SFAC – Farmers Producer Organization (FPO)

Major constraints in agriculture sector in rural areas is lack of infrastructural facilities such as intermediate collection centers, Godowns, transport, farm implements, affordable quality inputs, technology, quality extension, investment on natural resources, credit facilities, secondary agriculture activities and marketing. The other problems are farmer literacy, small land holdings, insufficient quantity of production to set up secondary agricultural activities in a given location of singular villages. The solution is farmer collective endeavours. Most farmers produce small quantities for sale and as individuals have little bargaining power with traders and must often except almost any price offered. Large-scale farmers produce large quantities of a consistent quality standard. The only way small-scale farmers can compete with these large farms is to co-operate with each other to form an association or farmers marketing group. The role of FPOs in reducing costs of financial inter mediation for formal financial institutions and more effective targeting of small producers for financial services has also been favorably noted.

Farmer Producer Organization – Objectives :

  1. Mobilizing farmers in groups at the village level and build their associations (FPOs) at an appropriate
  2. federating point to plan and implement product specific cluster/ commercial crop cycles Strengthen farmer capacity through agricultural best practices for enhanced productivity
  3. Ensuring access to and usage of quality inputs and services for intensive agriculture enhancing cluster competitiveness
  4. Facilitate access to fair & remunerative markets including linking producer groups to marketing opportunities by market aggregators
  5. An organization will be called a Producers Organization if  It deals with business activities related to the primary produce/product, – 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 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,
  6. This FPO can improve returns to farmers through:
    • Collective inputs purchase,
    • Collective marketing,
    • Processing,
    • Increasing productivity through better inputs,
    • Increasing knowledge of farmers,
    • Ensuring quality.

Assistance from Small Farmers’ Agribusiness Consortium: SFAC is to promote Farmer Producer Organizations (FPOs) across the country and link producer groups to marketing opportunities. The activities undertaken by the SFAC for FPO are summed up are :-

  1. Input supply,
  2. Financial & Technical,
  3. Marketing Linkages,
  4. Training & Networking.

SFAC provides:

  1.  Government will provide a matching Equity Grant of upto Rs.10.00 Lakh to double the share capital of FPOs.
  2. A Credit Guarantee Fund with a corpus of Rs.100.00 Crore will be created in SFAC to provide cover to financial institutions which lend to FPOs without collateral.

Financing and supporting Producer Organisations by NABARD:

NABARD has taken an initiative for supporting producer organizations, adopting a flexible approach to meet the needs of producers. In order to give a special focus, the “Producers Organization Development Fund”(PODF) has been set up wef 01 April 2011, with an  initial corpus of   50 crore . Any registered Producers Organization viz, Producers Company( as defined under Sec 581 A in part IXA of Company’s Act 1956), Producers Cooperatives, registered Farmer Federations, MACS, industrial cooperative societies, other registered federations, PACS, etc. set up by producers are eligible under the fund. Support under PODF is provided as under: Credit Support is provided for financial intervention. Support in the form of grant, loans, or a combination of these is a lso available for capacity building & market interventions.

Generally Projects having duration of around 7 years would be considered under the Fund. Projects can have a moratorium up to 1-2 years. However, in exceptional cases, may be extended up to a maximum of 10 years inclusive of moratorium based on cash flow and viability of the project. NABARD’s assistance will be limited to a maximum of 90% of the total project outlay. However, the quantum of assistance and the Organization contribution may vary from project to project depending on the project size, outlay, means of financing and the resource support available from various agencies/sources, etc. The financial assistance by way of loan will be secured by hypothecation/ mortgage of assets created out of the assistance from the Fund, mortgage of other immoveable property, or any other security which may be prescribed by NABARD.