Producer companies face several challenges such as weak sense of ownership among producer shareholders, under capitalization, inadequate business skills, poor governance and the lack of an enabling ecosystem. We found that these challenges are partly a result of incongruities in stakeholder imaginations of the purpose of producer companies. In order to improve the likelihood of PCs’ success, we recommend promoting them in a two-tier model comprising multiple supplier PCs and one marketfacing company in each block or district (depending on the number of small producers). It is vital that supplier PCs and individual farmers own a significant stake in the market-facing company and have strong representation on its board to ensure alignment with interests of small producers. It is equally important for the market-facing company to be invested in the success of supplier PCs. It would also be advisable to simultaneously fund and develop a business ecosystem to support producer companies by encouraging local entrepreneurship for providing support services to PCs. Such an approach allows producer companies to attract greater capital and skilled talent, and generate higher turnover, profits and member loyalty.
Currently there are 7374 producer companies covering over 4.3 million small producers in the country. These numbers are expected to more than double over the next few years, covering almost 10% of all agricultural households in India. Strengthening the long-term viability of producer companies has the potential to improve the life and livelihoods of millions of small and marginal producers across the country.
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