Formation And Promotion – FPO – UPDASP, Project Coordinate Unit

Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)

Government of India realizing indispensable role of collectivization of farmers particularly small and marginal farmers into their groups to leverage the economies of scale in production and marketing, Department of Agriculture, Cooperation & Farmers’ Welfare (DAC&FW), Ministry of Agriculture & Farmers’ Welfare (MoA&FW), launched pilot programme for promoting Farmer Producer Organizations (FPOs) during 2011-12 itself under two sub-schemes of the Rashtriya Krishi Vikas Yojana (RKVY), namely the National Vegetable Initiative for Urban Clusters and the Programme for Pulses Development for 60,000 rain-fed villages. The initiative got real momentum after the Department issued a national policy and process guidelines for FPOs in 2013. However, FPOs continue to face challenges like a lack of market access & credit linkages, inadequate financial support and a lack of managerial skill, etc.

To address these challenges, the Department has formulated a dedicated central sector scheme, “Formation and Promotion of 10,000 Farmer-Producer Organisations (hereinafter “FPOs”) for implementation across the country. Under the scheme, FPOs can be registered either under Part IXA of the Companies Act, 1956 (as made applicable by Section 465(1) of the Companies Act, 2013), or under the Cooperative Societies Act of the States, and handholding is to be done for five years by professionally managed and run ‘Cluster Based Business Organisations (CBBOs). Issues of marketing and institutional credit linkages have also been addressed. In addition, provision has been made for assistance to existing FPOs as well as to promote the formation of FPOs by Agri-Value Chain organisation/ Industry.

Aims and Objectives of the Scheme

To provide a holistic and broad-based supportive ecosystem to form new 10,000 FPOs to facilitate the development of vibrant and sustainable income-oriented farming, and for the overall socio-economic development and well-being of agrarian communities.
To enhance productivity through efficient, cost-effective, and sustainable resource use and realise higher returns through better liquidity and market linkages for their produce, and become sustainable through collective action.
To provide handholding and support to new FPOs up to 5 years from the year of creation in all aspects of management of FPO, inputs, production, processing, and value addition, market linkages, credit linkages, and use of technology, etc.
To provide effective capacity building to FPOs to develop agriculture entrepreneurship skills to become economically viable and self-sustaining beyond the period of support from government.

Farmer Producer Organisation (FPO)

FPO is a generic name, which means and includes farmer-producers’ organisation incorporated/ registered either under Part IXA of the Companies Act or under the Co-operative Societies Act of the concerned States and formed for the purpose of leveraging collectives through economies of scale in production and marketing of agricultural and allied sectors. However, FPOs registered under the Cooperative Societies Act of the State (including Mutually Aided or Self-reliant Cooperative Societies Act by whatever name it is called) for the purpose of this Scheme are to be insulated from all kinds of interference, including in the election process and day-to-day management, through suitable provisions in their Memorandum of Association and Bye-laws with a view to encouraging healthy growth and development of FPO.

Broad Services and Activities to be undertaken by FPOs

The FPOs may provide and undertake the following relevant major services and activities for their development as may be necessary:-

Supply quality production inputs like seed, fertiliser, pesticides and such other inputs at reasonably lower wholesale rates.
Make available the need-based production and post-production machinery and equipment, like cultivator, tiller, sprinkler set, combine harvester and such other machinery and equipment on a custom hiring basis for members to reduce the per unit production cost.
Make available value addition like cleaning, assaying, sorting, grading, packing and also farm-level processing facilities on a user-charge basis at a reasonably cheaper rate. Storage and transportation facilities may also be made available.
Undertake higher income-generating activities like seed production, beekeeping, mushroom cultivation, etc.
Undertake aggregation of smaller lots of farmer-members’ produce; add value to make them more marketable.
Facilitate market information about the produce for judicious decisions in production and marketing.
Facilitate logistics services such as storage, transportation, loading/unloading, etc., on a shared cost basis.
Market the aggregated produce with better negotiation strength to the buyers and in the marketing channels, offering better and remunerative prices.

