Introduction
Farming continues to be the major source of income, employment, livelihood and a predominant business option in the rural India. Feeding ever increasing population through next millennium remains an uphill task and the country will have to feed about 1.3 billion people by 2020 which requires around 5-6 million tonnes of additional food grains every year. The rural poor, predominantly dominated by small holders, do not have proper access to food and non-food commodities due to poor employment and infrastructure facilities. Highly radical and innovative policies can help in addressing these issues. This mainly requires concerted efforts of integrating farmers that have smaller holdings. This has been a much discussed topic as the youngsters are losing
interest in farming and are looking for alternative means to earn their livelihoods. This grave area of concern requires innovative institutional models and approaches so that small scale land holders are supported through integrated efforts of related institutions with the value chain so that the net return at the farmers end is remunerative enough for the farmers to remain interested in farming.
India has more than 92 million small holdings and the second largest country to have highest small holdings after China (Oksana Nagayets, IFPRI, 2005) and thus has a challenge of making these small holdings productive. Historically several institutional models have been prevailing and various new models area is also being tried in India to integrate farmers with the value chain, however, most of the models have not been proved very effective. Realizing the need for giving the business and commercial outline to the co-operatives, the Government of India enacted the Producer Companies
Act by incorporating a new section IXA in the Indian Companies Act.1956 through an amendment, with an objective of formulating a legislation that would enable incorporation of cooperatives as companies and conversion of existing co-operatives into companies, while ensuring that the unique elements of the cooperative business remain intact in the new legislation. The collective of farmers in the form of a producer company enshrines the ethos and basic tenets of cooperatives and infuses a greater professional approach and attitude into their management.
Need for farmers Company:
Organizing small-scale farmers into a producers company can ensure effective forward and backward linkages and enable supply of quality inputs, agricultural credit, crop insurance, technical know-how and other essential extension services and also to ensure effective forward linkages such as bulking of the produce, collective marketing, processing and with an overall objective of ensuring a better collective bargaining power for the small farmers. The company’s law provides opportunities to the farmers for the formation of a company which can offer statutory and regulatory framework for the
farmer’s collective and creates the potential for the producer-owned enterprises to compete with other
enterprises.
Objects and Activities of Producer Company The important objects and activities of producers
company include crop production, harvesting, procurement, grading, pooling, handling, marketing of primary produce of the members or import of goods or services for their benefit, processing of the farm produce, supply of inputs, machinery, consumables, etc to members, providing education and other welfare activities for members, generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications
related to primary produce, insurance of produce, and other allied or ancillary activities including financing thereof. Important characteristic features of Producer Company: The important features of Producers Company are
• It is a corporate body registered under the Indian Companies (Amendment) Act 2002.
• Its membership is held only by ‘primary producers’ or ‘Producer Institution’ and the equity of each member cannot be traded
• The clauses of Private Limited Company shall be applicable to the producer companies except the clauses specified in Producer Company Act, from 581-A to 581-ZT which make it different from a normal private or limited company
• The liabilities of the producer company are limited to the value of the share capital it has issued and the liability of the members is limited to the value of share capital held by them.
• The minimum authorized capital at the time of incorporation of a producers company should be Rs.5 lakh.
• The minimum number of producers required to form a producers company is 10 and there is no limit for the maximum number of members and it can be increased as per feasibility and need.
• There cannot be any government or private equity stake in the producer companies, which implies that Producers Company cannot become a public or deemed public limited company.
• The area of operation is the entire country. Process of incorporation of Producers Company: The process of incorporation of a producers company should also follow social process as done in case of a community based organizations (CBO). The producer company also has a shared objective, mutually agreed plan of actions, shared responsibilities and benefits and a mechanism of functioning where the decisions are taken by the opinions of majority of the members. The broad steps followed in mobilizing the members for the producer company are given below.
