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“The median size of paid up capital in the majority of the FPOs is Rs 1 lakh and 75% of the FPOs registered in India have less than Rs 5 lakh, which is inadequate to run a business,” according to the report.

Thousands of farmer producer organisations (FPOs) are still unable to access capital from the financial institutions because of the smaller volume of business generated by these entities, a new report stated. Even though there has been a steady growth in the number of entities owned by farmers, FPOs face several challenges ranging from management of the business, irregular supply, and lack of timely financial assistance, the report stated.

According to the corporate affairs ministry, there are 24,183 farmer producer companies (FPCs) registered till March 31. Of these, 23,354 have an ‘active’ status, according to the report by the National Association for Farmer Producer Organisation.

FPOs struggle to secure sufficient funds for their operations, hindering their ability to invest in infrastructure, technology, and capacity-building, it said. “With a poor resource base and less capital to invest, smallholders’ contribution to the equity base is insufficient,” the report noted.

“The median size of paid up capital in the majority of the FPOs is Rs 1 lakh and 75% of the FPOs registered in India have less than Rs 5 lakh, which is inadequate to run a business,” according to the report.

It has stated that the ability to influence the agricultural value chain in a significant manner remains far-fetched for the majority of FPOs. The report has stated that the private sector involvement with FPOs is still limited in nature because of ‘gaps’ in building mutually inclusive business models. However it has stated that several companies such as Corteva, ITC, Bayer and others have been working with FPOs which are ‘demand’ driven in nature.

The report has said the short duration of hand-holding support received from the agencies including farmers’ cooperative NAFED, Small Farmers Agri-Business Consortium and NABARDis insufficient either to develop the business acumen needed or build strong governance and management of FPOs. Currently, Rs 18 lakh is provided as financial assistance initially to FPOs for three years for taking care of operational expenses.

The study also points out that the convergence of government schemes has emerged as a valuable intervention for FPOs. “By leveraging government schemes, FPOs gain access to additional resources that may not be available through traditional financing options,” it stated.

Through the adoption of various technological solutions technology has enabled FPOs to leverage data analytics, precision agriculture, and e-commerce platforms, leading to increased productivity, profitability, and market reach.

“Going forward we will see a shortening of the supply chains from farmers to consumers with FPOs playing a critical role in it,” Pravesh Sharma, director, Samunnati, a NBFC, told FE. The entity is currently associated with 600 farmer collectives with 6 million farmers as members.

Meanwhile, under the central sector scheme of ‘formation and promotion of 10,000 FPO’ launched in 2020 with a total budgetary outlay of Rs 6,865 crore, more than 6,000 FPOs by 1.1 million farmers have been registered so far.