Frequently Asked Questions
A Farmer Producer Organisation (FPO) is an organisation formed by farmers or other primary producers such as artisans, dairy farmers, fishermen, bee-keepers etc. A FPO is a legal entity which is usually registered as a producer company under the Companies Act, 1956 (as mandated in 2002) or as a cooperative society.
FPOs aim to ensure better incomes for primary producers (or farmers) through aggregation, value addition and collective marketing of produce which result in ensuring better prices for the members. Thereby reducing vulnerability of small producers and their exploitation by intermediaries who often work in a non-transparent manner. By aggregating the demand for inputs, the FPO can buy inputs in bulk and provide them to the members at cheaper prices thus reducing the overall cost of production. Similarly, the FPO may aggregate the produce of all members and market in bulk, thus, fetching better price per unit of produce. FPO can also assist the members by providing market information to enable them to hold on to their produce till the market price become favourable.
FPOs are engaged in providing a host of services for their members (and even non-members) that include (but not limited to) capacity building, production, harvesting, packaging, processing, marketing, technical support, input supply, financial services, insurance and any other support as and when required.
The following are key features of FPO:
a. An FPO is a registered body and a legal entity formed by a group of producers for either farm or non-farm activities.
b. Producers are shareholders in the FPO.
c. FPO aims to provide benefits to its members through a range of business activities.
d. A part of the profit of FPO is shared amongst the producers
Ownership of FPO rests with its members who are also the shareholders while the management of the FPO is through the Board of Directors who are elected from amongst the members.
Financial and/or technical support can be provided to the FPO or to it promoter agency by various agencies which include NABARD, SFAC, government departments, corporates and other aid agencies. There are specific schemes of NABARD and SFAC for promotion and strengthening of FPOs.
FPO can be registered under any of the following legal provisions:
a. Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act of the respective State
b. Multi-State Cooperative Society Act, 2002
c. Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013
d. Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013
e. Societies registered under Society Registration Act, 1860
f. 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 FPO by way of dividend among members. Hence these legal forms are preferred over others which do not explicitly provide for profit sharing.
FPO is a collective of primary producers and apart from helping its members in production and marketing of their produce FPO can also work as a platform to facilitate better access to government services for its members e.g. PDS, MNREGA, Scholarships and Pensions, etc. It can liaison with the government departments for convergence of programmes, like drinking water, sanitation, health and hygiene.
FPO 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 FPO has been formed, can become member of the FPO. Membership is voluntary. The procedure for obtaining FPO membership depends on the bye-laws of the FPO. The founder-members are those who were there at the time of formation of the FPO. Other members join the FPO later. However, all members enjoy equal rights. A primary producer can become member of a FPO by submitting an application and a nominal membership fee. Some FPOs also charge annual membership renewal fee.
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 FPO. Persons engaged in collection of minor forest produce are also eligible for membership of FPO although they gather these from forests and strictly are not producers.
Benefits from the FPO will accrue to members in proportion to the volume/value of produce given to the FPO. Therefore, one person from a family can provide the whole produce of the family to the FPO and get the same amount of benefit as multiple members providing the same volume/value. If however there are two different FPOs in the vicinity, each for a different type of produce, say vegetables and milk, one person can become member of both these FPOs, if the family produces both milk and vegetables.