Importance of FPO in Agriculture

, 8 minute read

Quick summary: A small member-run organization trying to uphold the agricultural industry in India, working hard and tirelessly in person with small farmers to build, develop and help increase profits; Farmer Producer Organization (FPO)s are acting as a link between the government and farmers to work on a single goal to put Indian Agricultural on top of the Global market. 

Guide to Farm Management

Farm management practices can help FPOs increase productivity, manage risks, and improve quality control, resulting in higher incomes and better financial sustainability.

India ranks second worldwide in farm outputs and around 70% of its population, works in the agricultural sector. The agriculture sector is production oriented rather than market oriented with more than 80 % farmers who contribute to half of total production being marginal farmers. Lack of access to credit and weak market linkages and inability to adopt technologies and farm practices are few of the challenges. How do you assist and upgrade small players in the industry and revitalize agriculture?

Introduction to agriculture and farming 

India has a huge agricultural stand in the global world; it is gearing up to cater to robust demand for the years to come. The estimate of the increase in population is driving an increase in demand for food products all over the world and India is perfectly poised to take such a leap. In FY20 Agriculture in India amounted to a Gross value of 276.37 Billion USD and exports stood at 41.25 Billion USD in FY21.

A diverse bed and appropriate climate conditions have helped India become the second-largest producer of rice, wheat, sugarcane, cotton, groundnuts and fruits & vegetables. According to Inc42, the Indian agricultural sector is predicted to increase to US$ 24 billion by 2025. The Government is in synch with advancements and growing demand by providing scope of foreign incomes, sportive policies, better infrastructure, technological assistance and tax benefits. Going forward, the Agro-industry is bound to make a bigger mark in volume, quality, safety and exports. 

The farming system has come a long way since the green revolution, and various developments in technology and agriculture-aided infrastructure have come to force across the country. India has not only adopted better farming methods, but it has also sought to develop seed quality, irrigation methods, quality produce, marking advancements, technological inclusions, logistics management, warehousing and many more. 

There are more than 570 million farms run by smallholder farmers, operating 12% of the agriculture land. These smallholder farmers have no access to the right inputs, lack knowledge on modern farming techniques and lack direct market access. These farmers carry on farming activities for their subsistence and sell their produce when they have the need. Farming is just a requirement and not a business opportunity which limits them from realizing their potential and earn a better livelihood. However, they could transform the food and agriculture sector if given the support and right direction. Farmer producer organizations empower the farmers by leveraging their strengths to enhance crop productivity and thereby realize profitable markets. 

What are Farmer Producer Organizations? 

A farmer producer organization (FPO) is made up of both farmers and non-farmers who work together to offer farmers end-to-end support, including crop inputs, technical assistance, processing, services, middlemen, and marketing. 

Farmer Producer Organizations (FPOs) and Farmer Producer Companies(FPCs) aggregate small and marginal farmers where farmers can leverage their collective  strength to scale their economies and avail institutional credit. They can realize a better price for their collective marketing of their produce. They will be able to access quality inputs and increase crop productivity and income.

In India, the necessity for an FPO arose as a result of farmers’ struggles to get their goods into major markets. FPO helps small farmers improve the quality of their food by giving them quality seeds, teaching farmers how to manage soil, use less fertilizer, manure, irrigation, and livestock. Along with assisting in the selling of goods to larger and better markets, it also updates and aids farmers in implementing cutting-edge farming equipment and upgrades in technology. There are around 6000 FPOs in India, 3000 registered by Department of Agriculture and Cooperation, Ministry of Agriculture and 1000 FPOs have registered in eNAM platforms to sell their produce through e-trading.

An FPO is usually formed with the equity contribution by the member farmers and later registered as a non-profit organization, under the Co-operative act, trust, or as a company. The owners of the FPO are the farmers collectively and the day-to-day management is performed by a group of professionals who are managed by a General body or the Board of Directors.  

“The Government of India has approved and launched the Central Sector Scheme of “Formation and Promotion of 10,000 Farmer Producer Organizations” to form and promote 10,000 new FPOs till 2027-28 with a total budgetary outlay of Rs 6865 crore. 

