Union Budget 2018 proposes 100% tax deduction to Farmer Producer Companies having annual turnover up to Rs.100 crores in respect of their profit derived from such activities for a period of five years from financial year 2018-19. Earlier, 100% deduction is allowed in respect of profit of co-operative societies which provide assistance to its members engaged in primary agricultural activities.
This 2019-20 budget also mentioned that within the next five years 10,000 FPOs are planned to set up to enrich agricultural practice. From these we can realize how important FPOs are and how our government trust on that activities.
So what is FPO?
It is one type of Producer Organisation (PO) where all 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.
A Producer Organisation (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.
Peasant member driven POs, FPOs are established under the Companies Act 1956 to resolve the farmers issue and to consider farmer’s needs. In that FPO can be registered as many types as a federation, or trust, or cooperative society or company. Around 3,100 FPOs are currently promoted in the country through central and state Government schemes and NABARD.
Essential features of a PO
- It is formed by a group of producers for either farm or non-farm activities. It is a registered body and a legal entity.
- Producers are shareholders in the organization.
- It deals with business activities related to the primary produce/product.
- It works for the benefit of the member producers.
- A part of the profit is shared amongst the producers.
- Rest of the surplus is added to its owned funds for business expansion.
Benefits of FPO
* Farmers essentials like seeds, fertilizers, pesticides, machinery procurement are available as wholesale, so the cost of production will be greatly reduced.
* Marketing of farmer’s product will be enhanced, as supply chains are enhanced by this FPOs.
* Value added to the farmer’s product is usually increased.
* Modern technological adaptation is possible through FPOs.
Some successful FPOs as Case studies
1.Farmers Turn Traders
The Nachalur Farmers Producer Company Ltd. in Tamil Nadu was started by a group of 100 farmers from 30 villages as a Producer Organisation in June 2012. These farmers decided to open an input shop at Nachalur village to reduce the cost of the inputs (initially, fertilizers and pesticides). The farmers were able to successfully sell 300 tonnes of fertilizers by December, mainly because of the low price factor. Encouraged by the success of this venture, the farmers decided to expand the initiative to three more villages. Subsequently, the company purchased farm equipment and rented out to the farming community at an affordable cost.
Their next target is to set up a paddy and black gram seed processing unit for Rs. 30 lakh financed by NABARD. It also provides Internet connections, helping members get the latest updates on weather and commodity prices so that they can improve their bargaining power. The principal goal of this FPO is to reduce the input cost so that cost of production comes down.
2.Creating A Rural Distribution Network For Women Farmers
RUDI, as the name suggests, is a rural distribution chain that processes and sells farm produce after procuring it from marginal farmers (who make up the bulk of producers in India) at market price. RUDI has successfully created a sustainable ecosystem at the village and block level, a mode that can be replicated and expanded seamlessly. Now, the Self Employed Women’s Association (SEWA) is setting up to extend the outreach of these initiatives to Rajasthan, Uttar Pradesh, Bihar and Uttarakhand, while simultaneously scaling up its presence across nine districts in Gujarat.
It is a shining example of addressing food security issues at both the production and consumption levels through a model managed by the beneficiaries themselves. The supply chain employs hundreds of poor women, who handle the management and are involved at every stage of the chain.
RUDI also stands for a brand, signifying quality and affordability. This set up assures a market for these marginal farmers, improves their economic status and generates purchasing power. This also encourages farmers to make investments on their farm and increase productivity. Moreover, by selling grains and spices in small packets at competitive prices, RUDI not only ensures a high quality standard, but also caters to the food needs of its rural members.
3.Powering Agriculture Through Alternative Energy
Narayangadh Agro Producer Company Limited supported by Indian Society of Agribusiness Professionals (ISAP). It is a collaborative effort by the farmers of Khodad village, Junnar block, Pune. This FPO was recently established under the National Vegetable Initiative for Urban Clusters (VIUC) scheme. Most of the small and marginal farmers have an average income of around Rs. 75 per day per hectare. With the help of these cost beneficial, solar-based processing machines, farmers are expected to get higher prices for their produce and, subsequently, higher returns. The man behind this exceptional idea of making use of solar energy is Ravikant Balshiram Fulwade, chairman, Narayangarh Agro Producer Company.
Adding value to the crop produce is an exemplary and groundbreaking idea that deploys solar technology in agriculture and horticulture based processing machines. The development of a solar power facility has helped in generating 10-20 horsepower through the photovoltaic machines.
The technology adopted by the company is a live example to other FPOs, Self Help Groups (SHGs) and agri-cooperative groups of effective usage of alternative energy to address the energy scarcity issues in India.
4.One Stop Solution For Irrigation Problems
The rural areas of arid Gujarat are plagued by irrigation problems, such as paucity of water, soil salinity and waterlogging. Amid all this, Bhomaikrupa Bhungroo Juth FPO, by Sajjata Sangh has emerged as a one-stop solution to deal with these difficulties in an effective and affordable way. This novel idea entails the collection and storage of rainwater. By collecting rainwater for just about 10 days in a year, Bhungroo enables as much as 40 million litres of irrigation-suitable water to be stored in the underground aquifer reservoir. This water reserve enables the farmers to conveniently have two cropping cycles, that is, monsoon and winter farming over seven to eight months in a year.
The method involves hand-drilling a porous pipe (4” in diameter) onto the surface. This is done from the lowest point of the catchment area, where rainwater rushes and accumulates to a maximum depth of 110ft to touch the subsoil aquifer. The pipe then guides the captured water to the saline aquifer. It frees the land surface from waterlogging, creating various low-density water lenses within the subsoil aquifer, while simultaneously diluting the salinity of the subsoil aquifer.
The solution, which initially covered 14 villages in the Sami and Harij blocks of the Patan district in Gujarat, has been replicated in other parts of the state by the Gujarat Ecology Commission and Gujarat State Planning Board, while the State Education Board has incorporated the idea into its school curriculum.
5.Timbaktu Collective: A Producer Owned Business Enterprise
The Dharani Farming and Marketing Mutually Aided Cooperative Society Ltd is a producer-owned business enterprise, promoted by the Timbaktu Collective, under the brand Timbaktu Organic. It was registered in April 2008, under the Mutually Aided Cooperative Society Act of Government of Andhra Pradesh, 1995.
It provides services like processing and packaging of raw goods procured from farmer members and conducting marketing activities to reach viable customer segments. It also provides agricultural training programmes to members and evaluates their adherence to organic certification standards. The primary intention of Dharani is to procure, process and market products of its farmer members at a premium price, to ensure higher returns.
It is successfully increasing the income of the marginalized smallholder farmer community by getting them better prices for their produce, along with improved productivity of their lands and animals, while supplying much-needed healthy foods to the consumers.
The FPOs in the country are facing a lot of challenges including
- Access to finance at initial stages
- Provisions of basic facilities like power and water
- Lack of sufficient storage place
- Connectivity and logistics issue with mainland or buyers
- Lack of awareness about modern technology
- Need for capacity building of members for managing it as company
Thus, FPOs on ground has changing the agricultural landscape from deploying best of marketing strategies and addressing pressing needs of water and power by self generation. The Government aid in this regard with target to form 10,000 FPOs in five years to ensure economies of scale for farmers is welcoming. However it should also try to devote more funds in capacity building, rural infrastructure and motivate women farmers to leverage better farm productivity and appropriate price realisation for farm products.
Compiled by Sa.Kaviyarasan, BioInformatics graduate and Executive editor of Kalanipoo.com, an agricultural Tamil website of IMoT Agri Forum.