Low grant sanctions, disbursement: India wants to promote FPOs but where are the funds?

What is the news?

State of India’s Livelihood (SOIL) Report 2021 has been released by Access Development Services, a national livelihoods support organisation.

Focus of the report: The report ​​analysed only farmer producer companies registered under The Companies Act, 2013 since they make up a large majority of the organisations started in recent years.The number of FPOs registered as cooperatives or societies is very small. 

What are the key findings of the report?

Farmer producer organisations (FPO) have received  just 1-5% of funding under central government schemes introduced to promote them in the last seven years

Central Government Schemes for FPOs and their performance:

Equity Grant Scheme: The Scheme is operated by the Small Farmers’ Agri Business Consortium (SFAC).

It aims to extend support to the equity base of Farmer Producer Companies (FPCs) by providing matching equity grants up to a maximum of Rs 15 lakh in two tranches.

Performance: Over the past seven years, only 735 organisations have been given grants, which is just 5% of the total FPCs currently registered in the country. Maharashtra has received the highest number of grants sanctioned, followed by Tamil Nadu and Uttar Pradesh.

Credit Guarantee Scheme: The scheme provides risk cover to banks that advance collateral-free loans to FPCs up to Rs 1 crore. Only about 1% of registered producer companies have been able to avail the benefits.

Central Sector Scheme of Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs): The scheme was launched by the Ministry of Agriculture & Farmers Welfare to form and promote 10,000 new FPOs till 2027-28.

Under the scheme, the formation and promotion of FPO is based on Produce Cluster Area approach and specialized commodity based approach. While adopting cluster based approach, formation of FPOs will be focussed on “One District One Product” for development of product specialization.

The scheme is being implemented by the SFAC, National Cooperative Development Corporation(NCDC), NABARD, NAFED among others. 

What are the suggestions given by the report?

There is a need to make it easier for FPOs to avail government programmes and schemes for providing equity grants and loans. This can be achieved either by reducing the threshold for eligibility or by supporting FPOs to reach the eligibility criteria.

Moreover, FPOs also need capacity building support to establish relations with customers, establish internal governance processes among other things

Source: This post is based on the article ‘Low grant sanctions, disbursement: India wants to promote FPOs but where are the funds’ published in Down To Earth on 27^th Dec 2021.