Empowering smallholder farmers & marginal farmers through formation & promotion of FPOs

Introduction

The Central Sector Scheme for Formation and Promotion of 10,000 Farmer Producer Organisations (FPOs) was launched by Prime Minister Narendra Modi on 29^th of February, 2020. The scheme was launched with a budget outlay of Rs 6,865 crore till 2027-28. Since the launch of the scheme, Rs 254.4 crore in equity grants have been released to 4,761 FPOs and credit guarantee cover worth Rs 453 cr has been issued to 1,900 FPOs.

Recently, FPOs were in the spotlight as India reached a transformative milestone by establishing 10,000 Farmer Producer Organisations (FPOs), ahead of the March 31, 2025, deadline, collectively bringing together nearly 30 lakh farmers across the country, 40% of whom are women. These FPOs are now conducting business worth thousands of crores of rupees, contributing immensely to the growth of the agricultural sector.

On the occasion of the release of the 19^th instalment of PM-KISAN in Bhagalpur, Bihar, the Prime Minister launched the 10,000^th FPO, a milestone marking a significant leap in Farmer Welfare and inclusive agricultural development. The 10,000^th FPO was registered in Khagaria district and focuses on maize, banana, and paddy.

The concept behind the Farmer Producer Organisations

Farmers who are the producers of agricultural products can form groups. To facilitate this process, the Small Farmers’ Agribusiness Consortium (SFAC) was mandated by the department of agriculture and cooperation, ministry of agriculture, government of India, to support the state governments in the formation of FPOs.

Objectives

• To provide a holistic and broad-based supportive ecosystem to form to facilitate the development of vibrant and sustainable income-oriented farming and overall socio-economic development and wellbeing of the agrarian communities.
• To enhance productivity through efficient, cost-effective, and sustainable resource use to realise higher returns through better liquidity and market linkages for their produce and become sustainable through collective action.
• To provide handholding and support to new FPOs up to five years from the year of their creation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages, and use of technology etc.
• 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 the government.

The Farmer Producer Organisations (FPOs)

The FPOs are collectives formed by farmers to:

• Enhance productivity;
• Reduce costs, and;
• Improve market access through cooperation.

The primary aim of an FPO is to enable farmers to benefit from the economies of scale, enhancing overall Farmer Welfare.

The Small Farmers’ Agribusiness Consortium (SFAC) under the Ministry of Agriculture plays a pivotal role in supporting the formation of the FPOs, which are registered under either:

• The Companies Act, or;
• The Co-operative Societies Act.

Need for FPOs

Small, marginal, and landless farmers face challenges during the agriculture production phase, such as:

• Access to technology;
• Quality seeds;
• Fertilisers and pesticides, and;
• Requisite finances.
• Challenges in marketing their produce due to a lack of economic strength.

FPOs help in the collectivisation of such small, marginal, and landless farmers, giving them collective strength to deal with such issues. managing their activities together to get:

• Better access to technology;
• Inputs;
• Finance, and;
• Market for faster enhancement of their income.

The way FPOs help Smallholder Farmers

• Achieving Economies of Scale

FPOs help small and marginal farmers reduce input costs and secure better prices by aggregating purchases and sales.

Access to institutional credit since long a barrier for smallholders, is improved through FPOs, aligning such support with ongoing government schemes for farmers aimed at financial inclusion.

FPOs enable smallholders to access international markets.

• Overcoming Shrinking Farm Sizes

With average landholding size shrinking from 1.08 hectares in 2015–16 to just 0.74 hectares in 2021–22, FPOs help farmers aggregate resources and invest in modern equipment.

This consolidation enables economies of scale:

• Allowing for bulk purchases;
• Shared services, and;
• Use of advanced machinery is improving productivity, a key enabler of agricultural sector growth.
• Supporting Value-Addition & Processing

Through shared infrastructure like mini-mills and cold storage FPOs help farmers earn more by adding value to raw produce, strengthening Farmer Welfare through diversified income streams.

Key Features of the Scheme

• Up to Rs 18 lakh financial aid over 3 years
• Matching equity grant of Rs 2,000 per farmer (max Rs 15 lakh)
• Credit Guarantee up to Rs 2 Crore in project loans
• Cluster-based handholding support for 5 years

Challenges Faced by FPOs

• Many farmers joining FPOs have limited exposure to modern agricultural practices, quality standards, and market requirements.
• Most farmer-leaders lack formal training in business management, financial planning, human resources, and strategic planning.
• Most FPOs begin with minimal capital contributed by farmer members who themselves have limited financial resources, creating a precarious situation where the organisation struggles to invest in necessary infrastructure, working capital, or growth opportunities.
• Farmer members often expect immediate benefits from their FPO membership but are reluctant to make significant financial contributions.
• Traditional financial institutions often view these organisations as high-risk borrowers due to their agricultural focus, limited collateral, and perceived management weaknesses.
• Many FPOs lack the market intelligence necessary to make informed decisions about what to produce, when to sell, and at what prices, putting them at a disadvantage competing with established suppliers or negotiating with buyers.

Epilogue

By fostering collectivisation, enhancing market access, and providing financial and institutional support, the initiative has empowered millions of small and marginal farmers, including women and economically weaker sections, boosting agricultural productivity and income, contributing to rural job creation and economic resilience. As FPOs continue to evolve, they promise a more equitable and resilient future for India’s agricultural landscape, it is opined.

Critics however state that it is critical to move beyond numbers. They opine a target-oriented approach may work in the initial phase. As such, although reaching the target of 10,000 FPOs ahead of the March 31, 2025 deadline is commendable, there is now a need to focus on better outcomes.

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