Mr. Mohamed Aseemudheen M, Masters Scholar, Kerala Agricultural University, College of Agriculture, Thiruvananthapuram, Kerala, explains how to set up FPO with small group of farmers.
A producer organisation is a legal entity formed by primary producers or farmers. The organisation will share the profits and benefits among its members which is an important activity of a producer organisation. Various activities such as procurement of inputs and disseminating marketing information are important in a producer organisation. The members should be aware of what is happening in the market, both locally and internationally, and the producer organisation should keep the members aware of the technologies and innovations, facilitating finance for inputs as small and marginal farmers will not have financial stabilities. The producer organisation should also help in aggregation and storage of produce. The producer organisation can help in aggregating and storing the produce to be sold when demand is there. When 10 to 20 farmers join together to aggregate their produce, it increases the bargaining capacity of the produce, and producer organisation facilitates this through aggregation storage.
Storage is an important component in the market price as commodities can be stored and sold later to fetch good price. The producer organisation also helps in drying, cleaning, grading, publicizing the product etc., to create a good value for the product. It also helps in packaging, labelling, and standardizing according to the conditions prescribed by the government. Producer organisation is also involved in quality control which the farmers do not know due to their low level of literacy. It can also help in participation of commodity exchange and export by aggregating large quantity of produce. The major organisation is called Farmer producer organisation or farmer producer company.
Small Farmers Agribusiness Consortium is formed by Government of India for facilitating and supporting the FPOs. It is an autonomous body formed for implementing the central government of India schemes for small and marginal farmers in agribusiness activities. All facilitations and promotions are carried through this organisation. Mainly it helps farmers with credit guarantee fund which will mitigate the risk for financial institutions who lend to FPC or FPOs. It also provides equity grant of up to Rs. 15 lakhs which is distributed in a phased manner to the single FPOs. The main objective of SFAC is to enhance viability and sustainability of FPCs. When the FPO starts lacking managerial techniques and trust, it leads to breaking or dismantling of the FPO, and to achieve the sustainability, it should work for a long time. The SFAC helps in providing credit worthiness and sustainability. The shareholders can increase their participation and ownership in the FPO.
There are many legal procedures in India to start an FPO. Normally FPO or FPC will focus on forming a cooperative society or a producer company. So FPOs newly formed will choose the legal entity of producer company under the Indian Companies’ Act. The cooperative society act and producer company act are involved in sharing of profit among members of that organisation, which is the main objective of an FPO. There are other forms such as Trust Act, but when we go for Trust to register, the profit cannot be shared. We need profit to run the organisation, and so we choose cooperative society or company. This will have capacity to procure input and raw materials in bulk and sell by following legal conditions of the producer company act or cooperative act.
The first step to form a producer company is to identify the cluster in a particular district, find out if this producer organisation is viable there. We have to be careful in these initial stages as any failure here will lead to failure of the entire process of formation. Then we have to meet the beneficiaries or the members of the producer organisation in person, introduce the concept of the producer company, and clearly explain how it functions, the need for the same so that the farmers will understand how they will be benefited by this kind of producer company and get interested in the process. We can also take them for an exposure visit to the already established and successfully running FPO to make them see for themselves by seeing and interacting. Then we can include the enthusiastic members of the cluster to form the critical group to canvas other eligible members too by explaining the benefits of participating in this activity. Proper understanding is very important.
The technical aspect of forming a producer company starts with preparing a business plan that can be revised or refined as per the development. Once the members are willing to participate in this and ready to share their capital, we can start looking for promoter directors for the FPC. We can prepare a draft of Articles of association with rules for the company to be followed throughout. A consultant can be approached to help in this as it is difficult for a farmer to accomplish. We can organise a meeting to approve the Article of Association and Memorandum of Association to select the promoters and start collecting the capital to proceed further. The minimum number of members needed to start an FPO or FPC is 10, and maximum can be any number. The higher the number of members, the better is the sustainability of the organisation. The digital signature from the nominated director has to be obtained, a unique name for the FPO should be selected by registering with the Registrar of Companies. We have to apply for DIN for the director, affidavits, and MoA, PoA should be completed. We have to apply for INC 1 for name approval and get the certification of commencement to proceed with operation of producer company. The total charges involved will be around Rs. 40 thousand.
