Producer Company

Producer Company Model - Current Status and Future Outlook : Opportunities for Bank Finance EV Murray* In recent times, almost every major business house of the country is venturing in a big way into the agri-business sector, especially with regulations allowing corporates to now directly have contractual arrangements with farmers. One of the triggers for this newfound interest in agribusiness by the corporates is the change occurring in the retail markets, where consumers are making dramatic shift from purchasing at neighbourhood kirana stores to shopping at supermarkets, malls and food plazas, enabling development of food supply chains from the farms to consumers. Ironically, at this very time we get news that between 1995 and 2005, one and a half lakh farmers committed suicide across the country. A Situation of Farmers study undertaken by the National Sample Survey Organisation (NSSO) of the Government of India indicates that forty percent of farmers, given a choice wish to get out of agriculture. How is it that when the capitalists are rushing into agriculture in droves, the farmers are rushing to get out of it? With a population of over one billion and rising disposable income, the demand for food is only growing. Why then are the farmers in distress? Is there an explanation to this dilemma? One explanation for this is that value addition in agricultural commodities happen only post production. And since in the Indian context the farmer disposes off his produce in unprocessed form, there is no plough back of surpluses from value addition to the farmer. Can something be done to address this dichotomy? Producer Companies look to be one plausible solution. Expectation of Farmers from Agriculture The expectation of farmers while carrying on agricultural activities is, beyond meeting his consumption needs, to be able to get a reasonable return on the time and money invested by him. Also his desire is to increase his share in the consumer rupee. The structure of