Chapter 1 - Introduction
This chapter covers the introduction to FPOs. This also covers the concept of Farmer Producer Organization, Understanding of FPO, Objectives and activities of FPO, Important characteristic features of Farmer producer organization, Key challenges for the success of a Farmer producer organization and some important FAQs and answers.
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The FPOs can be legally registered as a Cooperative Society under the provisions of the following Cooperative Societies Acts. (a) Cooperative Societies’ Act of individual state in India (b) Autonomous Cooperative Societies’ Act existing in many States (c) Multi State Cooperative Societies’ Act (a Central Act)
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The producer organizations can also be registered as a society under society’s act. The society can be defined as an association of persons (generally unincorporated) united together by mutual consent to deliberate, determine and act jointly for a common objective and a collective purpose. As per the provisions of the Societies Registration Act, 1860, a society can be formed by minimum of seven persons. Individuals (excluding minors but including foreigners), partnership firms, companies and registered societies are eligible to form a society.
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The producer organizations can be registered under trust act as charitable trusts. In simple words, it is a transfer of property by the owner to another for the benefit of a third person along with or without himself/herself or a declaration by the owner, to hold the property not for himself/herself but for another or another and himself/herself. A person who creates a Trust is called a settlor, the person to whom the property is transferred on trust is called a trustee and the person for whose benefit the property is transferred is called the beneficiary.
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The process of incorporation of a Farmer producer organization is an important step and has to be initiated by a person or by an organization having enough experience in organizing farmer’s institutions. A person or an organization involved in initiating the process of formation of a FPO is called as an initiator or a facilitator who leads the process of incorporation of the FPO guides the group of farmers through the entire process.
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Successful operation of the FPO is one of the important aspects for its sustainability. This mainly requires the preparation and finalization of a business plan in consultation with the members and experts. A detailed consultation on the proposed business plan of the FPO should be done during the first general meeting of FPO. While developing the business plan, the FPO has to understand the physical, social and cultural aspects of the proposed area of operation, its potential, requirement of the shareholders relating to farming (supply of quality inputs such as fertilizer, seeds, pesticides, tools, implements, machineries, credit, technical services etc), surrounding markets and the existing competitors. Demand and supply analysis of products to be sold and product to be required by shareholders would be helpful. A business plan of an FPO would not only convey the organizational structure, business goals and the strategies to meet them, but will allow the company to assess the potential problems and the ways to solve them. Business plan also help to assess the capital required for the proposed business, which, further be required to be submitted to any financial agency (nationalized/ cooperative banks etc) to apply for loans
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The financial management of the FPO is an important aspect that decides the success or failure of a given FPO. The share capital or equity in the FPO means the total of the payments made to the FPO by all the shareholders Members (farmer producers/ institutions of farmer producers) on their shares. It represents a form of member commitment to the group and it defines each member's stake in the group. In a FPO registered as a Producer Company it shall consist of only equity shares.
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Any business will have financial requirement to start the business and run the business. The capital requirement of the FPO will depend on the nature and volume of business which would vary from case to case. The cost will include both fixed and running cost
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Monitoring forms one of the most important aspects in successful and sustainable operation and management of FPO. Monitoring is nothing but a systematic collection and analysis of information of about the FPO and its ongoing projects. Monitoring aims at improving the efficiency and effectiveness of the project implementation so as to derive maximum benefits for the producers.
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The administration or governance of a FPO forms the most important aspect in successful management of FPO. Governance is done by the various actors in the company such as the shareholders or the members, board of directors and the executive staff of the company or the office bearers
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The registered FPO’s have to maintain various types of books, registers and documents regarding the day to day business of the company and keeping of various registers listed below is compulsory for every company. Any lapse or shortfall in book keeping is an offence and is punishable with fine. All the registers should be kept open for the inspection by members of the company at no cost during the business hours of the company. Failing to produce the registers on demand, the concerned person, would be liable to fine, which may extend to five hundred rupees.
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The central government plays and an important role in supporting the FPOs in the country. The state government plays an important role in extending support to the producer’s companies. Apart from encouraging state governments to take up formation of producer’s organizations on a large scale through centrally-sponsored and state-financed programmes and schemes, the Department of Agriculture and cooperation suggests the following actions to be taken by state government to support and strengthen farmer’s producer’s organizations
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