Trends and policy impact of farmer producer organizations in India: Evidence from Telangana

Introduction

India's agricultural sector, employing approximately 44 per cent of the national workforce is predominantly characterized by fragmented landholdings and restricted market access (NCBI, 2024) Over 85 per cent of Indian farmers are classified as small and marginal, possessing landholdings of less than 2 hectares (Agarwal and Goyal, 2022) [1] . This situation significantly diminishes their individual bargaining power, rendering them vulnerable to exploitation by market intermediaries. Consequently, collective institutional mechanisms have become essential for enhancing the economic conditions of these farmers (Lalitha et al., 2024) [11] . FPOs were established under Section 581C of the Companies Act 1956 and later under the Companies Act 2013, have become the preferred institutions for collective action in Indian agriculture. These organizations enable smallholders to benefit from economies of scale, lower transaction costs, access institutional credit and high-value markets, and integrate into agricultural value chains (IFPRI, 2025; Biswas et al., 2025) [3] . Research indicated that FPO membership is linked to increased farm income, enhanced market efficiency, and decreased indebtedness (Kumar, 2021; Singh and Vatta, 2019) [10,19] . FPOs in India are financially supported by two main organizations: the Small Farmers Agribusiness Consortium (SFAC) and the National Bank for Agriculture and Rural Development (NABARD). NABARD runs its own older subsidiary, the Producers Organisation Development Fund (PODF, 2011), and PODF-Interest Differential for credit facilitation, capacity building, and market linkage, along with NABKISAN Finance Ltd. for FPO-specific credit needs. SFAC separately operates the Equity Grant Fund, matching member equity contributions for smaller and emerging FPCs. Complementary support comes from the Agriculture Infrastructure Fund (3% interest subvention on post-harvest infrastructure loans) and market linkage pushes via NAFED, e-NAM, and NCDEX's FPO platform. Recently, the National Co-operative Development Corporation (NCDC) had been involved as an agency for the formation and promotion of FPOs (NCDC, 2021). The Government of India formally recognized the promotion of FPOs as a national priority under the Rashtriya Krishi Vikas Yojana, and subsequently launched the landmark Central Sector Scheme for the Formation and Promotion of 10,000 FPOs in February 2020, with a budgetary outlay of ₹6,865 crore (GOI, 2020-21).

Data and methodology

The study is exclusively based on secondary data collected for the period 2014 to 2024. State-wise annual data on the number of registered FPOs were sourced from the official portal of Tata Cornell Institute, supplemented by the Ministry of Agriculture and Farmers Welfare, Government of India. District-wise FPO data for Telangana were also compiled from the same portal.

To measure the growth rate, the CAGR was estimated using the following exponential growth model: Y = ab t Where, Y = number of FPOs; t = time variable (year); a and b are constants; and the compound growth rate r = (b -1) × 100.

The goodness of fit was evaluated using the coefficient of determination (R²) and statistical significance was tested using the F-test (p-value). To characterise year-on-year volatility, per centage change from one year to the next was also computed. Further, choropleth map was prepared using QGIS and R software to depict the state-wise and district-wise CAGR of FPOs in India and Telangana during 2014-2024. States were shaded according to their CAGR values, with darker green colours indicating higher growth rates and red colours indicating lower growth rates (Devi et al., 2025) [6] .

Results and Discussion

National growth trends

The state-wise variation in the FPOs formed between 2014 and 2024 is illustrated in Figure 1. During this period, a total of 43,804 FPOs were established. The national CAGR was estimated at 29.35 per cent per annum, with a coefficient of determination (R²) of 0.74 and a p-value of 0.0007. These findings indicate a highly significant positive growth trend over the decade. However, FPO formation was not uniform over time. From 2014 to 2021, formation expanded significantly, rising from 494 FPOs in 2014 to a peak of 9,038 in 2021, an increase of nearly 18-fold over seven years. The most substantial single year growth occurred in 2019, coinciding with the policy momentum leading up to the launch of the 10,000-FPO scheme. Implementation of the scheme after 2020 helped to sustain this growth, with FPO numbers reaching 4,817 in 2020 and 9,038 in 2021. This acceleration during 2020-2021 corresponds with findings from the International Food Policy Research Institute (IFPRI, 2025) [9] , which reported that more than 35,000 FPOs were established between 2020 and September 2024 and the target to reach 10,000 FPO formation was achieved in Feb, 2025 (PIB, 2026). A notable reversal occurred from 2022 onward, with FPO formation declining slightly to 8,848 in 2022 (-2.10%) and 8,702 in 2023 (-1.65%). In 2024, the number fell sharply to 3,870, a decline of 55.53 per cent. This sharp decrease was attributable to a national consolidation phase, as government support shifted from formation toward ensuring viability and compliance (National Policy on FPOs, 2024). The earlier, significant drop in 2017 (-47.08%) was likely a temporary setback related to implementation challenges, dependence on a limited number of promoters, and financial constraints (Prasad, 2019) [16] .

