Draft National Policy on Farmer Producer Organisations

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Source-This post on Draft National Policy on Farmer Producer Organisations has been created based on the article “Enabling farmers: New policy on FPOs should improve returns” published in “Business Standards” on 10 July 2024.

UPSC Syllabus-GS Paper-3- Storage, Transport and Marketing of Agricultural Produce and Issues and Related Constraints; E-technology in the aid of farmers

Context-The Department of Agriculture and Farmers’ Welfare has recently introduced a draft National Policy on Farmer Producer Organisations (FPOs). aimed at consolidating existing FPOs and promoting the formation of new ones.

What are the challenges in India’s agriculture sector?

1) Fragmented Land Ownership– Indian agriculture is hindered by fragmented land ownership, with small and marginal farmers owning about 85% of land holdings, according to NABARD. These small plots restrict the adoption of modern farm machinery and limit the value that small farmers can earn from their crops.

2) Unorganized Farmers and Small Producers– Farmers who are not organized lack the ability to negotiate effectively and face challenges storing crops for sale during the off-season. Small producers also cannot take advantage of cost savings from larger-scale production due to their limited inputs and output.

3) Transparency in Agricultural Marketing -In agricultural marketing, there’s a long chain of middlemen, often lacking transparency, which means farmers receive only a small share of the final consumer price.

What is the significance of Farmer Producer Organizations in addressing these challenges?

1) Institutional Support-Each Farmer Producer Organisation (FPO), led by elected farmer directors, is owned by its members who share profits. These cooperatives receive support from institutions like NABARD and government departments for finance and technical expertise.

2) Support Agricultural Operations -FPOs streamline operations, cutting out middlemen that can harm farmers. By pooling resources, farmers can improve yields and get better prices for their crops.

3) Enhancing Farmer Bargaining Power -FPOs strengthen farmers’ bargaining power with buyers and suppliers. They procure inputs, provide market information, facilitate access to finance, and provide storage and processing facilities.

4) Marketing Support– FPOs assist in branding, packaging, and marketing produce to larger buyers.

Read More- Issues associated with India’s agricultural imports

What are the provisions of the new draft Policy on Farmer Producer Organizations?

1) Objective-

A) To consolidate existing FPOs and promote the formation of new ones.

B) To create an ecosystem that supports income-oriented farming and enhances the overall well-being of farmers.

2) Operation– It plans to establish seven to eight active primary-level FPOs in each of the 7,256 blocks in India, with an average membership of 500 farmers per FPO.

3) Supply Chain Model- The policy suggests a three-tiered supply chain model, inspired by Amul’s successful milk model, for agricultural and horticultural produce. This model covers value addition, processing, and marketing, targeting both domestic and international markets.

4) Credit & Financing- It includes funds like the FPO equity grant fund and FPO formation fund, along with support from the Agriculture Infrastructure Fund scheme. This support includes interest subsidies and credit guarantees.

What is the significance of the new policy?

1) The policy will benefit around 25 million farmers nationwide, boosting their income through simpler agribusiness operations and more efficient production practices.

2) It will enhance the value of agricultural and horticultural produce for farmers, benefiting both domestic sales and exports.

3) It will tackle the problem of inefficient management in FPOs, including challenges in hiring and keeping skilled managers.

Question for practice

What are the key provisions of the new draft Policy on Farmer Producer Organizations (FPOs)? What is the importance of this updated policy?

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