Farmer producer companies (FPOs) can become attractive trading partners for corporate buyers seeking to hedge their risk of production, according to agri body ISAP.
FPOs, registered under the Companies Act, are firms of small and marginal farmers. There are 300 FPOs in India and they are supported by government body Small Farmers Agribusiness Consortium (SFAC).
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.
The government recently launched a ‘Kisan Mandi’ in Delhi to enable FPOs directly sell their produce to consumers.
According to Sudarshan Suryawanshi, CEO of Indian Society of Agribusiness Professionals (ISAP), " 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."
"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 stressed.
Recently, SFAC and NABARD signed a memorandum of understanding to jointly implement schemes for the promotion of 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.