News Excerpt
The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, has recently given approval for 10,000 FPOs to be formed in a five years period from 2019-20 to 2023-24 to ensure economies of scale for farmers. Support to each FPO to be continued for 5 years from its year of inception.

Pre-Connect
●    FPO is one type of Producer Company (PO) where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any product, e.g., agricultural, non-farm products, artisan products, etc.   
●    In the Union Budget 2019-20, Government has announced creation of 10,000 new FPOs to ensure economies of scale for farmers over the next five years, for which a dedicated supporting and holistic scheme as Central Sector Scheme is proposed for targeted development of FPOs and its sustainability.

Highlights
⮚    Initially there will be three implementing Agencies to form and promote FPOs, namely Small Farmers Agri-business Consortium (SFAC), National Cooperative Development Corporation (NCDC) and National Bank for Agriculture and Rural Development (NABARD).
⮚    FPOs will be formed and promoted through Cluster Based Business Organizations (CBBOs) engaged at the State/Cluster level by implementing agencies.
⮚    There will be a National Project Management Agency (NPMA) at SFAC for providing overall project guidance, data compilation and maintenance through integrated portal and Information management and monitoring.
⮚    Initially the minimum number of members in FPO will be 300 in plain area and 100 in North East & hilly areas.
⮚    Priority will be given for formation of FPOs in aspirational districts in the country with at least one FPO in each block of aspirational districts.
⮚    FPOs will be promoted under "One District One Product" cluster to promote specialization and better processing, marketing, branding & export by FPOs.
⮚    There will be a provision of Equity Grant for strengthening equity base of FPOs.
⮚    There will be a Credit Guarantee Fund of up to Rs. 1,000 crores in NABARD with equal contribution by DAC&FW and NABARD.

Advantages
    Small and marginal farmers do not have economic strength to apply production technology, services and marketing including value addition. Through formation of FPOs, farmers will have better collective strength for better access to quality input, technology, credit and better marketing access through economies of scale for better realization of income.
    Government is providing various assistance such as Equity Grant Scheme, Credit Guarantee Fund Scheme through SFAC, to encourage more farmers to set up FPOs. Moreover, to promote agri-business activities, FPOs can also avail assistance under various schemes such as Agricultural Marketing Infrastructure (AMI), Venture Capital Assistance (VCA) and Mission for Integrated Development of Horticulture (MIDH) Scheme.

Concerns
    Direct market linkages- Many FPOs lack the capacity to manage the supply-chain operations and store the unsold produce, besides faltering in procurement, logistics and price negotiations. E-retailing and e-marketing are viable possibilities for FPOs.
    Promoter conundrum- The FPOs are generally mobilised by promoting institutions/resource agencies (RAs). While RAs normally have social mobilisation skills, they lack business development and marketing skills, which are critical for the success of FPOs as a business entity. Therefore, FPOs should be promoted only after ascertaining the need, absorption capacity, potential membership, and a strong business case in the given socio-economic context. In order to be successful, FPOs should be run by trained professionals.  
    Professional capabilities- A few professional institutions are engaged in capacity building of various aspects of FPOs. However, a focus on management capabilities in the supply chain operations, business planning according to market intelligence and market development is clearly missing in majority of the training programmes. These require long term capacity investments, execution, negotiation skills, monitoring, statutory compliance, etc., inter-spaced with simulation, field demonstrations, internships and institutional attachments.

Way Forward
o    Best practices like maintaining crop maturity indices, documenting plant protection chemicals used, geo-tagging the land under cultivation, etc. must be promoted.
o    ICT tools and block-chain technology for agriculture are the need of the hour. Block-chain tech, using hyper ledger in the agri space, enables tracking inefficiencies and improving transparency in the value chain operations. This would also help identify better markets for the produce, improve banker’s comfort to finance such agri-supply chains managed by farmers.
o    It is time for funding agencies to focus on financing a few pilots in such agri block-chain technology to facilitate this transformation. Currently, only a few FPOs have developed mobile phone-based extension guidance to help reduce cost of cultivation and access information about market prices of commodities.
While FPOs do a good job in the provision of inputs, which is a kind of low-hanging fruit, linking the farmers to the markets with quality products is a challenge. The success of farmer organizations is critical for ensuring the success of smallholder and marginal farmers in India. FPOs will continue to blossom as an aggregator of aspirations for millions of farmers across the country.

PEPPER IT WITH
Equity Grant and Credit Guarantee Fund Scheme, NAM, MIDH Scheme.