Farmer Producer Companies Past, Present and Future by Richa Govil Annapurna Neti Madhushree R. Rao

Farmer Producer Organisations: Experience in Maharashtra PPT

Comparative Study of Farmer Producer Organizations in Bihar and Maharashtra by Tata Cornell Institute

Women FPOs can revolutionize India’s Agri sector

The Girdhan Mahila Utpadak (Producer) Company in Jharkhand onboarded Ms Neelima Muramu as a board member and treasury in-charge.  Kiran Devi proved her business acumen and diversified her income source by venturing into value-added products when others around her stuck to the old way of doing business. Both Neelima and Kiran broke the proverbial glass ceiling in a sector that discriminates against women. But Neelima is no MBA, and Kiran has not had much schooling. 

Both these women are farmers who turned their lives around after they became part of the organization, a Farmer Producer Organization (FPO).  FPOs are a body of farmers/producers who come together as shareholders to pursue business activity (production/marketing) that will benefit its members. 

Countless women like Neelima and Kiran form 73.2% of the rural female agricultural workforce in India. The sector is strangely paradoxical when it comes to gender equity. It employs 80% of all economically active women yet rarely recognizes or renumerates their contribution. 

In agriculture, women often get relegated to doing the hard work (weeding/sowing/transplanting) for poor pay and highly exploitative working conditions. Women in agriculture have, over the years, tried to break free of this cycle and assert their economic and social independence through the Co-operative and Self-Help Group (SHG) movement. The benefits have been incremental at best. FPOs are a better and lucrative alternative that provides a more viable and definite means to this end.

Unfortunately, as with many other initiatives, the number of women-led/ women-dominated FPOs is still few despite the overall surge in FPOs across the country.

Take this statistic from the reply of Union Minister of Agriculture and Farmers Welfare Shri Narendra Singh Tomar in the Lok Sabha in 2021. The National Bank for Agriculture and Rural Development (NABARD) has promoted 5073 FPOs via its two dedicated funds – PRODUCE Fund and Producers Organizations Development Fund (PODF). Of these, just 178 (over 3%) are exclusive women FPOs.

Overall female membership in FPOs also remains minuscule viz-a-viz their participation in agriculture. Several factors, including social and patriarchal norms, limited mobility, restricted access to finance and poor awareness about policy measures, perpetuate this gender disparity.  

Even when FPOS have women representatives they are rarely active members who get to engage deeply with the operations of a company. Often, it is a woman’s husband who represents her at FPO meetings and takes decisions on her behalf as women rarely have decision-making authority in the family and village hierarchy. Women in villages have restricted mobility and unchaperoned women going about attending company meetings, particularly outside their village, is frowned upon. Hence, many women end up being represented by their husbands.

Govt initiatives

It is not that the government does not realize the merit of promoting women in agriculture and by extension FPOs. The Ministry of Agriculture & Farmers Welfare (MoA&FW) has several beneficiary-oriented schemes which mandate that at least 30% of the expenditure should be on women farmers.

The Ministry of Rural Development’s Mahila Kisan Sashaktikaran Pariyojana (MKSP), a sub-component of Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM) is aimed at empowering women by making systematic investments to enhance their participation in agriculture-based livelihoods. 

The MoA&FW’s Central Sector Scheme of Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs) has promoted 100 women owned FPOs under the scheme till December 2021. Though laudable, this is just 1% of the total targeted 10,000 FPOs. The scheme launched in February 2021 has a budgetary provision of Rs 6865 crore and provides 5 years of professional handholding support for each FPOs. 

The way ahead

In the coming days, FPOs will gain further prominence as the government looks to promote agriculture and augment farmers’ income through enhancement of value and supply chain-related schemes. 

If women’s representation in FPOs continues to remain poor, it will be a setback for the emancipation of rural women, who usually own no land or assets, and are not decision-makers in their families.

In many villages, women tend to the fields as men move to cities in search of better opportunities and wages. As agriculture gets feminized further, women should and will play a dominant role in FPOs. Our structural and policy guidelines should reflect these changes and act as the catalyst for this transformation. Here’s what can be done…

• The rules and regulations governing FPOs should be aimed at enhancing women’s participation. This includes guidelines that should make it mandatory for FPOs to have a certain percentage of women members. This could be anywhere from 30% to 55%. 
• Schemes aimed at promoting FPOs should have a mandatory target of promoting a certain number of women FPOs. The Central Sector Scheme of Formation and Promotion of 10,000 FPOs for instance could ensure that at least 50% of the promoted FPOs are women-led or women-dominated.
• Special incentives in terms of finance, interest subsidy, and access to subsidized infrastructure for FPOs with a certain percentage of women shareholders can be announced. 
• State and Central initiatives can focus on training and building management and leadership skills of women in FPOs, ensuring adequate representation of female members in FPO boards, and spearheading digital literacy campaigns for them. 
• Corporates can use their CSR funds to train young, educated women FPO members in agribusiness and help develop market linkages. Such funds can help women launch agri-entrepreneurship ventures while still operating within the FPO boundaries.
• Governments can and should encourage non-profits which play an important role in the promotion of FPOs, particularly women led FPOs. Non-profits have been instrumental in the success of FPOs offering them farmer training, market linkages and risk mitigation strategies.

In our projects aimed at empowering rural women farmers, we have helped establish FPOs with at least 33% women board members. Our experience working with rural women in accessing share capital and developing their management and leadership skills has shown that a woman farmer’s prosperity percolates to every section of society. It helps alleviate extreme poverty and hunger and brings long-term positive social impacts.

