National policy on farmer producer organisations for cheaper loans

Suggests making Amul-like three-tier institutional architecture for FPOs

A national policy on farmer producer organisations (FPOs) has proposed a slew of measures, including providing cheaper institutional loans and a three-tier Amul-like model, to help and benefit millions of farmers.

The draft national policy advocates a special sub-set within primary sector lending norms of banks to make lending to FPOs easier. 

It pitches for a scheme to incentivise hiring talent in FPOs, and encouraging farmer groups to establish agribusiness marketplaces acting as deemed ‘mandis’ under the state agricultural produce laws.

The draft proposes that marketplaces by primary FPOs act as aggregators of farmer produce, provide quality inputs at affordable rates, develop wholesale retail outlets, and offer basic knowledge. 

It suggests implementing an Amul-like three-tier institutional architecture for FPOs. 

The draft notes that mandis set up by FPOs should have the authority to grant trading licences and be integrated fully with existing platforms such as National Agriculture Market (eNAM) and Open Network for Digital Commerce (ONDC).

The draft was recently made available for public comments and is one of the first documents to lay down a structured policy statement on the FPO ecosystem in over a decade. 

It calls for a targeted development of primary-level FPOs in each of the 7,256 blocks of the country over the next five years, benefiting about 25 million farmers out of the total 126 million small and marginal farmers.

Currently, the country has over 7,000 functional FPOs, with many being established in recent years under the Central scheme to promote and form 10,000 FPOs.

The draft policy recommends a comprehensive assessment of FPOs formed under any scheme, emphasises the importance of engagement with ministries and departments concerned to streamline the incorporation process of FPOs. 

It highlights the need for policies at the state level and continued funding of FPOs through the equity grant fund and Formation Fund.

The policy also calls for the agriculture ministry, which will be the central nodal department (CND) for all FPOs, to engage with ministries and departments concerned to simplify the incorporation process of FPOs. 

It aims to ensure that FPOs can act as procurement agencies at minimum support price (MSP) and be exempt from stock limits.

The policy urges the agriculture ministry to discuss with the Ministry of Finance how to make institutional loans available to FPOs at cheaper rates and to provide tax incentives to corporations that offer financial support to FPOs. 

The draft also calls for formulation of state-level FPO policies in states where they are not already in place, in line with the national policy.

Additionally, the policy calls for developing a scheme to incentivise the appointment of highly qualified CEOs and managers in FPOs through a selection process, aiming to retain highly qualified talent in FPOs.

 

1)   The policy urges the farm ministry to collaborate with the finance ministry to provide cheaper institutional loans.

 

2)   It advocates for a three-tier Amul-like model for Farmer Producer Organisations (FPOs).

 

3)   There is a call for an assessment of all schemes to promote FPOs, including one focused on setting up 10,000 FPOs.

 

4)   It suggests that states should have their own FPO policy.

 

5)   There should be a policy enabling FPOs to undertake procurement at Minimum Support Price (MSP) and for incentivising talent in FPOs.

 

6)   The target is to establish 50,000 FPOs over the next few years.

 

7) Studies indicate an 18.75 per cent to 31.75 per cent increase in farm productivity among member farmers associated with FPOs.