Importance of FPO 

The agriculture sector is a cluster of small, medium and big farmers spread across the nation. It is difficult to manage, regulate and process such a big pool of players, hence FPOs help in managing a certain group of farmers in a certain region, this helps in division of work, specialized produce, easier management and better visibility. 

The main purpose of an FPO is to maximize farmers’ income and to do so, they provide services and activities which help cater to such needs. 

  • Supply of quality production inputs like seeds, fertilizers, pesticides, etc at wholesale rate.  
  • Provides value addition facilities like cleaning, grading packing, storage and logistics at less cost. 
  • Machinery and infrastructural facilities like sprinklers, cultivators, harvesters, etc are given for rent and purchase. 
  • Facilitate market information on produce, demands, trends, price fluctuations, Government regulations, etc are shared with the members. 
  • Help reach bigger markets and export options with the help of pooling produce from its members. 
  • Bigger and better credit options are available compared to unregistered organizations. 
  • An FPO can accept deposits from members in the form of fixed or recurring deposits and disperse them as loans at a reasonable rate of interest. 

 All such benefits from an FPO help accumulate small farmers get what they deserve to enhance profits and develop quality products.

Challenges of FPO 

FPO has helped in growing profits through low-cost inputs, market information, technology and agro-services. Within such growth, FPO faces few challenges in sustainable growth. Few among them are, 

FPOs connected with KMIT project were able to use the digital app for crop advisory

Digital apps and farm management tools provide real-time crop advisory and personalized recommendations to farmers, helping them optimize their farming practices and increase crop yields.

  • As members of an FPO are majorly farmers, it is difficult to find professional management and control ability in rural areas. 
  • With the financial strength of small and medium farm members, FPO cannot achieve and compete with large markets and members. 
  • The credit guarantee scheme can only be availed by a large company registered FPOs who have a minimum of 500 members and isn’t accessible by any other small registered FPOs. 
  • FPO’s inability to operate in a regular agricultural market where there is resistance by licensed traders. 
  • Insurance of risk is only on produce and not on the FPO itself, therefore there is high risk involved in provision to business covers. 
  • Lack of awareness among farmers about the existence and legalities of an FPO is less. 

Technology and FPOs 

Technological support is one of FPOs’ features; it helps in providing both technical knowledge and infrastructure to farmers. An FPO upgrades itself from time to time with the latest agricultural technology to provide farmers with advanced machinery, farming techniques and technological training to its members. An organized entity is better equipped than the farmer alone. 

How can FPOs be empowered digitally? 

  • Digitized platform for farm management 
  • Agronomy practices for best yields and reduced losses. 
  • Post harvest management 
  • End to end traceability for better visibility and supply chain optimization 
  • Analytics for better insights and market reach. 
  • Sustainable and climate resilient practices 
  • Access to Finance 

TraceX and FPOs 

TraceX has partnered with a number of FPOs, which work with thousands of farmers involved in E2E management of various agri-commodities.  

TraceX’s Blockchain solutions have been implemented to promote traceability and sustainability in crop production across many geographies.. Various challenges like mismanagement of stakeholders, proper ledger maintenance, residue-free production and traceability are being handled. We provided a one-stop solution through our FOODSIGN application catering to various needs like the systematic recording of data, crop and farmers’ information updates, performance tracker, water and pesticides dose recommendation, and visibility throughout the supply chain.   

This enables the farmers to gain trust and confidence which helps them to reap multiple benefits. Both farmers and consumers can track operations and take decisions accordingly.   

 Under the Krishi Mangal project, TraceX is working with two farmers-producers organisations (FPOs) in Ramadurga taluk of Belgaum district, Karnataka, covering around 1,000 farmers who are cultivating maize and pulses. 


Management and development of such a huge industry cannot be done just by the regulators; it requires lots of groundwork, effort and farmer relationship, and FPOs are delivering the same. It serves as middlemen between government and farmers in working toward a common goal. It has also helped small farmers upgrade, develop and reap multiple benefits through proper training, quality produce, better management, and financial and infrastructural support. The Government has planned to increase the number of FPOs throughout the country, distribute the workload and concentrate on small farmers in rural areas. 

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