Strategy for Formation of FPO and Identification of Cluster Area

Formation and promotion of FPO is based on Produce Cluster Area, which is broadly defined as: “Produce Cluster Area” for the purpose of FPO formation and management herein means a geographical area wherein agricultural and allied produce, such as ltSytlthytS h produce of similar or of almost similar nature is grown/cultivated; therefore, an FPO can be formed for leveraging economies of scale in production and marketing. This will also cover Organic Produce and Natural Farming.
The produce cluster area is to be identified with the input of the District Level Monitoring Committee (D-MC), State Level Consultative Committee (SLCC), other Ministries/Departments of the Government of India and the States, as well as with recommendations of Implementing Agencies with input from Cluster- Based Business Organisation (CBBO) and suggestions of relevant Government of India Organisations.
CBBOs will undertake a Feasibility Study in assigned clusters, which will include the following:
- Diagnostic study, including a baseline survey to find out the production and socio-cultural similarity, existing gap and potential activity, interventions in terms of infrastructure, services, etc. required in the value chain of agricultural and horticultural produce, including post-harvest management and marketing. Baseline survey should also identify the current situation of farming, small, marginal and landless farmers for aggregation, to identify the minimum geographical area for potential interventions, etc.
- Prospective Business Plan in order to establish a fit case for the formation of an economically sustainable FPO.
FPOs with a minimum farmer-members’ size of 300 shall be eligible under the scheme in plains, while in North-Eastern and Hilly areas* (including such other areas of UTs), a size of 100 shall be eligible. Farmer-members cohesively located with almost the same interest are to be mobilised to form a group of 15-20 Members, calling the group as Farmer Interest Group (FIG) or Self Help Group (SHG), Farmers Club (FC), Joint Liability Group (JLG), Rythu Mitra Group. Such 20 or more groups from a produce cluster area or a village/ cluster of neighbouring villages based on certain commonalities are to be put together to form an FPO with a minimum farmer-members size of 300 to be eligible under this scheme in plains, while in Hilly and North Eastern regions, 7-8 are to be put together to form an FPO with a minimum farmer-members size of 100. It may provide special focus to include small, marginal and women farmers/women SHGs, SC/ST farmers and other economically weaker categories, etc., as members to make FPOs more effective and inclusive.
* – Hilly area means an area at a height of 1000 metres or above MSL.
However, efforts will be made to achieve an average membership size of 500 farmers in plain areas and 200 farmers in Hilly and North-Eastern regions to make them sizable for economic sustainability and profitability. Based on experience/ need, the Department of Agriculture, Cooperation and Farmers Welfare (DAC&FW) may revise the minimum membership norm per FPO, with the approval of the Union Agriculture Minister. Efforts will be made to form, on average, two FPOs in at least each of the potential 5,000 blocks out of the existing about 7,000 blocks. However, efforts will be made to cover all blocks in the country.
The FPOs can federate at the district level and the state level based on their need for processing, branding and marketing of produce/trading of commodities, which are essential for scaling up for survivability and growth in an era of competition. 4 Based on their need, success and product, they can federate at the National level also to promote packaging/branding and domestic/international trading of quality produce. Such a Federation may avail advisory services of the National Project Management Agency (NPMA) as well as be eligible for the Credit Guarantee facility under the Scheme to strengthen their activities relating to setting up of infrastructure and supply chain for value addition and marketing.
While adopting a cluster-based approach for produce or produce mix, formation of FPOs will also focus on “One District One Product” approach for development of product specialisation, in case the focused agriculture produce has been declared for that district, whereby FPOs will be encouraged for promoting processing, branding, marketing and export of the product for better value realisation. There may be more than one cluster for one product in one district, and a cluster may also extend beyond a district. However, to be an FPO economically sustainable and diversify risk & enhance returns, the FPO will also have an additional product and service mix, so that there are enough activities and engagements with the members throughout the year. Furthermore, FPOs can federate at the district level, State level, & National level for the product identified as per their requirement of processing, branding and marketing.
Concerted efforts will be made to prioritise the formation of FPOs in aspirational districts through intense awareness programmes and making FPOs economically sustainable through adequate support, handholding, training & skill development. However, intensive efforts will be made to form & promote at least 15% of the total targeted 10,000 FPOs (i.e. 1,500 FPOs) in the next 5 years in aspirational districts with at least one FPO in each block of aspirational districts of the country for their development. In order to promote the forest and minor forest produce by the tribal communities, intensive efforts will be made by the implementing agencies to prioritize formation and promotion of FPOs in the notified tribal areas in the country. The benefits of quality input, technology, credit and value addition and processing, as well as better market access, should reach the tribal community and North-East Region through the Scheme in co-operation with Tribal Affairs Ministry, DONER and North Eastern Council (NEC).
Existing FPOs will also be allowed to avail relevant benefits, if not earlier availed in any scheme of the Government of India, such as Credit Guarantee Fund and advisory services from the National Project Management Agency (NPMA) under the Scheme. The FPOs which are already registered but have not been provided funds under any other schemes and have not yet started operation will also be covered under the Scheme.

