By Mr. Vignesh Kumar, Mr. K. C. Gummagolmath, Mrs. Kanaka Durga
Status of Farmer Producer Companies
India lacks a comprehensive database on the total number of Farmer Producer Organizations
(FPOs). The State of the Sector Report by NAFPO (2024) estimates that over 40,000 FPOs have been
established since 2003, based primarily on data from the Ministry of Corporate Affairs. A policy brief
by the Tata-Cornell Institute provides a more precise estimate, reporting 44,460 FPOs as of September
2024. The surge in FPO registrations in recent years can be largely attributed to the proactive initiatives
of the Government of India, particularly the Central Sector Scheme for the Promotion of 10,000 FPOs,
launched in 2020.
Despite the substantial number of FPOs formed, concerns persist regarding their business viability and operational efficiency. While there is no definitive data to support this claim, it is widely understood that only a small fraction of FPOs with strong foundations thrive and sustain their operations. In contrast, the majority exist merely by fulfilling annual compliance requirements without significant business activity.
Several factors contribute to the challenges faced by FPOs. Regarding the Paid-up Capital (PUC) of FPOs, the Tata – Cornell Institute (TCI) Dashboard (2022) indicated that the median PUC is approximately ₹1 lakh per FPO. However, the details reveal a stark disparity, as the distribution of PUC is heavily skewed toward a few FPOs with significantly higher capital. In contrast, nearly 75 per cent of FPOs have a PUC of less than ₹5 lakhs. Paid-up Capital (PUC) plays a crucial role in determining an FPO’s viability, serving as an indicator of its operational scale and investment appeal. A higher PUC reflects the FPO’s capacity to sustain operations, invest in inventory and fixed assets, enhance value addition activities, and secure working capital effectively.
A key issue is that most FPOs and their memberships lack the scale needed to undertake largescale business activities. Considering the membership particulars, a study on the sub-sample of FPOs by TCI revealed that 47 percent of the FPOs were small sized while only 28 per cent of them had more than 500 members. Additionally, they often suffer from a shortage of skilled personnel to manage and govern the organizations effectively. Furthermore, the presence of numerous commodity-specific FPOs operating across different regions with varied business objectives has led to fragmentation within the sector.
Given these challenges, an important question arises: why not consolidate FPOs into federations at the state or national level? Such an approach could enhance their bargaining power, streamline operations, and create a more robust ecosystem for sustainable growth.
Despite the substantial number of FPOs formed, concerns persist regarding their business viability and operational efficiency. While there is no definitive data to support this claim, it is widely understood that only a small fraction of FPOs with strong foundations thrive and sustain their operations. In contrast, the majority exist merely by fulfilling annual compliance requirements without significant business activity.
Several factors contribute to the challenges faced by FPOs. Regarding the Paid-up Capital (PUC) of FPOs, the Tata – Cornell Institute (TCI) Dashboard (2022) indicated that the median PUC is approximately ₹1 lakh per FPO. However, the details reveal a stark disparity, as the distribution of PUC is heavily skewed toward a few FPOs with significantly higher capital. In contrast, nearly 75 per cent of FPOs have a PUC of less than ₹5 lakhs. Paid-up Capital (PUC) plays a crucial role in determining an FPO’s viability, serving as an indicator of its operational scale and investment appeal. A higher PUC reflects the FPO’s capacity to sustain operations, invest in inventory and fixed assets, enhance value addition activities, and secure working capital effectively.
A key issue is that most FPOs and their memberships lack the scale needed to undertake largescale business activities. Considering the membership particulars, a study on the sub-sample of FPOs by TCI revealed that 47 percent of the FPOs were small sized while only 28 per cent of them had more than 500 members. Additionally, they often suffer from a shortage of skilled personnel to manage and govern the organizations effectively. Furthermore, the presence of numerous commodity-specific FPOs operating across different regions with varied business objectives has led to fragmentation within the sector.
Given these challenges, an important question arises: why not consolidate FPOs into federations at the state or national level? Such an approach could enhance their bargaining power, streamline operations, and create a more robust ecosystem for sustainable growth.
Federations of Farmer Producer Companies – Concept
The Concept of Federation is similar to a Farmer Producer Organization (FPO) in terms of
incorporation, as it is registered either as a producer company under the Companies Act or as a
Section 8 company under the same legislation. The primary distinction between Farmer Producer
Organizations (FPOs) and Federations lies in their membership structures. While individual farmers
serve as shareholders in an FPO, Federations are designed to promote institutional membership, where
member FPOs act as the shareholders.
