A NAAS study released in April 2026 reveals that India's 44,000+ registered FPOs face structural constraints limiting their viability. Despite their potential to integrate smallholders into modern value chains, most FPOs struggle with low equity, limited credit access, small membership bases, and weak infrastructure. Only 21% engage in value-addition activities like processing and branding. The study recommends simplifying compliance, strengthening financial access, digitization, industry linkages, and capacity building to make FPOs sustainable and market-driven.

FPOs represent a critical institutional innovation for India's 146 million agricultural holdings, where 86% are smallholders below 2 hectares. By aggregating produce and collective bargaining, FPOs theoretically enable smallholders to achieve economies of scale and access formal markets that individual farmers cannot penetrate. However, the NAAS study exposes a harsh reality: rapid quantitative growth has not translated into sustainable impact. The typical three-year support period from promoting agencies proves insufficient, leaving most FPOs dependent on low-margin activities like input distribution rather than high-value processing or direct marketing. Financial constraints stem from the absence of collateral and weak business plans, while inadequate cold storage and processing infrastructure restricts market access. Governance challenges, including weak internal systems and social heterogeneity across caste and political lines, further undermine collective decision-making. The study's emphasis on industry linkages, digital tools, and differential support based on developmental stages reflects a shift toward market-driven sustainability rather than subsidy-dependent growth. This matters because FPOs are central to doubling farmer incomes and integrating smallholders into India's modernizing agricultural value chains, making their structural reform essential for rural economic transformation.