Farmer Producer Organization (FPO) is a model of aggregation for primary producers viz. farmers, milk producers, poultry farmers, fishermen, etc. with the intention to strengthen the negotiation power of farmers through developing a judicious economy of scale at the farm-gate. The model is aimed towards mobilizing small holder farmers into member-owned producer companies, or Farmer Producer Companies (FPCs) for enhancing production, productivity and profitability, which in turn would help enhance their incomes.

Since farmers or the producers are the equity holders of the FPO, an FPO as an organization provides for sharing of profits/benefits among the members as well as an appropriate framework for owning the company by the farmers themselves.

The underlying rationale for the development of FPOs is the typical fragmented and small size of land holdings of farmers in India. With typical holdings of less than 1 hectare, farmers cannot individually enjoy economies of scale and afford to invest in farm mechanisation/technology for enhancing farm productivity, nor optimally procure inputs nor directly access buyers. Aggregation through FPOs is the only feasible option left for farmers to enhance their bargaining power and farm-related value accruals, as has also been established through various programmes.

As a matter of fact, the collectivisation of producers, especially small and marginal farmers, into producer organisations has globally emerged as one of the most effective pathways to address various challenges in agriculture, but most importantly to enable improved access to investments, technology, inputs, credit, and markets.

The Department of Agriculture, Cooperation & Farmers’ Welfare under the Union Ministry of Agriculture & Farmers’ Welfare has identified FPOs, registered under the special provisions of the Companies Act, 1956, as the most appropriate institutional form around which to mobilise farmers and build their capacity to collectively leverage their production and marketing strengths.

FPOs focus on the entire supply chain and this is what distinguishes them from other aggregation models. With around 86% of land holdings in India being small and marginal, the FPO model becomes an effective instrument to cater to the aggregation needs of farmers at the grass root level.

The Department of Agriculture, Cooperation & Farmers’ Welfare, under the Union Agriculture Ministry, launched a pilot programme for promoting Farmer Producer Organisations (FPOs) during 2011-12. This was in partnership with state governments and was implemented through the Small Farmers’ Agribusiness Consortium (SFAC).

The pilot programme involved the mobilisation of approximately 2.50 lakh farmers into 250 FPOs (each with an average membership of 1,000 farmers) across the country, under two sub-schemes of the Rashtriya Krishi Vikas Yojana (RKVY), namely the National Vegetable Initiative for Urban Clusters and the Programme for Pulses Development for 60,000 rain-fed villages.

To scale the FPO model, ‘Policy & Process Guidelines for Farmer Producer Organization’ were formulated in 2013. As a result of public policy thrust, there has been a substantial increase in the number of FPOs.

Promotion of FPOs

A new Central Sector Scheme for Formation & Promotion of new 10,000 FPOs was launched by Hon’ble Prime Minister Shri Narendra Modi on 29th February, 2020 with budget outlay of Rs 6,865 crore till 2027-28. Shri Modi launched the 10,000th FPO in February 2025 marking the achievement of the 10,000-FPO target set under the scheme.

Under this scheme, there is a provision for handholding support for a period of five years to each new FPO formed, and financial assistance to the tune of Rs.18 lakhs to each FPO under the scheme towards management cost for 3 years. Additionally, matching equity grant upto Rs. 2,000 per farmer member of FPO with a limit of Rs. 15 lakh per FPO and a credit guarantee facility upto Rs. 2 crore of project loan per FPO from eligible lending institutions to ensure institutional credit accessibility to FPOs

FPOs are not just organizations but an unprecedented force to increase farmers’ income and provide small farmers with direct access to significant market benefits, bargaining power and improving market access. Approximately 30 lakh farmers in the country are connected to FPOs, with around 40 percent of them being women. These FPOs are now conducting business worth thousands of crores in the agricultural sector.

Activities undertaken by FPOs

The FPOs provide and undertake following relevant major services and activities for their development:

1. Supply quality production inputs like seed, fertilizer, pesticides and such other inputs at reasonably lower wholesale rates.
2. Make available need-based production and post-production machinery and equipment like cultivator, tiller, sprinkler set, combine harvester and such other machinery and equipment on custom hiring basis for members to reduce the per 2 unit production cost.
3. Make available value addition like cleaning, assaying, sorting, grading, packing and also farm level processing facilities at user charge basis on reasonably cheaper rate. Storage and transportation facilities may also be made available.
4. Undertake higher income generating activities like seed production, bee keeping, mushroom cultivation etc.
5. Undertake aggregation of smaller lots of farmer-members’ produce; add value to make them more marketable.
6. Facilitate market information about the produce for judicious decision in production and marketing.
7. Facilitate logistics services such as storage, transportation, loading/un-loading etc. on shared cost basis.
8. Market the aggregated produce with better negotiation strength to the buyers and in the marketing channels offering better and remunerative prices.

-Strategy Paper for promotion of 10,000 Farmer Producer Organisations, Small Farmers’ Agribusiness Consortium (SFAC)
-Ministry of Agriculture & Farmers’ Welfare, Government of India
– 10,000 FPOs Achieved under Government’s Flagship Scheme, A Step Towards Atmnirbhar Krishi, Ministry of Agriculture & Farmers Welfare, Press Information Bureau