Government plans to ease process of converting primary agriculture cooperatives into FPOs

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Published: August 30, 2019 5:25:06 AM

“We also hope to form 10,000 new farmer producer organisations to ensure economies of scale for farmers over the next five years,” finance minister Nirmala Sitharaman had said in her maiden Budget speech.

primary agriculture cooperatives, farmer producer organisations, Nirmala Sitharaman, FPO model, Nabkisan FinanceNabard had created a Rs 50-crore fund — PODF in 2011-12 — for supporting the existing producer organisations, including PACS.

The government is planning to ease the process of shifting of some of the primary agriculture cooperatives (PACs) — currently over 95,000 in operation — into farmer producer organisations (FPOs) to fulfil the Budget promise of forming 10,000 such bodies in next five years. This will help the government cut down the time to achieve the target while using the current expertise at the grassroots to boost farmers’ income.

“We also hope to form 10,000 new farmer producer organisations to ensure economies of scale for farmers over the next five years,” finance minister Nirmala Sitharaman had said in her maiden Budget speech. After the stagnation of growth in the cooperative sector, the government introduced the FPO model in 2011-12 to unite farmers by forming a company to achieve economy of scale in marketing their products for better prices.

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Currently, there are 819 FPOs promoted by SFAC (Small Farmers’ Agribusiness Consortium) while other bodies such as Nabard (National Bank for Agriculture and Rural Development), too, have supported the creation of FPOs which include cooperatives. Nabard had created a Rs 50-crore fund — PODF in 2011-12 — for supporting the existing producer organisations, including PACS.

The refinancing agency had also set up a subsidiary, Nabkisan Finance, to meet the credit requirements of FPOs. However, the PACs remained cooperatives and their current growth is on an average lower than FPOs, officials said.
Out of the total PACs, about 40% had reported losses in 2017 and less than 50% were in profit. In contrast, almost all FPOs have started making profits in two years and none are in losses. This has necessitated a thorough analysis and the agriculture ministry is in the process of analysing whether allowing these PACs to become FPOs will help them make profit.

“Since farmers are the member-shareholder in FPOs, the profit earned by the company will be distributed among them. They will not be under the control of the local registrar, unlike a PAC,” an official said. The government will make necessary changes in law if required so that any PAC can become an FPO, the official added.

Meanwhile, global retailer Walmart’s philanthropy arm Walmart Foundation recently announced $4.8 million in grant to Digital Green and TechnoServe, two organisations helping small farmers overcome poverty. The grant would allow the two firms to enable programmes to help farmers access agriculture technology, training on sustainable farming methods, enhanced access to formal markets, and skill and capacity building for FPOs.

The amount is a part of the foundation’s $25-million commitment it made in September to be invested over five years. Walmart India also said it would increase its direct sourcing from farmers, mainly through FPOs, to 25% by 2023.

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