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Farmer producer organization (fpo)



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Farmer producer organization (fpo)

  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 20. Services provided by FPO Financial services Input- supply services Marketing services Technical services Networkin g services
  21. 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. 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.
  23. 23. Input Supply Services (Seeds, Fertilizers & Machinery) Financial Services (Credit, Saving, Insurance, extension) Marketing linkage services (Contract farming, Procurement under MSP) Training and Networking Services (HRD, Policy Advocacy, Documentation ) FPO
  24. 24. Types of FPO’s  Community based, resource oriented farmer producer organization  Commodity based, market oriented farmer producer organization