Government Built FPOs, Now The Market Must Keep Them Alive

The Central Sector Scheme for Formation and Promotion of 10,000 FPOs was launched in 2020 to bring small and marginal farmers onto a common platform and provide them with bargaining power in markets, value addition, processing, storage, and access to export markets. The scheme initially had an estimated total outlay of ₹6,865 crore.

An FPO is a legal organisation formed by farmers, generally registered as a Producer Company, Cooperative Society, or under another legal framework.

Small Farmers' Agribusiness Consortium (SFAC), National Bank for Agriculture and Rural Development (NABARD), National Cooperative Development Corporation (NCDC), and other implementing agencies are involved in implementing the scheme.

Parliamentary Concerns Over FPOs

The Departmentally Related Standing Committee on Agriculture has noted that audited financial statements are not available for 729 FPOs. The Committee has expressed concern over the need for skilled manpower and expertise for FPOs. Parliamentary committees have questioned not merely the number of FPOs but also their economic performance. The committee is chaired by Charanjit Singh Channi, who has sought details from the government regarding the financial performance of FPOs.

According to official data from the Union Ministry of Agriculture and Farmers Welfare, a total of 6,557 FPOs have received ₹430.77 crore in matching equity grants, while 2,671 FPOs have been provided bank credit guarantees amounting to ₹662.71 crore. The government does not provide FPOs with annual funds for direct buying and selling. Its objective is to build the organisation during the initial three years and transform it into a self-sustaining business. Thereafter, FPOs are expected to generate their own revenues through trading farmers’ produce, processing, branding, value addition and marketing.

More than 40,000 FPOs Listed

According to the Bharat FPO Finder, a digital tool of the National Association of Farmer Producer Organisations (NAFPO), more than 40,000 FPOs are listed across the country, covering more than 600 districts. According to this data, Maharashtra has the highest number, with more than 18,000 FPOs, followed by Uttar Pradesh, Madhya Pradesh, Odisha, and Karnataka among the top five states.

However, under the Central Sector Scheme, more than 10,000 FPOs had been registered by March 2026.

AgPro Consulting Director Devendra K. Jha told The Secretariat that thousands of FPOs have already been registered under the Central government’s scheme.

Yet, crucial questions remain: what is their turnover, how much credit are they accessing, and how are the procurement of agricultural inputs and the sale of agricultural produce changing in rural India?

According to Jha, an estimated 8%–12% of registered FPOs have reached the stage of primary processing, cleaning, grading, bagging, basic food processing, or branded retail. “In these circumstances, farmers need more guidance and exposure,” he said.

Jha said that the commercial success of an FPO cannot be measured at a single point in time. It is a lifecycle. Based on available scheme-related data and fieldwork, an indicative pattern can be observed. According to field estimates, only around 10%–20% of registered FPOs reach the actual commercial stage. Therefore, for companies looking to undertake large-scale offtake or input-supply partnerships, selecting the right FPO becomes an important filter.

On the challenges facing FPOs, Jha said that despite the availability of a Credit Guarantee Fund, many FPOs are unable to secure sufficient working capital in line with their aggregation capacity.

Focus Must Be On Capacity Building

Running a Producer Company requires commercial discipline. Many first-generation FPO boards are still developing this capacity. The absence of binding offtake contracts with large buyers remains a major challenge. The next phase could therefore focus on capacity building, governance, working capital, debt sustainability, and stronger market linkages. The future of FPOs will not merely be about organising farmers, but about turning them into sustainable and capable agricultural business partners.

Kisan Congress President Pal Ambalia told The Secretariat that there are many FPOs where a Board of Directors has been formed, but farmers’ produce is not actually being aggregated. Buying and selling activities have stalled. There is no turnover. In some cases, transactions stop after a bank account is opened. Some FPOs appear to have been created merely to access government assistance, he alleged, because farmer ownership appears weak in several cases. In many places, NGOs, promoting agencies and consultants continue to take a larger role in decision-making.

According to Ambalia, if an FPO has to purchase onions from 1,000 farmers, it needs adequate working capital, but many FPOs do not have access to such funds. Many FPOs also lack buyers, processing units, brands, and packaging facilities.

Farmers become members but often do not attend meetings. There is a shortage of professional management, while marketing capabilities remain weak. Weak branding and inadequate processing infrastructure are also among the major challenges facing FPOs.