pie of domestic and international market in primary commodities and quality processed foods in large volumes from domestic producers, which the present APMC system lacks.

With the country’s farmers primarily being micro and small units in millions, this segment is increasingly facing major professional challenges like poor inputs, fund crunch, technological barriers, weather uncertainties, stressed power, water and infrastructure, poor warehousing and unfair buying practices by vested middlemen. This section can only be saved with urgent adoption of innovative institutional solutions.

The role of FPOs might change the scenario in its head. While FPOs will be able to leverage their collective strength to access inputs, credit and technology, they will be able to tap high value markets and ink partnerships with more experienced and resourceful international and domestic players. FPOs shall contribute towards rural poverty alleviation.

Growth and Sustenance of FPOs

For FPOs to grow, bureaucracy, political class and regulatory regime must encourage member-owned bodies. This model shall coexist with the Primary Agricultural Cooperatives (PACs) which is ruled by and for the elites, excluding the small and marginal farmers.

FPOs can evade elite capture by forging horizontal and local alliances to avoid vertical, extra regional and patronage based networks like PACs. As FPOs and PACs conceptually give rise to possible conflict of interest, it is better if FPOs learn to coexist and complement than be conflict prone.

FPOs with around 20 to 40 members with a common socio-economic background are more successful and stable. But a mixed membership of small to large farmers tends to produce dynamic leadership. With comprehensible rules and regulations, compliance, accountability and enforcement profiles are higher. Equity and fair play within the group are strong bonding factors that are key determinants of the sustainability of the group.

FPOs should desist marginal farmers becoming members because of their risk profile. As their first task is to procure household’s food supply, they are at greater risk into adopting the group’s market oriented production. This category may be better served by linking to government rural wage programs and skill upgradation in off-farm activities.

Women dominated FPOs could be risky as women in traditional societies have a lesser say to apply the group's decision on their family farm. Lack of marketing experience is another factor. Thus, targeted training of women members is the need of the hour.

FPOs need 3 to 5 years to become sustainable. For long term viability, FPOs should take up and sustain income generating activities, enabling leveraging of productive capacity and marketable surplus.

Government on Policies

Should the government directly get involved in mobilizing FPOs? Facilitating the role for the Centre in creating an enabling policy framework but staying clear of direct involvement in institution building is an option. Demand for identifying "chain champions" (which can be official, private or NGO bodies) that act as facilitators to help farmers mobilize, but slowly hand over all decision making functions to FPO representatives themselves after investing in managerial and technical capacity can also be an alternative.