What is the Meaning of Producer Company?
What is the Meaning of Producer Company?
A Producer Company is a unique hybrid model that combines the benefits of a cooperative society with the robust legal structure of a private limited company. It was introduced in India through the Companies (Amendment) Act, 2002 under Section 581A to 581ZL of the Companies Act, 1956, with a specific objective to help farmers and producers access organized markets and services.
Definition of a Producer Company
According to Section 581A of the Companies Act, 1956, a Producer Company is formed by a group of producers to carry out production-related activities such as harvesting, procurement, grading, pooling, handling, marketing, selling, or export of produce or import of goods and services for their benefit.
Eligibility: Who Can Form a Producer Company?
- Minimum of 10 individual producers, or
- 2 or more producer institutions, or
- A combination of both
The members must be engaged in activities related to agriculture, animal husbandry, forestry, handloom, or similar sectors.
Objectives of a Producer Company
- Production, processing, and selling of primary produce
- Export of goods and services for members
- Education and training for member benefit
- Welfare measures for producers
Salient Features
| Aspect | Details |
|---|---|
| Legal Status | Registered under Companies Act |
| Ownership | Only producers can own shares |
| Profit Sharing | Based on patronage, not capital |
| Minimum Capital | No prescribed limit |
| Board of Directors | Minimum 5, Maximum 15 |
Benefits of a Producer Company
- Improved access to finance and credit
- Collective bargaining power
- Better pricing of agricultural produce
- Professional and accountable management
Real-Life Examples of Producer Companies in India
- Sahaja Samrudha Producer Company (Karnataka): A group of organic farmers managing seed supply and training across South India.
- Mahagram Agro Producer Company Ltd (Maharashtra): Helps tribal farmers market their forest produce like honey and herbs.
- Fresh From Farm Producer Company (Uttar Pradesh): Aggregates vegetables and fruits from small farmers and supplies to urban markets.
Case Study: Krushidhan Producer Company Ltd (Gujarat)
Background: A group of cotton farmers in Gujarat were suffering due to poor pricing and lack of storage facilities. They formed Krushidhan Producer Company in 2015.
Impact:
- Installed community-owned ginning machine
- Improved income by 40% over 3 years
- Farmers gained access to NABARD-backed credit
This company became a benchmark for other producer groups in Gujarat.
Why Producer Companies Are Not Yet Popular in All Parts of India
Despite their potential, producer companies are not uniformly spread across India. Here's why:
- Lack of awareness: Many rural producers are unaware of the concept and benefits of producer companies.
- Poor financial literacy: Producers often lack training in legal and financial management.
- Complex regulatory process: Initial registration and ROC compliance discourage rural groups.
- Limited support in remote regions: Government and NGO interventions are concentrated in specific states.
Government Initiatives to Promote Producer Companies
- NABARD: Provides funding, training, and handholding to newly formed companies.
- SFAC: Supports cluster development and marketing linkage.
- FPO Scheme under Ministry of Agriculture: Offers equity grant and credit guarantee fund support.
Frequently Asked Questions (FAQs)
No. Though registered under the Companies Act as a private company, it cannot include “Private Limited” in its name and is limited to producers as members.
No. Only producers—those directly involved in primary production—can be members.
Yes. Profits must be distributed as patronage bonus in proportion to business conducted with the company.
Yes. They are subject to normal income tax rules unless exempted under a special provision.
No. It can raise capital only from its members.
Comparison with Other Forms
| Feature | Producer Company | Cooperative Society | Private Company |
|---|---|---|---|
| Governing Law | Companies Act, 1956/2013 | State Cooperative Acts | Companies Act, 2013 |
| Profit Sharing | Patronage-based | Limited Dividend | Equity-based |
| Members | Only Producers | Any cooperative members | Any person/entity |
Conclusion
The concept of a Producer Company is a powerful tool for the economic empowerment of producers. It helps in transforming agriculture and allied sectors into profit-oriented enterprises by ensuring fair pricing, market access, and professional management.
While adoption is still limited in remote and underdeveloped regions, increased government support, training, and digital outreach can change the landscape for millions of rural producers in India.
Recommended Resource: Ministry of Corporate Affairs – Official Portal
Tags: Producer Company Meaning, Indian Company Law, Farmers Business Model, CMA Foundation Notes
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