The agrarian economy of India is driven by 70% of the 1.32 billion population. The agriculture sector has gained significant focus from the government in the past decade. Farmer Producer Organisations (FPOs) have emerged as the most preferred institutional mechanism for farmer prosperity by policy makers and development agencies. The government’s push towards promoting 10,000 FPOs, and a slew of other measures supporting FPOs, including 5-year tax breaks, in the Budget 2018 has made FPOs the lynchpin strategy for doubling farmer’s income.
From modest beginnings, the FPO numbers have acquired impressive strength in many States. In the last decade, an estimated 5600 FPCs have been registered and another 10,000-15,000 FPOs will be organised in the coming 5 years. 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. In addition, only a small percentage of FPOs have been able to truly access the resources required to become robust entities with stateless support and facilitating promoting institutions. More often than not, local level intermediaries are replaced with regional/state level intermediaries, with more or less unsatisfactory outcomes in terms of price realization and terms of trade. The ability to influence this value chain in a significant manner remains far-fetched for the majority of FPOs. With credit being the most important aspect of any business activity the lack of it havocs a major hurdle in progress of FPOs.
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. In the context of Madhya Pradesh, the State Government has also introduced many farmer centric schemes like Price Difference Payment scheme, RKVY- RAFTAAR and Agriculture mechanization to name a few along with multiple extension services. The State is also a pioneer in developing FPO specific guidelines to create an enabling ecosystem for FPOs. Many other States like Odisha, Karnataka and Andhra Pradesh are following the same route to support the FPOs. The spread of FPOs promoted is skewed with 60% being concentrated in the Northern and Southern region while the Eastern region has the lowest concentration.
Support required from State Govt
- Based on the objectives of the Central govt, the Ministry of Rural development, Agriculture & Farmer Welfare and Panchayati Raj should be made the nodal agency for FPOs and a clear mandate to issue State policy guidelines for FPOs should be made for development of FPOs
- The farm produce should reach directly to the factories from the farm and the new industry and processors should be given rebate of 50% on purchase of raw material from FPOs in the mandi
- FPOs should be allowed access to credit on low interest rate for ease in business exposure
- A Single window for issuing licenses to FPOs should be made
- The State govt should have a Credit Guarantee Fund similar to SFAC fund by Central govt
- FPOs should be given equal rights and authorisation to purchase at MSP rates in their area from marginal farmers
- FPOs should be a fixed allocation of fertilisers (atleast 10%) so that FPO members can get fertilisers at reasonable cost
- FPOs should be allowed Warehouse Receipt financing and credit at low interest rate so that farmers can hold their produce
- A State FPC Support Cell should be made in the department to support FPOs