Page 28 - Banking Finance December 2020

ARTICLE

NABARD and PRODUCE fund of Government of India etc. A India (including SFAC), State Governments, NABARD and
FPO can be a producer company, a cooperative society or other organizations. Of these, 792 FPOs are registered as
any other legal form which provides for sharing of profits/ Producer Companies and the remaining as Cooperatives/
benefits among the members. Societies, etc. Majority of these FPOs are in early stage of
their operations with shareholder membership ranging from
Essential features of a FPO 100 to over 1000 farmers and require not only technical
hand holding but also adequate credit, capital and
Y Formed by a group of producers for either farm or non- infrastructure facilities including market linkages for
farm activities. sustaining their business operations.
Y It is a registered body and a legal entity.
The typical structure of a FPO
Y Producers are shareholders in the organization.
Y It deals with business activities related to the primary
produce/product

Y It works for the benefit of member producers.
Y A part of the profit is shared amongst the member and
rest of the surplus is added to its owned funds for
business expansion.

Need of formation of FPO
The main aim of FPO is to ensure better income for the
producers through an organization of their own. Small
producers do not have the volume individually to get the
benefit of economies of scale. Besides, in agricultural
marketing, there is a long chain of intermediaries who very State level Policy advocacy, explore wider
often work non-transparently leading to the situation where markets, strategic partnerships
the producer receives only a small part of the value that Cluster level Credit, inputs, technology, capacity
the ultimate consumer pays. (10-12 Villages) building, Marketing linkages
Village level Crop planning, Seed production,
Collectivization of producers, especially small and marginal demonstration, Knowledge sharing,
farmers, into producer organisations has emerged as one aggregation
of the most effective pathways to address the many
challenges of agriculture but most importantly, improved Formation of FPO:
access to investments, technology and inputs and markets. To ensure sustainability and economic viability of FPOs/POs,
Department of Agriculture and Cooperation, Ministry of their nurturing plays an important role in taking up viable
Agriculture, Govt. of India has identified farmer producer business activities like aggregation of produce, collective
organisation registered under the special provisions of the marketing, bulk procurement of inputs, primary processing,
Companies Act, 1956 as the most appropriate institutional etc. To meet the credit requirements of FPOs/POs in various
form around which to mobilize farmers and build their stages of their life viz. Initial phase, Growing phase, and
capacity to collectively leverage their production and Maturity phase, the loan products mentioned below have
marketing strength. been introduced.

Current status of FPO Opportunities for financing to FPOs by
As on 31.03.2019 totally 897 FPOs are in existence in India, banks
which were formed under various initiatives of the Govt. of To ensure sustainability and economic viability of FPOs, their

28 | 2020 | DECEMBER | BANKING FINANCE