Importance of FPOs | Farmer Producer’s Organisations

Synopsis: FPOs Farmer Producer’s Organisations could be a solution to the agrarian distress if they are helped to access credit and markets

What are the main reasons for farmer’s distress?

• First, the declining average size of farm holdings is one of the reasons for agrarian distress.
  • • The average farm size declined from 2.3 hectares (ha) in 1970-71 to 1.08 ha in 2015-16.
    • This resulted in a further increase in small and marginal farmers from 70 percent in 1980-81 to 86 percent in 2015-16.

• Second, getting access to inputs and marketing facilities is another main challenge faced by Small Farmers.

How FPOs can help small and marginal farmers?

Institutionalizing FPOs Farmer Producer’s Organisations can help marginal and small farmers to overcome their challenges. FPOs will allow members to gain greater bargaining power in the purchase of inputs, obtaining credit, and selling the produce. For example,

1. One, FPOs in Gujarat, Maharashtra, and Madhya Pradesh, Rajasthan have shown positive outcomes. Farmers through FPOs  Farmer Producer’s Organisations were able to realize higher returns for their produce.
   • • For example, tribal women in the Pali district of Rajasthan formed a producer company, and they are getting higher prices for custard apples.
2. Two, The International Food Policy Research Institutes comparative study of FPOs in Maharashtra and Bihar has revealed the following benefits of FPO’s.
   • • FPO’s are doing better than non-FPO farmers. Also, within FPOs, organically evolved FPOs (OFPOs) are more beneficial than pushed or promoted Farmer Producer’s Organisations (PFPOs). For example,
       • According to the survey, OFPOs resulted in an increase in gross income. While only 2 percent indicate a decline in the same.
       • For PFPOs, 64 percent report an increase in gross income while 27 percent report no change in income.
       • Whereas, only 32 percent of the non-members indicate an increase in gross income.

Steps taken by the government in this regard?

• Since 2011, the center has intensively promoted FPOs under the Small Farmers’ Agri-Business Consortium (SFAC), NABARD, state governments, and NGOs.
• The FPO is supported through,
  • Capital infusion: up to Rs 10 lakh to registered FPOs
  • Credit guarantee cover to lending institutions: maximum guarantee covers 85 per cent of loans not exceeding Rs 100 lakh.
  • Budgetary support: Budget 2018-19 gave a five-year tax exemption for FPO’s. Budget 2019-20 targetted to set up 10,000 more FPOs in the next five years.
  • State support: In Tamil Nadu, under collective farming, six lakh small and marginal farmers have been integrated into 6,000 farmer producer groups.

What are the Challenges for building sustainable FPO’s?

Studies of NABARD shown the following challenges for building sustainable FPOs:

1. Lack of technical skills,
2. Inadequate professional management,
3. Weak financials, inadequate access to credit,
4. Lack of risk mitigation mechanism and
5. inadequate access to market and infrastructure

How to address the challenges faced by FPO’s?

1. First, for a large country like India, more than one lakh FPOs are required. (currently 10,000 FPO’s).
2. Second, to address issues such as working capital, marketing, infrastructure. For that
   • Banks must be facilitated to come with structured products for lending to FPO’s.
   • Also, banks need to focus on capacity building to improve their professional management.
3. Third, FPO’s have to be linked with input companies, technical service providers, marketing/processing companies, retailers etc. This will enable them to access data on markets and prices and other information and competency in information technology.
4. Fourth, FPOs need to look for land consolidation of their members where contiguous tracts of land are available. To some extent, Aggregation can overcome the constraint of small farm size. Women farmers also can be encouraged to group cultivate for getting better returns.

Source: Indian Express