Creating an enabling ecosystem for India’s multitudinous FPOs

The challenges facing Farmer Producer Organizations (FPOs) may be broadly considered in two contexts: first at the pre-formation stage, and subsequently at the post-formation incubation stage. At the pre-formation stage, the challenges are in mobilizing like-minded farmers and bringing them into the fold of one legal entity which is usually a company or a society.

Thereafter, the challenge is of mobilizing equity contribution from farmer members. At the post-formation phase, the critical concerns are with regard to inadequate guidance from the concerned agencies to help establish an input shop, adopt good agricultural practices, set up a common service center to undertake primary and secondary processing, and create storage to help them undertake price and risk hedging through the NCDEX platform. The challenge at this stage is also to prevent distress sale, by establishing credit linkage, undertaking seed production activity, meeting statutory and legal and quality compliance requirements, establishing direct market connectivity, etc. Another critical constraint in the case of many FPOs in the absence of an enabling environment in terms of related state-level Act.

In order to redress these challenges, there is a need for deployment of experienced service-providing professional institutions to guide and build the capacity of evolving and established FPOs, make existing PPP schemes for primary and secondary processing and storage more FPO ‘friendly’, and perhaps accommodate NBFCs into credit guarantee (cover) schemes. An enabling policy environment may require the imposition of lending targets to FPOs on State and District Level Bankers’ Committee, rather akin to the targets imposed under the Prime Minister Employment Generation Programme (PMEGP) scheme. Further, Mandi Fee exemption for direct farmer FPO-buyer transactions, a realistic contract farming framework, and direct market license facilitation are critical needs. In terms of national policy, exemption from income tax in perpetuity is what global circumstance and experience warrants.

About the Author

Padmanand V. is a Partner at Grant Thornton, one of the largest fully integrated Assurance, Tax and Advisory firms in the country. With 4,500+ people and presence in 15 locations across 13 cities, they help dynamic clients unlock their potential for growth and deliver the greatest value by collaborating across services to create innovative, tailored solutions to resolve clients’ complex challenges.