Agri ministry starts equity grant and credit scheme farm cos

Ministerial body to promote setting up of 250 farmer producer organisations (FPOs) covering 250,000 farmers

The ministry of agriculture has come up with an equity grant and credit guarantee fund to promote the development of farmer producer organisations (FPO) in the agricultural sector, thus declaring the 2014 as the year for FPOs.

Small Farmers’ Agri business  Consortium (SFAC), a society promoted by  Department of Agriculture proposes to promote setting up of  250 FPOs covering 250,000 farmers. In addition, the government has mandated SFAC to be  procurement agency  to conduct price support operations for oilseeds and pulses but only for FPOs, in case prices fall below minimum support price (MSP).

This proposal for credit guarantee and equity guarantee scheme  was a budget announcement in 2013-14 and the guidelines are released now. In order to lend support to the equity base of FPOs, an amount of Rs 50 crore has been earmarked for the equity grant. Similarly, to provide cover to banks over advance loans to FPOs, an initial corpus of Rs 100 crore has been set aside as per the guidelines, an eligible FPO for equity grant should have minimum individual shareholders of 50 and paid up equity  does not exceed Rs 30 lakh.

An FPO is company set up by producers of agricultural commodities, and is typically promoted by farmers, run by farmers and for the benefit of farmers. The objective of such a firm is to improve returns to farmers through collective input purchases and collective marketing besides enhancing quality by increasing productivity through better inputs, and increasing the knowledge base of farmers.

According to officials, the basic objective of the FPO concept is to link small farmers to technology as well as to the markets in association with private, corporate or cooperative sector and if necessary, by providing backward and forward linkages. That is where the need comes to bring in corporate structure to induce governance and monitoring.

As for information collected by officials of SFAC through its field meetings, the major weakness of FPOs is lack of awareness about teh concept among producers, corporate sector, input suppliers, commercial banks, district level and agriculture department officials. These reports suggest that major hurdles lie in complex requirements, ranging from registration to annual filing of information, lack of access to capital, particularly working capital, need for both backward and forward linkages. Besides, policies that impede the growth of FPOs are mandi laws, cooperative regulation, tenancy provisions, among other factors.