Are farmer producer organisations the future of India’s agriculture?

The Indian agricultural system suffers from low productivity and low incomes for farmers, impacting the lives of roughly 100 million small and marginal holder farmers (SMFs), resulting in low stability & predictability of livelihoods, as well as extreme vulnerability to external shocks. Policymakers started to realise that if the plight of the Indian SMFs is to be resolved, then the entire household-level farming system has to move from subsistence agriculture to market-facing agriculture. But the SMF had a negligible surplus and the skills and knowledge to produce for the market.

Thus, the most practical solution was the consolidation of the SMFs into economic collectives. Farmer Producer Organisations (FPOs) were introduced in the early 2000s to improve farmer incomes, creating group enterprises with improved bargaining power and market access. The FPO promotion efforts in the country received a major fillip through the 10,000 FPO policy, with the number of registered FPOs in India increasing to 33,000. Among these, 66 per cent of FPOs have been in operation for less than 4 years with an average annual revenue of ₹700-800 per member. While this revenue is not high enough to drive strong farmer engagement, these FPOs have been steadily growing.

Struggling to raise revenue

While the initiation phase is complete for these emerging FPOs, many begin to stagnate when they have been in operation for 5 years. Most of the emerging FPOs struggle to increase revenue per member, and member engagement plateaus at 20-30 per cent of registered members once they reach a revenue bracket of ₹25-45 lakh.

In India, FPOs are becoming instrumental in livelihood development for small and marginal holder households while ensuring food security and social mobilisation on one hand and transitioning subsistence agriculture systems into more market-facing and remunerative agriculture on the other. The farmers are incorporating new practices, shifting towards improved rainfed and irrigated farming.

Producer Groups (PGs) and Agriculture Production Clusters (APCs) are also playing a key role in collectivising smallholders around specific crops, enhancing productivity and building critical backward-forward linkages. While APCs are showcasing their contributions to the development of the agriculture base, long-term sustainability and building a supportive ecosystem for the farmers require institutional anchoring, which is coming from FPOs.

The FPOs are bridging the systemic gaps and strengthening institutions to serve small farmers, while women-led FPOs are empowering women through leadership, capacity building and economic inclusion.

Viable biz model, an issue

FPOs are taking the roles of planning, input-output management and market engagement. PRADAN supported the formation of 84 all women FPOs across seven States (Jharkhand, Bihar, Odisha, West Bengal, Madhya Pradesh, Rajasthan and Chhattisgarh), most of which were registered in the last two years. These FPOs now operate as Farmer Producer Companies (FPCs), cooperatives or trusts. While these FPOs are evolving into critical institutions for rural transformation, their requirements for consistent support across multiple domains like governance, finance, business planning, compliance and market access are rapidly increasing. PRADAN has institutionalised a Centre of Excellence, Farmer Producer Organisation Resource Centre (FPORC) in the organisation to support the growth of the FPO eco-system in India.

The Central Sector Scheme (CSS) for promoting 10,000 FPOs is significantly contributing to the efforts of FPORC by unlocking access to robust policy frameworks, dedicated funding avenues and extensive national networks – accelerating the growth and sustainability of FPOs across the country.

While FPOs are significantly helping farmers today in the entire rural economy, many of them are struggling to finalise viable business models. Innovation and strategic thinking are often missing due to capacity gaps. In terms of investments, FPOs face significant investment challenges – share capital mobilisation remains inadequate, credit access is limited and financial sustainability is hindered.

Another big challenge is the availability of a skilled workforce; most FPOs are only able to hire freshers or low-cost staff as Chief Executive Officers (CEOs) or Managers, as profit margins are very thin, leading to a vicious cycle of low performance and meagre returns.

As FPOs are growing instrumental in developing the entire rural eco-system, the road ahead demands deeper collaborations, stronger state and central partnerships, improved financing tools (carbon credits, AIFs, social stock exchanges, low-cost financing instruments) and a responsive Corporate India who are willing to partner with these emerging business entities. As part of the efforts of the CSS to promote 10,000 FPOs, FPORC is strategically positioned to align grassroots initiatives with national priorities. The vision is to create autonomous, resilient and competitive FPOs that can uplift the rural economy and secure dignified incomes for smallholder farmers, especially women.

(Ghatak is Lead, Centre of Excellence-FPO, PRADAN, and Singh, National Lead for FPO Business, PRADAN)

Published on July 12, 2025