The economy of India is an agricultural-centric economy. Around 60% of the population depends on agricultural activities for their livelihood. But, the primary producers and farmers have had a long struggle in India.
In order to address these problems, the Government of India set up an expert committee, led by Y.K. Alagh (an economist) to look into the matter. In the year 2002, they introduced the Producer companies concept to the Indian economy. Since then, they have helped primary producers gain access to input, credit, production technology, market etc.
A producer company can be defined as a legally recognized body of farmers/ agriculturists with the aim to improve the standard of their living and ensure a good status of their available support, incomes and profitability. Section 465(1) of the Companies Act, 2013 (‘Act’) provides that the provisions relating to a Producer Company under the Part IXA of the Companies Act, 1956 shall continue to apply. Thus, under the Act, a Producer Company can be formed by 10 individuals (or more) or 2 institutions (or more) or by a combination of both (10 individuals and 2 institutions) having their business objective as specified under the Act.
An farmer producer company is a hybrid between private limited companies and cooperative societies, registered under the Act. They have democratic governance and each member or producer has equal voting rights irrespective of the number of shares held.