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News Analysis


Formation & Promotion of 10,000 FPOs

  • 25 Apr 2022
  • 5 min read

For Prelims: Farmer Producer Organization, Cluster Based Business Organizations, Central Sector Scheme

For Mains: Government Policies & Interventions, Agricultural Marketing, Agricultural Pricing, Significance of Scheme of Formation and Promotion of FPOs

Why in News?

Recently, the Ministry of Agriculture & Farmers Welfare has organized the National Conference of Cluster Based Business Organization's (CBBOs), under the Central Sector Scheme of Formation and Promotion of 10,000 FPOs (Farmer Producer Organization).

What is the Scheme of Formation & Promotion of 10,000 FPOs?

  • Launch:
    • In February 2020, at Chitrakoot (Uttar Pradesh) with a budgetary provision of Rs. 6865 crores.
  • About:
    • More than 2200 FPOs produce clusters have been allocated for the formation of FPOs in 2020-21.
    • Implementing Agencies (IAs) are engaging Cluster-Based Business Organizations (CBBOs) to aggregate, register & provide professional handholding support to each FPO for a period of 5 years.
      • CBBOs will be the platform for end-to-end knowledge for all issues related to FPO promotion.
  • Financial Assistance:
    • Up to Rs. 18.00 lakh per FPO for a period of 3 years.
    • Provision has also been made for matching equity grants up to Rs. 2,000 per farmer member of FPO with a limit of Rs. 15.00 lakh per FPO.
    • Provision of a credit guarantee facility up to Rs. 2 crores of project loan per FPO from the eligible lending institution to ensure institutional credit accessibility to FPOs.
  • Significance:
    • Increase Farmers' Income:
      • It will promote the selling of farmers' produce from the farm gate of farmers thereby enhancing farmers’ income.
      • This will shorten the supply chain and accordingly marketing costs will get reduced resulting in better income for farmers.
    • Create Employment:
      • It will accelerate more investment in marketing and value addition infrastructure near to farm gates creating more employment opportunities for rural youth.
    • Making Farming Viable:
      • It will make farming more viable by aggregating land.
  • Progress:
    • More than 5.87 lakh farmers have been mobilized under the Scheme.
    • About 3 lakh farmers have been registered as shareholders of the FPOs.
    • Equity contribution by farmer members amounts to INR 36.82 crores.
    • The total equity base of the FPOs, including the Equity Grant released, amounts to INR 50 crores.

What are the Other Initiatives for Farmers?

What are FPOs?

  • FPOs are voluntary organizations controlled by their farmer-members who actively participate in setting their policies and making decisions.
  • They are open to all people able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.
  • FPOs operatives provide education and training for their farmer-members, elected representatives, managers, and employees so that they can contribute effectively to the development of their FPOs.
  • FPOs in Gujarat, Maharashtra and Madhya Pradesh, Rajasthan and some other states have shown encouraging results and have been 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.
  • FPOs are generally mobilized by promoting institutions/resource agencies (RAs).
  • The resource agencies leverage the support available from governments and agencies like National Bank for Agriculture and Rural Development (NABARD) to promote and nurture FPOs.

Way Forward

  • The role of CBBOs should be to strengthen FPOs so that farmers seek them out.
  • FPO is not merely a company, it is a collective for the benefit of farmers. More and more farmers should be part of FPOs.
  • Indian agriculture is dominated by small and marginal farmers with average land holdings size of less than 1.1 ha.
  • These small and marginal farmers constituting more than 86 % of the total land holdings are facing tremendous challenges both in production and post-production scenarios.
  • Collectivization of farmer producers through formation of FPOs is very important to address such challenges and enhance their incomes.

Source: PIB

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