The Farmer Producer Organisations (FPOs) Promotion Scheme is an initiative launched by the Ministry of Agriculture and Farmers’ Welfare in 2020. This scheme aims to support the formation and promotion of FPOs with a substantial budget of Rs. 6,865 crore. The primary objective is to create 10,000 FPOs by 2025, enhancing farmers’ incomes through aggregation of agricultural produce and collective bargaining power. Typically registered as companies or cooperatives, FPOs provide small and marginal farmers with improved market access, financial assistance, and sustainable income growth.
The scheme is likely to be extended by 4–5 years beyond 2025 as only around 9,200 FPOs have been established so far. Reports from Samunnati and the National Association for Farmer Producer Organisations (NAFPO) indicate that many FPOs encounter structural challenges, such as weak leadership, lack of effective business models, limited market linkages, and insufficient financial backing. By extending the timeline, the government aims to provide necessary support to help these organisations overcome hurdles and achieve more robust and sustainable growth.
Under the FPO Promotion Scheme, each FPO receives up to Rs. 18 lakh over a span of three years for their formation and initial setup. Additionally, each FPO is granted equity support of Rs. 4.5 lakh. For financial needs beyond the government's funding, Rs. 581 crore has been allocated in the current fiscal year to assist FPOs in securing finance from non-banking financial institutions. This budget represents a 30% increase from the previous fiscal year’s allocation, showcasing the government's commitment to enhancing FPO financing.
The State of the Sector Report – 2024, published by Samunnati and NAFPO, reveals that numerous FPOs have faced challenges in growth due to operational and structural issues. With weak leadership, inadequate business models, low bargaining power, and limited market access, the report advocates for an “institutional mechanism” to address these challenges. This would allow FPOs to learn from one another and replicate successful strategies across various regions and contexts.
Extending the FPO scheme by 4–5 years will grant these organisations the necessary time to establish stronger foundations. With ongoing support, FPOs can focus on scaling operations, establishing market linkages, and managing issues like price fluctuations and input costs. The extension also aims to empower FPO federations at both the district and national levels, enabling them to provide structured support to member farmers and enhance resilience against market volatility.
FPOs enable farmers to pool their resources and market their produce collectively. This collaboration helps them achieve economies of scale, better pricing, and enhanced bargaining power. With government-backed financial aid and market access support, FPOs contribute to stabilising incomes for small and marginal farmers. They are particularly beneficial during periods of excess supply or when negotiating with larger buyers, thereby strengthening farmers’ positions within the supply chain.
FPOs play a transformative role in rural economies by improving farmers’ access to markets, reducing transaction costs, and facilitating easier access to credit. They also enhance rural employment through related services such as storage, transportation, and marketing. By supporting the government’s goal of doubling farmers’ incomes, FPOs promote rural economic stability.
The extension of the FPO Promotion Scheme is a strategic initiative aimed at building sustainable and empowered FPOs throughout India. By addressing operational challenges and increasing financial aid, the scheme is poised to strengthen the rural economy and foster collaborative farming practices that greatly benefit small and marginal farmers. The findings from the State of the Sector Report highlight the importance of a structured approach to ensure that FPOs can evolve beyond basic formations and become integral players in the agricultural sector.
Kutos : AI Assistant!
