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tate
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2015
showed that non-members are also able to
buy urea from the PC outlet at the same
price as the members do.
Urea is in short supply and restricting its
sale tomembers first and then giving them to
non-members at a higher price would have
been a clear winning strategy. The quality of
other inputs sold by several PCs was good
and they were sold below the market price.
In such cases it should have been possible to
make the non-members pay a higher price
than members so that the non-members
choose to becomemembers thereby strength-
ening the PC. In case of outputmarketing, the
PC can either charge a service fee from non-
members or offer a slightly lower price than
offered to members. When such preferential
treatment is afforded to members it has two
fallouts; the first is that the members under-
stand the benefits of membership in an eco-
nomic sense and second, the non-members
aremotivated to becomemembers looking at
benefits foregone. Patronage bonuses tend to
increase the volume of business thatmembers
do with the PC and counters competition
from external buyers of member outputs.
A further issue is that PCs have been
trying to make profits to show that they
have turned the corner, and higher profits
are assumed to reflect greater strength.
Being a farmers company, the PCs should
part with the maximum benefits to active
members through higher prices for produce
purchased and lower prices for inputs and
other services. By so doing the PC will keep
its profits to the minimum and avoid pay-
ing out shareholders surpluses as income
tax. When needed the members can be
requested to invest additional equity in the
company. Since there is no open market
for the producer company shares, issues
relating to share values do not arise. The
focus of PCs’ governance should rightly be
on benefits to active shareholders and not
on value of shares.
Sector experts mention that just because
farmers are shareholders in a company for
five to seven years doesn’t mean they will
remain loyal. Even established companies
with goodmarket linkages find that member
loyalty canbe an issue. Producers decide from
a trading point of view to sell their produce
to whoever offers a higher price. Producer
companies should communicate withmem-
bers as to the reason for their being part of
the company, the services provided and the
reasons for members’ continued use of the
company’s services.Most PCs are yet to build
strong relations with the members. There
is little advice on production, and package
of practices especially for farmers; little do
companies realise that farmers are loyal to the
input dealer cum trader since he gives advice
along with sale of inputs.
Major activities undertaken by
producer companies
The basic purpose of the PC is to collectivise
small producers for backward linkage for
inputs like seeds, fertilisers, knowledge and
extension services and forward linkages
such as collective marketing, processing,
market led production etc. to gain collec-
tive bargaining power for small farmers
or producers. Financial services especially
credit and insurance are other needs of the
producers that the PCs can facilitate.
The activities being takenupby PCs canbe
grouped into three (Figure 5.2). (a) Technical
and skill services and input supply for
productivity enhancement, (b) Marketing
linkages and (c) Financial services. Most PCs
begin operation with aggregation of input
requirements and try to organise input
supply. Some of them on account of the
POPIs expertise have commenced providing
advice of cultivation with advisories on vari-
eties and package of practices for productiv-
ity improvement. Most dairy PCs have been
formed for addressing the marketing con-
straints and thus the initial activities involve
marketing. Financial services provision,
especially credit for individual member of
PC, is rare. Producer companies find finance
for their own operations scarce and it is even
more difficult to find funds for onlending to
members. Some PCs especially in Rajasthan
were able to tie-up bank loans for their
