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Re: Enabling rural cooperatives and producer organizations to thrive as sustainable business enterprises

Mr. Subhash Mehta Devarao Shivaram Trust, India
18.07.2012
Subhash

Dear John and Janos,
In response to the contributions made I am adding to my earlier contribution for further clarity.

Differences in Structure, Functions, Relationships & Purposes between the Producer Company(PC)/ Farmer Organizations and the Industrial Corporations/ Companies under the Indian Companies Act 1956

Issues relating to costs, taxation policy, legal requirements, structure deficiencies & purpose in developing countries:
1. The central and state taxes, duties, etc., to be paid by the Farmer’s Rural PC/Farmer Organizations, Self Help Groups, Societies and Producer Cooperative, etc., formed by smallholder and marginal farmer producers should be exempted.
2. Inability and relevance of the Rural Producer groups to be able to absorb the cost of registration, various taxes, duties, etc.,, that maybe applicable.
3. Type of documents required and procedures to be followed are difficult even for the educated entrepreneurs and thus beyond the competence and or means to be produced by the smallholder producers to register themselves as a PC.
4. Ability of the small and marginal producers to provide the different types of documents for registration of the PC.
5. Equity (seed capital) required for formation of a producer company/cooperative and its feasibility for marginal producers to come together on this.
6. Tax benefits available to producer companies/cooperatives vis-à-vis other large business houses, should be need based
7. Type of subsidies available to industrial organizations/private business enterprises vis-à-vis producer companies/cooperatives should be much more as it serves public interest
8. Provisions for grant and seed capital available for producer companies/cooperatives should be liberal
9. Provision for producer companies/cooperatives (formed by a group of farmers/producers) to avail the various schemes and departmental programmes of the government that individual farmers are eligible for be converged and accepted as the promoters contribution/ margin
10. Ownership structure of producer companies formed needs to be of the rural farmers/ other producers but staffed by professionals, to meet all the
needs of their members by filling in all the gaps
11. Different types of formal and informal sources of credit developed for the small and marginal producer orgs could be sourced
12. Types of credit required by the small farmers/producers could all be sourced by their PC
13. Type of credits and flexibility offered by the money lenders to the small producers could be taken over by the PC and at low rates of interest
14. No documents required to be produced by the farmers to borrow loan from the government system of formal credit system as the PC would provide the colateral.
15. Challenges faced by small and marginal farmers in borrowing money from the formal credit system is enabled with the PC intervention and supported by the financial institutions/ Government.
17. Amount of money borrowed by the PC intervention to meet the needs of their members, namely, marginal and small farmers and other rural producers becomes possible and at very low rates of interest from the formal credit systems.
18. Capital available in the future from the savings made by the small and marginal producers
Warm regards
Subhash