An assessment of the status and performance of farmer producer organizations (FPOs) in Telangana, India

Introduction

The promotion and development of Farmer Producer Organizations (FPOs) have been identified as a cornerstone of inclusive agricultural development, as articulated in the Government of India's 12th Five Year Plan. In recognition of their potential to address the challenges faced by small and marginal landholders, the government, along with apex financial institutions such as NABARD, various financial bodies, and private donor organizations, has initiated significant measures to foster their growth and efficacy as viable business entities. The fundamental objective of FPOs is to enable smallholder farmers to achieve economies of scale by strengthening support systems and services within emerging value chains. Effective farmer organizations are characterized by a common interest among members, mandatory membership with adherence to strict rules and regulations, compliance with quality production standards, and shared, rotational responsibilities. This collective structure enhances the farmers' negotiating position with buyers, thereby reducing transaction costs and mitigating production risks. The successful functioning of an FPO is critically dependent upon the strength of its management systems, governance framework, and capital structure.

DAATT Centres and KVKs. From the 311 FPOs operating in these districts, a purposive sample of 18 FPOs was selected based on their established rapport with local extension units, consisting of 9 FPOs from DAATT centers, 8 from KVKs, and one from RARS, Jagtial. A total of 450 respondents were chosen for the study, comprising 90 officials (Board of Directors/CEOs) and 360 farmers, with 20 farmers randomly selected from each of the 18 FPOs. The status and performance of each FPO were measured using a modified version of the NABARD Performance Grading Tool. This tool evaluated a comprehensive set of parameters, including the FPO's age, governance, management, infrastructure, membership, share capital, training of board members, business plan, financial aspects, annual turnover, market linkage, member service utilization, convergence with government schemes, and compliance/record-keeping.

Results and Discussion

A. Categorization of FPOs by Age Profile

The analysis of the 18 sample FPOs' age profiles revealed that the majority are in a nascent stage of development. The categorization showed two dominant groups: those over five years old and those between two and three years old, each accounting for 38.89% of the sample. While the older FPOs have initiated business activities, the two-to-three-year-old FPOs are still largely confined to completing registration formalities and have not yet begun commercial operations. A smaller proportion of FPOs (11.11% each) are in the fourto-five-year-old category and the very nascent stage (less than one year), with the latter having yet to initiate resourcesupporting activities. The findings collectively indicate that many FPOs are still in the initial stages of their operational journey, with a primary focus on input supply and produce procurement. The text suggests that a key impediment to their progress is a lack of sufficient funds to scale up business activities and establish value-addition infrastructure.

B. Categorization of FPO's based on Governance

The study categorized FPOs based on their governance, revealing that a majority are operating with average or poor governance practices. The analysis, which considered factors such as board composition, member experience, and the regularity of board meetings, found that 61.11% of the FPOs had average governance. This was followed by 27.78% with poor governance and only 11.11% with good governance. The findings suggest that the less-than-optimal governance can be attributed to the inexperience of board members, along with a lack of consistent support and guidance from promoting organizations. While resource institutions have adapted guidelines to local contexts, the results highlight a critical need to strengthen the internal leadership and operational structures of FPOs to improve strategic decision-making and overall organizational effectiveness. A key finding was that while CEOs receive essential training from NABARD on processing and marketing, the timeliness of their salaries from promoting institutions is a probable reason for the average performance. Nonetheless, the presence of strong group leadership and member cohesiveness within the FPOs appears to mitigate these issues and contribute to improved managerial skills, aligning with similar findings by Venkattakumar et al. (2019) [9] .

