A Farmer Producer Organization (FPO) is a legal entity, which is a type of institution formed by primary producers, primarily farmers, to leverage economies of scale in production and marketing. The concept emerged in the early 2000s to address the challenges faced by small and marginal farmers, who constitute nearly 86% of total farm holdings, such as fragmented landholdings and weak bargaining power. The initiative gained momentum after the Department of Agriculture, Cooperation & Farmers' Welfare launched a pilot program in 2011-12 under the Rashtriya Krishi Vikas Yojana (RKVY).
An FPO can be registered as a Producer Company under Part IXA of the Companies Act, 1956, which is made applicable by Section 465(1) of the Companies Act, 2013, or as a cooperative under the respective State Cooperative Societies Act. The mechanism involves aggregating farmers to enable collective purchase of inputs, value addition, processing, and improved market access, with the organization managed by an elected Board of Directors (BoD). Key institutions connected to the promotion and regulation of FPOs include the Small Farmers' Agribusiness Consortium (SFAC), which acts as the national coordination agency, and the National Bank for Agriculture and Rural Development (NABARD).
The most significant recent development is the Central Sector Scheme, "Formation and Promotion of 10,000 Farmer Producer Organizations (FPOs)," launched by the Ministry of Agriculture & Farmers Welfare in 2020. This scheme, with a budget of ₹6,865 crore, aims to form and promote 10,000 new FPOs by 2027-28. Under the scheme, each FPO receives financial assistance up to ₹18 lakh and a credit guarantee cover up to ₹2 crore. The scheme provides professional handholding support for five years through Cluster Based Business Organisations (CBBOs).