LEC 19-22 - FPO – DEFINITION – FEATURES – FUNCTIONS

- FPO – POLICIES AND PROCESS GUIDELINES

- FPO IN INDIAN AND GLOBAL AGRIBUSINESS ENVIRONMENT
- PROMOTION AND DEVELOPMENT PROCESS OF FARMER
PRODUCER ORGANIZATION

Dr.V.Sakthirama
FPO – Definition
the Indian government introduced the concept of
`producer companies', which constitute an attempt
to establish basic business principles within farming
communities, to bring industry and agriculture closer
together, and to boost rural development
Farmers' producer companies can be seen as
hybrids between private companies and
cooperative societies.
Producer Company / Producer
institution
"producer" means any person engaged in any activity
connected with or relatable to any primary produce ; (l)
"Producer Company" means a body corporate having objects
or activities specified in section 581B and registered as
Producer Company under the Act ;

"Producer institution" means a Producer Company or any other

institution having only producer or producers or Producer
Company or Producer Companies as its member whether
incorporated or not having any of the objects referred to in
section 581B and which agrees to make use of the services of
the Producer Company or Producer Companies as provided in
its articles.
FPO - National Bank for Agriculture
and Rural Development
``The concept of producer companies in India is a
very recent development. These are just like
cooperatives, but they are registered as companies.
The requirement is that the members, the
shareholders of this company, are producers
themselves. No nonproducer can be a member of
the company. They get together; they combine their
share capital, register as a company, employ a
professional to run the com- pany and do value
addition, whatever is possible. Some of them even
have their own processing units''
Meaning of Producer Company
A producer company is basically a body corporate registered as Producer
Company under Companies Act, 1956 and shall carry on or relate to any
of following activities classified broadly:-
(a) 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 :
(b) rendering technical services, consultancy services, training, education,
research and development and all other activities for the promotion of the
interests of its Members;
(c) generation, transmission and distribution of power, revitalization of land
and water resources, their use, conservation and communications relatable
to primary produce;
(d) promoting mutual assistance, welfare measures, financial services, insurance
of producers or their primary produce;
FPO –features

An Organization will be called a Farmer Producer Organization, if

it is formed by a group of primary producers
it is a registered body and a legal entity
producers are primary shareholders in the organization
it deals with business activities related to the primary
produce/product/ related inputs
it works for the benefit of the member producers
Portions of profit are shared amongst the producers and the
balance goes to the share capital or reserves.
It has minimum shareholding members numbering 50 at the time of
registration. However, the shareholding membership will have to be
increased over a period of 3 years to a sustainable level.
FPO –functions / Activities

Good Agricultural Practices

Procurement of inputs and related finances
Disseminating market and weather information
Introducing new technologies and innovations
Aggregation, transport and storage
Primary processing activities
Quality control
Post-harvest ,branding and marketing
 FPO – policies and process guidelines

Company formation – NABARD, SFAC

Company registration – the companies Act 2013, Section 8

Small Farmers’ Agribusiness Consortium (SFAC), a Society promoted

by Dept. of Agriculture, Govt. of India, has been nominated by
Ministry of Agriculture to act as a nodal agency to coordinate with
various State governments, civil society partners, private sector,
financial institutions, resource persons and other stakeholders to help
in the conduct of baseline studies, promote Farmer Producer
Organizations (FPOs) across nthe country and link producer groups
(both existing ones and newly formed institutions) to marketing
opportunities
 FPO – policies and process guidelines

The guiding principles for assistance under the NABARD Fund will
be broadly as indicated below:
i. The FPO registered under any statute / legal form will be
supported
ii. The FPO will act for the benefit of the producers
iii. There is active community participation (ownership/
management/ empowerment)
iv. Activities of FPO to be eligible for support under the Fund may
fall within the domain of agriculture / activities allied to agriculture
including dairy, poultry, fisheries, etc. and cover the entire value
chain.
 FPO – policies and process guidelines

v. The support under the scheme will broadly cover the cost towards
promotion of FPOs including capacity building, business planning,
registration, MIS development, market linkages and linkage to value
chain, administrative expenses of promoting agency, deliberations/
interaction meets, documentation, research, publicity, monitoring of
progress and such other items of expenditure required for
promotion of FPOs.
vi. There is integrated approach in implementation of projects(need-
based and flexible, convergence with other schemes / programmes)
Guiding principles for sustaining Farmer
Producer Organization development -
SFAC
Focus on shared member needs and common objectives use more
participatory approaches to group development need to be
applied in which the Farmer Group is the decision maker. The
final decision on what the group should do and how it should be
done, should be based on group member consensus
A range of different organizational approaches and forms
should be used ‐ the type of group approach used
(community‐based, small group, inter‐group association,
cooperative, producer association, income generation‐focused,
technology‐focused etc.) will vary and should be appropriate to
the group objective pursued and the particular stage of
development of group members, i.e. their level of organizational
skills, technical knowledge, education and asset base
Guiding principles for sustaining Farmer
Producer Organization development -
SFAC
Give top priority to promoting sustainability ‐ ensure that groups
formed become financially self‐reliant enough to sustain their
operations without the continued need for outsider support
There is an inherent conflict between the role of the member as
a “user of the group’s services” and as “an investor in group
business”‐ ensure that the group savings and capital
contributions to the enterprise continue to grow to ensure that:
a) Member savings or capital contribution requirements are in
proportion to their level of use of the group enterprise’s
services; and
b) That incentives to attract member capital are comparatively
positive.
FPO in Indian agribusiness environment
FPO in Indian agribusiness environment
FPO in Global agribusiness
environment
Developed countries
Developed countries
Opportunity to compete with global market
Technology development
Promotion and development process
of farmer producer organization
Issued to be considered
Types of small scale producers
Sufficient demand in market.
Willingness of producers to join FPO.
Previous experience of collective action.
Supply chain challenges.
Market Environment.
Vulnerability to market shocks.
Support from external agencies.
Incentives for joining.
 Strategy for Promoting Farmer
Producer Organizations

