Farmer Producer Organisations (FPOs) and Collective-Action Farming Models

An FPO is a group of farmers who own and run a business together. Think of a village where farmers grow pulses on small plots. One farmer has little to sell and little say over the price. Many farmers selling as one body get more say. That is the idea behind an FPO.

“FPO” is a general name. It covers farmer-producer groups registered under Part IXA of the Companies Act or under a state Co-operative Societies Act.

1.1 Why do small farmers need an FPO?

Nearly 86 per cent of farmers in India are small and marginal. The average land holding is below 1.1 hectare.

These farmers face two big problems.

• They find it hard to get technology, quality seed, fertiliser, pesticides and finance.
• They find it hard to market their produce, because a small seller has little economic strength.

An FPO gives them collective strength. Members manage their activities together. They get better access to technology, inputs, finance and markets.

1.2 How does a farmer become a member?

A farmer joins by buying shares, not by giving up land. Any small or marginal farmer can become a shareholder by putting money into the equity of the company. So can a landless labourer. The price of membership is money, not land.

1.3 Which legal forms can an FPO take?

An FPO can be one of two main forms. The first is a producer company under the Companies Act. The second is a cooperative society. A producer organisation can register as a cooperative society under any of these laws.

• The Cooperative Societies Act, 1912.
• A state Act on autonomous or mutually aided cooperative societies.
• The Multi-State Co-operative Societies Act, 2002.

Many learners think every FPO is a company. That is not true. The form can be a company or a cooperative society. The Department of Agriculture has called the producer company the most appropriate form around which to mobilise farmers.

A producer company is a company whose members are farmers or other primary producers. Its objects include producing, harvesting, procuring, grading, pooling, handling, marketing and selling the members’ produce. It can also process the produce. It can supply machinery, equipment and other goods mainly to its members.

2.1 Where did the producer company come from?

The idea has a short history.

• The Y. K. Alagh Committee (1998) recommended a new company form. Its aim was to add corporate muscle to cooperatives, for better management and good governance.
• The Companies Act, 1956 was amended in 2002. The new provisions sit in Part IXA of that Act.
• The Companies Act, 2013 now has Chapter XXIA on producer companies. The Companies (Amendment) Act, 2020 added it. It began on 11 February 2021.

Do not mix the two labels. Part IXA belongs to the old 1956 Act. Chapter XXIA belongs to the 2013 Act. Under Section 378C(5) of the 2013 Act, a producer company is deemed to be a private company.

2.2 Who can be a member?

Only certain people can join a producer company.

• A primary producer, or a producer institution, may be admitted as a member.
• A producer institution is a body whose members are only producers or producer companies.
• Membership is voluntary.
• A person whose business conflicts with the company’s business cannot join.
• Members are shareholders in the company’s equity share capital.

Ten or more producers can form a producer company. So can two or more producer institutions, or a mix of ten or more producers and producer institutions.

2.3 How does voting work?

When every member is an individual, each member gets one vote. This holds whatever the member’s shareholding or patronage. A farmer holding 500 shares has the same single vote as one holding 10 shares.

When the members are only producer institutions, the vote follows their participation in the company’s business in the previous year. In the first year, it follows their shareholding. When individuals and institutions are both members, each member again gets one vote.

3.1 What came before the 10,000 FPOs scheme?

The scheme did not start from zero. Three earlier steps led to it.

• In 2011-12, the Department of Agriculture ran a pilot with SFAC. It brought about 2.50 lakh farmers into 250 FPOs. The pilot used two sub-schemes of the Rashtriya Krishi Vikas Yojana (RKVY).
• In 2013, the Department issued Policy and Process Guidelines for FPOs. They urged states to support FPO promotion under RKVY during the Twelfth Plan.
• In the Union Budget 2019-20, the Government announced 10,000 new FPOs over five years.

The report on doubling farmers’ income had also pushed this idea. It recommended 7,000 FPOs by 2022.

3.2 When was the scheme approved, and when was it launched?

Two dates are easy to mix up.

• 19 February 2020: the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister, approved the scheme.
• 29 February 2020: the Prime Minister launched it at Chitrakoot, Uttar Pradesh.

The scheme is titled “Formation and Promotion of Farmer Producer Organizations (FPOs)”. It aims to form 10,000 FPOs in five years, from 2019-20 to 2023-24. Each FPO then gets support for five years from its start.

The money comes in two parts. A total of ₹4,496 crore is set for the five years 2019-20 to 2023-24. A further ₹2,369 crore is committed for 2024-25 to 2027-28, to hand-hold each FPO for five years. The Ministry of Agriculture quotes the scheme’s budget as ₹6,865 crore. The two parts add up to that figure.

4.1 Which agencies implement it?

The CCEA release named three implementing agencies. They are SFAC, NCDC and NABARD. The Agriculture Department allocates clusters and states to these agencies. They then hire Cluster Based Business Organisations (CBBOs) in the states. States may also name their own implementing agency.

