How a Farmer Producer Company model change Indian Agriculture?
Indian agriculture is a huge part of our economy. More than 66% of people livelihood depend on agriculture. But, due to lack of resources and support a farmer of India unable to get their actual price of the farm products. To help farmers, the government was inaugurated Producer Company Concept in the year of 2002. In the year 2003, the provision was made for the Farmer Producer Company in the companies Act 1956 by amendment of the act.
As per the Sec.581C (1) of the companies 1956, a producer company meaning is a company which is formed by the collaboration of 10 or more members.
According to the National Bank for Agriculture and Rural Development (NARBAD), a farmer-producer company is a hybrid between the private and corporative society. It combines the goodness of cooperative societies and the efficiency of the company.
In India, Generally, most of the Farmer Producer Companies Act are located at Madhya Pradesh, Rajasthan, Maharashtra, and Bihar. In which many of the FPC’s are engaged in providing agriculture inputs like seeds and pesticides, some FPC’s are engaged in marketing farm items, while others are engaged in production, infrastructure, and technology.
Some Important Facts of Farmer Producer Company:
• The concept of farmer producer company is to organize farmers collectively improve their production, marketing, infrastructure, and technology units.
• These companies are backed by the government, shareholders and administrated by professional managers.
• Non-producers can also become shareholders to support this firm.
• This company can be made by 10 or more members. They can carry on with activities related to farming, pooling, harvesting, machinery, technology, and financing.
• The Farmer Producer Companies have democratic governance, each member of these firms have equal voting right an irrespective number of share held. The profit is mostly distributed on the basis of “Patronage”, which is a bonus for the members.
Understand the facts of Farmer Producer Company through this example:
An Agriculture engineer Mr. Vilas Shindhe, owner of Sahyadri farms, the Farmer Producer Company has reaped the richest harvest. He established his firm in the year 2011 and now his firm become one of the largest profitable the Farmer Producer firm. With a membership of 8,000 farmers and his firm has crossed a turnover Rs.300 crore. His firm was overtaken by the Mahindra Agribusiness and become one of the greatest grapes producer company.
Recently, the Retail giant future group has signed a Memorandum of Understanding with Sahyadri firm for outsourcing fruits and vegetables at the supermarkets.
Another motivational example of Farmer Producer Company is that a new corporate of India in the making as close to 1,000 companies owned by the young farmers take shape and engage in business like export, market with the revenue of few crore rupees.
It goes without saying, a Producer Company Act can help smallholder farmers participate in an emerging high-value market, such as export market and unfolding modern retail sector in India.
Some of the issues faced by the FPC’s;
There might be around thousands of Farmer Producer Companies in India so far. However one will be unable to keep the exact track. The first FPC built in India was Vanilla India Producer Company, set up in Kerala in the year 2004 respectively.
In spite of the fact that FPC has gotten support from the government and the shareholders, yet it is confronted a few obstacles that clarifies why the advancement of the Farmer Producer Company in India is low.
• Since there is a restriction in trading in the shares of an FPC, hence there is no exit route for the investors to invest.
• It is workable for the non-producers to put resources into offers of these FPC’S. The reason is that it is difficult to activate sizeable assets as the primary producers don’t have adequate assets to contribute large fund to the share capital.
• Despite NARBAD, numerous banks and social cooperative societies are not aware of this idea. Subsequently, FPC’s cannot take the advantages of financial services from these banks.
• It is not an easy procedure to get the Agriculture marketing committee permit which is mandatory for trading.
• Due to less awareness about the Farmer Producer Company Act, their visibility is low in India.
• Farmer Producer Company cannot become a Public Company on any Circumstances.
The Farmer Producer Company Concept is excellent; if individuals implement this concept in the right direction, it offers great profit to the farmers as well as the consumers.
Much Need Relief for Farm Sector:
It is a high time to support our farmers by offering great facilities and consider farmers organization as a prime responsibility. Currently many FPC’s take loan from the banks at a high-interest rate 22% from the banks. This is making a huge burden on the farmers' shoulders when it comes to repaying money to the banks.
Finally, a sign of relief for the farmers; A long-standing demand from the Farmers producers companies to the government has a gotten a positive response regarding tax and loan interest rate. The Finance Minister has given a 100% deduction of profits made by such companies. The tax benefits are applicable to the profit of all FPC’s with a turnover of Up-to 100 crore.
In spite of the fact that the introduction of the GST had put some money related weight on the working of the FPC’S nonetheless, the income tax exceptions would help improve their gratefulness to an enormous degree.
It goes without saying, Producer Companies Act has changed the model of Indian Agro-business. It can be aptly concluded that the intention of the government to inaugurate producer companies Act is to ensure farmers that they can efficiently do their business and receive an actual worth of their hard work. Exemption of income tax on Producer company is a great relief to the farmers. But, despite receiving tax exemption benefits and financial support, still, Farmer Producer Company is not gaining the importance as it was expected.