A producer company is a hybrid between a private ltd company and cooperative society. The liability of members is limited to the paid amount of shares which is safe from the company loss. Minimum paid up capital should be Rs. 5 lakhs. There is no interference from the government or private body. The producer company can operate anywhere within the country which gives flexibility and expansion to improve business. There are a few limitations too. Registration of a producer company requires a consultant’s help and is time consuming. Members cannot transfer their shares freely. Getting a CEO at affordable cost is tough. The producer company should follow the statutory provisions of the Indian Companies’ Act without fail. But the central government has announced schemes for formation and promotion of 10 thousand FPO with a budget of Rs. 6865 crores. There are many states which have a good number of FPOs registered.
What are the initial steps and requirements in forming an FPO with smaller group of farmers? What support or incentives are available for small scale farmers who want to establish an FPO at the community level?
We have to identify the cluster in a district or state with farmers, analyse the situation if there is a need for FPO or FPC. Then we must go ahead with forming a critical group, exposure visit, and with enthusiastic farmers, the FPO can be formed. The SFAC is a body meant to support the small and marginal farmers in the case of economic holdings as we know they lack aggregation of produce and marketing techniques. The SFAC give credit guarantee to support them with all the credits in the initial stage of forming an FPO. Once the FPO is formed, they will get equity grant of Rs. 15 lakhs per FPO which will be distributed in phased manner. This will help them in proceeding further with the functioning of the FPO and improve the sustainability of the particular FPO.
How can small groups of farmers effectively pool their resources and contributions to initiate the formation of FPO?
The FPC act requires a minimum of 10 members to form the FPO with mutual understanding and good interest to proceed further. After formation of the FPO, they will be benefited by all the produces aggregated together. Their produce will be harvested at the same time, have bulk quantity, and have good bargaining capacity in the market. They will get good price from the dealers. The small and marginal farmers will lack knowledge about market situations, and the FPO and the CEO supporting the FPO will share all the information about the market price and get involved in good market practices to get good profit.
Can you provide guidance on the legal and administrative procedure involved in registering and establishing the FPO?
Yes, there are various legal procedures involved in forming an FPO, such as signing of Articles of Association, Memorandum of Agreement, and provision of INC 1 form for name for the FPO. There are many legal documents and procedures which should be clarified before starting an FPO which can be carried out with the help of consultants.
Are there any special training programs or resources to help farmers to enhance organisational and managerial skills for FPO management?
I don’t think there are specific training programs for farmers. Since the government is promoting 10 thousand FPOs, they are providing training for the cluster based business organisations. There are many such organisations that are involved in gathering all FPOs prevailing in the cluster which will pool the FPOs in the cluster, provide training, and capacity building of the farmers, and to create awareness in them. these organisations will be provided with training by the government by conducting conferences, inviting CEOs of cluster based business organisations to train them. Bur for farmers there is no specific training, and institutions promoting these FPOs will train them.
How can farmers ensure inclusivity and active participation from all members in decision making process of the FPO? How can technology and digital platforms help in streamlining communication and operation within the FPO?
In the preparatory stages of FPO, we must be clear about selecting the farmers who are interested in the group activities. They will understand the benefit of the FPO, get involved and motivated to carry out all the activities. The decision making and such activities should be taken care of by the board of directors who have set of organisational structures, have consultation among themselves, to carry out all the activities. This will help in sustainability of the FPO. These activities are carried out through the hierarchical set up through the Companies’ Act. Technology has saved many farmers during the pandemic by helping them trade in other states too. The eNAM portal is connected to all mandis in various states of India to facilitate interstate trade.
Can you share the success stores or examples of FPOs formed by small group of farmers and the positive impact on their communities? What financial models or funding resources are available?
In Kerala, there are many FPOs and FPCs which are successfully running the businesses to change the socioeconomic conditions to get the benefit from the government and cluster based business organisations. They act in mutual understanding among themselves. As they sell by aggregating their produce, they get good price and profit. The government of India has identified 9 agencies such as SFAC, NABARD, National Cooperative Societies to provide funds for them. Small scale banks will also help them. SFAC provides credit guarantee for the FPO in the initial stages. NGOs are also now involved in supporting them. Based on the support from SFAC, they can approach money lending organisations for support.
Are there any mentorship programs or partnerships with experienced FPOs that small group of farmers can tap into for guidance and support?
During the preparatory stages, we will have exposure visits which has become mandatory. This helps in seeing and believing and makes the farmer realise the benefits. He will get motivated and will be engaged in the process easily. Such visits will also help promote the FPOs, help a farmer to become member of two FPOs also to sell his produce. He can thus be benefited by getting guidance from other FPOs also.
