FPOs formed after central scheme driven by target pressure: Report

FPOs formed before 2021 had a median paid-up capital of ₹5 lakh, compared with ₹1 lakh for newer entities, while seven in ten surveyed FPOs lacked institutional credit

A significant number of farmer-producer organisations (FPOs), also known as farmer-producer companies (FPCs), incorporated after the launch of the Central scheme to create 10,000 FPOs have a median paid-up capital of just ₹1 lakh, compared with around ₹5 lakh for those formed before the scheme.

This suggests that pre-2021 FPCs were built over time with genuine business intent, while those formed after 2021 were largely registered under pressure to meet scheme targets, a chapter in the latest State of the FPO Sector (SoFPO) 2026 report, released on Monday, said.

 

The chapter said older FPCs, formed before the 2021 scheme, were more than three times better capitalised than newer ones, although their capitalisation remained inadequate.

  

“Between 2004 and 2018, fourteen years of organic growth, the country produced roughly 6,670 FPCs with a median paid-up capital of ₹5 lakh while between 2021 and 2023 alone, three years of the scheme added approximately 27,000 more were added, with a median of ₹1 lakh. These are structurally different cohorts,” the report said.

 

The chapter reiterated that pre-2021 FPOs/FPCs were built over time with genuine business intent, while those registered after 2021 were largely driven by pressure to meet scheme targets.

 

In February 2020, the Central government announced a Central Sector Scheme titled “Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)”, with a budget outlay of ₹6,865 crore until 2027-28. 

 

A survey of 420 FPOs across 12 states, conducted by the National Association of FPOs (NAFPO) to supplement the chapter’s data and findings, found that only 30 per cent of the respondents had received a bank loan, meaning seven in 10 operated without institutional credit.

 

“This remains one of the most persistent structural challenges for the FPO sector, and the survey data helps quantify its consequences,” the chapter said.

 

Among FPOs that had received loans, 61 per cent were profitable without government support, compared with 43 per cent of those without access to credit.

 

“Conversely, the loss rate among non-credit FPOs (7 per cent) is three times that of credit-accessing FPOs (2 per cent). While causality is difficult to establish from a cross-sectional survey (more creditworthy FPOs may also be more operationally capable), the correlation is robust across revenue,” the chapter said.

 

The chapter, titled ‘The Institutional Landscape: From Producer to Owner: The Institutional Landscape for Farmers, with a Focus on the Most Marginalised’, was written by Aneesha Bali and Anish Kumar. It showed that, as of 2026, India had around 51,001 registered FPCs, of which around 97 per cent had an ‘active’ status in Ministry of Corporate Affairs (MCA) records.

 

Of the 1,198 FPCs struck off nationally, dissolution rates were highest in Delhi (18 per cent), Haryana (10.3 per cent) and West Bengal (5.8 per cent). At the other end, Karnataka and Assam had sustained large FPC populations with very low dissolution rates of 0.9 per cent each, the chapter said, adding that the quality of the promotion ecosystem was the key variable.

 

“The very low strike-off rates in post-2021 cohorts are not a sign of health; these FPCs are simply too new. The 2013–2015 cohort, formed under similar scheme conditions, shows 180–250 strike-offs per year from year five,” the report said.

 

The report said the clock was ticking for the 27,000 FPCs registered between 2021 and 2023. New registrations fell 45 per cent in 2024 after the scheme target was met, indicating that the sector had been built on promotional logic rather than market logic.

 

Women-centric FPOs

 

The survey also found that women-centric FPOs, in which more than 90 per cent of members are women, had notably larger membership bases than their peers.

 

“Over 99 per cent of women-majority FPOs (those with more than 90 per cent women members) have membership bases exceeding 300, and 31 per cent have more than 800 members. In contrast, among FPOs with less than 30 per cent women members, over half have fewer than 300 members,” the chapter said.

 

“The takeaway is that women FPOs have successfully mobilised the most fundamental asset of any producer organisation: membership size,” the report said.