Farmer Producer Companies: Past, Present and Future

Abstract

About 87 percent of agricultural households in India are small and marginal producers, cultivating small plots which generate low returns. Their average monthly income is Rs 6426, making farming on small plots economically unviable (NSSO 2014). Therefore, policy makers and practitioners are turning to producer collectives as a means for improving the economic situation of small producers.


Contents

Table of Contents

Preface by Ved Arya .….….….….….….….….….….….….….….….….….….….….….….….…… 05

Foreword by M. S. Sriram .….….….….….….….….….….….….….….….….….….….….….…. 07

Executive Summary .….….….….….….….….….….….….….….….….….….….….….….….….. 09

1. Introduction .….….….….….….….….….….….….….….….….….….….….….….….….….….… 17

2. Research Methodology .….….….….….….….….….….….….….….….….….….….….…… 23

  • 2.1 Analysis of Quantitative Data .….….….….….….….….….….….….….….….….….… 23
  • 2.2 Interviews with Stakeholders .….….….….….….….….….….….….….….….….…… 25
  • 2.3 Interviews with Producer Companies .….….….….….….….….….….….….…… 26

3. Promotion and Support of PCs .….….….….….….….….….….….….….….….….….… 29

  • 3.1 Conversion of Cooperatives to PCs .….….….….….….….….….….….….….….… 30
  • 3.2 Support by SFAC .….….….….….….….….….….….….….….….….….….….….….….…… 30
  • 3.3 Support by NABARD .….….….….….….….….….….….….….….….….….….….….….…. 31
  • 3.4 Support by Others .….….….….….….….….….….….….….….….….….….….….….…… 32
  • 3.5 Self-promoted PCs .….….….….….….….….….….….….….….….….….….….….….…… 33
  • 3.6 Characteristics of NABARD and SFAC Supported Companies .….…… 33
  • 3.7 Summary .….….….….….….….….….….….….….….….….….….….….….….….….….….… 35

4. Overview of PCs in India: Numbers, Locations, Shareholders .….….. 37

  • 4.1 Total Number of PCs Registered by Year .….….….….….….….….….….….…. 37
  • 4.2 State-wise Distribution of Producer Companies .….….….….….….….…… 39
  • 4.3 District-wise Distribution of Producer Companies .….….….….….….….… 40
  • 4.4 Density of FPCs .….….….….….….….….….….….….….….….….….….….….….….….…. 45
  • 4.5 Active and Struck-off Companies .….….….….….….….….….….….….….….….… 46
  • 4.6 Number of Shareholders .….….….….….….….….….….….….….….….….….….….. 47
  • 4.7 Summary .….….….….….….….….….….….….….….….….….….….….….….….….….….… 48

5. Financial Viability of PCs .….….….….….….….….….….….….….….….….….….….….… 49

  • 5.1 Operating Models .….….….….….….….….….….….….….….….….….….….….….….…. 49
  • 5.2 Paid-Up Capital: Overview .….….….….….….….….….….….….….….….….….….….. 53
  • 5.3 Top 20 Producer Companies, by PUC .….….….….….….….….….….….….….…. 59
  • 5.4 Companies with Low Paid-Up Capital .….….….….….….….….….….….….….…. 60
  • 5.5 Discussion: Under-capitalized Producer Companies .….….….….….….…. 61
  • 5.6 Summary and Recommendations .….….….….….….….….….….….….….….…… 64

6. Selected Categories of PCs .….….….….….….….….….….….….….….….….….….…… 67

  • 6.1 Milk Producer Companies (Dairies) .….….….….….….….….….….….….….…… 67
  • 6.2 Non-farm Producer Companies .….….….….….….….….….….….….….….….…. 68
  • 6.3 Women in Producer Companies .….….….….….….….….….….….….….….….… 69
  • 6.4 Summary .….….….….….….….….….….….….….….….….….….….….….….….….….….… 73

7. Normative Imaginations of PCs and their Implications .….….….….….. 75

  • 7.1 Normative Imaginations of Stakeholders .….….….….….….….….….….….… 75
  • 7.2 Sense of Ownership among Shareholders .….….….….….….….….….….…. 77
  • 7.3 Importance of Business Acumen .….….….….….….….….….….….….….….…… 79
  • 7.4 Importance of Enabling Ecosystem .….….….….….….….….….….….….….…… 81
  • 7.5 Weak Internal Governance .….….….….….….….….….….….….….….….….….…… 82
  • 7.6 Onerous Compliance Requirements .….….….….….….….….….….….….….…. 85
  • 7.7 Summary and Recommendations .….….….….….….….….….….….….….….…. 86

8. Recommendations .….….….….….….….….….….….….….….….….….….….….….….…… 89

  • 8.1 Promote Two-tier, Multi-commodity, Value-adding PCs .….….….….….. 90
  • 8.2 Address the Geographical Skew .….….….….….….….….….….….….….….….….. 93
  • 8.3 Refine Policy and Regulation .….….….….….….….….….….….….….….….….….… 94
  • 8.4 Concluding Remarks .….….….….….….….….….….….….….….….….….….….….….… 97

9. About the Authors .….….….….….….….….….….….….….….….….….….….….….….….… 99


Full Text

This report is based on a two year research study which 

  1. Analyses their characteristics; 
  2. Investigates their strategic challenges, capitalisation, regulation, long-term potential etc and 
  3. Recommends possible strategies for improving their viability. 

Producer companies combine the principles of collective action with the structural benefits of a company. Over the last 17 years, thousands of producer companies have been promoted in India in the belief that they would enable small producers to pool their resources and establish successful businesses which would improve their incomes and reduce risks in the long run. 

This study identifies certain normative, strategic and regulatory challenges which may limit their chances of success and recommends a possible path forward, to enable practitioners and policy-makers to improve the viability of such companies in the long-run.