This is Subhash Mehta again in response to Edward's contribution.
Steps of Evolution:
1. All families of the community who produce some agriculture, forest, horticulture, animal husbandry, poultry, art, craft, etc. are eligible to become producer members/shareholders/owners of the company.
2. The local unemployed educated youth to be trained to become general practitioners (GPs) in agriculture, volunteers/community workers/facilitators/employees of the producer company (PC) or any other community enterprise system to take over all risks and responsibilities other than on-farm activities.
3. The PC/community enterprise system aims to complement the strength of the local community and to integrate all the facilities in a community towards building trust, cooperation and higher quality of life.
4. All producer-members have equal say in management decision on price, policy & profit sharing, etc., but management is left to the professionals
5. Profit of the company after providing for reserves will be shared proportionately among the producer-members at the end of every season depending on their contribution of produce/ product.
6. Collection, sale and profit distribution of the produce shall be:
Level 1: Base price paid as agreed at the time of contracting
Level 2: Profit distributed every year after providing for reserves.
7. Stages of building a sustainable community owned enterprise system.
a. Registration of the company
b. Election of a board of directors under the guidance of a respected father figure who will continue this role till the enterprise starts making a profit
c. Selection of professionals to staff the PC
d. Macro (5 yrs) and one year micro plans and budgets along with marketing plan for surplus produce/products submitted to all concerned institutions for seed capital, funding and or financing
e. Contracting a successful farmer of the area as the model for wide replication of member farms, transfer of know-how for integrated agriculture, production of inputs, primary value addition to increase shelf life to minimise post harvest losses and storage of seeds for the next year
f. Farm management plan/annual calendar for each member farm/enterprise
g. Create central facilities for storage, production of inputs, need based primary and secondary value addition facilities to increase shelf life of the produce to minimize post-harvest losses and logistics for marketing
h. Create the required infrastructure on each farm for water harvesting and or re-charging of wells/tanks and or tube wells
i. Create the required facilities to store produce for meeting emergencies
j. Create the required office and training facilities for members, unemployed educated youth, etc.
h. To take over responsibility from the local government/banks/etc., the delivery of all services meant for, and or required by, members and the community
Subhash Mehta, Trustee,
Devarao Shivaram Trust,
NGO Association for Agricultural Research Asia Pacific (NAARAP),
Hegenahalli PO, Devanahalli Taluka,
Bangalore Rural North, Pin Code: 562110,
email: icapsm (at) gmail.com
Tel: +91-80-28494009 / +91-80-22712290,
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
“The role of small holder producer organizations/ company (PC) interventions could feed the world and promote economic growth” The Government of India, realising the problems faced by the Cooperatives and Societies, being a department of the State Governments, legislated the Producer Company (PC), amendment IX-A of the Indian Companies Act 1956, as a sustainable local community enterprise institution of, for and by the smallholder farmer/and rural producers. The PC has the features of an enterprise and will be driven by the cooperative and societal spirit of the community. This local institutional intervention, staffed by professionals, will serve as a single window through which their members (smallholder farmer/ rural producers) will transact with various external forces by taking over the risks and responsibilities, viz., management, finance, banking, imparting knowledge/ training and capacity building, product development, factor market, capital market, research-extension services, value addition, delivery of government programmes, logistics, etc.. It will also be responsible for all internal management of the smallholder farmers/producer viz., integrated agricultural production for meeting their own need of nutritious food and at farm gate prices, planning, budgeting, value addition, women empowerment, nutrition, health, education, increasing purchasing power and net incomes, ensuring safety, quality, livelihood improvement of the small holder farmer/producer families and their communities and a positive 'cash to cash cycle'. To be able to put up such a farmer led and professionally managed local institution, public funding towards overheads, working capital, basic infrastructure, technical and managerial support need to be provided for the first 5-8 years, depending on the nature and type of agricultural communities. An example of such a Producer Company can be viewed at navajyoti.org. The Funding and Loan Projects considered by the Financial Institutions must not only directly fund the PC intervention as the PEA but also make such an intervention compulsory, before sanctioning any project, as it takes over all risks and responsibilities from its mostly illiterate, resource poor members, other than on farm activities. The Governments of developing countries need to make huge investment in this area for not only correcting the mistakes made in the past but also for feeding their populations and ensuring economic growth, but also to get back the small holder farmer / rural producers at the centre of sustainable farming activities. Briefly, the functions of the Producer Company (PC) will be: PCs will be set up by competence and capabilities of the rural producers, staffed by unemployed educated youth trained to become GPs in agri 'culture'/ professionals to take over all risks and responsibilities other than on farm activities, requiring handholding by the village elders, CSO/ NGO working with the community, till break even ( about 5 years) Increase net incomes and purchasing power of members by focussing on the local successful integrated agriculture producing to meet their own nutrition, food and health needs at farm gate prices, surplus sold in the vicinity for meeting their cash needs, achieving long term sustainability Impart now how/ training of the successful integrated farming in the area, especially on farm production of quality inputs and water conservation Contracting successful farmers, for training on their model farms and wide replication of their integrated agriculture system, to meet their nutrition, health, food and cash needs Arrange with financial institutions (IFAD, NABARD, etc.) the annual limits for capital, seed capital and working capital needs Primary and secondary value addition to increase shelf life of produce/ products, minimizing post harvest losses and increasing net incomes Plan, budget and market produce/ products at farm gate price to members/ communities, for meeting their nutrition, food and health needs, surplus first stored as reserves for emergencies and balance converted to cash in the vicinity (food miles) Empowerment of women by fully involving them in the planning, budgeting, decision making and Governance of the PC Convergence of Government programmes and schemes for delivery to members Etc. Prior to setting up the PC by the rural producers in that community, they need to be given all the information about the features of the PCs and the benefits that would accrue to them by their NGOs and the local Government bodies. The role of NGOs will be vital as the rural communities have lost faith in the mainstream agriculture systems, having been driven to hunger and poverty, if we are to succeed in the execution of the project during its formative period. It is understood that their role would be confined to organizing communities, creating cadres, building trust, developing skills and overseeing the professionals staffing the PC, etc., important role in ‘hand-holding’ until the business breaks even, the staff has the confidence to manage the ‘cash to cash cycle’, thereafter keeping an eye on the professionals and thus ensuring that the interests of the resource poor illiterate members are protected. Subhash Mehta, Trustee, Devarao Shivaram Trust, NGO Association for Agricultural Research Asia Pacific (NAARAP), Hegenahalli PO, Devanahalli Taluka, Bangalore Rural North.