i. Identification of potential FPOs among successful Watershed

Development projects, Wadi Projects and their Federations.
ii. Identification of natural clusters of farmers groups to facilitate
formation of FPOs
iii. Close involvement of stakeholders such as NGOs, Banks, Govt. line
departments, commodity Boards, Corporations, Corporate, functional
Universities, cooperatives, Federations, Trade bodies, etc. for
identification, promotion, nurturing, development, capacity building,
evaluation etc. of FPOs
iv. Development of Best Practices, Pilot Projects and Success Stories for
wider publicity and field level replication
 Strategy for Promoting Farmer
Producer Organizations

v. Adoption of mission mode with periodic qualitative and quantitative

milestones with timelines
vi. Wide publicity to the FPO Scheme through print, electronic media
and adopting other Mass Communication Strategies
vii. Conventional/non-conventional publicity and awareness creation
methods
viii. Launching of pilot projects, action research projects, experimental
projects, field trials etc. to learn and understand various models of
FPOs and successful strategies for wider replication
Resource Support Agency
Role of POPIs
NGOs, Trusts, Corporates, State Govt. Depts., NABARD
subsidiaries, KVKs, Big FPCs, Farmers’ Federations,
Commodity Board / Federations, Cooperative Milk
Unions and Other experienced institutions are eligible
institutions for POPIs
Awareness Creation among farmers about FPOs
Organizing, enrolling and registering of FPOs
To develop organization chart, business plans and
nurture the FPOs
Monitoring project implementation progress of FPOs
Eligibility of POPIs
Registered under relevant Acts
Minimum 3 yrs audited Balance Sheets/P&L accounts
Good track record/relevant experience
Dedicated and professionally competent staff
Adequate infrastructure, not blacklisted by any agency
No negative net worth, no default to any FI
Experience in facilitating business / livelihood activities
with market linkage
Activities eligible for support to
POPIs and FPOs
POPI
Mobilization of Farmers
Registration of PO
Training-cum-Exposure Visits of Farmers (for two programmes)
Training to Board of Directors of POs (for three programmes in three years)
Training to CEOs of POs ( Two programmes in two years)
Compensation to resource person of POPI ( for three years)
Preparation of Business Plan/DPR , MIS, etc.

FPO
Compensation to CEO and office expenses
Revolving Fund assistance
Promotion 7
process of
FPO
SFAC

Energising
Farm
Production
Systems :
Institutional
Arrangement
s for
Transition to

Coordinated
Surplus
Farme r
Steps Of Forming Producer Company
1.Application of pan card for the individual farmer
Members and farmers institutes Members
2.Digital signature certificate for at least one Director
3.Director Identification number(DIN)
4.Naming of a producer company
5.Preparation of Memorandum and Articles of Association
6.Documents to be submitted to the Registrar Of Companies
for incorporation of producer company
7.Certificate of incorporation
8.Tasks to be completed immediately after incorporation of
producer company
 Capacity Building – Key to the
success of FPO
Communication and Management skills for extension
Building and
professionals for good farming system
strengthen
organizational Implementation of Good Agriculture Practices (IND GAP)
and institutional for Food Safety and Quality Farm produce released by
capacity of FPO Quality Council of India for small and marginal farmers
is a critical Smart Agri input delivery and implementation mechanism
requirement to
Integrated farming system for natural resource
be addressed for
conservation
efficient
functioning and Good collection and packing practices for soil and water
success of FPO... collection and testing
Harvesting and Post harvesting operations
Quality control and Grading as per the consumer market
demand.
Supply chain management based on market
Credit Requirements
Early Stage: In early stages, financial need of the
FPOs revolves around the cost of mobilizing
farmers, registration cost, cost of operations and
management, training, exposure visits etc. Mostly
the need is met through the grant support from the
institutions
Regular Operational Activities: FPOs need working
capital to run their businesses. As the FPOs move
towards expanding their businesses, term loans are
also needed to set up facilities for value addition.
Assessing the capital requirement For
FPOs
The quantum of capital would depend on the nature and volume of the
business of FPO. Consideration of the following components is critical
for planning and optimum utilization of financial resources.
Number of producers/acreage/number of products and its month wise
availability.
Total expected volume of raw produce to be handled.
Time lines of the activities.
Purchase and sales price.
Existing Credit limits with the member farmers of FPO.
Storage of the produce.
Packaging and Transportation costs.
Grading/processing facilities required
Insurance.
Marketing costs.
Challenges faced by FPOs in mobilization of
working capital and term loans

For any financial institution, FPO is a commercial entity

and therefore they require a margin money contribution
to the working capital limit.

Provision of collateral security to the banks for the loans

sanctioned.

Initially, FPOs do not have credentials for showcasing

their successful businesses which also makes the financial
institutions uncomfortable for initial financing.
Overcoming Challenges
Effective liasoning with input suppliers for availing input
credit
Networking and utilization of nearby warehouses/cold
storages and hiring of farm machinery
Initially starting with limited number of member
producers and showcasing its successes in the first or
second year of operations to the financial institutions,
which will be provide a positive outlook for finances.
Availing various options from government and other
financial institutions for creating need based
infrastructure
THANK YOU