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Need of Farmers Producer Organisation(FPO)

NEED OF FARMERS PRODUCER ORGANISATION (FPO)

 

The main aim of Producer organization is to ensure better income for the producers through an organization of their own. Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.

 

 

Why FARMER PRODUCER COMPANIES ARE PREFERABLE IN COMPARE TO CO OPERATIVE SOCIETIES.

 

There are different legal types of producer organization. In these days Farmer producer companies are more preferred as producer organization because this format of organization is more suitable and comfortable to achieve main object of PO. Also there are few limitations under cooperative societies as compare to Producer Company. Let’s understand few differences under Cooperative societies and Producer Company:

 

PARAMETER

COOPERATIVE SOCIETY

PRODUCER COMPANY

Registration
  • Cooperative Societies Act 1860
  • Time Consuming Process
  • India Companies act 2013
  • Ease to Incorporate.

Objectives

Only Single object

 Multi-objective

Area of
Operation

Restricted as per applicable society act

(state wise)

Entire union of India.

Membership

Only Individuals and cooperatives

Any individual

Group of Persons/ Association

Any producer of goods or services

Share

Non tradable in market

Non tradable but transferrable with limited to members at par value.

Profit
sharing

Limited dividends

Profits are commensurate with volume of business.

Voting rights

One member, One vote

 

Government and Registrar of Cooperatives hold veto

One member, One vote

 

Members not having transactions with the company cannot vote.

Government
control

High

Minimal interface of Govt.

Transparency

Low (in compare to Company)

High

Extent of
Autonomy

Companies are fully autonomous, self-ruled within the provisions of Act.

Reserves

Reserve (in case of profits)

Mandatory

Amendment in Bye-laws

  • Time Consuming Process
  • Approval by Registrar.
  • Easy to Amend by Laws.
  • Approval by Member’s Resolution.

Mode of Compliance

Offline

Online

Borrowing
power

Restricted as per bye-law.

Borrowing limit fixed by Special Resolution

Audit

Compulsory

Compulsory

Minimum Member Required

10

10 (Individual Producers)

Or 2 or more Producer Institutions

Incorporation Cost (Apx)

-

INR 30,000

 

Preferable form for Producer Organization:

FPOs are more preferable in compare to cooperative societies, due to following reasons:

  1. Societies are restricted governed by societies act 1860 on basis of state laws , But FPO are free to operate at any place of India and monitor by Ministry ofcorporate affairs.

 

  1. There are only Single object in case of cooperative society But Multi-objects are possible in case of Company.

 

  1. In case of society Government and Registrar of Cooperatives hold veto power to Vote but in case of FPO no such rule.

 

  1. Companies are more transparent and easy to amend its bylaws but in case of society process are time consuming and in offline mode.

 

  1. For Borrowing Power Under Co Operative Society Restricted as per bye-law. Any amendment to bye-law needs to be approved by the Registrar and time consuming But in Company Borrowing limit fixed by Special Resolution in general meeting. Companies have more freedom to raise borrowing power.