Corporates can bet on FPOs to hedge farm production risks:ISAP

Farmer producer companies (FPOs) can become attractive trading partners for corporate buyers seeking to hedge their risk of production, according to agri-professionals' body ISAP.
FPOs, which are registered under the Companies Act, are firms consisting of small and marginal farmers. There are total 300 FPOs in India supported by government body Small Farmers Agribusiness Consortium (SFAC).
"Of total FPOs set up till now, we have mobilised smallholder farmers to get organised to form 50 companies to reap benefits -- not only from joint action, but also from links to evolving high-value markets in India's urban centers," Indian Society of Agribusiness Professionals (ISAP) CEO Sudarshan Suryawanshi told PTI.

As small and marginal farmers face several constraints, the purpose of setting up of FPOs is to integrate smallholders into modern networks -- minimising transaction and coordination costs, while benefiting from economics of scale, he said.
Stating that the concept of FPOs is gradually picking up in the country, Suryawanshi said that the government has recently launched a 'Kisan Mandi' in Delhi to enable FPOs directly sell their produce to consumers.
"Many FPOs in Maharashtra are selling vegetables directly to consumers. Going forward, producer companies can become attractive trading parters for corporate buyers seeking to avoid risks of production themselves," he said.

Given the flexible production methods, producer companies can successfully collaborate with larger organisation

of retailing and processing industries, he added.
Pune-based Junnar Taluka Farmers Producers Company, promoted by ISAP, has a membership of 1,000 plus farmers. The company produces mainly vegetables and fruits.
"We are selling vegetables directly to consumers in and around Pune. We are getting good response," the company's Marketing Manager Vikas Bhalerao said.
Recently, SFAC and National Bank of Agriculture and Rural Development (Nabard) signed a memorandum of understanding (MoU) to jointly implement schemes for the promotion of farm producer organisations (FPOs).
Under the deal, Nabard will leverage the benefits of the equity grant and credit guarantee fund for FPOs set up by SFAC to ensure that finance for producer companies flows smoothly.

The SFAC is implementing a scheme whereby FPOs are given equity support and the financing banks are given credit guarantee cover to enable formation of such organisations.