How to Start a Mushroom Farming Business in India: Oyster, Button and Milky Mushrooms, Training, Support, Costs and Selling

Mushroom farming is one of India’s most accessible agribusinesses. It needs little land, uses agricultural waste such as straw as a growing medium, and can produce harvests within weeks. Oyster mushrooms can be grown in a spare room or shed in many parts of India; button mushrooms need more controlled conditions but have larger markets; milky mushrooms suit hot climates. Demand from households, restaurants, hotels and processed food makers keeps growing. This guide explains how to start a mushroom farming business in India, from licences and costs to finding your first customers.

This guide explains how to choose a mushroom type, get trained, set up production, control contamination, and sell profitably.

Key points

• Choose a mushroom suited to your climate and market: oyster (easy, many climates), button (largest market, needs controlled conditions or cool seasons), and milky (suited to hot, humid regions).
• Get trained first: ICAR’s Directorate of Mushroom Research and Krishi Vigyan Kendras (KVKs) run training programmes.
• Hygiene and contamination control decide yields. Most failures come from contamination by moulds and pests.
• Government horticulture programmes have supported mushroom units, such as production units, spawn labs and composting units; check current assistance through your state horticulture department.
• Fresh mushrooms are perishable: plan selling before you grow.

Step 1: Choose your mushroom

Many beginners start with oyster mushrooms, then add others as skills grow.

Step 2: Get trained

• ICAR-Directorate of Mushroom Research (Solan) runs training programmes on cultivation, spawn production and processing.
• Krishi Vigyan Kendras in most districts offer practical training.
• State agricultural universities and horticulture departments also run courses.
• Visit working farms to see real conditions and ask about problems.

Step 3: Set up a growing space

• a clean room or shed with good ventilation, protection from direct sun, and the ability to control humidity
• racks or hanging systems for bags
• humidity control: misting, wet gunny walls or humidifiers
• temperature control for button mushrooms, such as air conditioning or insulated rooms in warmer areas
• separate areas for substrate preparation, spawning, incubation and fruiting where possible
• clean water supply and drainage

Step 4: Spawn and substrate

• Spawn (mushroom "seed") must be fresh and pure; buy from reliable labs, including those certified or recommended by research institutes.
• Substrate: oyster mushrooms grow on chopped, pasteurised or sterilised straw; button mushrooms need properly prepared compost; milky mushrooms grow on straw with a casing layer.
• Pasteurisation or sterilisation of the substrate kills competing moulds and pests.

Step 5: Grow and harvest

A typical oyster mushroom cycle:

1. prepare and pasteurise straw
2. mix with spawn and fill bags
3. incubate in darkness until the white mycelium covers the bag
4. open bags and move to the fruiting area with humidity, light and fresh air
5. harvest mushrooms when caps are well formed, in several flushes over a few weeks

Harvest carefully, handle gently, and chill quickly.

Step 6: Control contamination

• cleanliness: clean rooms, tools and hands; footbaths at entrances
• pasteurise substrate properly
• remove contaminated bags immediately, away from the growing area
• control pests such as flies with screens and traps
• don’t mix old and new crops in the same room

Step 7: Registrations and support

• FSSAI registration if you sell packed mushrooms or processed products such as dried mushrooms, pickles or powders. See our FSSAI guide.
• Udyam registration: free, and useful for loans. See our Udyam guide.
• Government support: horticulture schemes have provided assistance for mushroom production units, spawn production and composting units in many states; check with your state horticulture department and district agriculture office.
• Loans: Mudra loans and bank agricultural or MSME loans; see business loans and government schemes.

Step 8: GST and tax

• Fresh mushrooms, like other fresh vegetables, are generally exempt from GST.
• Dried, processed or packaged mushroom products may be taxed; check HSN codes.
• Income tax: whether income from mushroom farming counts as agricultural income depends on how it’s grown; courts have taken different views for mushrooms grown in controlled conditions. Ask a chartered accountant.

Step 9: Costs and yields

An illustrative example: oyster mushrooms

These figures are illustrative; yields depend on skill, substrate and conditions. A small farmer prepares 200 bags of oyster mushrooms in a cycle, each with about 4 kg of dry straw. Straw, spawn, bags and pasteurisation cost about ₹12,000, and labour and electricity about ₹6,000, for ₹18,000 per cycle. If each bag yields about 2.5 kg of fresh mushrooms over several flushes, that’s 500 kg. Selling at ₹120 a kg to local buyers brings ₹60,000 per cycle. With losses from contamination and unsold produce, a realistic return is lower, but the example shows why skill and selling are so important.

