Concept of Farmer Producer Organization
A group of farmers established as an FPO is gaining prominence due to the numerous advantages it provides over the conventional model of farmers’ cooperatives. The Producer Companies Act supports a more professional approach to management and attitude in FPO businesses while outlining the values and fundamental concepts of cooperatives. FPOs are frequently created with equity contributions from the member farms. A proper framework for the farmers’ or producers’ collective control of the business is included in the law’s provision for the FPO.
It is envisaged that a group of outside professionals working under the direction of the Board of Directors, who were chosen or elected by the General Body of the FPO for a specific period, will run the FPO on a day-to-day basis. Given that farmers and producers make up the majority of the FPO’s stockholders, the organisation is a perfect vehicle for the farmers to own their company.
Need of Farmer Producer Organization
The fundamental objective of a Farmer Producer Organization is to provide farmers with greater revenue through their own organization. Small farmers lack the volume (in terms of inputs and outputs) necessary to profit from economies of scale. In addition, there is an extensive network of intermediaries in agricultural marketing who frequently act in an opaque manner, resulting in a scenario where the producer only receives a small portion of the value that the final customer pays. The primary producers can profit from economies of scale by grouping. Additionally, they will be able to negotiate more favorably with large producers and suppliers of supplies.
The company’s law provides following opportunities to the farmers through formation of company.
● A FPO can provide the farmer’s cooperative with a legal and administrative framework, which opens up opportunities for producer-owned businesses to engage in competition with other businesses.
● It offers a chance for the establishment and registration of “FPO” on the basis of mutual aid and collaboration within the more lenient regulatory framework made available by the company legislation with appropriate adaption.
● The law also gives existing cooperatives, organizations, and societies the option to voluntarily transform into the new FPO or producer company structure.
Advantages of a Farmer Producer Organization
● The Producer Company is a legal entity with perpetual succession, the ability to enter into contracts, sue and be sued in its own name, and the ability to acquire, keep, and transfer of assets.
● The Producer Company would function as an organisation with the characteristics of a Private Limited Company after it had been formed. However, the way that mutual advantages are distributed among Members is founded on the ideals of a cooperative organisation.
● In no circumstance may the Producer Company be construed to have been or be a Public Limited Company. As a result, there are certain restrictions on how expensive and complicated it is to comply with corporate regulatory rules.
● Members of a Producer Company are only liable for the unpaid value of the shares they own. Therefore, even if the Producer Company is liquidated, the Members’ individual assets will be protected.
● The Producer Company has the ability to conduct business globally and across the entire nation.
● Producer Companies can also establish subsidiaries or join forces with other companies to enhance their supply chains, storage capabilities, and access to technology, all of which will increase their profitability.
Activities undertaken by FPOs
The FPOs may provide and undertake the following relevant major services and activities for their development as may be
necessary: –
● Provide affordable wholesale prices for high-quality farming inputs including seeds, fertiliser, insecticides, and other inputs.
● To lower the cost of production per unit, make necessary production and post- production machinery and equipment, such as cultivators, tillers, sprinkler sets, combine harvesters, and similar machinery and equipment, accessible to members on a bespoke hiring basis.
● Provide user-paying facilities for value additions such cleaning, assaying, sorting, grading, packaging, and farm-level processing at a fairly lower cost. The provision of storage and transportation facilities is also possible.
● Provide farmers with information on crucial practises including selecting agricultural inputs, innovative farming methods, and more effective marketing strategies.
● Engage in higher-paying activities including mushroom farming, beekeeping, and seed production.
● Aggregate smaller amounts of farmer-members’ produce and add value to increase their marketability.
● Make it easier to get market data on the produce to help producers and marketers make informed choices.
● Arrange for shared costs for logistical services such loading and unloading, transportation, and storage.
● Offer higher and more lucrative rates when promoting the combined goods to customers and through the marketing channels.
