A Producer Company combines the institutional and ideological strengths of cooperatives (ownership limited to users; limited interest on shares; no trading of shares; patronage is not capital-based) with the flexibility and autonomy available under company law. A Producer Company is a business enterprise registered under provisions of Part IX A of the Companies Act, 1956 but is run on the basis of principles that are by and large the same as those adopted by the International Cooperative Alliance. There are however a few key enabling features in a Producer Company's legal framework which differentiate it from cooperatives (Producer Companies vis-a-vis Cooperatives).
Even though a Producer Company is a private limited company, there are certain distinct features which differentiate it from other companies (Producer Company vis-a-vis Other Companies).
Why Producer Companies in the Dairy Sector ?
About 50% of the milk produced in the country is retained for local consumption. Of the remaining 50% – or the marketable surplus – cooperatives procure about 17% of the milk produced from around 20% of rural milk-producing households in 23% of the country’s villages.
Meanwhile, the organised private sector unlike the cooperatives (barring some exceptions) is rapidly expanding its operations into the dairy business and could overtake cooperatives in the years to come. While the organised private sector will grow in the years to come, it is important – in the interest of livelihoods and inclusiveness – that cooperatives and other producer organisations continue to handle at least 50 per cent of the milk handled by the organised sector.
A substantial part of the marketable surplus continues to be handled by traders and vendors. To ensure that consumers get good quality milk and milk products processed under hygienic conditions, it is necessary that cooperatives continue to be strengthened, and that more Producer companies are incororated and operationalised.
NDDB Dairy Services is working in the states indicated below and has assisted producers in these states to establish Milk Producer Companies. Together, the five milk producer companies enrolled about 2.67 lakh milk producers as members as of 31st March 2015. Among them about 36% were women and 52% were small and marginal milk producer-members. All the five companies put together procured about 18 lakh Kg per day of milk during the year. An amount of Rs. 473 million had been collected as share capital by these five companies.