Farmer Producer Organizations: A Pathway to Rural Prosperity (2025)

Policy Update
Atharva Salunke

Background:

Farmer Producer Organizations (FPOs) have evolved as collective institutions designed to empower small and marginal farmers with the aim of solving issues of fragmented landholdings, lack of credit and technology, and market access facilities. Recognizing that the individual farmer is often placed at a disadvantage in production and marketing, the Government of India facilitated the promotion of FPOs so that economies of scale can be achieved, and increased bargaining power can be attained. 

Prime Minister Shri. Narendra Modi Ji launched the Central Sector Scheme for “Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)” with an outlay of ₹6,865 crore up to 2027-28 on February 29, 2020. Farmer Producer Organisation (FPO) is a general term for producer groups registered under Part IXA of the Companies Act or under the respective State Co-operative Societies Acts with a purpose to utilise collectives for economies of scale in agriculture production and marketing. To enable this, the Department of Agriculture directed the Small Farmers’ Agribusiness Consortium (SFAC) to assist States to establish FPOs.

Aims and Objectives of the Scheme

1. To provide holistic and broad based supportive ecosystem to form new 10,000 FPOs to facilitate development of vibrant and sustainable income oriented farming and for overall socio-economic development and wellbeing of agrarian communities. 
2. To enhance productivity through efficient, cost-effective and sustainable resource use and realize higher returns through better liquidity and market linkages for their produce and become sustainable through collective action. 
3. To provide handholding and support to new FPOs up to 5 years from the year of creation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages and use of technology etc. 
4. To provide effective capacity building to FPOs to develop agriculture-entrepreneurship skills to become economically viable and self-sustaining beyond the period of support from government. 

Functioning:

The implementation of the Central Sector Scheme on the “Formation and Promotion of 10,000 FPOs” is carried out through designated Implementing Agencies (IAs), which play a pivotal role in mobilising farmers and ensuring the sustainability of FPOs. As of February 2021, nine IAs were finalized: 

1. Small Farmers’ Agribusiness Consortium (SFAC), 
2. National Cooperative Development Corporation (NCDC), 
3. National Bank for Agriculture and Rural Development (NABARD), 
4. National Agricultural Cooperative Marketing Federation of India (NAFED), 
5. North Eastern Regional Agricultural Marketing Corporation (NERAMAC), 
6. Tamil Nadu-Small Farmers Agri-Business Consortium (TN-SFAC), 
7. Small Farmers Agri-Business Consortium Haryana (SFACH), 
8. Watershed Development Department (WDD)-Karnataka,
9. Foundation for Development of Rural Value Chains (FDRVC) under the Ministry of Rural Development. 

These Implementing Agencies (IAs) engage with Cluster-Based Business Organizations (CBBOs), which act as grassroots facilitators by bringing farmers together, registering FPOs, and providing professional support for a duration of five years. An FPO may be subjected to capital assistance amounting to ₹18 lakhs for three years, with an equity matching grant of ₹2,000 per farmer member (up to ₹15 lakhs per FPO), and the credit guarantee facility may be extended to ₹2 crores per FPO to ensure institutional credit is made accessible.

Capacity building through structured training shall be imparted by the Bankers Institute of Rural Development (BIRD) in Lucknow and the Laxmanrao Inamdar National Academy for Co-operative Research & Development (LINAC) in Gurugram; IIT shall develop specialized skill modules to strengthen FPOs.

Key initiatives under the scheme include:

1. Credit Guarantee Fund (CGF): It provides guarantee cover to cover lenders’ risk in advancing loans to FPOs, and financing for input collectivization, working capital, and marketing.
2. ONDC Platform Integration: 5,000 out of 8,000 FPOs have been integrated on the Open Network for Digital Commerce for selling their products online for facilitating broader access to markets, digital payments, and direct B2B/B2C transactions.
3. Conversion to CSCs: MoU with CSC SPV would convert 10,000 FPOs into Common Services Centers, thereby facilitating the delivery of citizen-centric services through the Digital Seva Portal and offering rural employment opportunities.

Performance:

FPOs scheme has reached an important milestone with the successful onboardment of 10,000 FPOs on February 24, 2025. This is a big step towards making collective farming strong under the vision of Atmanirbhar Krishi. The historic 10,000th FPO was inaugurated by Prime Minister Shri. Narendra Modi Ji in Khagaria district, Bihar, during the launch of the 19th instalment of PM-KISAN. Maize, banana, and paddy are its specialty, and the FPO represents the emphasis of the scheme on crop diversification and market-led farming.