• Setting the goal and objective
• Developing the blue print or the plan
• Identification of area of operation
• Finalizing the number of producers Building rapport with members
• Exposure visit for the members
• Assessment of training needs of the members
• Training of members
• Preparing calendar for successive years
• Fixing the share value and share collection
• Membership mobilization
• Developing preliminary business plan
• Developing Memorandum of Articles of the Association.
• Organizing the first meeting of the share holders
• Selection or election of the members
• Registration of the company
• General Body meeting
Registration of Producers Company:
The process of registration involves
(1) Obtaining Digital Signature Certificate
(2) Obtaining Director Identification Number
(3)Naming the Producer Company
(4)Preparation of memorandum and articles of
Association.
Documents required for registration:
• Letter of Registrar of Companies confirming the availability of name for formation of the company
• Memorandum and Articles of Association
• Form 18 showing full address of Registered Office
• Form 32 regarding particulars of directors
• Form-1(on a stamp paper) declaring compliance of all/ incidental matters regarding formation of companies
• Form 29 – consent of the director.
• An affidavit has to be submitted by subscribers, if the Memorandum of Association is submitted in Hindi by subscribers claiming the understanding of same.
• Power of Attorney.
• The Registrar of the Companies will issue a ‘certificate of incorporation’ within thirty days. The incorporation of Producer Company is effective from the date mentioned in the certificate of registration granted by the Registrar of Company.
Board of Directors & their powers:
The Board of Directors is the executive body of the company. The powers and functions of the Board
of Directors include responsibility of formulating, supervising, and monitoring of the performance of
the producer company; Determination of quantum of dividend; Determination of the quantum of withheld price and recommended patronage to be approved at the general body meeting; Admission of new members; Formulation of organizational policy, objectives; Approve corporate strategies and financial plans; Appointment of a CEO and other officers and exercise supervision, direction and control over them; Sanction any loan or advance, in connection with the business activities of
the Producer Company to any member; Investment of the funds of the company; Acquisition or disposal of property of the company ; Exercise supervision over the book keeping, annual auditing and presenting the annual accounts in the annual general meeting with the auditor’s report etc.
Business and organizational management of a producers company:
Successful operation of the company requires a strong business plan which requires the understanding by the company about the physical, social and cultural aspects of the area of operation, its potential, requirement of the shareholders relating to farming, surrounding markets and competitors. Demand and supply analysis of products to be sold and product to be required by
shareholders etc. A business plan would not only convey the organizational structure, business goals and the strategies to meet them, but also will allow the company to assess the potential problems and the ways to solve them. It helps in assessing the capital required for the planned business, which, further be required to be submitted to any financial agency to apply for loans.
Generating business ideas for Producers Company:
The first step in business planning is identifying business opportunities. Identification of specific business opportunity is largely a reactive process. The step by step approach can be adopted to discuss various tools of generating business ideas. Identification of Creative Business Opportunity Identification of creative business opportunities is done through brainstorming in small groups. This process is done in two phases. In the first phase, the emphasis is on generating a large number of ideas, without commenting on the quality of the ideas. The group facilitator must ensure that ideas are not evaluated, but are only recorded in detail. In the next phase, ideas are evaluated and short-listed. The criteria for evaluation may even be subjective. Some of the possible ideas are
given below.
• Development of problem-solving products/services:
• First step is to hit upon an idea that can be a solution to a problem experienced by farmers. This can include collective sale of farm produce or collective purchase of farm inputs can be creative ideas since it reduces role of intermediaries and ensures quality services to farmers.
• Introducing the custom hire centers for exploitation of new technologies:
• Small farmers cannot afford cost of mechanization individually and introducing hire services of
mechanized implements to the small farmers can be of great help to them.
• Creating a demand for Agriculture Extension services:
• Looking at the need for quality extension services the producers company can think of introduction
of professional extension services at a reasonable cost. Similarly, introduction of products like crop
insurance can serve the farmers in a big way.