Mr. Mohamed Aseemudheen M
Email: mohamed-2022-11-074@student.kau.in
Phone number: 9597524538
A producer organisation is a legal entity formed by primary producers or farmers. The organisation will share the profits and benefits among its members which is an important activity of a producer organisation. Various activities such as procurement of inputs and disseminating marketing information are important in a producer organisation. The members should be aware of what is happening in the market, both locally and internationally, and the producer organisation should keep the members aware of the technologies and innovations, facilitating finance for inputs as small and marginal farmers will not have financial stabilities. The producer organisation should also help in aggregation and storage of produce. The producer organisation can help in aggregating and storing the produce to be sold when demand is there. When 10 to 20 farmers join together to aggregate their produce, it increases the bargaining capacity of the produce, and producer organisation facilitates this through aggregation storage.
Storage is an important component in the market price as commodities can be stored and sold later to fetch good price. The producer organisation also helps in drying, cleaning, grading, publicizing the product etc., to create a good value for the product. It also helps in packaging, labelling, and standardizing according to the conditions prescribed by the government. Producer organisation is also involved in quality control which the farmers do not know due to their low level of literacy. It can also help in participation of commodity exchange and export by aggregating large quantity of produce. The major organisation is called Farmer producer organisation or farmer producer company.
Small Farmers Agribusiness Consortium is formed by Government of India for facilitating and supporting the FPOs. It is an autonomous body formed for implementing the central government of India schemes for small and marginal farmers in agribusiness activities. All facilitations and promotions are carried through this organisation. Mainly it helps farmers with credit guarantee fund which will mitigate the risk for financial institutions who lend to FPC or FPOs. It also provides equity grant of up to Rs. 15 lakhs which is distributed in a phased manner to the single FPOs. The main objective of SFAC is to enhance viability and sustainability of FPCs. When the FPO starts lacking managerial techniques and trust, it leads to breaking or dismantling of the FPO, and to achieve the sustainability, it should work for a long time. The SFAC helps in providing credit worthiness and sustainability. The shareholders can increase their participation and ownership in the FPO.
There are many legal procedures in India to start an FPO. Normally FPO or FPC will focus on forming a cooperative society or a producer company. So FPOs newly formed will choose the legal entity of producer company under the Indian Companies’ Act. The cooperative society act and producer company act are involved in sharing of profit among members of that organisation, which is the main objective of an FPO. There are other forms such as Trust Act, but when we go for Trust to register, the profit cannot be shared. We need profit to run the organisation, and so we choose cooperative society or company. This will have capacity to procure input and raw materials in bulk and sell by following legal conditions of the producer company act or cooperative act.
The first step to form a producer company is to identify the cluster in a particular district, find out if this producer organisation is viable there. We have to be careful in these initial stages as any failure here will lead to failure of the entire process of formation. Then we have to meet the beneficiaries or the members of the producer organisation in person, introduce the concept of the producer company, and clearly explain how it functions, the need for the same so that the farmers will understand how they will be benefited by this kind of producer company and get interested in the process. We can also take them for an exposure visit to the already established and successfully running FPO to make them see for themselves by seeing and interacting. Then we can include the enthusiastic members of the cluster to form the critical group to canvas other eligible members too by explaining the benefits of participating in this activity. Proper understanding is very important.
The technical aspect of forming a producer company starts with preparing a business plan that can be revised or refined as per the development. Once the members are willing to participate in this and ready to share their capital, we can start looking for promoter directors for the FPC. We can prepare a draft of Articles of association with rules for the company to be followed throughout. A consultant can be approached to help in this as it is difficult for a farmer to accomplish. We can organise a meeting to approve the Article of Association and Memorandum of Association to select the promoters and start collecting the capital to proceed further. The minimum number of members needed to start an FPO or FPC is 10, and maximum can be any number. The higher the number of members, the better is the sustainability of the organisation. The digital signature from the nominated director has to be obtained, a unique name for the FPO should be selected by registering with the Registrar of Companies. We have to apply for DIN for the director, affidavits, and MoA, PoA should be completed. We have to apply for INC 1 for name approval and get the certification of commencement to proceed with operation of producer company. The total charges involved will be around Rs. 40 thousand.
