Formation and Promotion of Farmer Producer Organizations (FPOs)
Introduction: Understanding the Context
Before we go into the technicalities of the scheme, let’s first understand why this scheme was needed.
In India, over 85% of farmers are small and marginal. This means their landholdings are too tiny for mechanized farming, and their bargaining power in markets is negligible. They suffer due to:
- Poor access to inputs (seeds, fertilizers, tools)
- Inability to store, transport, or sell their produce at the right time or place
- Exploitation by middlemen
So, the Government of India came up with this scheme to organize farmers into formal business units—called Farmer Producer Organizations (FPOs)—so they can function like a company while retaining their identity as farmers.
Quick Facts at a Glance
| Feature | Details |
| Type of Scheme | Central Sector Scheme (fully funded by the Centre) |
| Launch Year | 2020 |
| Purpose | To leverage economies of scale and improve market access for farmers |
| Beneficiaries | Groups of farmers—minimum 300 members in plains, 100 in North-Eastern and hilly areas |
| Implementing Agencies | 9 Implementing Agencies (IAs) designated to form and support FPOs |
| Target | 10,000 FPOs by the year 2027-28 |
Core Objectives
- Empower farmers to act collectively as producers and sellers
- Help them gain market power, reduce input costs, and increase returns
- Promote agribusiness among rural communities
Salient Features Explained
1. What is an FPO?
An FPO is a legal entity—like a company or cooperative society—formed by farmers themselves. It is:
- Registered under the Companies Act or State Co-operative Act
- Meant to help farmers collectively produce, process, and market agricultural goods
- Run like a business but for the farmers’ welfare
Think of an FPO as a farmer’s startup, where each farmer is a shareholder.
2. Strategic Approach of the Scheme
- Cluster-Based Model: FPOs will be formed in areas with common agricultural produce, to focus on specialization.
- Follows the idea of “One District One Product”, which means each district will focus on promoting one crop/product that it has a natural advantage in.
3. Better Price Realization
- FPOs will be integrated with the e-NAM platform (National Agriculture Market), which enables:
- Transparent price discovery
- Wider market access
- Competitive bidding
- Reduction in middlemen exploitation
4. Training & Capacity Building
Institutions like:
- BIRD (Lucknow) – Bankers Institute of Rural Development
- LINAC (Gurugram) – Laxmanrao Inamdar National Academy for Cooperative Research
…will provide training in:
- Financial literacy
- Governance
- Market strategies
- Record-keeping
5. Institutional Framework
To ensure smooth execution:
- National Project Management Agency (NPMA): Acts as a guiding and monitoring authority, managing data through MIS (Management Information Systems).
- District Monitoring Committees (D-MC): Headed by the District Collector or Zila Parishad CEO to supervise local implementation.
💰 Financial Assistance Structure
The scheme supports FPOs through threefold financial assistance:
1. Operational Grant
- Amount: ₹18 lakh per FPO
- Disbursed over: 3 years
- Covers: Salaries, office rent, awareness campaigns, training, handholding activities
2. Matching Equity Grant
- Amount: ₹2,000 per farmer-member, capped at ₹15 lakh per FPO
- Purpose: Strengthens the FPO’s equity base, making it more creditworthy
- Encourages farmers to become true shareholders of the FPO
3. Credit Guarantee Facility
- Loan coverage: Up to ₹2 crore
- How it helps:
- Reduces risk for banks and financial institutions
- Encourages lending to FPOs even without collateral
- Ensures financial autonomy and business expansion
✅ In Summary
The scheme is not just about organizing farmers into groups—it’s about:
- Making them entrepreneurs
- Giving them the financial and institutional backbone to function independently
- Ensuring their produce gets fair prices, and their farming becomes sustainable and profitable
🧠 Exam Tip (for UPSC Mains)
In GS-3 answers, you can mention FPOs as:
- A structural reform in agricultural marketing
- A tool to increase Farmers’ Income
- A vehicle for cooperative federalism, as the scheme involves central guidelines but district-level execution