FPO, Farmer Producer Organization, Formation of the FPO, FPO Scheme, Activities performed by Farmer Producer Organization, Cluster-Based Business Organizations, Ebizfiling

A complete guide to the Farmer Producer Organization

Introduction

New Guidelines for the Farmer Producer Organization (FPO) were published by the Ministry of Agriculture and Farmers Welfare as part of the scheme to form and promote 10,000 Farmer Producer Organizations (FPOs). According to the updated regulations, FPOs may register under the Companies Act of 2013 or the State’s Cooperative Societies Act, with management responsibilities required for five years of hand-holding. All the New Guidelines and the formation of the FPO (Farmer Producer Organization) are summarized in this article.

What is FPO?

The Farmer Producer Organization (FPO) is a legal body that was established under the Companies Act or Co-operative Societies Act in the year 2013 for the states Concerned to utilize collectives through economies of scale in the production and sale of agricultural and related industries.

 

Suggested Read: Producer Company Registration in India under Companies Act, 2013

The formation of the FPO (Farmer Producer Organization) Scheme

The following are the goals of formation of the FPO under the FPO Scheme:

  • To create 10,000 new FPOs with a complete supportive environment to help in the growth of healthy and sustainable income-oriented farming.
  • To give guidance and support to new FPOs for up to five years following the year of creation in all aspects of management of FPO, inputs, production, processing, and value addition, market links, credit links, and use of technology, among other things.
  • To increase productivity via cost-effective and sustainable resource utilization and release higher returns through better financing and access to market for their production.

Advantages for Farmers by the Farmer Producer Organization

Farmers will have better access to high-quality inputs and technologies through the development of FPOs because of their collective strength. Additionally, the farmer will be able to access better financial and marketing opportunities because to economies of scale, which will improve income generation.

Activities performed by Farmer Producer Organization

Following are the significant services and activities performed by the Farmer Producer Organization for the development under the new regulations:

  • The FPO can provide high-quality production inputs, such as seeds, fertilizer, and insecticides, at an affordable wholesale price.
  • In order to lower the cost per unit of production, FPO can provide members with custom-hired production, post-production machinery and equipment based on requirement.
  • FPO can invest in valuation processes like cleaning, grading, packing, and farm-level processing facilities on a user fee basis at a lower cost.
  • The FPO can provide its members with a facility for storage and transportation.
  • The FPO must invest in higher-paying jobs including mushroom farming, beekeeping, and seed production.
  • The FPO must combine smaller lots and add value in order to make the produce of its farmer members more marketable.
  • Facilitate logistics services including loading and unloading, transportation, and storage at a shared cost.
  • FPO is better suited to promote the combined production with higher margins and more continuous interaction with the customers.

Cluster-Based Business Organizations (CBBOs)

The Cluster-Based Business Organizations in the States will be formed by the Department of Agriculture and Farmer Welfare by allocating Cluster to Implementing Agencies. These Cluster-Based Business Organizations (CBBOs) will be used to develop and promote FPOs, providing a platform for comprehensive knowledge of all FPO promotion-related concerns. There will be five categories of specialists in the CBBOs, including

  • Farming of crops
  • Agrimarketing or processing and value addition
  • Social participation
  • Law and accounting
  • IT/MIS.

Equity for Farmer Producer Organization

The government is giving equity grants to FPOs to help them build their financial bases and make it easier to borrow funds from financial institutions for projects and the working money they need for company expansion. Following are the goals of the Equity Grant given to FPO:

  • To improve the sustainability and viability of FPOs.
  • To improve the reliability of FPOs.
  • To raise members’ equity in order to boost FPO ownership and involvement.

Farmer Producer Organization eligibility requirements

The following requirements are eligible to apply for an equity grant under the Formation and Promotion of 10,000 Farmer Producer Organization (FPO) Scheme

  • The FPO should be a legal entity.
  • FPO has acquired equity from its members according to its articles of association/Bye-laws.
  • A minimum of 50% of the FPO’s shareholders must be small, marginal, and landless tenant farmers, with preference given to women farmers.
  • The maximum shareholding by members cannot exceed 10% of the FPO’s total stock.

FAQs on Farmer Producer Organization (FPO)

How many members are required for FPO?

FPO will initially require 300 members in plain areas and 100 in the northeast and hilly areas. The Department of Agriculture and Farmers Welfare has the right to modify the required membership minimum considering previous experience.

Who will promote FPOs?

The “One District One Product (ODOP)” cluster will promote FPOs to encourage specialization and improved processing, marketing, branding. The creation of FPOs in India’s aspirational districts will receive priority, with at least one FPO being established in each block of progressive districts, under the revised criteria.

What is the maximum amount to be allocated for each FPO?

A maximum of Rs. 15 lakhs will be allocated for each FPO, with a matching grant of up to Rs. 2000 to per farmer member of the FPO.

Why Government is providing the Credit Guarantee Facility to the FPOs?

The government is accelerating the flow of institutional credit to FPOs by lowering the risks taken by financial institutions. This will strengthen its financial capacity to carry out better business strategies that will result in higher profitability.

What is the purpose of Credit Guarantee Facility?

The main goal of CGF is to offer a Credit Guarantee Scheme Cover to Eligible Lending Institutions (ELI) in in order to allow them to offer Farmer Producer Organizations credit without the need for collateral through reducing the lending risks associated with loans.

What are the Eligibility requirements for Credit Guarantee Facility?

Credit Guarantee for an FPO or Federation of FPOs that is insured by the Scheme may be obtained through an ELI (Employer Liability Insurance).  It must be guaranteed that the ELI has approved within six months of the date of application for the Guarantee.

Conclusion

On February 29, 2020, Prime Minister Narendra Modi launched 10,000 FPOs from Chitrakoot throughout India. A farmer producer business can be established by 10 or more producers working together, as well as by two or more producer agencies. The National Conference of Cluster-Based Business Organizations (CBBOs) was held by the Ministry of Agriculture and Farmers Welfare as part of the Farmer Producer Organization.

 

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