Much of modern agriculture's economics rests on scale. Buying inputs in bulk lowers unit costs. Selling in large, graded lots attracts better buyers. Investment in machinery, storage or processing pays off only when spread across enough output. Access to formal credit, certification and export markets often presumes a minimum size of operation. By these standards, the typical Indian farm is very small indeed.
Holdings have fragmented over generations as land is divided among heirs, and there is little realistic prospect of reversing that through consolidation. Land in India carries meanings — security, identity, social standing, a fallback in hard times — that make it unlikely to change hands simply because a larger farm would be more efficient. The policy question is therefore not how to make farms bigger, but how small farmers can capture the advantages of scale without owning it.
Institutions as scale
The answer, in principle, is collective organisation. Farmer producer organisations and cooperatives allow many small growers to act as one buyer of inputs and one seller of output. They can negotiate with processors, invest in shared grading and storage, reach credit that no individual member could obtain, and absorb the fixed costs of compliance and market information. India's dairy cooperatives have long shown that the model can work at very large scale.
The past decade has seen a determined push in this direction. A central scheme to form and promote 10,000 FPOs, with an outlay of ₹6,865 crore, was launched in February 2020, and the 10,000th FPO was registered in February 2025. A separate Ministry of Cooperation was created in July 2021, signalling that the cooperative sector would receive dedicated administrative attention.
Registering an organisation takes weeks; building one that farmers trust with their produce and their money takes years.
The hard part comes after registration
Counting registrations, however, measures the easiest step. An FPO becomes an economic institution only when it performs functions that members value enough to stay loyal. That requires capabilities that are scarce in rural India:
- Governance — boards that are accountable to members, resistant to capture by local elites, and able to manage conflicts over pricing and payment.
- Working capital — money to pay farmers promptly at the point of aggregation, before the organisation has itself been paid by buyers. Without it, members side-sell to traders who pay cash on the spot.
- Professional management — people who can handle procurement, logistics, accounts, quality standards and buyer relationships, at salaries a young organisation can afford.
- A viable business — a clear reason to exist beyond receiving grants, whether in input supply, aggregation, processing or services.
Many collectives, in India and elsewhere, have struggled once initial support tapers off. The risk is a large population of organisations that exist on paper but transact little. That is not an argument against the model; it is an argument for measuring it differently — by turnover, member retention, prices realised and the share of members' produce actually channelled through the organisation.
There is a trade-off in the push itself. Targets create momentum and bring organisations into being in regions that might otherwise have none, but they can also reward speed of formation over depth of foundation. Registering an organisation takes weeks; building one that farmers trust with their produce and their money takes years. The next phase will be judged not by how many collectives exist, but by how many would survive without the scheme that created them.