Why India’s farmer producer organisations must think local to thrive

As climate change tightens its grip on Indian agriculture, farmer producer organisations (FPO) could be key to building resilient food systems, if they embrace circular economies rooted in local knowledge and regenerative practices.

India introduced the concept of FPOs in the early 2000s to help smallholder farmers achieve economies of scale and strengthen their bargaining power through collective action. In 2019, the Government of India launched the Formation and Promotion of 10,000 FPOs scheme, allocating a budget of Rs 6,865 crore. 

As of June 30, 2024, a total of 8,875 FPOs have been registered under this initiative. While only 9,000 FPOs were formed between 2002 and 2013, this number surged to over 30,000 from 2013 to 2024. This growth underscored the urgent need for the government to adopt policies that further empower farmers and reinforce the agricultural sector. 

The ecosystem and enabling policy landscape are evolving rapidly. To build robust FPOs, we must interlink resource systems and effectively address the challenges and opportunities of the green economy.

A circular economy model can redefine how FPOs operate, balancing profitability with environmental stewardship and community well-being. This approach emphasises production systems that cater to local consumption while promoting ecological health. It prioritises sustainability by reducing reliance on external inputs and markets, instead focusing on locally appropriate crops that conserve water, improve soil health and are resilient to climate variability.

Currently, many FPOs are focused on strengthening supply chains for crops demanded by external markets. While often lucrative, these crops can overexploit natural resources such as water, degrade soil health and may not suit local agro-climatic conditions. At the same time, traditional crops that are healthier, more sustainable and integral to local diets are declining due to reduced cultivation, which could mean ecological, economic and social implications.

What can we do?

There are several ways to build resilience in crops. 

• Prioritising crops with local demand and environmental benefits: Encouraging the cultivation of crops that are well-suited to local agro-climatic conditions, require less water, enhance soil health, and form part of the community’s traditional diet.

• Reducing external dependency: Producing essential inputs such as organic fertilisers, bio-pesticides, and seeds locally, using available resources. At the same time, promoting the consumption of locally grown crops rather than exporting the entire yield to external markets.

• Balancing local consumption with marketable commodities: While ensuring the community’s nutritional needs are met through indigenous crops, identifying surplus quantities of sustainable produce that can be marketed profitably at regional and national levels.

• Value addition for local commodities: Processing agricultural produce locally, for instance, into pulp, juice, or flour—to extend shelf life and tap into niche markets focused on sustainability and health.

Trust, branding issues plague FPOs

FPOs are key institutions for promoting rural prosperity. Yet, despite substantial efforts, many are struggling to achieve their intended outcomes. Reports indicate that a significant number of FPOs are defaulting or failing to pay penalties. Upon closer examination, it becomes evident that many FPOs are fixated on penetrating urban markets, attempting to sell their products far from their point of origin. This leads to challenges related to trust, branding, unfulfilled promises, poor marketing strategies and governance issues.

Start-up industry standards typically recommend allocating 12-15 per cent of initial investment to marketing, while established companies spend 8-10 per cent of total revenue on branding. For most FPOs, however, such budgets are unrealistic, making it difficult to compete. Nevertheless, one of their strongest assets is the trust they command within their communities. There is a pressing need to position FPO shareholders as owners, brand ambassadors, producers, and crucially, as consumers of their own produce. This sense of interconnectedness is currently lacking and must be rebuilt.

We must therefore reimagine the narrative and strategy of FPOs. In the face of climate change and the growing need for regenerative agriculture, FPOs are emerging as powerful agents of change. Transforming their business models through local circular economies is essential. This approach not only builds viable and resilient enterprises but also significantly reduces the environmental footprint of food production and distribution, particularly carbon emissions associated with long-distance food travel.

FPOs often promote organic and regenerative farming practices. By reducing dependency on synthetic fertilisers and pesticides, they limit environmental degradation and improve soil health. This shift leads to healthier food production and lowers greenhouse gas emissions tied to conventional agriculture. Additionally, the promotion of indigenous crops can bolster biodiversity and strengthen resilience to climate change. Enabling policy measures such as the Paramparagat Krishi Vikas Yojana and the National Mission for Natural Farming are supporting these efforts.

One of the most tangible environmental benefits of local circular economies in agriculture is the reduction in food miles. The average food journey in India spans approximately 1,200 kilometres, contributing significantly to emissions. By focusing on local markets, FPOs minimise the need for long-haul transport, thereby reducing emissions, packaging waste and spoilage. Their trust capital should be leveraged to target local markets, shorten supply chains and promote direct farmer-consumer connections. This, in turn, reduces carbon footprints while fostering regenerative agricultural practices.

FPOs must adopt several business practices aligned with circular economy principles. By aggregating production from smallholder farmers, they can reduce inefficiencies and gain economies of scale. Rather than relying on industrial supply chains, they facilitate access to regional markets and even help close resource loops through waste reuse. Prioritising shareholders and their extended networks as primary consumers reinforces local economic resilience and reduces dependency on global supply chains vulnerable to climate shocks. Moreover, FPOs can play a vital role in educating consumers on the benefits of local, sustainable food systems, instilling pride within the community.

FPOs can further drive circular economy strategies by promoting waste reduction and resource reuse in agriculture. Initiatives such as composting, resource-sharing among farmers and creating value-added products from surplus produce can greatly lower environmental impact. This holistic, community-oriented model maximises resource efficiency and fosters sustainability. Farmers often pool resources for food processing and packaging, ensuring more value remains within the community while reducing reliance on distant, centralised facilities.

To strengthen local sales channels, FPOs must establish and promote marketplaces where fresh produce is sold directly to consumers. This curtails transport distances, minimises packaging and reduces food waste. Waste-to-value initiatives, such as converting crop residues into compost, bioenergy, or bioplastics, can generate new income streams while lowering the environmental impact of farming.

There is an urgent need to shift from conventional business thinking to sustainable, responsible, green entrepreneurship. FPOs not only safeguard farmers’ livelihoods but also contribute to a more resilient and sustainable future. Embracing local circular economies enables them to reduce the carbon footprint of food systems, boost farmer profitability and strengthen local communities. In a world increasingly threatened by climate change, FPOs offer a powerful blueprint for a more just and regenerative agricultural future. Governments, policymakers and development organisations must support and empower FPOs to realise their full potential.

Satyasovan Das is the state lead of the Foundation For Ecological Security-Bhopal and Manvendra Pratap Singh is director of programmes at Udyogini.

Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth.