The main aim of Producer organization is to ensure better income for the producers through an organization of their own. Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.

WHY FARMER PRODUCER COMPANIES ARE PREFERABLE IN COMPARE TO CO OPERATIVE SOCIETIES

There are different legal types of producer organization. In these days Farmer producer companies are more preferred as producer organization because this format of organization is more suitable and comfortable to achieve main object of PO. Also there are few limitations under cooperative societies as compare to Producer Company. Let’s understand few differences under Cooperative societies and Producer Company:

Need of Farmer Producer Organisation (FPO)

PARAMETER COOPERATIVE SOCIETY PRODUCER COMPANY
Registration
  • Cooperative Societies Act 1860
  • Time Consuming Process
Objectives Only Single object Multi-objective
Area of
Operation
Restricted as per applicable society act (state wise) Entire union of India.
Membership Only Individuals and cooperatives Any individual Group of Persons/ Association Any producer of goods or services
Share Non tradable in market Non tradable but transferrable with limited to members at par value.
Profit
sharing
Limited dividends Profits are commensurate with volume of business.
Voting rights One member, One vote Government and Registrar of Cooperatives hold veto One member, One vote Members not having transactions with the company cannot vote.
Government
control
High Minimal interface of Govt.
Transparency Low (in compare to Company) High
lExtent of
Autonomy
Companies are hilly autonomous, self-rt led within the provisions of ACt.
Reserves Reserve (in case of profits) Mandatory
Amendment in Bye- laws
  • Time Consuming Process
  • Approval by Registrar.
  • Easy to Amend by Laws.
  • Approval by Member’s ResolUtion.
Mode of Compliance Offline Online
Borrowing
power
Restricted as per bye-law. Borrowing limit fixed by Special Resolution
Audit Compulsory Compulsory
Minimum Member Required 10 10 (Individual Producers) Or 2 or more Producer Institutions

Preferable form for Producer Organization:

FPOs are more preferable in compare to cooperative societies, due to following reasons:

1. Societies are restricted governed by societies act 1860 on basis of state laws , But FPO are free to operate at any place of India and monitor by Ministry of corporate affairs.

2. There are only Single object in case of cooperative society But Multi-objects are possible in case of Company.

3. In case of society Government and Registrar of Cooperatives hold veto power to Vote but in case of FPO no such rule.

4. Companies are more transparent and easy to amend its bylaws but in case of society process are time consuming and in offline mode.

5. For Borrowing Power Under Co Operative Society Restricted as per bye-law. Any amendment to byelaw needs to be approved by the Registrar and time consuming But in Company Borrowing limit fixed by Special Resolution in general meeting. Companies have more freedom to raise borrowing power.

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