New Delhi: Gayatri Karma speaks with a confidence and a sense of pride, which is rare for a small farmer. Thirty-seven and a mother of three, Karma spends her days tending to her kitchen garden and growing a variety of crops from chana to maize, in Dewas, Madhya Pradesh. Karma is also part of a farmer-run company set up back in 2012. Last year, she joined the company’s board and now actively takes part in reviewing its quarterly business plans. That’s no small achievement for a farmer with a landholding of just three acres.
The farmer producer organization (FPO) that Karma has been a part of since its inception is Ram Rahim Pragati Producer Co. Ltd. In 2024-25, the 6,000-member strong FPO clocked a turnover of nearly ₹16 crore. So, what difference has the FPO made to the life of a small farmer like Karma? A lot, she said.
Karma’s cultivation costs have halved as the FPO helped farmers switch from expensive chemical inputs to bio-nutrients and organic pest repellents. The farmer-run company now supplies staples like wheat, maize and pulses to a host of corporate buyers like ITC, AWL Agri Ltd (formerly Adani Wilmar) and Safe Harvest, among others. Unlike individual farmers, who often sell their produce immediately after harvest, the FPO holds the produce for a better price, and also does primary processing (like converting wheat to flour and milling pulses), grading and packaging for food brands.
“I no longer worry about low prices, which is the norm during the harvest season. We are not at the mercy of local traders,” Karma said. Her monthly groceries, from cereals and sugars to oils and soaps, are supplied by the FPO at lower than market rates. “To grow an acre of wheat, I used to spend more than ₹10,000 in chemical inputs. This has come down to less than ₹4,000 with locally produced organic inputs,” Karma added.
In addition, the largely women-run FPO has pushed its members into growing organic vegetables for home consumption. The result? Healthy soils and a more nutritious, diverse diet for her family.
Crorepati FPOs
Beginning in 2011, India started promoting FPOs to harness the collective bargaining power of farmers, both as buyers of inputs and sellers of crops. Farmers are usually price takers in both input and output markets—which means they cannot determine prices of either the seeds they buy or the harvested grains they sell. They buy inputs in retail and sell their harvest in the wholesale market. In both markets, they accept the price offered by traders. The idea behind the FPO programme was that a large farmer group will be able to aggregate produce, fetch a better price for its members, and even directly sell to business-to-business (B2B) customers and consumers, bypassing traders.
A formal policy was introduced in 2013 wherein FPOs could be set up under the Companies Act, 2013, to free them of the bureaucratic and political interference common in the cooperative model. The policy tries to replicate the success of India’s hugely successful dairy cooperatives (like Amul and Nandini) in other farm commodities.
In the FPO model, a group of farmers can set up a company by contributing equity capital and becoming shareholders. A 1,000-member group can register themselves as a company, contribute, say ₹1,500 per member, and therefore, raise an equity capital of ₹15 lakh. This makes them eligible for a matching equity grant from the government.
As of March 2025, nearly 44,000 FPOs have been formed, including around 11,000 set up under a central scheme, according to the state of the sector report by the National Association for Farmer Producer Organisations, an industry body. A large majority of these FPOs, about 41,500, are active, but only about 5,100 have opened bank accounts.
This is not surprising since a bulk of the FPOs are young and have yet to raise working capital to service their members (by supplying them with inputs and purchasing the crops harvested by member farmers). Besides, building an institution and turning farmers into entrepreneurs takes time.
Yet, a change is underway. As per the agriculture ministry, more than 1,100 FPOs have crossed an annual turnover of ₹1 crore. Further, as of June last year, 10,000 FPOs formed under the central scheme achieved a cumulative turnover of ₹5,035 crore. This motley crowd of FPOs are now supplying to premium B2B customers and even hedging price risk by taking positions in commodity exchanges.
“An FPO is unlikely to outcompete a trader in a conventional market. So, it needs to find an edge—a differentiator,” said Prasanna Rao, chief executive officer (CEO) at Arya.ag, a startup that provides warehousing, finance and digital market linkage services. “But we are seeing a pattern: FPOs which have created an edge with a differentiated product have a viable business model. If a food company wants to buy low methane emissions rice or low residue produce for infant cereal products it has to go to a farmer group.” Because traders cannot influence the process of production and the quality of the harvest. An FPO can.
Buddha rice
Sometime in 2022, Anshuman Upadhyay, a former marketing executive, returned to his village in Gorakhpur, Uttar Pradesh, to start afresh. He decided to set up an FPO and pinned his hopes on a lost rice variety.
Kala Namak, an ancient, short-grain fragrant variety of rice, had nearly disappeared from the area until it was revived and reintroduced by a retired agriculture scientist. The rice has unique qualities: three times the protein (17% by weight) of regular varieties and a low glycaemic index (which delays the release of sugars into bloodstream, making it suitable for diabetics). Plus, an unforgettable, earthy and sweet aroma. The legend goes that after Lord Buddha attained enlightenment, he distributed the seeds of this rice to his followers as a blessing. Hence, the moniker: Buddha rice.
The FPO set up by Upadhyay, named Pravidhaan Farmer Producer Co., has over 1,200 members, about a third of them women. In FY26, Pravidhaan, is likely to touch a turnover of ₹3.2 crore, more than double the business it did the previous year. Farmer members of Pravidhaan now receive a premium price for the Kala Namak ( ₹120 per kg) they grow, nearly three times what they would receive if they planted a regular rice variety. But it wasn’t a cakewalk.
