Co-operative Farming: A Sustainable Model for Smallholder Farmers in India

India is home to over 86% of farmers who own less than 2 hectares of land. These small and marginal farmers – the backbone of Indian agriculture – often struggle with the same set of problems: high input costs, fragmented landholdings, poor market access, and inadequate credit. Cooperative farming offers a practical, time-tested answer to these challenges. By pooling land, labour, and capital, farmers can collectively access what none of them could afford individually. Yet, despite its promise, cooperative farming in India has not achieved the scale it deserves. Understanding why – and what can be done – is essential for anyone interested in agricultural law, rural development, or cooperative governance.

What is cooperative farming? 🔗

Cooperative farming is a system where farmers voluntarily come together to pool their resources – land, labour, capital, and equipment – to conduct agricultural activities collectively. The defining feature is that individual farmers typically retain ownership of their land, while operations such as sowing, harvesting, input procurement, and marketing are carried out jointly. This distinguishes it from collectivisation, where individual ownership itself is extinguished.

As a concept, cooperative farming is a compromise between full peasant proprietorship and collectivised farming. It draws on the spirit of the cooperative movement – democratic governance, mutual aid, and equitable benefit-sharing – and applies it to the field of agriculture. The goal is to give small farms access to the same economies of scale that large commercial farms naturally enjoy.

Why small and marginal farmers need cooperative farming 🔗

The structural challenge facing Indian agriculture is well-documented. The average operational size of a landholding in India is just 1.33 hectares, far below the world average of 3.7 hectares. With land fragmented across generations, individual plots are often too small to justify investment in tractors, irrigation infrastructure, or modern seeds. Farmers end up paying higher prices for inputs (because they cannot buy in bulk) and receiving lower prices for output (because they have no bargaining power in the market).

Cooperative farming directly addresses this. When farmers pool resources, three outcomes become possible: specialisation, economies of scale, and better marketing. Bulk purchasing of seeds and fertilisers cuts costs. Shared use of tractors and harvesters reduces per-unit expenses. And collective selling increases bargaining power, allowing farmers to negotiate directly with buyers and bypass exploitative middlemen.

Types of cooperative farming societies in India 🔗

Not all cooperative farming societies operate in the same way. Indian cooperative law and practice recognise four broad types, each suited to different levels of resource pooling and collective involvement:

Cooperative better farming society 🔗

This is the most basic and widely accepted form. Each farmer manages cultivation independently on their own plot. However, activities like procuring seeds and fertilisers, storing harvested produce, and marketing are carried out jointly through the society. It is essentially a service cooperative layered over individual farming, and serves as an ideal entry point for communities new to cooperative methods.

Cooperative tenant farming society 🔗

Here, the society purchases or leases land from government or private sources and then sub-leases it to individual members. Each member cultivates their assigned plot independently and pays rent to the society. This model is useful in areas where farmers are landless or land redistribution is being pursued.

Cooperative joint farming society 🔗

In this model, members pool their individual landholdings into a single, consolidated farm that is then cultivated jointly. Individual ownership of land is retained, but cultivation and management are collective. Members receive wages for their labour and also earn a share of profits proportional to the land they contributed. This is the form most closely aligned with the classical vision of cooperative farming.

Cooperative collective farming society 🔗

This is the most intensive model, where permanent pooling of land occurs and members cannot exit by selling their individual share to outsiders. Instead, a departing member’s rights are transferred to another member. The society functions much like a joint farming society in its day-to-day operations, but individual exit rights are restricted. Critics have noted that this arrangement runs counter to the foundational cooperative principle of voluntary membership with the freedom to withdraw.

Benefits of cooperative farming for smallholder farmers 🔗

The economic case for cooperative farming is strong and multi-dimensional. Cooperative farming can solve the core problems of small and uneconomic holdings in several ways:

Economies of scale: Consolidating small plots into a larger operational unit allows efficient use of machinery, reduces wasted boundary land between fields, and makes large-scale irrigation investments viable. A tractor shared across twenty farms is far more affordable than one owned by a single farmer with two acres.

Better input access: Cooperatives negotiate bulk purchases of seeds, fertilisers, and equipment, passing on the resulting cost savings to member farmers. This addresses one of the most persistent complaints of smallholders – that they are forced to buy expensive inputs in small quantities.

Market access and bargaining power: Individual farmers rarely have the volume of produce needed to negotiate fair prices. Cooperative societies aggregate output and negotiate collectively, securing better prices and reducing dependence on intermediaries. This also opens doors to formal markets, export channels, and government procurement schemes.

Credit access: A cooperative society commands higher creditworthiness than individual farmers and can attract institutional finance at more favourable rates. Many societies also provide direct credit facilities to members through linkages with Primary Agricultural Credit Societies (PACS) and cooperative banks.

Risk sharing: Crop losses due to weather, pest attacks, or price crashes hit individual farmers hard. Within a cooperative, losses and risks are distributed, making the impact on any single member far less severe.

Knowledge transfer: Cooperatives often organise training programmes on sustainable practices, water conservation, and financial management, giving member farmers access to expertise they could not otherwise afford.

