A Farmer Producer Company (FPC) can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both. An FPC is a hybrid between cooperative societies and private limited companies. The Farmer Producer Companies, registered under the Indian Companies Act, 2013, have democratic governance, each producer or member has equal voting rights irrespective of the number of shares held.
The main aim of FPC is to ensure better income for the producers through an organization of their own. Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.
So far, there are around 5600 FPOs registered of which 5400 are actively involved in agriculture and allied activities. State level Producer Companies organized in Gujarat, Maharashtra and Madhya Pradesh, have yielded encouraging results particularly organizing seed production, linkages with processors and MSP procurement. Despite an impressive growth in the number of FPOs across the country, they face several challenges ranging from management of business, irregular supply and lack of timely financial assistance.
Mobilizing farmers into their collectives, as Farmer Producer Organisations, has emerged as the most preferred institutional mechanism for farmer prosperity by policy makers and development agencies- lynchpin strategy for Doubling Farmers’ Income. Budget 2018 had slew of measures supporting FPOs including 5-year tax breaks. In Budget 2019, Government of India has announced setting up of 10,000 FPOs across the country in the coming 5 years. Under this Central scheme, the agriculture ministry will fund, handhold, train, ensure easy credit availability and provide other support to the FPCs to make them viable. The government will also provide them with technological interventions for better output and they will be able to have access to shared affordable resources.