Farmers forming a private company and selling their produce in the market sounds like a cool idea. But it seems the idea is just not taking off despite a legislation to facilitate the formation of producer companies in 2003. And NGOs, who are the main support of such companies, are now discussing whether the enabling amendment in the Companies Act should be scrapped or modified to enable partnership with capital rich enterprises.
Here is a story of a producer company. A producer company is like a cross between a company and a cooperative. This is the Masuta Producers Company Ltd in Jharkhand.
The company is a group of 1,300 tasar yarn weavers and spinners. There are 82 tasar yarn spinning and reeling centres which have been registered as mutual benefit trusts. A typical reeling centre has about 30 women producers who come from one or more villages. The trusts have come together to form the company.
The main objectives of the company are to ensure round the year supply of raw material and buy yearn from the trusts at a fair price.
The fears are that the unique form of primary producer units are not doing as well as they were supposed to and are not attracting any share holders from big companies .
NGO Pradan is in the forefront of this discussion triggered off recently by the JJ Irani Committee suggestion that the Producers Company Act be scrapped as it is a failure.
Pradan is proactively pushing the cause of producer companies and says it will form a committee of NGOs to study the scenario and recommend measures to salvage the companies.
The profits now being made by producers companies are too insignificant to inspire replication.
But of the Rs 6 crore turnover from the company, the profits were Rs 38 lakh. And guess how much it translates to when each of the 1,300 farmer producer gets his annual profit "" it is just Rs 2,900.
Khitij Pandya who manages the production company of fabrics from the yarn given by Masuta, says that the problem is the cost of the yarn. It is costlier than the Chinese tasar by 40 per cent and so the profits are low. But it is totally women-driven and the NGO hopes to see the company do well in future. The modus operandi though is still unclear.
According to Soumen Biswas, executive director Pradan, the prospects of partnership with private companies rescuing these companies are dim.
"The total number of companies in existence under the 2002 legislation is not clearly known," he says. But he puts the number between 30 and 40. "That is why a committee is needed to study the situation in detail," he says.
Says Vijay Mahajan, former director of Pradan, "Private companies will never want to invest in these producer companies as investors want control."
Here the land and the capital belongs to the producer. He also rules out the use of savings in the hands of self-help group federations across the country for formation or strengthening of such producer companies.
YK Alagh, former Planning Commission member who headed the committee which provided the framework for the amendment in the Company's Act in 2003, swears by the producer company model.
He says that it incorporates the best elements of cooperatives and allows the entity to exist as a company as well.
"There is no question of either and or. Both cooperatives and producer companies are needed", says Alagh.
The way ahead is to find the best means to make the producer companies profitable, he adds.
