Is Government cheating poor villagers through Central Sector Scheme for promotion of 10000 new FPOs?

To unlock the full potential of India’s agri-based economy, we have to prioritise the health and nutrition of the agricultural sector – the primary source of livelihood for nearly 55% of India’s population. With an eye on this, the central government proposed the formation of 10000 new Farmer Producer Organisations (FPO which also include Producer Companies) in the country to revive the agriculture sector and provide livelihoods to the rural population during the Covid Pandemic (2020).

The concept of Farmer Producer Companies came through the Act passed in Parliament (2003, updated 2013), and FPOs registered as Producer Companies have been in existence since 2005. A study conducted by Azim Premji University in 2019 reported that till 2019, there were about 7500 Producer Companies in India, a vast majority of which were government sponsored or supported. This study found that most of these FPOs were very weak and unsustainable with a very high strike off rate. Another reliable study titled “Financial Performance of Farmer Producer Companies of India: A study from 2013–2014 to 2018–2019” reported that over one third of FPOs were in Loss and were unsustainable. Many study reports are available online which concurs that FPOs could not fulfil the objectives for which they were created.

The task for the formation of FPOs under the Central Sector Scheme (2020) was allotted by the various implementing agencies (NABARD, SFAC, NAFED and NCDC) to CBBOs (Cluster Based Business Organisations). These CBBOs (generally NGOs working in the rural livelihood sectors) were allotted at districts or blocks levels where they were supposed to mobilise farmers and form the FPOs. For this purpose the CBBOs were allocated Rs 25.00 Lacs (per FPO) spread over five years. The FPOs were also to be provided grant assistance of Rs 18.00 Lacs spread over three years (Rs 6.70 lacs in the first year). The payments to the FPOs and CBBOs were to be done on reimbursement basis, wherein the CBBO or FPO had to apply for the funds based on the tasks completed fulfilled.

It would be shocking to note that most FPOs under the New Central FPO Scheme registered during 2021 have already become defunct with fund and manpower issues. The budgetary support of the FPOs gets dried up after the 3-4th Instalment, as the FPOs are unable to fulfil the milestone of developing a Business Plan as accepted by Banks. Most FPOs have no idea or vision of how they will take the FPO forward, and with the funds crunch no development activity is likely to take place in the FPO.

At the end of the day, the loser is the poor rural community who invested money (Rs1000/-) with the company on the promise of getting many benefits. The outcome of the government supported FPOs are going to be no different from the Fraud Private Companies which come out with similar schemes to collect money from the poor villagers and then flee the area.

Is the government or the implementing agencies aware that they are actually cheating the poor villagers by creating FPOs which is likely to collapse sooner or later?

We have to admit that a fraud is being committed by these FPOs on the poor villagers of the area. The farmers are being told that if they become a member of the FPO they will get cheaper seeds, fertilizers, pesticides, and also that the FPO will procure their farm produce at better than market prices. Both FPO and CBBO have absolutely no idea as to how they will fulfil their promises, but the pressure for mobilising FPO shareholders forces them to spread lies. The matter of regret is that knowingly and unknowingly, the government system is also involved in this game of making farmers shareholders through promises which cannot be fulfilled.

Why can’t the government and implementing agencies work to develop SMART FPOs which can become sustainable and profitable in the first year itself and be meaningfully engaged with the rural community?

Why can’t Banks come out with a common DPR template, which can provide all information as may be needed by financial institutions?

In this age of technology, why can’t there be proper coordination between the different FPO stakeholders?

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