Evolution of FPOs in India

 

Farmer-producer organizations have a long history in India and many different organizational forms of farmers' collectives have been promoted in India at different times. The oldest formal collectives were the credit cooperatives, which have been promoted since the early 1900s under the 1904 Cooperative Credit Societies Act, with the primary objective of addressing farmers’ indebtedness. Collectivization of farmers in India has primarily been done through farmer cooperative structures, registered with the Registrar of Cooperative Societies under various state legislations. However, in recent times the functioning and financial performance of cooperatives have come under criticism because of low member centrality, excessive dependence on government funds, high degree of political interference, high bureaucratization, and corruption.

With the objective of reorganizing and infusing professionalism in producer collectives Government of India in 1999 formed a high-powered committee under the chairmanship of Dr. Y.K. Alagh for recommending guidelines for the formation and conversion of cooperative businesses into companies. The committee noted the need to transform the cooperative structure, especially its dependence on government support and to promote organizations with minimum government interference which offered space for farmer organizations to evolve.

The committee suggested a new organizational structure of the farmer producer company (FPC) and on the basis of recommendations of the Committee, a new Part IXA was inserted in the Companies Act, 1956 through “The Companies (Amendment) Act, 2002” which came into force on the 6th of February 2003.

The Department of Agriculture & Farmers’ Welfare, Ministry of Agriculture & Farmers Welfare, Government of India has identified Farmer Producer Organisations registered under the Companies Act, 1956 as the most appropriate institutional form around which to mobilize farmers and build their capacity to collectively leverage their production and marketing strengths (SFAC Strategy paper on implementation of 10,000 FPOs).

Over the last few decades, the collectivization of farmers to form farmer-producer organizations has gained momentum. These FPOs are engaged in a wide range of activities such as bulk procurement of inputs, aggregation of produce, value-addition, and marketing.

Cooperatives: Cooperatives registered with the Registrar of Cooperative Societies under various state legislations had been the prevalent form of FPOs for the collectivization of farmers in India until recently. According to the estimates by the National Cooperative Union of India (2018), India has a total of 6.17 Lakh non-credit cooperatives with roughly 3.5 Lakh cooperatives in Agriculture and allied sectors.      

Farmer Producer Companies: Multiple estimates suggest that currently there are roughly around 16,000 farmer-producer companies in India. According to a recent study by Azim Premji University, 6926 companies have an active status of registration, of which about 92% are in the farm sector. For every 100,000 agricultural workers in India, there are 2.6 farmer-producer companies. The study also highlights that there is a substantial skew in their geographical distribution with more than half of these companies in just 4 states, namely, Maharashtra, Uttar Pradesh, Tamil Nadu, and Madhya Pradesh. Nearly one-fourth of the producer companies can be found in just twenty districts indicating a considerable skew in the promotion efforts.