India is primarily an agrarian economy, which supports the livelihood of millions of farmers and supports the entire country, including surplus exports of food and food products. Though the sector faces slow growth because of issues like high production cost, low access to credit and minimal direct-market linkages. These factors adversely affect small and marginal farmers, which constitute 85% of the Indian Agriculture sector. To counter these problems, and to give a boost to the Agriculture industry, the Government of India has introduced the concept of Farmer Producer Organizations (FPO). Mr. Kailash Chaudhary, the Minister of State for Agriculture said that the government will give credit guarantee to FPOs for project loans up to Rs. 2 crores.
FPOs are aimed at making farmer community self-reliant, where the farmers will upgrade from producers to businessmen. Farmers can now directly trade in the open market and eliminate the middlemen. The farmers associated with FPOs can get better prices for their products and can trade fairly. The Union Minister said that more than 30 lakh farmers will benefit from FPOs. The government plans to set up at least one FPO per block of 100 districts across the country. 10,000 FPOs are planned to be set up by 2024 and Rs. 6,865 crores have been allocated towards this masterplan.
Each FPO should have at least 11 farmer members and the organization will be registered under the Company Act. To begin with, each FPO will be given an equity grant of Rs. 15 lakhs over 3 years, in which the growth of the FPO will be monitored. NABARD will rate the growth and work of the FPOs in the three years duration, after which further grant will be given to it.