While financial institutions have been extending credit facilities to expand activities of farmer producer organisations (FPOs), close to 90% of the lending are by non-banking financial companies (NBFCs), according to a report titled ‘a review of successful FPOs’ by CII and NABCONS. The report on FPOs has urged RBI to issue a directive requesting banks to report their lending to FPOs and provide those NBFCs who have shown that FPOs are bankable to get priority sector lending status thus reducing the cost of credit.

Besides, the CII–NABCONS report has stated that notwithstanding growth in the FPOs model, the growth across states has been uneven thus limiting its success. The report also identifies factors such as the lack of professional management, weak internal governance in FPOs, under-capitalisation to take up activities and also absorb credit, inadequate credit linkages, access to market and inadequate access to infrastructure. In February, 2020, the government launched a Central Sector Scheme of ‘formation and promotion of 10,000 FPOs by 2027-28. According to the NABARD database, there are 6,328 FPOs in total which have been formed as of March 2021.

There are 900-odd FPOs registered with the Small Farmers Agri-Business Consortium. Under the scheme, the formation and promotion of FPOs is based on the produce cluster area approach and specialised commodity-based approach. While adopting cluster-based approach, formation of FPOs will be focussed on ‘One District One Product’ for development of product specialisation. “Individual farmers find it difficult to get credit from banks and often have to remain dependent on local money lenders and pay high interest rates. A system is required for regular supply of funds to farmers,” Minhaj Alam, joint secretary, ministry of food processing industry, stated on Monday at the CII-NCDEX FPO summit.

Agriculture minister Narendra Singh Tomar speaking at the CII-NCDEX event on Monday said the government will promote setting up of more FPOs as part of its efforts to increase income of small and marginal farmers. “Farmers today cannot process their produce due to lack of infrastructure in their villages. If warehouses, sorting grading cooling chains are available, farmers can store their agri-produce instead of resorting to distress sales. Therefore, there is a need to establish FPOs at the village level to improve their bargaining power and improve incomes,” he said.

According to ministry of agriculture data, close to 86% of farmers are small and marginal with average land holdings being less than 1.1 hectare. FPOs support collectivisation of such small, marginal and landless farmers in order to give them the collective strength to deal with such issues. The government envisages that members of the FPO will manage their activities collectively in the organisation to get better access to technology, input, finance and market for faster enhancement of their income.