Basics of a Producer Company

Background

India is an agrarian economy where 58% of the population depends on agriculture for its livelihood and it provides employment for 42 % of Indian Population. Instead of playing such a pivot role in the economy of India, Agriculture sector has not experienced that much growth as compared to other sector.

Considering the various obstacle that agriculture sector faces like limited capital and asset base, climate dependency, electricity water supply, transportation etc. lawmakers had resorted to provide a corporate structure to agricultural activities in India.

Thus concept of producer company was introduced which basically takes all the features of a cooperative society and merged with the framework of a body corporate.

Under Producer Company, group of farmers comes together to act as member to carry agricultural business on self-help basis with an intention to earn profit and provide help to each member of its company through democratic management.

Some of examples of producer companies in India are:

  1. Dhari Krushak Vikash Producer Company Limited, Gujarat
  2. Rangsutra in Kerala
  3. Sahyadri Farmer Producer Company, Nasik
  4. Nachalur Farmer Producer Company, Tamil Nadu etc

Almost each state has registered producer companies, however major companies belong to Maharashtra, Uttar Pradesh, Tamil Nadu, Madhya Pradesh.

Part IX A was introduced in the Companies Act, 1956 by the Companies (Amendment) Act, 2002 whereby provisions of Producers Companies are mentioned in length.

We will discuss such provisions for Producer Company in this Article.

Benefits of Producer Company

  • Producer Company is corporate structuring for agricultural activities which support its members to increase the productivity by mutually resolving issues like funds for machinery, seed, fertilizer, marketing and distribution, storage, export, import etc.
  • Being a body corporate it enjoys separate legal entity and have perpetual succession
  • Producer Companies are widely recognised by Government, when it comes to subsidy of financial aids, since they are more organised and managed.
  • It operates on self-help basis thus support its members by providing them financial support.
  • Producer Company enjoys minimal regulatory control from authorities.
  • It is hybrid form of cooperative society and body corporate thus enjoys benefits of both form of business.

Producer Company as a legal entity in India

Part IX A of Companies Act, 1956 (“Act”) deals with formation and working of producer companies which is now repealed by Companies Act, 2013. However on considering Companies Act, 2013, Section 465 states as below:

“The provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies”

Thus Government is under consideration to enact such law which focuses specifically on producer companies, till then provisions of producer companies as given in Companies Act, 1956 will be taken as legal and valid.

Terminologies for Producer Company?

Before diving into the formation and management of a Producer company it is essential to understand the basic terms that is foundation of a producer company.

Section 581A (j) (k),(j),(m) of the Act defines Primary Produce, Producer, Producer Company, Producer Institution respectively

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