Low External Input Sustainable Agriculture

Organising farmer group into producer company

I worked with farmers and SHGs in Nadukuppam village, Marakanam block, Villupuram district, Tamil Nadu as a consultant to the Pitchandikulam Bioresource Centre, Auroville 605101. The project is situated in the centre of the Kaluveli Bio-Region of coastal Tamil Nadu, South India 110 kilometres south of Chennai. It is an extension of the work of Pitchandikulam Bio Resource Centre (PBRC), part of the Auroville Community located some thirty kilometres away.

As part of an exercise to introduce an integrated village development model, it was proposed that the village should set up enterprises managed as collectives to convert their natural resources and agricultural produce to commodities and products instead of selling off the raw produce to middlemen who pocketed the profit on its conversion. The main products of the area are Paddy, watermelon, tapioca, sugarcane and rain fed crops
Human capital was trained in tailoring, public health and teaching

Some of the projects identified were:
1. Tapioca conversion factory for edible starch products
2. Medicinal plant pharmacy making herbal and siddha medicines
3. Ready made cotton garments
4. Spirulina production plant along with functional products
5. Milk Dairy Processing plant with by-products
Termed as social enterprises, the village level staff and key animators were briefed on the basics of a producer company. The local branch of the State Bank of India adopted the village under its model village plan for the district and promised access to capital without strict criteria. During discussion, the concept of a producer company and awareness of such a structure mobilised support for the business like approach.

I used to advocate the formation of a public limited company under section 25 of the India Companies Act 1956 (Amended upto 2000) till then. However the article which appeared in issue March 2007, LEISA INDIA as ‘Producer Company – a new generation farmers institution’ by Yogesh Kumar Dwivedi and Arun R. Joshi was a quantum leap in my learning. Since then I have researched the concept on the net and have always spread the message in my training programs.

Procedure followed in forming Producer Company
The creation of the Producer Company is not yet complete. However the process flow till now is as follows:
1. Information shared with program staff and village animators
2. Concept discussed with Regional Manager – State Bank of India
3. Village Development Group created leading to other sub-groups like Famers, women and youths groups.
4. Foundation work for village organisation commenced with building of Village community Centre with pooled funds from MP and MLA funds, UNDP and panchayat land.
5. Village adopted as model village under SBI model village program. Micro loans given for income generating programs
6. Confidence Building Measures (CBM) through the above to create a sense of community
7. It seems that a Primary Health Centre (PHC) managed from community insurance pool and a web of micro-enterprises to supply the PHC with medical supplies would help to bring this structure into place. A community Service Centre would provide entrepreneurial groups with a clean environment to make herbal medicines, pack medical supplies and set up down stream and upstream cottage industries.
8. The proposal will be a part of a larger integrated rural development plan for the bioregion and submitted to the knowledge commission for its support.
9. Once funding is obtained, the following would be implemented;
9.1 exposure visits to Madhya Pradesh to study the functioning of producer companies
9.2 short listing of a lawyer and chartered account to draft the memorandum
9.3 prepare a social enterprise business plan
9.4 public exhibition and group discussions of the plan and modification of the draft documents
9.5 multi-agency supports to provide expertise
9.6 appointments of operations staff
9.7 project flag off

A. The farmers, SHG and others will benefit in the following ways:
1. Cheaper goods through collective and surplus distributed for community
2. Village becomes a business hub through the producer company and gets access to other markets in the bioregion
3. Savings of SHGs is mobilised for industrial production and away from personal loans
4. Community ownership of the enterprise serving public good and control on the surplus.

The amended Companies Act 2008 is tabled in the Rajya Sabha and will be passed in the Lok Sabha after elections. This will be another quantum leap for small and micro enterprises. Some of the proposed introductions will be:
1. Formation of 1 person Private Limited Company
2. Simplified creation and dissolution of Company

With these legal developments, there is a positive legal environment for micro-enterprises to be managed on sound business principles and get organised. This will provide access to finance and break the dependency on donor grants to run rural enterprises.

Source: Mr. Sanjay Doctor

6 Responses to Organising farmer group into producer company

  1. Ms. Ravdeep Kaur

    Dear Mr. Sanjay,

    I appreciate the systematic approach followed to form primary producers company in your region. Could you please update on the current status of this organization? is it operational? how many total members? how many women members and what have been the key challenges?

    This will help understand the actual benefit of Producer Company Act for inclusion of rural masses under organized umbrella.


  2. vivek kumar

    my self vivek i am working in upbsn world bank project our project objective formation of producer company in rural area please provide information

  3. Spectra organinsation

    we have 300 SHGs , our project objective formation of producer company in rural area please provide information

  4. Sumit Mitra

    Thanks for the insights. What is your opinion on:
    a) Producer Organizations supporting other related/unrelated commercial/ business activities in terms of local trade, village development, drinking water in a village, taluka etc.

    b) Number of Producer Organizations in a region with similar produce joining up to form a cluster with benefits of branding, packaging, modern storage and marketing of products nationally/ internationally

    c) Resistance of middle men with the creation of producer organizations and impact of their creation on local mandi, village markets etc.

    Your views and opinions on these are welcome.
    Sumit Mitra
    IIM Kozhikode, Kerala

  5. S.jayakumar

    I am a farmer in valavadi village , udamalpet tk, tirupur dt, tamilnadu .we are in the process of creating a producer company for value addition and marketing of agriculturial products. Kindly guide us in the regard

  6. shastri

    how to create step wise milk farmers converted into “producers company” like memebers/ where we go for registration/ members amount/ article memorandum example etc
    i have more than 1000 farmers , every frmers gives me at least 3 to 4 lt ,in lean procur 30000 lit in flush more than 100000 lit

    so pleae help me

Leave a Reply