The reach of the scheme is seen with 30 lakh farmers linked to FPOs, of which almost 40 percent are women, indicating inclusivity and empowerment of rural agriculture. These farmer collectives not only improved market linkages and bargaining capacity but also achieved a collective cumulative turnover of ₹5,035.5 crore up to June 30, 2025.

Integration with digital platforms has also improved efficiency levels further with 1.79 crore farmers, 2.67 lakh traders, and 4,518 FPOs enrolled on the e-NAM platform, enabling transparent trade of ₹4,39,941 crore. The operations of FPOs as business-focused organizations are pushing increased income, enhanced access to credit and technology, and the reshaping of the agricultural sector into a more robust, market-driven environment.

Impact:

The Scheme has shown significant impact in terms of inclusivity, women’s empowerment, and rural livelihood generation. Women’s participation has been remarkable, with 810 FPOs formed exclusively with 100 percent women members, reflecting a strong push towards gender-inclusive farming. Out of the total 19.82 lakh farmers registered in FPOs, 6.86 lakh are women farmers, highlighting their increasing role in decision-making, collective farming, and agribusiness operations. This inclusion strengthens rural household incomes by diversifying livelihoods and creating new opportunities for women farmers.

In addition, 379 FPOs are actively working under the One District One Product (ODOP) initiative, focusing on region-specific crops and products. This initiative promotes local branding, value addition, and stronger market linkages. Overall, the scheme is emerging as a transformative step in empowering farmers, especially women, through collective strength, better market access, and sustainable income opportunities.

Table 1: State/UT-wise number of FPOs working on the ODOP initiative 

Emerging Issues:

The Scheme can be called an outright success, having reached its target within the prescribed time and with the onboarding of the 10,000th FPO in February 2025. Linking of FPOs with platforms such as e-NAM and ONDC further helps in adding to digital access and transparency to agricultural trade, making the model more participatory and sustainable through inclusive provisions for the representation of small, marginal, and women farmers.

However, despite these achievements, FPOs continue to face emerging issues that affect their efficiency and sustainability. Constraints such as limited working capital, high input costs, and inadequate market linkages often weaken their economic base, while complex regulations and lack of awareness about policies restrict access to institutional support.

Way Forward:

The achievement of forming 10,000 FPOs marks a historic milestone in empowering India’s farmers and strengthening collective farming.The formation of 10,000 FPOs marks a landmark achievement in strengthening collective farming and empowering India’s agrarian communities.
Going forward, these institutions hold immense potential to drive rural prosperity, boost farmer incomes, and transform agriculture into a more resilient and market-oriented sector. With their growing presence, FPOs can emerge as powerful vehicles of inclusive growth and self-reliant agriculture.

References: 

1. Ministry of Agriculture & Farmers’ Welfare, Department of Agriculture, Cooperation & Farmers’ Welfare. (n.d.). Farmer producer organizations (FPO) guidelines. Government of India. https://dmi.gov.in/Documents/FPO_Scheme_Guidelines_FINAL_English.pdf
2. Press Information Bureau. (2021, February 9). Central sector scheme “Formation and promotion of 10,000 new farmer producer organizations (FPOs)” of Rs. 6865 crore. PIB Delhi. https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1696547
3. Press Information Bureau, Government of India. (2020, February 29). Prime Minister lays foundation stone for the Bundelkhand Expressway; Hails it as a historic day: Prime Minister launches 10,000 farmer producer organisations (FPOs) all over the country. PIB Delhi. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1604743
4. Press Information Bureau, Government of India. (2024, July 26). Women’s participation in farmer producer organisations. PIB Delhi. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2037661
5. Press Information Bureau, Government of India. (2025, February 28). 10,000 FPOs achieved under government’s flagship scheme: A step towards Atmanirbhar Krishi. PIB Delhi. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2106913
6. Press Information Bureau, Government of India. (2025, July 25). Registration of FPOs, farmers and traders on e-NAM platform. PIB Delhi. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2148525
7. Press Information Bureau, Government of India. (2025, August 8). Formation and promotion of FPOs. PIB Delhi. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2154174#:~:text=10%2C000%20Farmers%20Producer%20Organization%20%28FPOs,lakh%20per%20FPO%20%28%40Rs

About the Contributor:

Atharva Salunke is a Policy Research Associate at NITI TANTRA and a Research Intern at IMPRI. He has recently graduated with a Bachelor’s degree in Political Science from Sir Parashurambhau College, Pune.

Acknowledgement: The author extends his sincere gratitude to the IMPRI team and Ms. Aasthaba Jadeja for her invaluable guidance throughout the process.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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