As India aggressively pursues its food security goals, it cannot afford to ignore a large section of the agricultural workforce whose contribution often goes unnoticed.  Women hold the key to our food security concerns, and it is time for our agriculture policies to focus on daughters of the soil

Source: Women FPOs can revolutionize India’s Agri sector (indiatimes.com). 

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.

Central Sector Scheme on Promotion & Formation of 10,000 FPOs

Government of India has launched a new Central Sector Scheme titled "Formation and Promotion of 10,000 Farmer Produce Organizations (FPOs)" with a clear strategy and committed resources to form and promote 10,000 new FPOs in the country with budgetary provision of Rs 6865 crore. Organising farmers into farmer producer organizations will help in initiating collective decisions on various aspects of agriculture and create opportunities to get involved in value adding decisions and activities.

Objectives: The key objectives of the scheme are as follows:

-         To provide holistic and broad-based supportive ecosystem to form new 10,000 FPOs to facilitate development of vibrant and sustainable income-oriented farming and for overall socio-economic development and wellbeing of agrarian communities;

-         To enhance productivity through efficient, cost-effective and sustainable resource use and realize higher returns through better liquidity and market linkages for their produce and become sustainable through collective action.

-         To provide handholding and support to new FPOs up to 5 years from the year of creation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages and use of technology etc.

-         To provide effective capacity building to FPOs to develop agriculture entrepreneurship skills to become economically viable and self-sustaining beyond the period of support from government.

Key Provisions

-         To form about 2 FPOs across 5000 blocks (out of 7000 blocks) across India. 15% of FPOs to be formed in aspirational districts.

-         Minimum 300 members to be mobilized in an FPOs wherein efforts to be made to increase member base to 500 farmers.

-         Formation and Promotion of FPOs to be based on Produce Cluster Area. FPO formation will factor in ‘One District One Produce’ approach towards produce specialization.

-         The scheme provides handholding support to new FPOs for 5 years for management of FPOs including marketing and business activities and effective capacity building to FPOs to develop agri-entrepreneurship skills towards economic viability and self-sustainability beyond project period.

-         Under this scheme, FPOs will be provided financial assistance up to Rs 18.00 lakh per FPO for a period of 03 years. In addition to this, provision has been made for matching equity grant upto Rs. 2,000 per farmer member of FPO with a limit of Rs. 15.00 lakh per FPO and 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.

-         The scheme envisages a 3-tiered implementation and monitoring structure.

o   Nodal Agency: At the National level Small Farmers Agribusiness Consortium is the nodal agency for the implementation of the scheme.

o   Implementing Agency: At the state level, various implementing agencies are identified for the implementation of the scheme. Presently 09 Implementing Agencies (IAs) have been finalized for formation and promotion of FPOs. A total of 5 Implementing agencies namely NABARD, NAFED, NCDC, FDRVC and SFAC have been appointed in Bihar for the implementation of the 10,000 FPO scheme.

Cluster Based Business Organizations: Implementing Agencies (IAs) will engage Cluster Based Business Organizations (CBBOs) to aggregate, register & provide professional handholding support to each FPO for a period of 5 years. CBBOs have been empanelled & engaged by IAs. CBBOs will be the platform for an end-to-end knowledge for all issues related to FPO promotion. 

Farmer Producer Companies in India can help India's small and marginal farmers reap the benefits of collectivization.

Farmers Producer Companies (FPCs) in India were first introduced in the country in the early 2000s. The main goal of these companies is to empower small and marginal farmers by giving them a collective voice in the marketplace and helping them to negotiate better prices for their products. This is accomplished by allowing a group of farmers to come together and form a company, with each farmer becoming a shareholder in the company.

FPCs are different from traditional farmers' cooperatives in several ways. For one thing, FPCs are registered under the Companies Act, whereas cooperatives are registered under the Cooperative Societies Act. This means that FPCs have more legal and financial independence than cooperatives do. Additionally, FPCs can issue shares to farmers, whereas cooperatives cannot.

One of the main benefits of FPCs is that they allow farmers to negotiate better prices for their products. By coming together as a group, farmers are able to have more leverage in the marketplace than they would if they were acting alone. Additionally, FPCs can pool resources and invest in things like infrastructure, marketing, and research and development. This helps to improve the overall competitiveness of the farmers and the quality of their products.

Another benefit of FPCs is that they can help to reduce the dependence of farmers on middlemen. By cutting out intermediaries, farmers are able to receive a larger portion of the profits from their products. Additionally, FPCs can help to reduce the risk of farmers by spreading it out across the group.

The government of India has been actively promoting the formation of FPCs in the country. The Ministry of Agriculture and Farmers Welfare has launched several schemes to support the formation of FPCs, including the setting up of Farmer Producer Organizations (FPOs) and the provision of various forms of financial assistance to FPCs.

Despite these efforts, the adoption of FPCs in India has been relatively slow. One of the main challenges facing FPCs is the lack of awareness among farmers about the concept and the benefits of FPCs. Additionally, many farmers are hesitant to give up control of their land and resources to a company.

Another challenge facing FPCs is the lack of access to finance. Many FPCs struggle to raise the necessary capital to invest in infrastructure and other assets. This can make it difficult for them to compete with larger, more established companies.

In conclusion, FPCs have the potential to be a powerful tool for empowering small and marginal farmers in India. By allowing farmers to come together and form a company, FPCs can help to improve the competitiveness of farmers and the quality of their products. Additionally, FPCs can help to reduce the dependence of farmers on middlemen and to spread risk across the group. Despite the challenges facing FPCs, the government of India has been actively promoting the formation of FPCs in the country. It will be important to continue to raise awareness about the concept and benefits of FPCs and to address the issue of access to finance in order to increase the adoption of FPCs in India.