Indian economy is agricultural centric. Around 62% of population depends on agricultural activities for their livelihood. But the primary producers and farmers are still lacking in technologies and are fully unorganised. In order to address their problems, Government of India set up an expert committee, led by Y.K. Alagh (an economist) to look into the matter. In the year 2002, they introduced the Producer Companies concept. Since then, they have helped primary producers gain access to input, credit, production technology, market etc.
A producer company in India is a company registered under the Companies Act with mutual objectives of agriculture production, procurement, post-harvesting processing activities, import goods, selling and distribution, export of primary production of the members to earn more benefits. A producer company is a committee of 10 or more individuals or 2 or more institutions or by a combination of both (10 individuals and 2 institutions) with a joint objective of dealing with agricultural and post-harvesting processing activities. In simple words, it is a cluster of farmers who joint hands for better living and to improve their income.
Pre-requisites to form a Producer Company
- Any 10 or more producers (Individuals) can join together to form a producer company but there is no upper limit on the number of members.
- Or, any 2 or more producer institutions can form a producer company.
- A minimum capital of Rs. 500,000 is required to incorporate a producer company.
- There should be minimum 5 directors (maximum of 15) in a producer company.
- It can never be converted into a public company however it can be converted into a multi-state co-operative society.
The process of registering a Producer Company is similar to that of a Private Limited Company.
Benefits for Producer Companies
- Members of the Producer Company initially receive the value for the produce pooled and supplied as the directors determine. This amount will be later given out in form of cash/ kind/ equity shares to the members.
- Producer company members will be entitled to get bonus shares in the same proportion to the shares held by them.
- Members of the producer company may be given the surplus (after providing provision for payment of limited return and reserves) as patronage bonus.
Note: Patronage bonus is a distribution of the surplus income to the members of the producer company in proportion to their respective patronage. Patronage, on other hand, is the participation by members in their business activities by using the services offered by producer company.
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