Step 10: Sell

• vegetable vendors, supermarkets and organic shops
• restaurants, hotels and caterers, who need regular supplies
• direct to consumers through WhatsApp and home delivery
• processing: dried mushrooms, mushroom powder, pickles and ready-to-cook products, which last longer
• Google Business Profile and the India Business Directory: list your farm free

Plan sales before each crop, since fresh mushrooms last only a few days even chilled.

Costs to plan for

• a growing room or shed, with racks and humidity control
• spawn, straw or compost, bags and pasteurisation equipment
• cooling for button mushrooms
• labour
• electricity and water
• packaging and transport
• training

A getting-started checklist

1. Choose your mushroom type based on climate and market.
2. Complete training at ICAR, a KVK or an agricultural university.
3. Set up a clean growing space.
4. Source pure spawn from a reliable lab.
5. Start with a small trial crop.
6. Line up buyers before scaling up.
7. Register for FSSAI if you’ll sell packed or processed products.

Processing for longer shelf life

Fresh mushrooms last only a few days, so processing can reduce losses and add value:

• drying: sun or solar drying, or mechanical dryers, for dried mushrooms that keep for months
• powders: ground dried mushrooms for soups and seasonings
• pickles and ready-to-cook products, with FSSAI compliance and proper labels
• canning or freezing, for larger units with the right equipment

Training institutes and KVKs often teach processing too.

Your first 90 days

In the first month, complete training and prepare a clean growing room. In the second month, run a small trial crop with good spawn, and track contamination and yields. In the third month, line up buyers such as vendors and restaurants, then scale up gradually.

Key numbers to track

Review these every month:

• yield per bag or per kg of substrate, for each crop
• contamination rate: the share of bags lost
• days from spawning to first harvest
• price per kg achieved, by buyer
• unsold or wasted mushrooms
• cost per kg produced

Common mistakes

• Starting big without training or a trial crop.
• Poor hygiene, leading to contamination.
• Low-quality spawn.
• No buyers lined up for a perishable product.
• Ignoring temperature needs for button mushrooms.

Frequently asked questions about starting a mushroom farming business in India

Is mushroom farming profitable?
It can be, with good yields and reliable buyers.

Can I grow mushrooms all year?
Oyster and milky mushrooms can be grown for much of the year in suitable climates, and button mushrooms year-round only with controlled rooms. Plan crops around your local temperatures and humidity, and choose varieties suited to each season.

Where do I buy spawn?
From spawn labs recommended by ICAR’s mushroom research directorate, agricultural universities and KVKs, or established commercial labs with good reviews from growers.

How much space do I need to start?
A small room of around 100 to 200 square feet can hold a starter batch of oyster mushroom bags on racks, if it can be kept clean, humid and ventilated.

Do I need a cold room?
For button mushrooms in warm regions, yes, or grow seasonally in cooler months. Oyster and milky mushrooms need less temperature control, but chilled storage after harvest helps.

Which mushroom sells for the highest price?
Speciality mushrooms such as shiitake sell for more, but need more skill and controlled conditions. Button mushrooms have the largest market; oyster mushrooms are easiest to start with.

Can mushroom farming be done in villages?
Yes. Straw is widely available in villages, and many rural women’s groups grow oyster mushrooms successfully.

What causes mushroom crop failure?
Most often contamination from poorly pasteurised substrate, low-quality spawn, poor hygiene, or wrong temperature and humidity.

Can I sell mushrooms to restaurants?
Yes. Restaurants and hotels need regular, fresh supplies. Agree quantities, delivery days and prices, and deliver chilled.

Which mushroom is easiest to grow in India?
Oyster mushrooms are generally the easiest for beginners, growing in many climates on straw.

Where can I get mushroom farming training?
ICAR’s Directorate of Mushroom Research, Krishi Vigyan Kendras, state agricultural universities and horticulture departments.

Is GST charged on mushrooms?
Fresh mushrooms are generally exempt; processed or packaged products may be taxed.

Can I grow mushrooms at home?
Yes, oyster mushrooms can be grown in a clean, ventilated room at a small scale.

Is government support available?
Horticulture schemes have supported mushroom units in many states. Check current assistance with your state horticulture department.

How long until the first harvest?
For oyster mushrooms, often within a few weeks of spawning, depending on conditions.

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Sources

1. ICAR-Directorate of Mushroom Research
2. FSSAI, Food Safety Compliance System (FoSCoS)
3. Central Board of Indirect Taxes and Customs, GST
4. Ministry of MSME, Udyam Registration portal
5. Pradhan Mantri MUDRA Yojana

Last reviewed November 6, 2026. Startup costs are estimates; check local prices, licensing and tax rules before you commit money.