Farmer Producers’ Organizations (FPOs)

By Amigos IAS

Why is it in the news?

  • There is a significant growth in vegetable and fruit exports in Eastern UP in the past two years.
  • This growth is attributed to FPOs promoting cluster-based farming, technology adoption, and market linkage for farmers.

About FPOs

Understanding FPOs

  • Definition: FPOs are Voluntary organizations controlled by farmer-members aiming to improve their socio-economic situation.
  • Objectives: Leverage economies of scale in production and marketing to enhance sustainable income-oriented farming.

Role of FPOs in Modernizing Indian Agriculture

  • Reducing costs and increasing income through bulk purchases and marketing.
  • Modernizing agriculture, especially for small and marginal farmers.
  • Addressing the issue of small land holdings through collective farming.
  • Enhancing bargaining power and registering local products under Geographical Indications.
  • Providing access to technology, credit, and training.
  • Eliminating intermediaries for better income.
  • Value addition and efficient value chain management.
  • Managing price fluctuations and enabling effective communication.
  • Nutritional focus and local campaigns.

Issues Faced by FPOs

  • Lack of professional management and weak financials.
  • Limited access to credit, markets, and infrastructure.
  • Absence of risk mitigation mechanisms and technical skills awareness.

Government Initiatives to Support FPOs

  • Scheme for 10,000 FPOs: The government has laid down an ambitious plan to establish 10,000 FPOs. The aim is to collectively bring farmers under one umbrella, ensuring they benefit from economies of scale, better bargaining power, and improved profitability.
  • Equity Grant Fund Scheme for Enhancing Viability: To ensure that FPOs remain sustainable and creditworthy in the long run, the government is bolstering them with an equity grant fund. This financial support aims to fortify the viability and sustainability of FPOs.
  • Credit Guarantee Fund Scheme: Access to credit is a primary concern for many farmers and FPOs. This scheme ensures collateral-free credit availability to FPOs, giving them the necessary financial muscle to undertake various agricultural activities.
  • Scheme for the Creation of Backward and Forward Linkages: To mitigate the challenges posed by disjointed supply chains, this scheme focuses on both the backward (raw material procurement) and forward (market linkages) aspects. The initiative ensures that FPOs can readily access raw materials and have proper channels to sell their produce.
  • Operation Greens (TOP to TOTAL): This initiative broadens the scope of the agricultural value chain. It emphasizes promoting FPOs, strengthening agri-logistics, boosting processing facilities, and encouraging professional management. Together, these components are designed to uplift the overall value chain of agriculture.
  • 100% Tax Deduction for FPOs with Annual Turnover up to Rs. 100 Crores: Recognizing the importance of FPOs in the agricultural ecosystem, the government is offering a 100% tax deduction to those FPOs whose annual turnovers are within Rs. 100 crores. This fiscal measure is expected to bolster the operations of many FPOs.

 Uttar Pradesh (UP) Government Support for FPOs

  • Plans for 10,000 FPOs with a target of one FPO in each of the 826 blocks annually for five years.
  • Dedicated FPO cell and the FPO Shakti Portal (Launched in UP, it offers grievance redressal and business partnership opportunities for FPOs).
  • Financial assistance and subsidies for infrastructure development.

Way Forward

  • There is a need to scale and strengthen FPOs.
  • Amend the Agricultural Produce Market Committee (APMC) Act for fee exemptions.
  • Develop farm-level infrastructure and ensure MSP procurement.
  • Encourage private investment and extend funding schemes.
  • Formulate flexible policies and conduct rural farmer awareness programs.

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