Cluster- Based Business Organisations (CBBOs)

Implementing Agencies will set up Cluster- Based Business Organizations (CBBOs) at the State/Cluster level to form and promote FPOs as per their requirements; however, targets for produce clusters, full or part of the State or region, will be allocated by the Project Management Advisory and Fund Sanctioning Committee (N-PMAFSC). The Implementing Agencies will apply due diligence to ensure that professionally competent CBBOs are transparently engaged & have experience in promotion and professional support to FPOs.

In a State, based on geography, produce clusters, cropping patterns, etc., there may be one or more CBBOs. Even one CBBO may serve more than one State as per the requirement. However, CBBOs should be given work according to available human resources with them, their past turnover and work experience, etc.
The CBBOs should be going concerns with professional experience and exposure in the formation of FPOs in the agriculture and allied sector, and providing handholding support to them.
The CBBOs should be supported with five categories of specialists from the domains of (i) Crop husbandry; (ii) Agri. marketing / Value addition and processing; (iii) Social mobilization; (iv) Law & Accounts; and (v) IT/MIS in agriculture & agriculture marketing. The CBBOs with the requisite number of other technical and supporting staff to be housed/operated from their own offices in respective States or from offices of respective Implementing Agencies, which have selected them.

Criteria for Identification of CBBOs:

The professional organisation to be identified to function as CBBOs will be selected following a transparent method, and the organisation may be required to demonstrate such technical strength as is reasonably required for discharging its role envisaged under the Scheme.
A Committee under the Chairmanship of MD, SFAC, with representatives of the Chairman, NABARD and MD, NCDC, will consider and recommend the criteria for eligibility and qualification and other minimum requirements to select the CBBOs. The Committee may consider the minimum requisite qualification and experience of the requisite experts of CBBO, area of expertise & minimum experience, as well as the net worth of the organisation to be selected as CBBO. Finalisation of criteria for selection will be with the approval of DAC&FW.
Implementing agencies, if required, may seek the support of NPMA for assistance in the selection process.
Each Implementing Agency will then draw up the list of empanelled CBBOs for engagement by them in any cluster as may be necessary.
The initial engagement of CBBOs will be for a period of a maximum of three years for the purpose of formation of new FPOs (for which they will continue handholding for the entire relevant five years for each concerned FPO as provided in the Scheme).In case the performance of the CBBO is found satisfactory by the Implementing Agency, their term may be extended appropriately.
The implementing agency will review the performance of CBBOs from time to time for their continuation or otherwise to ensure that CBBOs perform efficiently in the formation and promotion of FPOs.
Interested State and Central Government Agriculture Universities and KVKs promoting FPOs may be empanelled as CBBOs, as may be relevant in consultation with N-PMAFSC on a nomination basis.
Subordinate and attached organisations of DAC&FW may be co-opted on operational need, based on consultation with N-PMAFSC on a nomination basis.