“It took time for farmers to understand the concept of an FPO. Leave aside contributing the share capital ( ₹1,000 per member), they would not even share their identity documents (needed to register the FPO),” Upadhyay said.
Currently, Pravidhaan supplies over 20 tonnes of Kala Namak rice every month to a staples brand named KisaanSay (launched in 2023). The FPO does the sorting, grading and packaging by employing some of its farmer members. KisaanSay, in turn, follows a unique model of co-branding and profit sharing with FPOs.
“In the FPO ecosystem, a lot of work was already done in terms of capacity building and training, but not so much when it comes to market linkage,” said Nitin Puri, founder and CEO of KisaanSay. “So, we developed this model where we co-curate (a farm produce tied to a geographical region), co-brand and co-profit with FPOs,” Puri added.
KisaanSay now works with 25-plus FPOs in nine states with a focus on popularizing regional products like black raisins from Nashik in Maharashtra, almonds and walnuts from Kashmir, cardamom from Idukki in Kerala, and aromatic rice varieties from Odisha and Uttar Pradesh.
“Our goal is to give farm produce a distinct identity and supply consumers with authentic and traceable products,” Puri said.
Sparks of success
Individual FPOs located in remote areas often find it difficult to market their produce to large corporate buyers. One way to deal with this is by bringing FPOs within a state under an umbrella federation. The federation takes care of marketing while individual FPOs focus on production. Several states have set up working federations including Maharashtra, Bihar, Madhya Pradesh, Gujarat and Telangana.
Be’nishan is one such federation set up in Telangana in 2019 which now brings together over fifty producer groups and nearly 10,000 farmers. “It functions as a professional marketing organization which connects FPOs to corporate buyers. The pre-indents from buyers are obtained ahead of planting, while farmer groups focus on meeting quality parameters (like pesticide residue limits),” said Rajitha Nared, CEO of the Society for Elimination of Rural Poverty, a state government department which provides hand-holding support to the FPO federation.
Between FY19 and FY25, Be’nishan, named after a popular variety of mango, did a cumulative business of ₹470 crore. The FPO federation aggregates fresh produce for retail chains like Reliance and quick commerce players like Zepto and BigBasket. In addition, it supplies custard apple pulp to Scoop (an ice cream brand), and spices like red chilli to ITC and maize to Mars Inc. As per a 2023 case study by the National Institute of Agricultural Extension Management, Hyderabad, income of member farmers rose by 21% between 2019 and 2022, following Be’nishan’s intervention. The key factors were better prices, direct purchase at the farm gate and sales assurance before planting.
The newfound success of farmer run companies like Be’nishan, Ram Rahim (which this piece begins with) and Pravidhaan (which is trying to find its feet with an heirloom rice variety) are but sparks of success. The vast majority are still not business-ready, either because they are young, have a fledgeling leadership or lack access to finance. For instance, only about 2,600 FPOs availed institutional credit during the study period (about 5% of all FPOs formed till date), found a Tata-Cornell Institute report published in February. The median loan size was ₹7.7 lakh for short-term and ₹10 lakh for long-term loans—too little to make a meaningful intervention. Constrained access to formal credit limits the growth potential and operational flexibility of FPOs, the report said.
Because their own equity capital base is small, FPOs often find it difficult to access credit, and when they do, the interest rates are exorbitant, between 14-19%, said Rangu Rao, CEO of Safe Harvest, a staples brand that procures zero-pesticide residue products from FPOs like Ram Rahim. “It is way more difficult for a profitable FPO to take a loan than for a bleeding startup to raise funds.”
Rao added that FPOs have a limited skill set and are often unable to attract talent (like a professional manager) due to their inability to pay a competitive salary. FPOs formed with government support can avail a grant of ₹25,000 per month for a CEO’s salary and ₹10,000 for an accountant’s pay, but only for the first three years of operation, following which they are expected to generate their own funds from business activities (the total administrative support is limited to ₹18 lakh per FPO).
While individual farm incomes are not taxed, FPOs have to pay taxes on their profit (they enjoy a tax holiday for first five years compared to 10 years for startups), said G.V. Ramanjaneyulu, executive director at the Centre for Sustainable Agriculture at Hyderabad, who has been a part of Be’nishan and another FPO-sourced organic food brand named Sahaja Aharam. “Only a handful of FPOs are able to crack the output market: one mistake (when the market price falls after the FPO has purchased crops from farmers) can sink them. Which is why most FPOs find it easier to get into the input business and become a conduit for the industry selling seeds, fertilizers, etc.”
Hedging risks
To be sure, price volatility continues to be the most significant risk (the other being climate and production-related) faced by farmers globally. In developed markets, farmers use commodity futures to get a sense of likely prices, before making their planting decision. But India only allows a handful of commodities in the futures market.
“Currently we are facilitating FPOs to trade and take positions in nine commodities which include guar seed, castor, spices like cumin and turmeric, and maize. In the current financial year, 199 FPOs took positions on our platform with a traded volume of 2.6 lakh tonnes (traded turnover of ₹179 crore),” said Pankaj Bhatt, who heads the FPO vertical at NCDEX, a commodity exchange focused on agricultural products.
Vishwatej Farmer Producer Co. Ltd from Sangli, Maharashtra, is one such FPO. Last year, it took positions in maize and turmeric, which allowed its member farmers to lock in prices higher than the spot market, ahead of harvest. “We joined the NCDEX (National Commodity and Derivatives Exchange) platform in 2021 and it took us some time to understand the nuances of this trade. Now we have a tool to deal with volatile prices,” said Khande Rao Patil, a director and farmer-member of the FPO.