Farmer Producer Organization (FPO): A hope for small farmers

Dr Dipak Nath *

Distribution of Power Tillers, Tractors by CM at Sanjenthong on July 12 2020 :: Pix - DIPR Manipur

A Producer Organization (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.

In some forms like producer companies, institutions of primary producers can also become member of PO. 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-a-vis the bulk buyers of produce and bulk suppliers of inputs.

The Farmers Producer Organization (FPO) is one type of 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 produce, e.g., agricultural, non-farm products, artisan products, etc.

The features of PO are -
1) It is formed by a group of producers for either farm or non-farm activities,
2) It is a registered body and a legal entity,
3) Producers are shareholders in the organization,
4) It deals with business activities related to the primary produce/product,
5) It works for the benefit of the member producers,
6) A part of the profit is shared amongst the producers,
7) Rest of the surplus is added to its owned funds for business expansion.

Any individual or institution can promote a PO. Individual persons or institutions may promote PO using their own resources out of goodwill or with the noble objective of socioeconomic development of producers. If, however, the facilitating agency wishes to seek financial and other support, then they have to meet the requirements of the donor/financing agency.

Producer Organization can be registered under any of the legal provisions-
1) Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act of the respective State,
2) Multi-State Cooperative Society Act, 2002,
3) Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013,
4) Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013,
5) Societies registered under Society Registration Act, 1860,
6) Public Trusts registered under Indian Trusts Act, 1882.

Institutions registered as cooperative societies and producer companies have legal provisions for sharing of profit earned by the PO by way of dividend. Other legal forms do not explicitly provide for profit sharing.

However, the PO can offer better price for the produce it procures from the members, thus, benefiting the latter. Similarly, it can procure inputs/ raw material in bulk and sell to members with low margin. Such activities are permissible for POs under all legal forms.

It is preferable for the PO to work as a legal entity. Only such an entity can enter into legally valid contracts including mobilization of funds from other institutions. There are specific Acts under which the PO could be registered. It is also possible for a PO to migrate from one legal form to another. The primary producers have skill and expertise in producing.

However, they generally need support for marketing of what they produce. The PO will basically bridge this gap. The PO will take over the responsibility of any one or more activities in the value chain of the produce right from procurement of raw material to delivery of the final product at the ultimate consumers' doorstep.

In brief, the PO could undertake the activities -
1) Procurement of inputs,
2) Disseminating market information,
3) Dissemination of technology and innovations d. Facilitating finance for inputs,
4) Aggregation and storage of produce f. Primary processing like drying, cleaning and grading,
5) Brand building, Packaging, Labelling and Standardization,
6) Quality control,
7) Marketing to institutional buyers,
8) Participation in commodity exchanges and
9) Export.

A PO will support the members in getting more income by undertaking any/many/all of the activities mentioned above. By aggregating the demand for inputs, the PO can buy in bulk, thus procuring at cheaper price compared to individual purchase. Besides, by transporting in bulk, cost of transportation is reduced. Thus, reducing the overall cost of production.

Similarly, the PO may aggregate the produce of all members and market in bulk, thus, fetching better price per unit of produce. The PO can also provide market information to the producers to enable them hold on to their produce till the market price become favourable. All these interventions will result in more income to the primary producers.

A PO is a collective of farmers (and non-farmers) who are the primary producers of a product (an agricultural produce or a manufactured product). It, therefore, can work as a platform to facilitate better access to government services, like PDS, MNREGA, Scholarships and Pensions, etc. It can liaison with the Government Departments for convergence of programmes, like drinking water, sanitation, health and hygiene.

A PO is an organization of the producers, specifically the primary producers. All primary producers residing in the relevant geography, and producing the same or similar produce, for which the PO has been formed, can become member of the PO. Membership is voluntary. The procedure for obtaining PO membership depends on the bye-laws of the PO.

The founder-members are those who were there at the time of formation of the PO. Other members join the PO later. However, all members enjoy equal rights. A primary producer can become member of a PO by submitting an application and a nominal membership fee.

Some POs also charge annual membership renewal fee. Although primary producers obtain membership of PO voluntarily, the promoting institution should make efforts to bring all producers into the PO, especially the small producers.

Any person engaged in any activity connected with or related to any primary produce will be treated as producer. Primary produce means the produce of farmers from agriculture and allied activities or produce of persons engaged in handloom, handicrafts and other cottage industries, including any by-product and product resulting from ancillary activities thereof.

Primary produce also includes any activity intended to increase the production or quality of aforementioned products or activities. Persons engaged in agriculture, horticulture, animal husbandry, fishery, sericulture, apiary, handloom, handicrafts, etc., can become members of appropriate PO. Persons engaged in collection of minor forest produce are also eligible for membership of PO although they gather these from forests and strictly are not producers.

Family is the unit of production in rural areas. Benefits from the PO will accrue to members in proportion to the volume/value of produce given to the PO. Therefore, one person from a family can provide the whole produce of the family to the PO and get the same amount of benefit as multiple members providing the same volume/value.

If however there are two different POs in the vicinity, each for a different type of produce, say vegetables and milk, one person can become member of both these POs, if the family produces both milk and vegetables.