A Model Producer Company (PC)
Subhash Mehta, O P Rupela & K Ramakrishnappa
During the last 50 years of planning the government has not succeeded in reaching the beneficiaries of its numerous schemes of rural development. Similarly it has also failed in agricultural knowledge delivery system because the approach of the ICAR institutes, Univs of Agri Sciences (UASs), Central and State Govt Extension has been ‘input producer’ centric and not farmer centric in research, extension and development, conducted. Particularly, the small and marginal farm holders had to obtain their information from the seed and input dealers who had to serve the companies they served and also their personal greed.
The small and marginal farm holders have very small quantities of surplus for sale and as such they cannot negotiate a reasonable price and almost always sell at distress prices. The petty traders collect such small quantities at low rates for the big trader. Having holding power sells it after a few months, when prices are at a peak . Therefore, the consumer is paying almost double or more than the price the farmers is paid. For example when the farmer sells wheat at Rs8 per kg, the consumer purchases it at Rs.12 to Rs.18 per kg. So is the case with all other produce. In perishables, like fruits, greens and vegetables the difference is much more.
The Producer company (PC) takes the best of a Pvt. Ltd company and a cooperative, thus has no Govt involvement. Its operations are transparent, subject to audit, and a vigilant Board of Directors to protect the interest of small farm holders. The intervention of a PC will help in transferring appropriate knowledge, production technology to the small farm holders, responsible for farming and on farm activities, taking over all other risks and responsibilities, like finance, management, adding value infrastructure for common facilities, lologistics, marketing, etc, ensuring benefits of scale.
Let us look at a model to achieve as above.
The PC would be of, say, 1000 member farmers, spread over a cluster of 20 to 50 villages. The members may contribute Rs.1000 for one share and their liability is limited to that sum only. (This subscription could be collected over a year in cash or kind and installments). The subscribed share capital, say Rs, 10 lacs, the government’s contribution could be 5 to 10 times. Thus the total paid share capital will be about a crore. Banks usually require 10 to 25% margin money, depending on the asset base, for loans (as is given to cooperatives). With this the funds accessable to the PC shall be adequate to service the capital and working capital needs of their members/communities.
The PC shall have a board of directors having 11 members, six of them will be farmers and 5 will be qualified professionals such as MD/CEO, Finance, Technical, Marketing and nominee of financial institutions. The chairman will be a father figure who has interest in the welfare of the community. Professionals and other staff to be paid commensurate to their ability and contribution for ensuring the successful ‘cash to cash cycle’ of the PC.
The small and marginal farm holders/communities, will be trained to follow the most successful farming system of the area, produce all the food that they need for their own consumption, balance if any, sold against orders on hand. Say, the surplus produce from one hectare of land has a value, the value of produce from the 1000 member farmers could be Rs 12,000,000. If this is value added, stored and sold after 3-6 months it could fetch say, 25 % higher per quintal. Thus the income would increase by Rs3,000,000 and pay for a part of the overheads, provision for reserves, etc, balance if any could towards paying a dividend to the members, if the board so decides. Thus, undertaking such activities for each season, the PC becomes a viable proposition and also doubles the purchasing power of its members, as it makes available to its members all their needs produced locally at farm gate prices, generally half the retail price. All other needs are procured in bulk and made available after adding a nominal service charge. The farmer gets the price, announced at the time of planning and budgeting, before the sowing season. In fact the declaration of purchase price well in advance will help in encouraging the farmers to sow crops like pulses and oilseeds which are always in short supply and stop them from sowing crops which are not in demand.
The PC shall undertake activities to train the farmers in Good Agricultural Practices GAP such as rainwater harvesting, production of inputs on farm from local resources, mulching, seed production of locally adapted breeds, species and varieties.
It is learnt that under the Horticulture Mission and or other GOI programmes, assistance is proposed to be given for conversion to organi if the farmer adopts GAP and other on farm activities. These and other funds to be provided as grant in aid under various programmes/schemes, for which Govt is having a serious delivery, monitoring and evaluation problems, the PCs could ensure delivery to the beneficiaries. The PC intervention, could use the services of SHGs or NGOs operating in the area, if necessary.
The PC will ensure local capacity building, thereby rural employment for the educated unemployed, skilled and unskilled workers.
PCs can be a viable proposition, provided, all concessions available to co ops, societies and similar orgs are also available to PCs, like cheap land, income and other taxes/duties holiday, exemption from labour laws as available to SEZs, etc, are also available to PCs and the amendment IX A of the Indian Cos’ Act, is suitably amended, can make the voiceless small and marginal farm holders, sustainable now and prosperous in the years to come. The purpose of writing this note is to use the PC intervention for the AAM ADMI, as proposed in the Common Minimum Programme of the UPA government. The note is circulated for your comments and queries if any.