A producer company means a body corporate registered as Producer Company under Companies Act, 2013 and having objects under section 581B of Company Act, 2013 such as:- (a) production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of *primary produce of the Members or import of goods or services for their benefit : (b) rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members; (c) generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce; (d) promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce; *Primary produce has been defined as a produce of farmers arising from agriculture including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products: produce of persons engaged in hand-loom, handicraft and other cottage industries: by – products of such products; and products arising out of ancillary industries.”Producer institution” means a Producer Company or any other institution having only producer or producers.
Any of the following combination of producers or institutions can incorporate a producer company:
• Ten or more producers (individuals); or
• Two or more producer institutions; or
• Combination of the above two (10+2).
- In a Producer Company, only persons engaged in an activity connected with, or related to, primary produce can participate in the ownership. The members have necessarily to be primary producers.
- These companies shall be termed as “Companies with Limited Liability” and the liability of the members will be limited to the amount, if any, unpaid on the shares.
- The name of the company shall end with the words “Producer Company Limited“
- On registration, the producer company shall become as if it is a private limited company for the purpose of application of law and administration of the company (however it shall comply with the specific provisions of part IXA).
- The maximum number of 50 members is not applicable to these companies.
Voting Right and Share Capital:
- The share capital of a Producer Company shall consist of equity shares only.
- Members’ equity cannot be publicly traded but only transferred.
- Voting when membership is
- Only of individuals then voting rights shall be based on a single vote for every member.
- Only of producer institutions then voting rights on the basis of their participation.
- Combination of both individual and producer institutions then voting rights shall be based on a single vote for every member.
- Every producer company is to have at least five and not more than 15 directors.
- A full time chief executive should be appointed by the board and shall be entrusted with substantial powers of management as the board may determine.
Primary producers‟ organisations or collectivities are being argued to be the only institutions which an protect small farmers from ill-effects of globalization or make them participate successfully in modern competitive markets (Trebbin and Hassler, 2012). Producers‟ organizations not only help farmers buy or sell better due to scale benefits but also lower transaction costs for sellers and uyers, besides providing technical help in production and creating social capital. In Mozambique, where 80% farmers are small holders and only 7.3% were members of any farmer organization in 2005, the membership in a farmers‟ organisation led to 50% increase in profits for small farmers from the crops handled by the organization (Bachke, n.d.). It is also argued that co-operatives or such collectivities are needed for small farmers as they help realize better output prices and credit terms and, thus, can help eliminate interlocking of factor and product markets into which small farmers are generally trapped (Patibandla and Sastry, 2004). In India, there are many legal forms of organisations into primary producer can organise themselves.
A Producer Company (PC) is one such and relatively new legal entity of the producers of any kind, viz., agricultural produce, forest produce, artisanal products, or any other local produce, where the members are primary producers. PC as a legal entity was enacted in 2003 as per section IXA of the Indian Companies Act 1956. Since the above enactment, the PC has been hailed as the organizational form that will empower and improve the bargaining power, net incomes, and quality of life of small and marginal farmers/producers in India. While each member in a PC can have only one vote, he/she can contribute different amounts of share capital to the PC. The shares of the PC members cannot be transferred outside the membership. A PC should have a minimum of 10 members or two producer entities or a combination thereof can form a PC. By virtue of assigning equal voting rights to each member, the issues of management control by small and marginal producers has been resolved in the design of PC. In spirit, the current PC design also takes into account the efficiency of the community of producers rather than the efficiency of shareholders/financiers of a profit seeking company.
Producer Companies (hereafter Producer Companies) were tried in Sri Lanka during the 1990s under the Companies Act in non-plantation sector (92 in 2003) where they were called farmer companies. These Producer Companies, by and large, failed as they were promoted by the state (or its agencies like Department of Agriculture, Ministry of Irrigation, and Economic Development Board) and had large membership ranging from 215 to 2234. They were involved in input supply, credit supply, crop/produce purchase, contract farming, and manufacture of tea. Most of them suffered from poor capital base, lack of farmer participation, restriction on shareholding, and poor perception of these entities by the farmers as service providers (Esham and Usami,2007).As of mid-2011, there were over 156 Producer Companies in India. Of these registered Producer Companies, the Producer Companies of District Poverty Initiative Project-Madhya Pradesh (DPIP-MP) are the most cited (Singh, 2008). The above Producer Companies sell their produce to any large national and international buyers/processors or to their promoters. In its attempt to aggregate the produce from the marginal producers, the above PC model focuses on the common interest groups (CIGs) or self-help groups (SHGs) as the basic units for aggregation with no limit on the size of membership and size of cluster/operational area.
The major research questions regarding role of Producer Companies include: how far Producer Companies are an improvement over the existing co-operative or other models of producer organization? How relevant and appropriate are the Producer Companies in the context of globalised markets? What is the competitive edge of Producer Companies over other modes of farmer or primary producer organization? What kind of policy treatment do the Producer Companies need to grow as vibrant producer entities and to make an impact on the livelihoods of small producers?
While there are some unresolved questions in the current design and context , the PC as an enterprise of small and marginal farmers/producers nevertheless appears to be a powerful vehicle to empower small farmers/producers and improve their quality of life leading to better rural development in India. It is an appropriate time to assess the functioning of the Producer Companies and their impact on the small and marginal farmers/producers in India as they have been in existence for almost a decade now.
Topic of Article/Page: Producer Company Registration in India Patna Bihar Muzaffarpur Ranchi Jharkhand
This article is written by: ACS Prince Kunal
Our group websites: