Key highlights of MoA&FW Guidelines for 10,000 FPOs Scheme

Post by Ramanjaneyulu GV 0 Comments
  • total 10,000 FPOs are to be formed till 2023-24 and support to each FPO is to be continued for 5 years.
  • The cost of proposed scheme is INR 6,866 crores.
    • 2023-24 with budgetary support of Rs. 4496.00 crore
    • 2027-28 may need about Rs. 2369.00
  • Key Features
    • Formation and promotion of FPO is based on Produce Cluster Area
    • Contiguous produce clusters and homogenous producers for economic and social bonding.
    • Requirement of Feasibility study and perspective business plan to establish a fit case for viable business proposition for FPO in the beginning.
    • Identification of the need for promotion of FPO Federations.
    • Identification of the minimal HR requirement of CEO and Accountant for FPOs.
    • Identification of the need for professional staff and support for FPOs.
    • Longer time period – 5 years
    • Increased equity grant up to Rs.15 lakhs per FPO and ensuring for the purpose of equity only.
    • Enhancement of credit guarantee cover up to Rs.2 crore per FPO.
    • Attempts to strike a balance between leveraging required government support for FPOs and trying to insulate the FPOs from undue interference from the government.
    • Focus on aspirational districts, notified tribal areas and North East areas.
    • Provision- Government may prioritize FPOs to undertake procurement operation on MSP.
    • a National Project Management Agency (NPMA) will be set up by SFAC
    • Implementing Agencies will set up Cluster- Based Business Organizations (CBBOs) at the State/Cluster level to form and promote FPOs as per their requirements
  • Support to FPOs: For the first 3 years a grant of 18 lacs is provided. This is released @ Rs. 6.0 lakhs per year. This Rs. 6.0 lakhs per year is towards the salary of the CEO, accountant etc so that the limited equity capital is not spent on human resources. However without appropriate human resources the FPO with hundreds of members cannot function as a business unit which can distribute wealth to its members.
  • FPO 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), size of 100 shall be eligible
  • Equity Grant: Equity Grant in the form of matching grant up to Rs. 2000 per each farmer member of the FPO. The grant has a maximum ceiling of Rs. 15.00 lakhs. Eg. Let us assume there are 750 farmer members in the FPO. Each farmer contributes Rs.2000/- as his equity capital. Thus the farmers contribution towards equity is 15 lacs. In this scenario Government of India gives a matching grant of Rs.2000/- for each farmer member towards increasing his equity. Thus each farmer will be having Rs.4000/- as his equity. In this way the original Rs. 15.00 lakhs equity becomes Rs. 30 lakhs by virtue of the matching grant of Rs. 15.00 lakhs by the Government.
  • Working capital through bank loans: Government wants large scale operations from the FPOs and want them to run successfully. For achieving multi crore turnover volumes the FPO needs large working capital. Banks insist on collateral securities (of non agricultural assets) and personal guarantees to provide term loan/working capital on large scale. Due to this major hurdle the FPOs are totally handicapped for large resources which are a must as the FPO is expected to pay its members immediately on the delivery of their produce.
  • In this 2020 guidelines Government has enhanced the credit guarantee scheme for FPOs.
    • In case of project loan above Rs.1 crore and upto Rs.2 crore, credit guarantee cover will be for 150 lakhs (Page No :25, Point 12.8(i)
    • In case of project loan upto Rs.1 crore, credit guarantee cover will be for 85 lakhs (Page No: 25, Point 12.8(i)).
  • The FPOs are also entitled to avail benefits under various schemes and programs of the Central and State Governments.
  • NAFED is bound to encourage FPOs to undertake price support purchase operations on its behalf. (a non-funding but income generating activity)
  • FCI and State Governments have also agreed to encourage FPOs as procurement agencies under the Minimum Support Price (MSP) Management operations for various crops. (a non-funding but income generating activity)
  • State Governments are also advised to use FPOs as implementing agencies for various agricultural development programmes, especially RKVY, NFSM, ATMA, etc. and extending the benefits of Central and State funded programmes in agriculture to members of FPOs on a preferential basis. (a non-funding but income generating activities)
Ramanjaneyulu GV

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