Emergence of Producer Companies as Innovative Institutions for Agriculture Development in India: Issues and Challenges

Abstract

Small and marginal farmers encounter several challenges in managing their farms, the major being limited investment capacity, access to inputs, water, power, and credit. In India, the Ministry of Agriculture recognized the collectivization of these farmers into producer organizations (POs) as the most appropriate institutional form to leverage farmers’ production and marketing capacities. The study aims to understand the characteristics of producer companies (PCs) and identify the issues and challenges in the emergence of PCs through a quantitative study of all PCs registered in the country using secondary data and a qualitative study based on interviews with 192 PC directors, members, and 11 promoting institutions. The formation and development of PCs are being actively undertaken by government and their agencies with major financial support from the Small Farmers Agri-Business Consortium (SFAC) and the National Bank for Agriculture and Rural Development (NABARD), with technical support from resource support agencies. A total of 7,381 PCs were registered by March 2019, across 33 states and union territories, and 2,749 PCs were active as of March 2018. PCs face numerous challenges, the major being shortage of investment and working capital, compliance-related problems, lack of vision and direction from the board and poor professional management. From the perspective of the producer organization promoting institutions or POPIs, the major issues were attitude of farmers, limited number of members, poor equity base, subsidy driven process, and non-result-oriented approach of the PCs.