Agriculture Industry

Preparing FPOs as an effective tool towards Aatmanirabhar Bharat: FICCI

23 June 2020, New Delhi: There are about 7374 Farmer Producer Companies (FPCs) in India which cover about 4.3 million farmers. The inherent strengths and capabilities of these institutions have been considered as one of the effective tools to combat the adverse impact of COVID-19 on the agrarian community. FPOs have a big role to play in not only building the socio-economic resilience of farmers but also in achieving several sustainable development goals.

The ambitious project of the Government of India of formation and promotion of 10,000 FPOs is a very positive step towards the development of the FPO ecosystem. With the formation of these FPOs, there will be a requirement of 10,000 CEOs, marketing managers, accountants among others to form the strong management team in a cost-competitive manner. Therefore, there is a requirement of the massive skilling of rural youth to fill the gaps. Local institutions like ITIs should be explored for this. Additionally, due to social distancing norms, capacity building exercises at the FPO level will suffer a lot. To adapt to the new normal, in case of training and capacity building, there will be a requirement of a socially embedded and disruptive ICT based learning management system.

Related Read: Small Farmers’ Agribusiness Consortium to form 10 thousand FPOs

There is a need for continued funding support for FPO promotion and strengthening activities. Various private sector programs and government schemes should seek common converging areas to ensure an enhanced positive impact on the FPO ecosystem.

In a recent announcement made by Hon’ble Finance Minister in the third tranche of Aatmanirbhar Bharat, considerable focus has been given to FPOs. Among other things, it strongly emphasizes the creation of farm-gate level agriculture infrastructure through FPOs and formalization of micro food enterprises, which will not only create a suitable ecosystem for the development of vibrant decentralized agriculture marketing system but also lead to better price realization of agricultural produce benefitting small and marginal farmers through value addition. These are very positive and welcoming initiatives which have the potential to catapult the FPO ecosystem to its fortunes. The proposed farm-gate infrastructure to be created through Rs 1 lakh Crore of Agri-Infrastructure Fund should be digitized to convert it into a virtual market GRID by capturing necessary details of agriculture produce stored. 

FPOs can play a critical role in mitigating the negative impact of covid on the livelihood of small and marginal farmers and migrant labourers. They can play a great role in creating income augmenting opportunities through innovative interventions like FPO-led small scale food-processing based entrepreneurship. Additionally, FPOs presents very good legal structure and transparent books of records for speedier and effective dissemination of government welfare schemes or other in-kind grant support to its member farmers.

FPOs across India are facing acute liquidity crunch. To remove bottlenecks in the FPOs financing and make processes more resilient, there is a need to digitize processes of loan appraisal and disbursement. Innovative financial instruments like warehouse receipt financing, impact bonds should be promoted. FPOs should be recognized as agri-MSMEs. This will open up new avenues of support for FPOs in raising capital for business operations. Additionally, FPOs will also become eligible for exploring opportunities for benefits from various government schemes that identify MSMEs as primary beneficiaries.

One of the important issues that has come up under FPO business portfolio, is its intended efforts to serve end-markets of urban areas with no or limited approach to serve the local consumption-based demand. There is a need to promote rural to rural value/supply chain for FPO’s business activities like seed production, nursery cultivation, small scale decentralized production, and local marketing of food products.

In order to further strengthen the FPO governance framework in times of COVID-19 which demands a high level of responsiveness in decision making, there is a need to promote design principles that can strengthen the governance framework of FPOs while providing necessary responsiveness in business activities as well.