Farmer-led cooperatives can drive the next phase of agricultural growth

Farmers in India are developing their agricultural practices mainly through improvements in traditional areas, with new seeds, chemical fertilisers and pesticides, mechanised modes for managing cultivation, and, occasionally, the adoption of new crops. Some farmers also depend substantially on government  fertiliser subsidies and on government procurement of food grains.

Most of the government purchase and the bulk of the fertiliser and food subsidies are for the production of paddy and wheat.  In 2023-24, the value of output of these two principal crops was ₹7.5 trillion, while the budgetary cost of fertiliser and food subsidies was ₹4 trillion. More than 800 million people receive these food grains free of cost from the central government. 

If one looks at the growth areas in agriculture in the 12 years between 2011-12 and 2023-24, production of paddy and wheat rose by just 27 per cent. Fruit and vegetable production rose by 52 per cent, and milk production by 85 per cent, even though they did not receive any substantial support by way of subsidies or minimum support price procurement by the government. The true growth areas in agriculture are out of direct central government support and depend largely on producer enterprise. 

The most interesting example of producer-managed growth is the substantial increase in milk production, which has been boosted by the effectiveness of milk producer cooperatives. The earliest instance was in Gujarat, where the milk producers in Anand set up a cooperative named after their district, Kaira, and labelled their product as Amul, which is the abbreviation of Anand Milk Union Limited. It developed as a response to the heavy dependence of milk suppliers on purchases by the sellers of Polson milk in Bombay. Tribhuvandas Patel led the initiative, and Verghese Kurien came in as the executive head. Their initiative has culminated in the Gujarat Cooperative Milk Marketing Federation, which is perhaps the largest food products marketing company in India and is owned by 3.6 million milk producers. 

This focus on production control was the basis for the management of the National Dairy Development Board set up in 1965 by Kurien and supported by the then Prime Minister Lal Bahadur Shastri, who saw merit in relying on producer-controlled cooperatives. Kurien was particularly strict about keeping bureaucrats at a distance from programme control. Operation Flood, which brought in financial support and milk supply (including free milk provided by Europe), came in 1970 and enabled the country-wide cooperatives to dominate the urban market through institutions like Mother Dairy.  

This sector, controlled by producer and not dependent on government procurement and minimum support prices, has boomed faster than the agricultural sector, particularly the growth in the production of paddy and wheat, which has been dependent on government support. In 2023-24, the value of output of cereals (mainly paddy and wheat) was ₹8.5 trillion, while the value of the largely cooperative-controlled milk sector was ₹12.2 trillion. 

The role of the producer- and cooperative-controlled sector may be relevant for an emerging option that could be a substantial source of income for farmers and also contribute significantly to our long-term challenge of coping with climate change. It basically involves the supply of electricity from farm fields. 

Electricity pricing for agriculture is heavily subsidised, with farmers typically paying a fraction — or nothing — of the average cost of supply. One way of reducing these losses is to see how power use in rural areas can be met by local sources. In fact, it is also possible to make agricultural areas a source of solar power that will contribute to the management of climate change. An option that has been designed, called agrivoltaics (Agri-PV), basically involves installing solar power at an elevated level above areas sown with crops that can cope with partial sunlight. It may be one way to overcome the difficulty in securing large areas of land, mainly in rural areas, for standard solar power units. 

The central government has a programme, elaborately entitled but more easily referred to as KUSUM1, which is aimed mainly at promoting the use of captive solar power for pump sets. This has to compete with the substantial subsidy or even free use of electricity provided to rural areas by state-level distribution companies.  But KUSUM also covers the possibility of support for Agri-PV projects, which combine the use of land for agriculture and for photovoltaic establishment to generate solar power for sale. This presents an interesting possibility of raising the returns from the ownership of agricultural land through the dual use of land for agriculture and for solar power generation for use and sale. 

A recent project implemented by the Indian Council for Research on International Economic Relations provides an interesting analysis of Agri-PV and evaluates the implementation of this dual use of land for agriculture and solar power generation in Madhya Pradesh and Rajasthan. What it does bring out is the substantial increase in farmers’ income resulting from this dual use of land. 

The other point that comes across is the huge level of investment required to set up solar power capacity — it was approximately ₹18.5 crore for the 15-acre land plot in Madhya Pradesh and approximately ₹2 crore for the 3-acre land plot in Rajasthan. Because of this high investment cost, relying largely on individual landowners will limit the impact. 

Some improvement may come from commercial developers who will share income with the  landowners. But real transformation can come mainly from community-based groups, organised as cooperatives or producer-based companies, which can combine small and medium landowners for implementing the dual use of land in Agri-PV. Do note that the average per capita ownership of agricultural lands in India is just 1.08 hectares and hence relying on individual landowners will greatly limit the impact of Agri-PV. 

At present, the promotion of Agri-PV is essentially through the central-sector scheme KUSUM, run by bureaucrats. Given the high investment cost, it may generally involve community- or sub-community-level cooperation. I would suggest that application system for Agri-PV be run by an organisation that directly involves the producers and not be left to bureaucrats.  The application is likely to vary greatly across different ecological zones, as agricultural conditions differ considerably from one locality to another. Moreover, the Agri-PV system requires judgements about crops that can tolerate reduced solar exposure, which can be assessed only by farmers at the local level and not by bureaucrats. 

The example of the cooperative institutional arrangement that has been responsible for the boom in milk production and marketing may provide an answer not just to Agri-PV, but also to the promotion of other products, such as fruits and vegetables, which are often produced by small landowners. The essential point is that we should rely more on producer-controlled organisations, such as cooperatives or producer companies, rather than on schemes controlled by bureaucrats for the modernisation of, and higher production in, agriculture.

desaind@icloud.com

1. Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan

2. Ashok Gulati and associates, Harvesting Sun and Soil: India’s Agri-PV Future, ICRIER, 2026