A producer company is a hybrid between a private ltd company and cooperative society. The liability of members is limited to the paid amount of shares which is safe from the company loss. Minimum paid up capital should be Rs. 5 lakhs. There is no interference from the government or private body. The producer company can operate anywhere within the country which gives flexibility and expansion to improve business. There are a few limitations too. Registration of a producer company requires a consultant’s help and is time consuming. Members cannot transfer their shares freely. Getting a CEO at affordable cost is tough. The producer company should follow the statutory provisions of the Indian Companies’ Act without fail. But the central government has announced schemes for formation and promotion of 10 thousand FPO with a budget of Rs. 6865 crores. There are many states which have a good number of FPOs registered.
What are the initial steps and requirements in forming an FPO with smaller group of farmers? What support or incentives are available for small scale farmers who want to establish an FPO at the community level?
We have to identify the cluster in a district or state with farmers, analyse the situation if there is a need for FPO or FPC. Then we must go ahead with forming a critical group, exposure visit, and with enthusiastic farmers, the FPO can be formed. The SFAC is a body meant to support the small and marginal farmers in the case of economic holdings as we know they lack aggregation of produce and marketing techniques. The SFAC give credit guarantee to support them with all the credits in the initial stage of forming an FPO. Once the FPO is formed, they will get equity grant of Rs. 15 lakhs per FPO which will be distributed in phased manner. This will help them in proceeding further with the functioning of the FPO and improve the sustainability of the particular FPO.
How can small groups of farmers effectively pool their resources and contributions to initiate the formation of FPO?
The FPC act requires a minimum of 10 members to form the FPO with mutual understanding and good interest to proceed further. After formation of the FPO, they will be benefited by all the produces aggregated together. Their produce will be harvested at the same time, have bulk quantity, and have good bargaining capacity in the market. They will get good price from the dealers. The small and marginal farmers will lack knowledge about market situations, and the FPO and the CEO supporting the FPO will share all the information about the market price and get involved in good market practices to get good profit.
Can you provide guidance on the legal and administrative procedure involved in registering and establishing the FPO?
Yes, there are various legal procedures involved in forming an FPO, such as signing of Articles of Association, Memorandum of Agreement, and provision of INC 1 form for name for the FPO. There are many legal documents and procedures which should be clarified before starting an FPO which can be carried out with the help of consultants.
Are there any special training programs or resources to help farmers to enhance organisational and managerial skills for FPO management?
I don’t think there are specific training programs for farmers. Since the government is promoting 10 thousand FPOs, they are providing training for the cluster based business organisations. There are many such organisations that are involved in gathering all FPOs prevailing in the cluster which will pool the FPOs in the cluster, provide training, and capacity building of the farmers, and to create awareness in them. these organisations will be provided with training by the government by conducting conferences, inviting CEOs of cluster based business organisations to train them. Bur for farmers there is no specific training, and institutions promoting these FPOs will train them.
How can farmers ensure inclusivity and active participation from all members in decision making process of the FPO? How can technology and digital platforms help in streamlining communication and operation within the FPO?
In the preparatory stages of FPO, we must be clear about selecting the farmers who are interested in the group activities. They will understand the benefit of the FPO, get involved and motivated to carry out all the activities. The decision making and such activities should be taken care of by the board of directors who have set of organisational structures, have consultation among themselves, to carry out all the activities. This will help in sustainability of the FPO. These activities are carried out through the hierarchical set up through the Companies’ Act. Technology has saved many farmers during the pandemic by helping them trade in other states too. The eNAM portal is connected to all mandis in various states of India to facilitate interstate trade.
Can you share the success stores or examples of FPOs formed by small group of farmers and the positive impact on their communities? What financial models or funding resources are available?
In Kerala, there are many FPOs and FPCs which are successfully running the businesses to change the socioeconomic conditions to get the benefit from the government and cluster based business organisations. They act in mutual understanding among themselves. As they sell by aggregating their produce, they get good price and profit. The government of India has identified 9 agencies such as SFAC, NABARD, National Cooperative Societies to provide funds for them. Small scale banks will also help them. SFAC provides credit guarantee for the FPO in the initial stages. NGOs are also now involved in supporting them. Based on the support from SFAC, they can approach money lending organisations for support.
Are there any mentorship programs or partnerships with experienced FPOs that small group of farmers can tap into for guidance and support?
During the preparatory stages, we will have exposure visits which has become mandatory. This helps in seeing and believing and makes the farmer realise the benefits. He will get motivated and will be engaged in the process easily. Such visits will also help promote the FPOs, help a farmer to become member of two FPOs also to sell his produce. He can thus be benefited by getting guidance from other FPOs also.
Mr. Mohamed Aseemudheen M
Email: mohamed-2022-11-074@student.kau.in
Phone number: 9597524538