Cooperative farming in India: where it stands today 🔗

India has the world’s largest cooperative movement, with more than 8 lakh cooperatives operating across various sectors. Dairy cooperatives under the Amul model and sugar cooperatives in Maharashtra are powerful demonstrations of what the cooperative structure can achieve in agriculture-linked sectors. Amul, born from the Anand Pattern, has transformed the lives of millions of small dairy farmers by giving them ownership of the entire value chain, from milk collection at the village level to retail marketing nationally.

However, cooperative farming specifically – the pooling of land and labour for crop cultivation – has lagged far behind. A look at India’s Five Year Plans reveals that cooperative farming was once a stated national priority. Pilot projects were established, and the Nagpur Resolution of the Congress in 1959 even proposed making cooperative farming a key tool for agricultural reform. Yet, nearly 40% of cooperative farms set up during early plan periods were found to be non-functional, and the political will behind the initiative gradually eroded.

Tamil Nadu has produced one of the more encouraging recent examples. Collective farming in Tamil Nadu has helped farmers break out of the cycle of low investment, low productivity, and low returns, demonstrating that cooperative farming can turn agriculture into a viable and profitable enterprise when designed and implemented well.

Why cooperative farming has not reached its potential 🔗

Despite its proven logic, cooperative farming faces a set of persistent structural and social barriers in India. Understanding these failures is as important as celebrating the successes.

Governance and management weaknesses 🔗

Cooperative societies have historically suffered from poor infrastructure, dormant membership, and a lack of professional management. In many cases, large farmers and landlords have captured leadership positions within societies, directing benefits disproportionately toward themselves and away from small and marginal farmers – the very people cooperatives are meant to serve.

Political interference 🔗

Sociologists have consistently pointed to political interference as a formidable obstacle. Selection of beneficiaries, leadership appointments, and resource allocation within many cooperatives have been driven by political considerations rather than merit or need. This erodes trust among members and undermines the cooperative’s credibility as a democratic institution.

Overdependence on government 🔗

Indian cooperatives have largely failed to become self-sustaining, continuing to rely on government patronage. This dependence makes them vulnerable to shifts in political priorities and reduces the incentive to develop internal financial discipline or member engagement.

Lack of spontaneity and member awareness 🔗

In many cases, cooperative societies have been imposed on communities from above rather than emerging organically from farmers’ own felt needs. Illiteracy, conservatism, and a lack of awareness about cooperative principles have meant that members treat cooperatives as government lending agencies rather than member-owned institutions, reducing active participation.

Bureaucratic and regulatory friction 🔗

Farmer Producer Organisations (FPOs), a modern variant of agricultural cooperatives, face significant bureaucratic hurdles such as difficulty obtaining APMC mandi licenses and restricted access to subsidised fertilisers – privileges that older cooperative societies enjoy. This regulatory inconsistency weakens the newer institutional forms that could otherwise complement traditional cooperative farming structures.

Social and cultural barriers 🔗

Deep-rooted caste hierarchies, mistrust between neighbouring farmers, and individualistic attitudes toward land – which is often tied to family identity and status – make it difficult to persuade farmers to pool their holdings even when the economic logic is clear. Finding qualified managers capable of handling large cooperative farms in rural areas is an equally persistent challenge.

The way forward: policy and institutional reform 🔗

For cooperative farming to realise its full potential, a multi-pronged approach is needed. Several directions stand out as particularly important.

The government’s commitment to forming 10,000 Farmer Producer Organisations (FPOs) under a dedicated Central Sector Scheme is a step in the right direction. FPOs combine the cooperative spirit with a corporate structure that can be more professionally managed. Ensuring these FPOs have equal access to subsidised inputs, mandi licenses, and credit facilities – on par with older cooperatives – is essential for their success.

The establishment of the Ministry of Cooperation in July 2021 signals renewed political attention to the sector. The government’s vision of Sahakar Se Samriddhi (prosperity through cooperation) envisions modernising cooperatives through digital tools, better governance, and expanded reach into every village. NABARD is developing a Cooperative Governance Index to assess and improve standards at the grassroots level, while computerisation of Primary Agricultural Credit Societies (PACS) is expected to bring greater transparency.

Equally important is investment in member education. Cooperative farming cannot succeed without informed, actively participating members who understand their rights, responsibilities, and the democratic processes through which cooperatives function. Training programmes, school-level curricula on cooperative principles, and community-level awareness campaigns are all essential inputs.

Structural reforms that ensure greater representation of small and marginal farmers in cooperative leadership – rather than allowing large landowners to dominate – are critical for restoring the cooperative’s original social purpose. Without this, cooperative farming risks becoming another instrument of rural inequality rather than a remedy for it.

What do you think? Given that India already has the world’s largest cooperative movement, why has cooperative farming specifically struggled to achieve scale – and do you think the answer lies more in institutional design, social attitudes, or political will? If you were advising a group of small farmers in your district on forming a cooperative farming society, which type of society would you recommend starting with, and why?

References

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