Opportunity and Threat – Analysis and identification of Business Opportunities:
The ideas generated are to be critically evaluated with respect to the external business environment
for identifying the business opportunity and threats. For every shortlisted idea one need to write down the opportunities and threats in terms of
• Size of the market
• Its stability (demand for the product/service long term or purely temporary)
• The extent to which the market is dissatisfied with the existing service/solution
• Level
• Price of competition, high, medium or low and quality sensitivity of the market.
• Degree
• Barriers of profitability to entry/exit
• Changes in government’s policies such as subsidy, availability of low cost funds. Based on the opportunities and threats analysis, one can identify an appropriate Business Opportunity which could
be considered for developing a business plan.
Policy support and role of Central Government:
The central government plays an important role in supporting the farmers companies in the country.
Department of Agricultural and Cooperation (DAC), act as the nodal agency for the development and
growth of companies. The Small Farmers’ Agribusiness Consortium (SFAC) is the designated agency of DAC to act a single-window for technical support, training needs, research and knowledge and to create linkages to investments, technology and markets. SFAC will provide all- round support to State Governments, FPOs and other entities engaged in promotion and development of FPOs. In particular, SFAC will create sustained linkages between FPOs and inputs suppliers, technology provide, extension and research agencies and marketing and processing players, both in the public and private sectors. The mandate National Cooperative Corporation (NCDC) is expanded to include FPOs in the
list of eligible institutions which receive support under the various programs of the Corporation. The NAFED is taking steps to include FPOs in the list of eligible institutions which act on its behalf to undertake price support purchase operations. The DAC is working with Food Corporation of India (FCI) and State Governments to include FPOs as procurement agencies under the Minimum Support Price (MSP) procurement operations for various crops. The DAC and its designed agencies are working with NABARD and other financial institutions to direct short and medium term credit for working capital and infrastructure investments needs of FPOs. The DAC is also working with all relevant stakeholders to achieve 100 percent financial inclusion for members of companies and link them to Kisan Credit Cards apart from working with Ministry of Corporate Affairs and other stakeholders to strengthen the provisions of the law relating to the registration, management and regulations of FPOs with a view to fostering fast paced growth of FPOs. Policy support and role of
State Government:
The state government also plays an important role in extending support to the producer’s companies. Apart from encouraging the formation of producer’s organizations on a large scale through centrallysponsored and state-financed programs and schemes, the state government also support and strengthen farmer’s producer’s organizations.
• The companies are declared at par with cooperatives registered under the relevant state legislation and self-help groups/federations for all benefits and facilities that are extended to member-owned institutions from time to time.
• By making provisions for easy issue of licenses to the farmer’s producer’s organizations to trade in inputs (seed, fertilizer, farm machinery, pesticides etc.) for use of their members as well as routing the supply of agricultural inputs through farmer’s producer’s organizations at par with cooperatives.
• By using farmer’s producer’s organizations as producers of certified seed, saplings and other
planting material and extending production and marketing subsidies on par with cooperatives.
• By suitable amendments in the APMC Act to allow direct sale of farm produce by farmer’s producer’s organizations at the farm gate, through farmer’s producer’s organizations owned procurement and marketing centers and for facilitating contract farming arrangements between farmer’s producer’s organizations and bulk buyers.
• By appointing farmer’s producer’s organizations as procurement agents for minimum support price
operations for various crops.
• By using farmer’s producer’s organizations as implementing agencies for various agricultural development programmes, especially RKVY, NFSM, ATMA etc. and extending the benefits of Central and State funded programmes in agriculture to members of farmer’s producer’s organizations on a preferential basis.
• By linking farmer’s producer’s organizations to inancial institutions like cooperative banks, State
Financial Corporations etc. for working capital, storage and processing infrastructure and other investments.
• By promulgating state level policies to support and strengthen farmer’s producer’s organizations to make tthem vibrant, sustainable and self-governing body. Thus it is important that various stakeholders in the development arena promote the formation and strengthening of farm producers companies and help the small scale farmers to join this movement and get benefited on a long term basis.
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