Federations are not limited to Producer Companies alone; they also enable cooperatives and Self-Help Groups (SHGs), Farmer Interest Groups (FIGs) and Commodity Interest Groups (CIGs) to come together under a unified structure. This inclusive approach can serve as a solution to instill professionalism among cooperatives and SHGs, bringing them under the umbrella of a more formal and organized setup. Federations can happen at the block, district, state and even the National level, customized according to requirements. SFAC Is already promoting State level Producer Companies as Federations at the State level.
Federations can also be broadly categorized into two categories as outlined below
Federations are not limited to Producer Companies alone; they also enable cooperatives and Self-Help Groups (SHGs), Farmer Interest Groups (FIGs) and Commodity Interest Groups (CIGs) to come together under a unified structure. This inclusive approach can serve as a solution to instill professionalism among cooperatives and SHGs, bringing them under the umbrella of a more formal and organized setup. Federations can happen at the block, district, state and even the National level, customized according to requirements. SFAC Is already promoting State level Producer Companies as Federations at the State level.
Federations can also be broadly categorized into two categories as outlined below
- Commodity-Specific Federations
These Federations focus on a single commodity, enabling better value chain development and
promoting the commodity on a larger scale. They facilitate the adoption of standardized agricultural
practices, ensuring consistency in the quality of produce. Additionally, establishing common
infrastructure for value chain management and processing becomes more feasible, leading to improved
efficiency and cost-effectiveness
- Multi-Commodity Federations
While value chain development for multiple commodities can be more complex, Multi Commodity Federations offer the advantage of incorporating a larger number of FPOs and extending
benefits to more farmers. Since most farmers cultivate multiple crops across different seasons, these
Federations can cater to their diverse needs and ensure continued business operations throughout the
year. Furthermore, Federations with a wide range of products can expand their presence across a
broader geographical area, increasing market outreach and impact.
By strategically utilizing these different types of Federations, a balanced approach can be achieved, ensuring enhanced value chain management and broader farmer inclusion.
By strategically utilizing these different types of Federations, a balanced approach can be achieved, ensuring enhanced value chain management and broader farmer inclusion.
Benefits of forming Federations
Federations offer significant advantages, primarily by assuming business operations on behalf of
their member FPOs. This relieves individual FPO management teams from the pressures of running
business activities, governance and regulatory compliance, allowing them to focus more on the quality
of production and procurement. By streamlining operations, Federations enhance the sustainability and
efficiency of FPOs.
Moreover, large Federations often gain visibility in policy-making circles, facilitating meaningful dialogue on improving the agricultural ecosystem. This amplifies the collective voice of Farmer Producer Companies, ensuring their concerns and interests are represented at higher levels of decision-making. Additionally, Federations act as umbrella organizations, providing critical support to member FPOs while serving as a bridge that integrates the knowledge and expertise of various stakeholders involved in agriculture and allied value chains.
Moreover, large Federations often gain visibility in policy-making circles, facilitating meaningful dialogue on improving the agricultural ecosystem. This amplifies the collective voice of Farmer Producer Companies, ensuring their concerns and interests are represented at higher levels of decision-making. Additionally, Federations act as umbrella organizations, providing critical support to member FPOs while serving as a bridge that integrates the knowledge and expertise of various stakeholders involved in agriculture and allied value chains.
Structure of Federation
The core of the Federation concept depends a lot on its structure. The following structure is
proposed for a federation to operate effectively.
| 1 | General Body | The General Body includes all forum members and meets annually to make key decisions, including electing the executive committee, approving plans, budgets, and audit reports, and forming sub groups. Only permanent members have voting rights. |
| 2 | Executive Committee | The Executive Committee, elected from the state forum, meets quarterly to plan, monitor, and guide activities. Government department representatives may attend as special invitees |
| 3 | Advisory Committee | The Advisory Committee includes executive members, NGOs, subject experts, financial institutions, and government agencies, offering strategic guidance. |
| 4 | Secretariat | Initially anchored by the Agriculture Department, the Secretariat handles administrative, compliance, and coordination functions. |
What can federation offer to the FPO shareholders ?
With the primary mandate of creating an enabling environment for FPOs to thrive, the federation
will focus on the following areas:
- Strengthening member FPOs through capacity building to ensure institutional sustainability. This includes training in bookkeeping, accounting, farming systems, market linkages, financial management, policy advocacy, bank linkages, accessing government schemes, and insurance services.
- Promoting agribusiness by fostering partnerships with input suppliers and marketing channel
- Facilitating access to credit and finance for FPOs.
- Knowledge sharing and dissemination of innovative ideas, practices, and technologies.