Fig. 1. Year-wise Growth Formation of FPOs in India

Current status in India

As per the MCA's company compliance records, among the 43,804 FPOs, 61 per cent (26,938) were classified as having active and compliant status. Over 34 per cent (14,982) of FPOs had not updated their status, leaving their compliance status unknown, while 1,346 FPOs were deemed noncompliant. Additionally, a total of 1,082 FPOs had been struck off or were in the process of having their company status revoked. (Policy Brief by TCI, 2025) [25]

State-wise distribution of FPOs

The CAGR estimated for FPOs across all 33 states and Union Territories. Fig. 2 represents the spatial distribution of state-wise CAGR of FPOs in India during the period 2014-2024. The map reveals considerable regional variation in the pace of FPO expansion across the country. Maharashtra leads the country with 15,211 FPOs, accounting for 34.73 per cent CAGR of the national total. It is followed by Uttar Pradesh with 6,976 FPOs (34.3%) and Madhya Pradesh with 2,382. This dominance of larger agrarian states aligns with the findings of Agarwal and Goyal (2022) [1] . However, between 2014 and 2024, there had been a notable trend of smaller and northeastern states emerging as high-growth performers in the formation of FPOs. Among the states with a CAGR above 40 per cent were Assam (55.81%), Arunachal Pradesh (53.37%), Jammu and www.extensionjournal.com Kashmir (47.29%), Himachal Pradesh (45.17%), Nagaland (44.61%), Jharkhand (41.24%), and Manipur (40.35%). These states, characterized by hilly or forested terrain and tribal farming communities, historically had low institutional reach but have significantly benefited from the targeted inclusion agenda of the 10,000 FPO scheme (Biswas et al., 2025) [3] . The high R² values observed in north-eastern states such as Manipur (0.85), Arunachal Pradesh (0.86), and Nagaland (0.84) indicated consistent, exponential growth, in contrast to states like Tamil Nadu (R² = 0.20) and Rajasthan (R² = 0.37) where growth was more uneven. The variation in R² across states implied that the national CAGR conceals significant inter-state heterogeneity in the quality and consistency of FPO formation. Telangana established a total of 1,009 FPOs from 2014 to 2024, ranking 13 th nationally. Of these, 953 FPOs are currently active, according to the SOFPO Report (2025). The state's overall CAGR was 20.50 per cent (R² = 0.35; p = 0.054), which is considered significant and reflects considerable year-to-year variability. The state experienced initial growth in 2015 and 2016, followed by a sharp decline in 2017, which saw a decrease of 78 per cent. In 2018 and 2019, there was a notable recovery with an increase of 70 per cent due to the pre-launch of the Central Sector Scheme. However, in 2024, the state faced another severe decline of 71 per cent, indicating an ongoing effort to strengthen and build the capacity of the already established FPOs to ensure their viability and sustainability. The district-wise analysis revealed significant disparities within the state. Nizamabad had the highest number of FPOs at 52, followed by Siddipet with 44. Khammam, Nalgonda, and Sangareddy each had 43 FPOs. This distribution can be attributed to strong irrigation infrastructure, a strong presence of supporting institutions, and market-oriented farming practices (Archana and Sudha, 2024). In terms of growth rate, Khammam recorded the highest CAGR at 21.69 per cent (R² = 0.49, p = 0.016), followed closely by Suryapet at 20.83 per cent (R² = 0.55, p = 0.009) and Nirmal at 20.07 per cent (R² = 0.62, p = 0.004). These three districts, which focus on paddy, cotton, and horticultural crops respectively demonstrated sustained and statistically significant formation of Farmers' Producer Organizations (FPOs) with a good model fit. Other districts showing notable positive growth include Karimnagar with a CAGR of 17.82 per cent (p = 0.037, R² = 0.40), Peddapalli at 17.29 per cent (R² = 0.57, p = 0.007), Rajanna Sircilla at 14.42 per cent (p = 0.035), Narayanpet at 13.55 per cent (p = 0.032), and Ranga Reddy at 13.57 per cent (p = 0.045). The challenges faced by certain districts in forming FPOs are evident, as several reported a negative CAGR. Specifically, Adilabad (-4.78%), Kamareddy (-2.29%), Komaram Bheem (-1.58%), and Medchal (-0.31%) show significant decline rates. Among these, Adilabad and Komaram Bheem Asifabad are predominantly tribal districts with substantial forest cover, which reflects structural barriers to FPO formation, including poor connectivity, low literacy rates among farming communities, and limited access to Community-Based Business Organizations (CBBOs). Meanwhile, Medchal, a peri-urban district adjacent to Hyderabad, has a primarily non-agricultural land use profile, contributing to its low number of FPOs. The growth patterns in Telangana reveal a significant disparity, with only 8 out of the 33 districts (24.2%) experiencing statistically significant development. In contrast, 72.7 per cent of states across the nation have shown significant growth. This underscores the pronounced variability within Telangana compared to the differences observed among states on a national level. Although some FPOs have achieved viability through credit linkages, market connections, and value addition, many continue to face systemic challenges in scaling their operations and maintaining functionality (NABARD, 2025).

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