D. Categorization of FPO based on the infrastructure facilities available

The study found a significant deficiency in infrastructure among the surveyed FPOs, which hinders their capacity to scale business operations and attract new members. While most FPOs (83.33%) possess an office building, and nearly half (44.44%) have a training center, a large majority lack crucial post-harvest infrastructure: 77.78% lack grading facilities, 61.11% lack storage structures, and 83.33% lack processing units. Furthermore, none of the FPOs own essential assets like cold storage or transportation vehicles for expanding their business networks and achieving market integration. The lack of sufficient capital and strong business models is a major impediment to the creation of these facilities. This finding highlights a critical need for substantial investment in physical assets to enable FPOs to move beyond basic services and engage in value-added activities that enhance profitability and sustainability. Singh, 2016) [2,4,8] emphasize that many producer companies operate with minimal paid-up capital, often around ₹1 lakh, which is inadequate for substantial growth.

Strengthening equity mobilization remains critical for improving member incomes and ensuring the long-term viability of FPOs.

F. Categorization of FPO's based on per cent of total members contributing to Share Capital

The results indicate from the Table 6 that all the members from all 18 FPO's were contributing to the share capital of FPO's. These results were in similar with findings of Navya et al. (2022) [5] .

H. Categorization of FPOs Based on Business Plan

Business planning is a critical determinant of the long-term success of Farmer Producer Organizations (FPOs). As shown in Table 8, a majority of FPOs (72.22%) prepared business plans for only one year, while just 27.78% developed plans extending to three years.

A robust business plan enables estimation of costs, revenues, and investments required for establishing an FPO, while also outlining backward and forward linkages, value addition strategies, marketing approaches, and economies of scale. Despite its importance, nearly two-thirds of the sample FPOs had yet to undertake this crucial exercise, highlighting a significant gap in strategic preparedness.

I. Categorization of FPOs Based on Financial Aspects

Financial support plays a vital role in the establishment and growth of Farmer Producer Organizations (FPOs). As presented in Table 9, the majority (77.78%) of FPOs had not received any financial assistance from lending institutions, while only 22.22% had accessed such support.

The study further reveals that nearly four-fifths of FPO representatives lacked awareness of capital mobilization opportunities under government schemes, leaving only 22.22% reasonably informed. Given that nurturing an FPO is a capital-intensive process, building financial awareness and improving access to institutional support are essential for ensuring their sustainability. Among the 18 FPOs studied, the DNT-FPCL stood out with a remarkable turnover of ₹14 crore, while most others remained in the early stages of formation without significant trading activities. This highlights the wide performance gap across FPOs and the need for strategies to accelerate their business growth.

K. Categorization of FPOs Based on Market Linkage

Market linkage is a critical factor in enhancing the profitability of Farmer Producer Organizations (FPOs). As per Table 11, a majority (83.33%) of FPOs depended on local markets to sell their produce, while only 16.67% had established linkages with cooperative buyers. This heavy reliance on local markets can be attributed to limited storage facilities, inadequate infrastructure, transport constraints, and price fluctuations. As most FPOs were recently established, marketing initiatives remained minimal. Strengthening market linkages, therefore, presents a significant opportunity for improving FPO performance. Similar findings were reported by Amitha (2021) [1] and Kandeeban et al. (2017) [3] .

L. Categorization of FPOs Based on Members Availing Services

Access to services such as input supply and extension is central to the effectiveness of Farmer Producer Organizations (FPOs). As shown in Table 12, the majority (77.78%) of FPOs provided input supply and extension services to over 75% of their members, while the remaining 22.22% catered to over 50% of members. These findings highlight the active role of FPOs in service delivery, ensuring member participation and benefits. Comparable results were reported by Patkar et al. (2012) [6] and Singh (2012) [7] , emphasizing the importance of service provision in sustaining member engagement. 16 show that a majority (44.44%) of FPOs targeted a proposed membership range of 500-1,000 farmers, while 16.67% aimed for memberships above 1,000, and 38.89% planned for fewer than 500 members. The proposed unit share values varied across sub-sectors and organizations. Most FPOs fixed membership at ₹50 or its multiples, while some adopted ₹100 or higher multiples.

These variations suggest that while FPOs are experimenting with flexible membership models, a balanced approach to shareholding and inclusivity remains essential for their sustainability.

References

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