Farmers Producer Organisation (FPO)
Farmers Producer Organisation (FPO)


A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company,a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. In some forms like producer companies, institutions of primary producers can also become member of PO.

Farmers Producer Organisation (FPO) is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.

Need of Farmers Producer Organisation (FPO)

The main aim of PO 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.

Essential features of a Producer Organisation (PO)

  1. It is formed by a group of producers for either farm or non-farm activities.
  2. It is a registered body and a legal entity.
  3. Producers are shareholders in the organization.
  4. It deals with business activities related to the primary produce/product.
  5. It works for the benefit of the member producers.
  6. A part of the profit is shared amongst the producers.
  7. Rest of the surplus is added to its owned funds for business expansion.

Ownership of a Producer Organisation (PO)

The ownership of the PO is with its members. It is an organization of the producers, by the producers and for the producers. One or more institutions and/or individuals may have promoted the PO by way of assisting in mobilization, registration, business planning and operations. However, ownership control is always with members and management is through the representatives of the members.

Different types of legal forms of Producer Organisation (PO)

Producer Organisation can be registered under any of the following legal provisions:

  • Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act of the respective State
  • Multi-State Cooperative Society Act, 2002
  • Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013
  • Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013
  • Societies registered under Society Registration Act, 1860
  • Public Trusts registered under Indian Trusts Act, 1882

Key differences between Producer Companies and Cooperative Societies

Registration Cooperative Societies Act Indian Companies Act
Objectives Single object Multi-object
Area of
Restricted, discretionary Entire Union of India
Membership Individuals and cooperatives Any individual, group, association, producer of goods or services
Share Non tradable Not tradable but transferable; limited to members at par value
Limited dividends on shares Commensurate with volume of business
Voting rights One member, one vote, but
Government and Registrar of
Cooperatives hold veto power
One member, one vote. Members not having transactions with the company cannot vote
Highly patronized to the extent of
Minimal, limited to statutory requirements
Extent of
Limited in “real world scenario” Fully autonomous, self-ruled within the provisions of Act
Reserves Created if there are profits Mandatory to create every year
Restricted as per bye-law. Any
amendment to bye-law needs to
be approved by the Registrar and
time consuming.
Borrowing limit fixed by Special Resolution in general meeting. Companies have more freedom to raise borrowing power.
with other
corporate /
houses /
Transaction based Producers and corporate entity can together float a producer company.