Farmer Producer Organizations (FPOs) are groups formed by agricultural producers to get better access to inputs, services and markets. FPOs allow smallholder farmers to aggregate their production and resources to achieve economies of scale. They provide members with financial services, input supply, marketing, technical support and networking opportunities. The document outlines the definition, structure, formation process, roles and importance of FPOs for supporting small farmers in India.
2. What is FPO
Farmer organization is a group of farmers with special
interests and concerns with developed structure, formal
membership, status and functions for its members and
with a set of byelaws and rules.
Mobilizing farmers into groups of between 15-20
members at the village level (called Farmer Interest
Groups or FIGs) and building up their associations to an
appropriate federating point i.e. Farmer Producer
Organizations (FPOs).
Farmers Producer organizations are groups of rural
producers coming together based on the principle of
membership, to pursue specific common interests of their
members and developing technical and economic
activities that benefit their members and maintaining
relations with partners operating in their economic and
institutional environment.
3. Meaning of FPO
A producer company is basically a body corporate
registered as Producer Company under Companies Act,
1956.
It covers following points:
Production, harvesting, processing, procurement,
grading, pooling, handling, marketing, selling, export of
primary produce of the Members or import of goods or
services for their benefit
Rendering technical services, consultancy services,
training, education, research and development and all
other activities for the promotion of the interests of its
Members
Generation, transmission and distribution of power,
revitalization of land and water resources, their use,
conservation and communications related to primary
produce
Promoting mutual assistance, welfare measures,
financial services, insurance of producers or their primary
4. Farmer Producer Company organization is nothing but a
cooperative form of business organization. It is registered
under Indian Companies Act.
It allows producers 10 or more to form an organization to
transact business in which surplus is distributed among its
members as per it Memorandum of Association and Articles of
Association. This Act was came in to effect in 2003 as an
amendment in the Part IX A of Companies Act 1956.
At no point a Producer Company can become a public limited
company. The shares of a producer company cannot be
transacted in any stock exchange or share can be transferred
to any non-users members.
The Chief Operating Officer of a Producer Company can be
become the Chairman and it has also proviso to co-opt
technical directors to seek their expertise to make the
company to achieve its set objectives.
This is one such statute that gives level playing field for
cooperative form of business organizations.
5. Background
Small holders had a mean farm size of 0.5 hectare and
that too in 5 to 10 small plots. The small holding size will
not produce enough food to support the family. Such
small holders constitute the vast majority of farmers in
the developing countries including India.
Because they are scattered individuals, they have little
or no bargaining power or political influence in securing
loans from scheduled banks (fewer than 4% of small
holders have agricultural credit cards) and very few
smallholder farmers carry crop insurance against natural
calamities, etc.
In addition, smallholders are especially vulnerable to
climate change-aggravated weather events, like untimely
rains (especially at harvest times), severe droughts and
floods, hailstorms and pest infestations, any of which can
wipe out their crops. They also continue to suffer from
market uncertainties as most agricultural policies (and
institutional support) tend to favor large farmers and
agricultural or food corporations, e.g., industrial
6. For example, in April 2013, the Government of India issued a
National Policy and Process Guidelines document on
formation of FPOs. This set of Guidelines encouraged State
Governments to provide incentives, including credits for and
support of the formation and ongoing operation of FPOs in
various states. By September 2013, over 500 FPOs had been
formed and are now successfully operating throughout the
country. Those FPOs which are set up as FPCs enable their
members to access financial and other inputs and services,
including appropriate technologies for farming. The FPCs also
organize collection, processing, storage and marketing of their
members’ produce in high-value markets at an optimal price.
These actions by the FPCs have thus reduced transaction
costs and allowed the FPCs to enter into a partnership with
private and public sector companies for purposes of supplying
farm produce on more equal terms.
7. As exemplified in Madhya Pradesh (MP) in India, the typical
business mix of an FPC would be:
Aggregation and sale of agricultural produce grown under
contract farming
Production and sale of certified and foundation level seeds
grown under seed production contracts with public and private
organizations
Supply of agriculture inputs and implements, including
financial and logistics services (like modern storage, transport,
etc.). This is brought about through agreements with collateral
service management groups
Price discovery through spot exchange mechanisms
Agriculture extension services, mainly for production of
certified crops, e.g., Responsible Soybean and Better
Cotton with the extension services being provided through
trained staff.
8. A preliminary assessment of FPCs in MP suggests that the
benefits to a member of an FPC are numerous, and in the
form of:
Timely and increased availability of good quality fertilizers,
seeds and other agriculture inputs at a reasonable rate
Better price realization for produce, with efficient extension
services leading to higher farm productivity and a reduction in
costs of cultivation. Provision of cash dividends and other
services, including finance, use of warehouses, access to
agricultural implements, a crop grading facility, etc.
Accrued financial and non-financial benefits to individual FPC
shareholders, which are estimated to be Rs. 8,000 to Rs.
10,000 per person per annum for a mature well-functioning
FPC.
9. It (FPO) is one of the important initiatives taken by the
Department of Agriculture and Cooperation of the Ministry of
Agriculture to mainstream the idea of promoting and
strengthening member-based institutions of farmers.
As per the concept, farmers, who are the producers of
agricultural products, can form groups and register themselves
under the Indian Companies Act. These can be created both at
State, cluster, and village levels. It is aimed at engaging the
farmer companies to procure agricultural products and sell
them.
