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Workshop on Producer Companies
WPC Report
WPC Report
PRADAN, under the aegis of the National Resource Centre for Livelihoods organised a workshop on Linking Small Producers to Markets through Producer Companies on December 20, 2007 at New Delhi. The objective of the workshop was to offer the participants an opportunity to learn about the experiences of practitioners working with Producer Companies along with enhancing their awareness of its strengths and short comings.

The workshop was attended by eminent resource persons, who shared their understanding of the opportunities that the Act makes available. Along with Prof. Y.K. Alagh were Mr. William Bissell, Mr. Sachin Oza, Ms. Sumita Ghose, Mr. Anish Kumar, Mr. Vijay Mahajan, Dr. Sankar Datta, Mr. Ravi Shankar, Prof. Arvind Gupta, Dr. N.V. Belavadi and Mr. Madhabananda Ray. The Workshop was attended by over s80 participants drawn from different fields as well as from different parts of the country. The participants belonged to civil society organisations, the government, the donor community, academicians and students. The workshop was an opportunity for many to learn about the legislation and clear their perspective.

Prof. Y.K. Alagh, giving the key note address observed that Producer Companies can be an effective way for helping poor farmers retain control on their land and water resources and enhance returns from farming. Small farmers are fast getting alienated from their lands and larger farmers and other economic interests are taking over control of land from small producers. The net area sown has gone down in the last decade. These can have disastrous consequences for the growth of agriculture and can affect negatively the food security and well being of small producers. Prof. Y.K. Alagh headed the committee that formulated the Producer Company legislation in 2002. He said the Producer Company format is a better way for organising poor producers compared to the co-operative format, which is known for its inadequacies. It offers an opportunity for them to compete and collaborate with other business organisations such as large companies.
 
Speaking on the occasion other resource persons  -  Prof. Arvind Gupta of IRMA, Mr. Anish Kumar of Pradan,  Dr. N.V. Belavadi of NDDB and Dr. Sankar Datta of the Livelihood School opined that  Producer Companies gives a robust framework for the small producers for organising themselves for effective linkage with markets. The producer companies offer a judicious mix of business principles with the co-operative spirit. The Producer Companies operates on the one-person-one-vote principle. It allows for experts to be co-opted as non-voting Directors. Though being a significant improvement on the cooperative legislation and providing a level playing institutional space to small-producers, there are certain gaps in the legislation that require attention.  Even though the producer company legislation was expected to facilitate transformation of well functioning Co-operatives into Companies, very few Co-operatives have taken up the option.
 
Mr. William Bissell of Fab India and Mr. Vijay Mahajan of BASIX highlighted a concern about the provision in the Producer Company legislation that allows only the primary producers to be the owners and shareholders in the Company; there is no provision for B class shares. The small producers by virtue of being poor will not be able to put in the required start up equity which will limit the growth of the Company. Creative ways of financing the start up of such Companies need to be looked at such as mobilising funds from the Government, or from private philanthropy. Since the shares of the Company cannot be traded in the secondary market, it does not allow unlocking of the real value of the Company. Another related concern was that there is no exit route for the shareholder once he or she buys a share, since the shares cannot be traded in the secondary market.
 
Mr. Madhabananda Ray, the CEO of MASUTA Producer Company formed by about 2000 Tasar yarn producers in Bihar, Jharkhand and Chhattisgarh presented the success story of the company. A seven  crore company now, the MASUTA Producer Company has set up joint ventures with Jharcraft (A Government of Jharkhand enterprise) for cocoon trading and with a private entrepreneur for Tasar Fabric Marketing - Eco-Tasar Limited. Ms. Sumita Ghose, CEO of Rangsutra a Producer Company of about 3,000 handicraft artisans from Assam, Rajasthan and Uttarkhand, spoke about the problems she faces with the mainstream commercial banks with regard to credit mobilisation. At the same time she also had problems with the donors in raising grants because of the commercial nature of the organisation. Given the difficulties Rangsutra has also been promoted as a Private Limited company, it has been easier to draw investments to this company. Mr. Sachin Oza of Development Support Centre, based in Ahmedabad spoke about the Producer Company they set up in Dhari, in Amreli district of Gujarat, comprising of over 1000 farmers. The Producer Company helps in support during production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce or import goods or services for their benefit. The Producer Company also looks at provision of techno-managerial services to farmers and also delivery of various financial services. Mr. Ravi Shankar of NDDB spoke about the new generation producer companies that NDDB is planning to float in Junagadh and Chittoor. Currently there are co-operatives there and they are being supported to transform into Producer Companies. NDDB is a major stakeholder in the idea of Producer Companies having worked very closely with Prof. Alagh in lobbying for the amendment of the Companies Act to create the new legislation.
 
Prof. Y.K. Alagh highlighted the need for the civil society organizations and others to work together to strengthen the Producer Company legislation to get rid of the various lacunae that were highlighted. As per the suggestions made by the JJ Irani Committee that is looking into the Company Act reforms, the Producer Company amendment should be dropped since it is not in the same league as  the Private Companies and therefore difficult to regulate under the same Act. Prof. Alagh warned that if the Irani recommendations are carried through then this great opportunity that has been accorded to the small producers to compete in the world of business as equals, will be lost and thus there is an urgent need for all stakeholders to come together to lobby in favour of the Producer companies, in order to facilitate inclusive growth.