Farmer Producer Organization (FPO)
Farmer Producer Organization (FPO) is a model of aggregation for primary producers viz. farmers, milk producers, poultry farmers, fishermen, etc. with the intention to strengthen the negotiation power of farmers through developing a judicious economy of scale at the farm-gate. The model is aimed towards mobilizing small holder farmers into member-owned producer companies, or Farmer Producer Companies (FPCs) for enhancing production, productivity and profitability, which in turn would help enhance their incomes.
Since farmers or the producers are the equity holders of the FPO, an FPO as an organization provides for sharing of profits/benefits among the members as well as an appropriate framework for owning the company by the farmers themselves.
The underlying rationale for the development of FPOs is the typical fragmented and small size of land holdings of farmers in India. With typical holdings of less than 1 hectare, farmers cannot individually enjoy economies of scale and afford to invest in farm mechanisation/technology for enhancing farm productivity, nor optimally procure inputs nor directly access buyers. Aggregation through FPOs is the only feasible option left for farmers to enhance their bargaining power and farm-related value accruals, as has also been established through various programmes.
As a matter of fact, the collectivisation of producers, especially small and marginal farmers, into producer organisations has globally emerged as one of the most effective pathways to address various challenges in agriculture, but most importantly to enable improved access to investments, technology, inputs, credit, and markets.
The Department of Agriculture, Cooperation & Farmers’ Welfare under the Union Ministry of Agriculture & Farmers’ Welfare has identified Farmer Producer Organisations, registered under the special provisions of the Companies Act, 1956, as the most appropriate institutional form around which to mobilise farmers and build their capacity to collectively leverage their production and marketing strengths.
FPOs focus on the entire supply chain and this is what distinguishes them from other aggregation models. With around 86% of land holdings in India being small and marginal, the FPO model becomes an effective instrument to cater to the aggregation needs of farmers at the grass root level.
The Department of Agriculture, Cooperation & Farmers’ Welfare, under the Union Agriculture Ministry, launched a pilot programme for promoting Farmer Producer Organisations (FPOs) during 2011-12. This was in partnership with state governments and was implemented through the Small Farmers’ Agribusiness Consortium (SFAC).
The pilot programme involved the mobilisation of approximately 2.50 lakh farmers into 250 FPOs (each with an average membership of 1,000 farmers) across the country, under two sub-schemes of the Rashtriya Krishi Vikas Yojana (RKVY), namely the National Vegetable Initiative for Urban Clusters and the Programme for Pulses Development for 60,000 rain-fed villages.
To scale the FPO model, ‘Policy & Process Guidelines for Farmer Producer Organization’ were formulated in 2013. As a result of public policy thrust, there has been a substantial increase in the number of FPOs. Currently, there are more than 7,000 producer companies formed under various initiatives of the Government of India, including NABARD, SFAC, State Governments and other organisations.
Promotion of FPOs
A new Central Sector Scheme for Formation & Promotion of new 10,000 FPOs was launched by Hon’ble Prime Minister on 29th February, 2020 with budget outlay of Rs 6,865 crore till 2027-28.
A total of 4,016 no. of FPOs were registered till December 2022 under the new FPO scheme.
The key objectives of FPOs can be summarised as follows:
- To mobilise small and marginal farmers to evolve FPOs across the country.
- To channel inputs on good agricultural practices for enhanced production and productivity at the farm level.
- To sustainably build the capacity of FPOs so as to help them evolve as strong rural self-governance platforms for farmers even while giving them increased bargaining strength.
- To ensure better access to quality inputs and services as well as markets to FPOs for intensive agriculture and value-added processing.
A FPO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. Such Producer Organisations can be registered under any of the following legal provisions:
- Cooperative Societies Act/Autonomous or Mutually Aided Cooperative Societies Act of the respective States
- Multi-State Cooperative Society Act, 2002
- Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013
- Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013
- Societies registered under Society Registration Act, 1860
- Public Trusts registered under Indian Trusts Act, 1882 – Majority of the FPOs, presently, are registered as producer companies and the remaining as Cooperatives/ Societies.
-Strategy Paper for promotion of 10,000 Farmer Producer Organisations, Small Farmers’ Agribusiness Consortium (SFAC)
-Ministry of Agriculture & Farmers’ Welfare, Government of India
-Confederation of Indian Industry (CII)