Historical background of producer companies in India
Producer Companies as an Institution have been conceptualised and structured, taking into the considerations of farmers, agriculturists (termed as 'Producers'), with a view that the business activities relating to agriculture, be channelized and governed in a formal manner. Part IX A was introduced in the Companies Act, 1956 by the Companies (Amendment) Act, 2002, which consists of Chapters I to XII, covering Sections 581A to 581 ZT, encompassing the provisions of producer companies. The Policy makers realised that, inspite of India being an Agrarian Economy since ages, formalisation and good governance have not even touched the Agricultural Sector. The challenges faced by primary producers, farmers due to their limited asset and capital base, climate issues, mobilisation of resources, issues relating to agricultural labour, policy changes, technological advancements, transparency, governance and systems have been taken into consideration here by the policy makers.
Principally the structure, concept and philosophy of Co-operative Societies formed under the Co-operative Societies Act, 1961 has been kept intact as a basic framework and then the same has been improvised. Provisions relating to conversion of the existing Co-operative Societies registered under various other statutes have been also incorporated so as to give an opportunity to the cooperative sector to corporatize itself.
The basis of this entire structure and system of co-operatives in India, takes us behind at least a 100 years from now. The Primary Agricultural Co-operative Society (PACS) is one of the oldest producer institutions in India. On the basis of the 'Principle of Co-operation', there have been various structures which have evolved like Self-Help Groups, Common Interest Groups etc. The objective of co-operative institutions, which the producer companies today have adhered to is not just earning profits but to help every member of such institutions and to share the profits between the members of such institutions.
The co-operative institutions and societies work under the following cardinal principles:
(a) Democratic management – one vote for each member irrespective of their shareholdings.
(b) Limited share in profits.
(c) The concept of mutual assistance.
(d) Co-operation and association with similar institutions
Producer Company as per the Companies Act
A producer company is a company incorporated under Companies Act 2013 (formerly the Companies Act 1956) and shall carry on following activities as mentioned in section 581B of Companies Act 1956:
• Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import goods for their benefit
• Processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members
• Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
• Providing education on the mutual assistance principles to its Members and others
• Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of interest of its members
• Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce
• Insurance of producers or their primary produce
• Promoting techniques of mutuality and mutual assistance
• Welfare measures or facilities for the benefit of Members as may be decided by the Board
• Any other activity, ancillary or incidental to any of the activities referred to in above clauses which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner
• Financing of procurement, processing, marketing or other activities specified in above clauses which include extending credit facilities or any other financial services to its members
Over the period of time Producer Company has gained popularity due to the following:
• Co-operatives have largely been state promoted, with a focus on welfare rather than to do business on commercial lines and more State government intervention in the management of Co-operatives.
• Whereas Companies Act is central legislation comparatively more liberal and minimal government control in the management of the Company.
• A Producer Company is hybrid of Company and Co-operative Society.
• It combines the goodness of a co-operative enterprise and vibrancy and efficiency of a company and accommodates the unique elements of cooperative business with a regulatory framework similar to that of a company.
Producer Company means a corporate body having objects or activities as specified under the Act. It consists of a group of people involved in the production of primary produce or having one or more objectives relating to primary produce. In a producer company, you can appoint agriculturist members and accept deposits in the form of RD/FD and provide them maturity as well as distribute loans to your farmer members and charge interest from them.