Duties and Responsibilities of CBBOs:

Assist in the implementation of the programme as suggested by the NPMA and as per Scheme guidelines.
Assist the Implementing Agency in cluster identification.
Assist in community mobilisation – baseline survey, cluster finalisation, value chain study, formation of groups and FPO and assist in their periodic meetings. They may seek the assistance of Local Bodies, wherever feasible, in the identification of the proper produce cluster and the mobilisation of members.
Registration of FPOs and Training of BODs on roles, responsibilities, management and also capital/ equity mobilisation.
Training and capacity building of FPOs/farmer groups- Training needs identification, developing training modules, conducting basic training workshops and exposure visits.
Encourage and promote social cohesiveness amongst members of FPOs.
Preparation and execution of Business Plans for long-term sustainability of FPO- Business plan preparation (for different incubation services), acquiring land, mobilizing equity capital and implementation of Business Plan while assisting in input management, adoption of proper and good agricultural practices through knowledge sharing, aggregation of produce, quality management, assaying, processing, packaging, supply chain development and marketing and market linkages with buyers/processors/exporters, trading, export etc as may be necessary to ensure long-term sustainability of FPOs.
Assist in regular interface with stakeholders like various Government Departments, Financial Institutions, Training, Research and Development Institutions at the cluster level.
Assist FPO in availing the Equity Grant and Credit Guarantee Facility as per need and growth.
Incubation/handholding services for sustainability – Provide support and monitoring in terms of incubation activities; capacity building of BODs and FPO management for sustainability. The incubation/handholding services include ensuring input, market linkages, preparing and implementing related business plans.
Facilitate the establishment of the necessary common pool production, marketing and processing infrastructure facility by the FPO, as may be necessary, to develop the business for long-term viability.
Facilitating traceability, compliance and global market connectivity. m)Review and monitoring of the field team during implementation as per desired outcomes.
Assist in communication and dissemination of information to farmers by way of market and crop advisory.
Progress report on all specified target activities to be submitted periodically to the NPMA. p) Ensuring programme/project targets are met.
Assist in compliance issues of FPO, including their capacity building in the subject.
Assist the NPMA and the Implementing Agency in data collection and generating MIS reports/information in the required data sheets.
Assist the Implementing Agency and NPMA in rating of FPOs as may be necessary.
Assist in federating FPOs when necessary for business growth and expansion.
Assist FPO in proper financial management and utilisation of funds and accounting, and timely submission of returns and certificates.
Any other activity related to the implementation, management and monitoring of the project.
An advisory body consisting of various stakeholders, including state government representatives, NGOs, RIs, KVKs or any other support institutions, will provide active guidance over project implementation.

4 Key Strategic Features

Farmer Collectivization

Formation of farmer groups to enhance collective decision-making and economies of scale.

Eligibility Criteria

Individuals or groups actively involved in agriculture or allied activities.

Document Required

Land ownership documents or lease/rental agreements.

Financial Access

Facilitation of credit, insurance, and financial services for FPO members.

Implementation Details

Component	Details
Scheme Code	3809
Nodal Agency	SFAC
Implementing Agency	UPDASP
Objective	Formation of 10,000 FPOs across India
Beneficiaries	Small and marginal farmers
Support Period	5 years handholding support

Activity Components

Key initiatives focused on FPO formation, business planning, capacity building, and market integration to strengthen farmer collectives.

FPO Formation

Mobilization of farmers into producer groups and formal registration of FPOs

Business Planning

Development of business plans for sustainable operations.

Capacity Building

Training on governance, financial management, and agribusiness operations.

Market Integration

Linkages with buyers, agri-business companies, and e-market platforms.

Gallery

Contacts

Formation And Promotion – FPO