The list grew. By February 2021, nine agencies had been finalised.

• SFAC, NCDC and NABARD.
• NAFED, the National Agricultural Cooperative Marketing Federation of India.
• NERAMAC, the North Eastern Regional Agricultural Marketing Corporation.
• TN-SFAC, the Tamil Nadu Small Farmers Agri-Business Consortium.
• SFAC Haryana.
• The Watershed Development Department of Karnataka.
• The Foundation for Development of Rural Value Chains, under the Ministry of Rural Development.

NAFED forms specialised FPOs that link forward to markets. It also gives market and value-chain links to FPOs formed by the other agencies.

4.2 What does NCDC do?

NCDC is the National Cooperative Development Corporation. It works on FPOs in the cooperative sector. In May 2023, the Government decided to form 1,100 new FPOs in the cooperative sector. These were allocated to NCDC under the FPO scheme.

4.3 Who are SFAC and NABARD?

SFAC is the Small Farmers’ Agri-Business Consortium. It was registered on 18 January 1994 under the Societies Registration Act, 1860. The Union Agriculture Minister is the President of its Board of Management. SFAC also operates an Equity Grant Scheme for farmer producer companies. The scheme also has a National Project Management Agency (NPMA) at SFAC. It gives overall project guidance and keeps the data.

NABARD is the National Bank for Agriculture and Rural Development. It was established on 12 July 1982 by an Act of Parliament. It is a development bank for agriculture and rural development.

4.4 What is a CBBO?

A CBBO is a Cluster Based Business Organisation. An implementing agency hires it to gather farmers, register the FPO and give professional handholding. The support lasts five years for each FPO.

Each CBBO has specialists from five fields.

• Crop husbandry.
• Agri-marketing, value addition and processing.
• Social mobilisation.
• Law and accounts.
• IT and management information systems.

5.1 What money and support does an FPO receive?

Each FPO registered under the scheme gets four kinds of help.

• Management cost: ₹18 lakh over 3 years.
• Equity grant: a matching grant of ₹2,000 per farmer member, up to ₹15 lakh per FPO.
• Credit guarantee: cover for project loans up to ₹2 crore per FPO, from eligible lending institutions.
• Handholding: professional support for 5 years, through a CBBO.

A small sum shows how the equity grant works. An FPO with 500 farmer members gets ₹2,000 for each. That is ₹10 lakh. The ₹15 lakh cap is reached at 750 members.

Training is built in. Two institutes lead it. One is the Bankers Institute of Rural Development (BIRD), Lucknow. The other is the Laxmanrao Inamdar National Academy for Co-operative Research and Development (LINAC), Gurugram.

5.2 How big must an FPO be, and where are they formed?

The scheme sets starting rules.

• A new FPO needs at least 300 members in plain areas and 100 members in the North East and hilly areas. The Agriculture Department may revise this.
• Priority goes to aspirational districts, with at least one FPO in each block.
• FPOs are promoted in produce clusters under “One District One Product”.

Credit guarantee funds back the loans. NABARD holds a fund of up to ₹1,000 crore, with equal contributions from the Agriculture Department and NABARD. NCDC holds a fund of ₹500 crore, with equal contributions from the Department and NCDC.

Knowing what an FPO is not clears up three common mix-ups.

• An FPO is not a government department. It is a legal body registered under company law or cooperative law. The Government supports it with grants and handholding.
• An FPO is not contract farming. Its members own it. In contract farming, a farmer signs an agreement with a buyer. Section 7 explains this.
• An FPO does not pool land. Members buy shares. Even a landless labourer can join.

Exam questions often ask you to tell farm models apart. Four models matter here.

7.1 What is cooperative farming?

In cooperative farming, a group of farmers forms a cooperative society. They pool their resources voluntarily, for more efficient and profitable farming. Individual farms remain intact. The society helps members buy inputs, sell their produce on better terms and process it at lower cost.

In NCERT, cooperative farming leaves each farm intact.

7.2 What is collective farming?

Collective farming is the model of the Kolkhoz, from the old Soviet Union. It rests on social ownership of the means of production and collective labour. Farmers pooled all their resources, such as land, livestock and labour. They could keep only very small plots for their daily needs.

7.3 What is contract farming?

The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 defined a farming agreement. It is a written agreement between a farmer and a sponsor. It is made before production. The sponsor agrees to buy the produce, which has a predetermined quality, and to give farm services.

Under the Act, no farming agreement could be made to transfer, sell, lease or mortgage the farmer’s land. So the land stayed with the farmer. The Agriculture Minister also wrote that the procurement price would be named in the farming agreement.

Parliament repealed this Act in 2021. The idea still matters. In contract farming, the farmer knows the buyer and the price before planting.