Supply of inputs such as seed, fertilizer and machinery, market
linkages, training & networking and financial and technical
advice are also among the major activities of FPO. The Small
Farmers’ Agribusiness Consortium (SFAC) has been
nominated as a central procurement agency to undertake
price support operations under Minimum Support Price (MSP)
for pulses and oilseeds through the FPO’s.
10. Formation and Registration
Any of the following combination of producers can incorporate a
producer company:
10 or more producers (individuals)
Two or more producer institutions
combination of the above two (10+2)
The registrar under 30 days of receipt of all the required
documents, after becoming satisfied that the requirements of this
act have been complied with, issues a certificate.
The liability of the members of the company is limited to the
amount of shares purchased by them
11. Management
No. of Directors should be 5 to 15
Directors should be appointed within 90 days of incorporation
A full time CEO appointed with substantial power of
management
Share capital consists only Equity shares
Voting:
Single vote for every member (Individual producer)
On basis of participation (institution producer)
12. Features of FPO
It is formed by a group of producers for either farm or non-farm
activities
It is a registered body and a legal entity
Producers are shareholders in the organization
It deals with business activities related to the primary
produce/product
Common interest, It works for the benefit of the member producers
Both long and short term objectives and plan of action
Enrolment through membership fee
Democracy through regular elections
Capacity of the organization should be strong to ensure its long term
stability and sustainability
Linkages and network with other Farmer Producer Organizations
Committed leadership
A part of the profit is shared amongst the producers, rest of the
surplus is added to its owned funds for business expansion
13. Need of FPO
The main aim of PO is to ensure better income for the
producers through an organization of their own.
Small producers do not have the volume individually
(both inputs and produce) to get the benefit of economies
of scale. Besides, in agricultural marketing, there is a
long chain of intermediaries who very often work non-
transparently leading to the situation where the producer
receives only a small part of the value that the ultimate
consumer pays.
Through aggregation, the primary producers can avail the
benefit of economies of scale. They will also have better
bargaining power vis-à-vis the bulk buyers of produce
and bulk suppliers of inputs.
14. Importance of FPO
Collective inputs purchase
Collective marketing
Processing
Increasing productivity through better inputs
Increasing knowledge of farmers
Ensuring quality
Marketing assistance
Technical services
Saving and credit
Local development
15. Why farmers Producers organization
Farmers Producers Organizations influence policies and
demand for required services.
Farmers can participate in the decision making process
of the developmental activities.
Service system becomes more effective and
accountable
They get better access to latest markets and technology
FPOs can involve in Farmer and market led extension
activities
Build interactions between research, extension and
farming systems
Enable farmers to organize themselves for action or to
share resources
Analyze farmers problems with extension support
More services can be made available to farmers through
16. Steps in establishing FPO
Understanding the village community
Identifying potential leaders in the community
Talking to the identified leaders and seeking cooperation from
other agencies
Helping local leaders to call community meetings
Nominating core group leaders to develop the FPO
Developing an organizational structure for the FPO &
Developing the FPO’s management through education and
action learning
Gearing up for action
Implementing selected projects
Monitoring and Evaluating the FPO’s progress
17. Structure of FPO
Farmers producer organization
General Body
Executive Body (2 representative
per FIG)
Board of Directors
General Manager
FPO Staff
Local resource
person
• Planning
• Implementation
• Management
18. Activities of FPO
Management activities
Procurement of inputs
Disseminating market information
Dissemination of technology and innovations
Facilitating finance for inputs
Aggregation and storage of produce
Primary processing like drying, cleaning and grading
Brand building, Packaging, Labeling and Standardization &
Quality control
Management of fields (Collective production)
Bulk purchase of inputs
Collective requests for credit
Management of selling of produce
Advice to producers & training to farmers
Marketing to institutional buyers
19. Who provides support to FPO
There are many organization who supports FPO’s. They
supports FPO financially and technically for the
promotion and handholding of FPO.
NABARD
SFAC
Govt departments
Corporates
Domestic and international Aid agencies
NGOs
20. Services provided by FPO
Financial
services
Input-
supply
services
Marketing
services
Technical
services
Networkin
g services
21. Financial services: The FPO will provide loans for crops,
purchase of tractors, pump sets, construction of wells, laying
of pipelines. The FPO will provide various insurance like Crop
Insurance, Electric Motors Insurance and Life Insurance.
Input Supply Services: The FPO will provide low cost and
quality inputs to member farmers. It will supply fertilizers,
pesticides, seeds, sprayers, pump sets, accessories, pipelines
• Procurement and Packaging Services: The FPO will procure
agriculture produce from its member farmers; will do the
storage, value addition and packaging.
Marketing Services: The FPO will do the direct marketing
after procurement of agricultural produce. This will enable
members to save in terms of time, transaction costs,
weighment losses, distress sales, price fluctuations,
transportation, quality maintenance etc.
22. Technical Services: FPO will promote best practices of
farming, maintain marketing information system,
diversifying and raising levels of knowledge and skills in
agricultural production and post-harvest processing that
adds value to products.
Networking Services: Making channels of information
(e.g. about product specifications, market prices) and
other business services accessible to rural producers;
facilitating linkages with financial institutions, building
linkages of producers, processors, traders and
consumers, facilitating linkages with government
programs.