- Promoting and integrating new and existing FPOs within the federation’s operational framework
- Serving as a liaison with external stakeholders, replacing the role of the promoter organization.
- Reviewing, regulating, and supervising the functioning of member FPOs
- Advocating for policies that create a conducive environment for FPO growth at state and national levels
Case Studies of Federations
The case of MAHA FPC Federation
MAHA Farmers Producer Company Limited (MAHAFPC) is a prominent state-level federation
of Farmer Producer Companies (FPCs) in Maharashtra, India. Registered under the Companies Act,
2013, on September 3, 2014, and headquartered in Pune, MAHAFPC has grown from its initial 11
member FPCs to over 650 member FPCs across 24 districts, making it the largest FPC federation in
India and generating a massive turnover of ₹1500 crores yearly
What does MAHA FPC Federation offer?
- Market Linkages: MAHAFPC collaborates with key organizations such as NAFED (National Agricultural Cooperative Marketing Federation), FCI (Food Corporation of India), and NABARD (National Bank for Agriculture and Rural Development) to facilitate Minimum Support Price (MSP) procurement for oilseeds and pulses. Also aims to develop commodity centric clusters of FPCs to enable value addition at the farm gate.
- Capacity Building: The federation plays a crucial role in supporting its member FPCs through infrastructure development, input-output aggregation, credit facilitation, and compliance management. This comprehensive approach enhances the operational capabilities of the member organizations.
- Local Empowerment: With regional offices in Latur (Marathwada) and Amravati (Vidarbha), MAHAFPC effectively serves FPOs at the grassroots level. This localized presence allows for tailored support that meets the specific needs of farmers in different regions
The case of Madhya Pradesh Women Poultry Producers Company
Madhya Pradesh Women Poultry Producers Company Ltd. (MPWPCL) is a producer company
registered under the Companies Act, 1956, with 14 producer organizations as shareholders. These
organizations provide input supply, production support, and marketing services for broiler poultry to
8,121 women poultry producers from marginalized tribal and Dalit families across 12 districts of
Madhya Pradesh, including Hoshangabad, Betul, Sidhi, and Dindori.
MPWPCL is one of the largest community-based institutions in Central India, with a collective turnover of more than ₹ 300 crores, positively impacting over 8,100 families. The company is the largest poultry producer in Madhya Pradesh, with a monthly bird replacement capacity of 1.5 million and an annual production of over 10 million table eggs.
MPWPCL is one of the largest community-based institutions in Central India, with a collective turnover of more than ₹ 300 crores, positively impacting over 8,100 families. The company is the largest poultry producer in Madhya Pradesh, with a monthly bird replacement capacity of 1.5 million and an annual production of over 10 million table eggs.
How does the MPWCL model works?
The MPWCL model adopts industrial poultry practices to empower small-scale women
farmers in remote villages by organizing them into cooperatives. Each cooperative, typically comprising
300-500 members with 25-30 farmers per village, operates modern poultry farms in members’
backyards. Women earn income while retaining ownership and control over production.
The model operates on three pillars
The model operates on three pillars
- Production Organization: Community-based supervisors and trained veterinarians ensure high-quality production and farm support.
- Structured Remuneration: Remuneration is structured by the federation to optimise the production efficiency and insulate the cooperatives and farmers from price fluctuations and uncertainties in market.
- Professional Management: Each cooperative is managed by a professional with expertise in veterinary or management sciences, ensuring smooth operations. A Poultry Management System using a Quality Assurance Systems approach standardizes business processes and compliance.
Here the cooperatives came together to form the federation, unlocking economies of scale,
enabling cost-effective procurement of inputs and improved compliance with industry standards. The
Federation also provides access to professional and technical expertise while creating a platform for
knowledge sharing and process refinement among member cooperatives. This collaborative structure
strengthens solidarity and ensures that cooperatives remain competitive by adapting to evolving
technological and commercial advancements in the industry.
Conclusion
The formation of federations presents a wonderful opportunity to redefine the governance
and operational landscape of Farmer Producer Companies (FPCs) in India. By aggregating resources,
enhancing market linkages, and providing critical technical and financial support, federations address
the inherent challenges of scale, efficiency, and sustainability faced by individual FPOs. Successful models
such as MAHAFPC and MPWPCL demonstrate the potential of federations in amplifying the collective
voice of farmers, ensuring better policy advocacy, and creating a more resilient agricultural ecosystem.
Moving forward, strengthening federations through strategic partnerships, capacity building, and policy
support will be pivotal in empowering FPOs to achieve long-term viability and growth, ultimately
benefitting the livelihood of smallholder farmers