7.4 How do the models compare?

The table sets the models side by side.

Small Farmer Large Field (SFLF) means that many small farmers in an area work as a group. They match their farm work, so their small plots act like one large field. The UPSC 2023 paper described it as “many marginal farmers in an area organize themselves into groups and synchronize and harmonize selected agricultural operations”.

8.1 Where did SFLF come from?

The idea gained attention in Vietnam. There, the area under the model grew from 8 hectares in 2011 to 196,000 hectares in 2015. Farmers’ profit rose by USD 110 to 180 per hectare. The idea also drew attention in Thailand.

8.2 How does it work on the ground?

Farmers in an SFLF group agree on shared steps.

• They grow one or two varieties of the crop.
• They set up a group nursery.
• They transplant and harvest around the same time.
• They deal with input dealers, service providers and millers as a group. This gives them more bargaining power.

Each farmer keeps their own plot. Vietnamese schemes range from formal setups, where farmers form a company and become shareholders, to informal synchronisation of work.

8.3 Has SFLF been tried in India?

Yes. Two cases stand out.

• Odisha: The International Rice Research Institute (IRRI) piloted a customised model in Taraboisasan village near Bhubaneswar, for the 2017 dry-season crop. 54 of 70 farmers joined, with 38 hectares. A later paper says IRRI piloted it in two Odisha villages, Taraboisasan and Khanijpur. One village had only women farmers.
• Bihar: A 2024 study from TAFSSA looked at SFLF in potato farming in Nalanda district, from 2022 to 2024. It reports yield gains of 30 to 35 per cent and input cost cuts of 10 to 15 per cent.

The Nalanda figures come from focus group talks (23) and key informant interviews (61). They are reported results, not a field trial.

8.4 How is SFLF different from an FPO?

An FPO describes who owns the group. SFLF describes how the farmers work. An FPO is a company or a cooperative society. SFLF is a way of timing and matching farm work. The two can overlap. In Vietnam, some SFLF schemes set up a company with the farmers as shareholders.

9.1 How many FPOs exist, and how much do they sell?

A Rajya Sabha reply of 7 August 2026 gave the latest picture.

• 10,000 FPOs have been formed under the scheme.
• Their cumulative turnover is ₹20,358 crore as on 31 July 2026.
• 1,175 FPOs have 100 per cent women members. About 40 per cent of all shareholders are women.
• Every FPO must have at least one woman on its board.
• 9,865 FPOs have taken management cost, 8,357 have taken equity grant and 3,140 have taken credit guarantee.

A reply of 28 July 2026 said the total turnover had crossed ₹20,340 crore. The two figures agree, as they are given for dates a few days apart.

9.2 How much money has the scheme released?

A PIB note of 23 March 2026 gave the funding position.

• The scheme’s budget outlay is ₹6,865 crore up to 2027-28.
• ₹481.38 crore has been released as equity grants to 7,041 FPOs.
• Credit guarantee cover of ₹712.16 crore has gone to 2,761 FPOs. This count includes new FPOs under the scheme and existing ones.

9.3 How fast has the turnover grown?

An earlier reply of 8 August 2025 gave cumulative turnover of ₹5,035.5 crore as on 30 June 2025. The later figure is ₹20,358 crore as on 31 July 2026. Both are running totals reported by the FPOs. When a question quotes a turnover, check its date.

10.1 Will the scheme be extended?

On 12 December 2025, a PTI report quoted the Agriculture Secretary, Devesh Chaturvedi. He said the Government will extend the central scheme for FPOs for another five years, from 2026-31. This was a statement of intent in a news report. No Cabinet decision on an extension appears in official releases up to October 2026. The PIB notes of 23 March and 7 August 2026 still give the outlay up to 2027-28.

10.2 When was the 10,000th FPO reached?

On 24 February 2025, the Prime Minister spoke at Bhagalpur, Bihar. He said the Government had reached its target of 10,000 FPOs. Bihar had the 10,000th FPO. It is registered in Khagaria district and focuses on maize, banana and paddy.

The Prime Minister also said that around 30 lakh farmers were connected to FPOs, and about 40 per cent of them were women.

UPSC asked about SFLF in the 2023 Civil Services Preliminary paper. The question names the concept and four options. Only one option matches the group-and-synchronise idea.

Read the UPSC question paper (Set A) and the UPSC answer key (Series A). The key gives (b).

Watch for five traps.

• Approval and launch: 19 February 2020 is approval. 29 February 2020 is launch.
• FPO and contract farming: an FPO is owned by its members. Contract farming ties a farmer to a sponsor.
• Cooperative and collective farming: only collective farming pools land.
• Producer company votes: one member, one vote, not one share, one vote.
• Dates on figures: turnover of ₹5,035.5 crore is for 30 June 2025. ₹20,358 crore is for 31 July 2026.