A senior official in the know told Business Standard the government is considering giving tax exemptions to these organisations, hitherto available only for cooperative societies.
“At present, cooperatives enjoy income tax relief under clause 80P, which could be extended to farmer producer organisations as well, since the functioning and nature of both is similar,” the official explained.
A farmer producer organisation is typically a company consisting only farmers and producers, but formed under the Indian Companies Act 1956 as amended in 2002. These organisations are created both at the block and cluster levels. However, they are different from a cooperative society, though in most places they are named as cooperatives. In a farmers producers organisation, only a producer can become a member, while in a cooperative society even others could become members. Cooperatives are registered under states cooperative acts.
The official said among other proposals that could be considered by the finance minister include allowing these organisations to access funds through External Commercial Borrowings up to $10 million at par with NGOs and non-banking finance companies.
These organisations could also be made eligible for loans from cooperative banks, state finance corporations, National Cooperative Development Corporation (NCDC) and similar financial institutions which primarily give loans to cooperative institutions.
“The Budget could also open the door for collateral free loans for FPOs, up to Rs 25 lakh,” the official said, adding that at present only self-Help Groups are eligible for collateral free loans up to Rs 5 lakh. Since farmer producer organisations are a federated body of primary producers, they must be made eligible for more collateral free loans, he said.
The official said all these proposals being considered by finance minister P Chidambaram have the backing of the Sonia Gandhi-led National Advisory Council (NAC).
In fact, a report of the working group of the council had advocated a strong role for these organisations to help small and marginal farmers.
Officials said venture capital support of up to Rs 1 crore and lower interest rate for these oganisations at par with individual crop loans for farmers are also among the other measures being considered.
At present, interest on short-term farm loans is 7 per cent, on which the government gives and interest subvention of around 3 per cent. According to a senior official from the department of agriculture, at present there are almost 300 odd farmer producer organisations across the country with a combined membership of over 500,000 farmers. Their number can significantly go up if the Budget support comes.