A structural change in India’s agri marketing ecosystem is taking shape as corporates begin sourcing agricultural produce directly from Farmer Producer Organisations (FPOs), bypassing traditional wholesale mandis. This shift, subtle yet strategic, is part of a concerted effort by the government to strengthen FPO-market linkages and enhance farmer incomes.
At the heart of this emerging model is a series of weekly webinars hosted by the Union Agriculture Ministry, led under the initiative of Secretary Devesh Chaturvedi. These digital sessions are designed to facilitate direct dialogue between FPOs and potential corporate buyers. Over the past two months, the webinars have enabled FPO representatives, many of whom were previously unaware of the feasibility of direct B2B transactions, to engage in structured conversations with corporates.
The approach is rooted in the belief that digital matchmaking can enable a more efficient value chain, provided the linkages continue and mature over time. Government officials are confident that this initiative, if scaled and sustained, could yield visible outcomes within one or two years.
Direct Sales Yield Higher Returns and Lower Costs
The early results have already begun to reflect in market transactions. In the latest rabi marketing season, some FPOs succeeded in fetching better prices for wheat by selling directly to corporates. According to a senior government official, this was largely due to the elimination of certain transaction costs that are otherwise incurred in mandi based procurement. These cost savings have incentivised corporates to prefer direct sourcing models, which in turn have allowed FPOs to retain a higher share of the final price.
The government is now considering policy measures to accelerate this shift. One such measure under review is the waiver of mandi fees for transactions involving FPOs. Officials believe this would not only make market yards more competitive but also unlock greater infrastructure potential for farmer collectives. The idea is to reduce regulatory frictions and make the market environment more conducive for direct FPO engagement.
Olam India Leads in Volume Procurement, Others Follow
Among the early adopters of this model is Olam India, which has reportedly procured over 800 tonnes of maize and more than 3,000 tonnes of wheat from FPOs based in Uttar Pradesh and Bihar. While Olam’s officials have not formally commented on the development, sources suggest that their participation has been instrumental in demonstrating the feasibility of the model. Other companies such as Britannia, Mother Dairy and HIL (formerly Hindustan Insecticides) have also come forward to explore similar partnerships with FPOs.
These engagements are not limited to commodity trading alone. The weekly webinars hosted by the Ministry bring one or two companies or government departments into conversation with FPOs each week, allowing detailed exchanges on quality specifications, delivery logistics, and pricing frameworks. This format has enabled corporates to gauge the operational capabilities of FPOs, while offering FPOs the opportunity to build business literacy and negotiate from a position of information.
Demand for Mandi Tax Exemption Gains Ground Among FPOs
Despite the enthusiasm among corporates, concerns persist at the grassroots level. One of the most pressing issues raised by FPOs is the continued imposition of mandi fees on their transactions. In States where such fees are not waived, FPOs claim that the financial burden is ultimately transferred to the farmer. As the CEO of an FPO in Uttar Pradesh explained, “No buyer pays the mandi fee from his own pocket, it is deducted from the transaction value, which FPOs have to bear. This cost is eventually passed on to the farmers.”
Such feedback underscores the complexity of integrating FPOs into mainstream procurement channels. While corporate interest offers new possibilities, the policy environment must adapt to make these partnerships financially sustainable for both sides. Eliminating mandi taxes for FPOs is increasingly seen as a necessary precondition for the model to work at scale.
FPOs Eye Digital Commerce via ONDC
Beyond institutional sales, the government is pushing for a parallel strategy to boost FPO revenues, enabling them to brand and market their own produce directly to consumers. This initiative is being operationalised through the Open Network for Digital Commerce (ONDC) platform, which is designed to democratise digital market access.
The move seeks to empower FPOs not just as aggregators, but as direct sellers capable of building visibility for regional and specialty products. It opens a new frontier in e-commerce for the agricultural sector, allowing producer groups to engage directly with end users while bypassing traditional distribution hierarchies.
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During a recent webinar, Praveen Sinha, Assistant Manager at Olam Agri, presented a detailed analysis of value chain margins. He pointed out that a 5–6 per cent profit typically exists between the farmgate and the processing or exporting stages. According to him, FPOs are well positioned to claim this margin, provided they deliver consistent quality and maintain traceability standards. His remarks reflect an evolving corporate mindset that increasingly views FPOs as long term supply partners rather than one off intermediaries.
From Formation to Functionality: Focus Shifts to Income Enhancement
With the government having already achieved its target of forming 10k FPOs, the emphasis is now on ensuring their financial viability. The current phase is oriented not towards quantity, but towards quality, developing business capabilities, improving negotiation power and securing consistent income streams for member farmers.
By facilitating direct procurement, easing regulatory barriers, and opening digital retail channels, the ecosystem is being recalibrated to make farmer collectives more competitive. Whether this results in long term shifts in agricultural marketing patterns remains to be seen, but the foundation for an alternate model is clearly being laid.
In a sector long dominated by middlemen and regulated markets, the emergence of direct FPO-corporate linkages signals a shift in momentum, one shaped by digital tools, institutional support, and the collective agency of farmers working together.