Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 73
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Deprecated (16384): The ArrayAccess methods will be removed in 4.0.0.Use getParam(), getData() and getQuery() instead. - /home/brlfuser/public_html/src/Controller/ArtileDetailController.php, line: 74
 You can disable deprecation warnings by setting `Error.errorLevel` to `E_ALL & ~E_USER_DEPRECATED` in your config/app.php. [CORE/src/Core/functions.php, line 311]
Warning (512): Unable to emit headers. Headers sent in file=/home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php line=853 [CORE/src/Http/ResponseEmitter.php, line 48]
Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 148]
Warning (2): Cannot modify header information - headers already sent by (output started at /home/brlfuser/public_html/vendor/cakephp/cakephp/src/Error/Debugger.php:853) [CORE/src/Http/ResponseEmitter.php, line 181]
Notice (8): Undefined variable: urlPrefix [APP/Template/Layout/printlayout.ctp, line 8]latest-news-updates/new-green-revolution-producer-companies-help-farmers-reap-profits-by-nidhi-nath-srinivas-11777.html"/> LATEST NEWS UPDATES | New green revolution: Producer companies help farmers reap profits by Nidhi Nath Srinivas | Im4change.org
Resource centre on India's rural distress
 
 

New green revolution: Producer companies help farmers reap profits by Nidhi Nath Srinivas

Farmers are joining India Inc in mind, body and spirit. In a quiet revolution underway across the countryside, growers are setting up companies, replete with balance sheets, professional CEOs, board of directors, and income tax returns. 

By pooling together the land and produce of their shareholders, these companies are signing lucrative deals with large retail chains, food companies and exporters keen to establish reliable supply chains. As many as 200 companies have been formed by farmers from different parts of the country and another 100 are likely to be set up by March next year. 

With an average 1,000 members, more than 2 lakh farmers are now shareholders in what are known as 'producer companies' under the Companies Act. "It was a job offer like any other in the market," said Sanjeev Kumar Gupta, managing director, Devbhumi Natural Products Ltd, based in Uttrakhand, with 2,200 shareholders. 

The company exports certified organic honey and also supplies silk and other produce to Fab India, the clothing and home furnishing chain. 

"Agri-business enterprises are increasingly looking for direct tie-up with farmers to source agricultural produce. Producer companies are an important solution for aggregation and quality management," said Bhaskar Reddy, director, Ficci. 

"The trigger was an amendment to the Companies Act in 2004 to allow producer companies," said Pravesh Sharma, managing director, Small Farmers Agri-Business Consortium, under the ministry of agriculture, which has given seed capital to 400 producer groups and helps negotiate bank finance. 

But registrations gathered steam only recently when farmers realised the value of economies of scale and collective negotiation in a more market-driven agriculture. Most companies are located in Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu. 

"Organised retail is doubling its share every three years or so and is likely to play an increasingly important role in influencing the nature of agricultural markets in the coming decade. Farmer-owned companies demonstrate the benefits of aggregation of production base and produce at a time when 83% of the land holdings are owned by small and marginal farmers," he added. 

Producer companies offer farmers several benefits. They allow growers to formulate a collective production and marketing strategy in line with customer requirement, negotiate better terms with buyers, buy inputs such as seeds and chemicals in bulk, and receive technical guidance at their doorstep. 

Some companies also undertake premium distribution and help in receiving subsidy from agriculture departments. "In rural areas where producers are dispersed and scattered and communications are not optimal, the importance of these organisations is even greater," said VV Sadamate, advisor, Planning Commission. An added attraction of the corporate structure is that it protects farmers from the influence of local politicians and the state government, which has been the bane of farmer cooperatives. 

"The law does not allow producer companies to get non-producer shareholders or members. This means private equity funds, other corporates or politicians cannot acquire stake or hold a post," said Sharma. Aslew of NGOs are acting as sponsor institutions and consultants for these companies. 

From identifying the opportunity, mobilising potential farmer shareholders, exploring the market potential in the product value chain, writing the business plan, and getting the company registered, appointing staff, to filing annual returns with the registrar of companies, these consultants are helping farmers learn the ropes, said N Madhu Murthy, project director at Hyderabad-based Access Livelihoods Consulting India. 

With barely a dozen consultants operating in this sector, demand for their services is growing leaps and bounds. "Our client base has grown from 35 to 150 in last three years. Now we are adding 10 new clients a year," he added. Farmer companies are dealing in a wide variety of crops, including cereals, horticultural produce, spices, oilseeds and pulses. 

Madhya Pradesh alone has 17 producer companies, of which 15 are crop based, one is engaged in milk production and one in poultry farming. With 41,560 shareholders, they have a combined annual turnover of Rs 38 crore. "Some of the large companies have annual turnover of almost Rs 20 crore," said Murthy. 

In most producer-owned companies, 10 farmers, usually active members of the community, are appointed as chief promoters. The company floats shares that are picked up by other farmers. These shares can be transferred but can't be listed on the stock exchange. 

"Our company shares were priced at Rs 10 and at least 400 shareholders bought 100 shares each. That is no small thing, given that they are marginal farmers living off subsistence agriculture," said Gupta. Like the rest of India Inc, access to credit and working capital is the chief hurdle in the growth of producer companies. 

Commercial banks are reluctant to lend without substantial collateral, which becomes a challenge for companies that don't have factories and other large physical assets. "Sometimes the chief promoters offer their land as collateral," said Murthy. With few options to raise money except through share capital, it becomes tough to scale up. 

"We have so many plans for expanding our supply chain, brand our products, and attract good professionals to our company. But it needs money," says Gupta. Luckily, the government is now more than willing to lend a hand "We spend Rs 2,000 per farmer over two years," said SFAC's Sharma. SFAC has now tied up with Nabard for loans to producer companies.