Farmers Producer Company (FPC) is a legal form of the company. It is a hybrid between cooperative societies and private limited companies. In 2002, an Act was passed in Parliament and this legal form was created. It takes care of the flaws in the cooperative societies but keeps its strengths. It has also borrowed the strengths of the corporate companies. According to this new law, only farmer – producers can be members of the FPC and the farmer members themselves will manage this company. Paid staff can be employed to help the farmer- producers run the FPC. These FPCs will be promoted by the farmers, will be run by the farmers and for the benefits of the farmers. Over the years, the surplus would be shared among the farmers only.

Key Points:

1. The objective of the concept of FPC is to organize farmers into a collective to improve their bargaining strength in the market.

2. They are owned and governed by shareholder farmers (or artisans) and administered by professional managers.

3.They adopt all the good principles of cooperatives and the efficient business practices of companies and also seek to address the inadequacies of the cooperative structure.

4. A Farmer Producer Company can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both. They can undertake activities related to production, harvesting, procurement, grading, pooling, marketing, processing, etc., of agricultural produce.

5. Non-producers seeking to invest in these companies as shareholders are precluded under the statute concerned.

6. The Farmer Producer companies have democratic governance, each producer or member has equal voting rights irrespective of the number of shares held. There is a limitation on the amount that can be distributed as dividend. Profit is largely distributed on the basis of “patronage”, which acts as a reward for members contributing to the business. There can be 5-15 directors and expert directors can be co-opted for professional guidance.