Farmers Producer Organisations (FPOs) Initiative
The government launched an initiative in 2020 to create 10,000 Farmers Producer Organisations (FPOs) with a budget of ₹6,865 crore. The scheme has achieved its numerical target with the registration of the Ami-Gramvikas FPO in Khagaria, Bihar, as the 10,000th FPO.
Current Status and Challenges
- The total number of grassroots-level rural business enterprises exceeds 44,400, including those set up before and outside the central scheme.
- Not all FPOs are successful; some struggle with commercial viability and exist only in records.
- Successful FPOs report annual turnovers exceeding ₹1 crore, and involve about 3 million farmers, with 40% being women.
Objectives and Benefits of FPOs
- Main aim: Enhance member-farmers’ income through economies of scale and stronger bargaining power.
- Engage in better procurement and marketing, benefitting not just crop farmers but also those in animal husbandry and fisheries.
- Receive financial assistance up to ₹18 lakh over three years, equity grants, and credit guarantees.
Historical Context
The formation of farmers' collectives dates back to the cooperative movement in 1904. While many cooperatives failed due to political interference, FPOs operate like private companies, facilitated by the Companies Act amendment in 2013 that allows them to function as "Producer Companies."
Advantages of Well-Managed FPOs
- Provide technical support, skill training, and improved financial access.
- Establish linkages with suppliers, consumers, and agribusinesses, improving logistics and reducing costs.
- Enable resource pooling for efficiency, optimal use of machinery, and enhanced marketability through value addition and branding.
Challenges Faced by FPOs
- Difficulty in securing finance due to poor asset bases and high risk perception.
- Limited ability to raise equity owing to members' smallholder status.
- Lack of professional expertise and managerial skills hinders business growth.
- Need for risk mitigation avenues to handle commercial contingencies.
Strategies for Success
- Develop well-conceived business models with value addition through processing and packaging.
- Improve leadership and administrative capacity of FPO management.
- Employ modern technologies, especially digital, for production and marketing to ensure sustainability and growth.
The movement towards collectivization for rural upliftment should continue beyond the target of 10,000 FPOs due to its institutional significance for resource-poor rural communities.