NABARD Loan for Producer Company

The concept of Producer Company was introduced to allow farmers cooperatives to function as a corporate entity under the Ministry of Corporate Affairs. A Producer Company is a registered company having an object that is one or all of the following, production, harvesting, procurement, grading, pooling, handling, marketing, selling, the export of primary produce of the Members or import of goods or services for their benefit. IndiaFilings can help you register a producer company or private limited company. In this article, we mainly look at the loan provided by NABARD for producer company in India.

Producer Organization Development Fund

In 2011, NABARD has set up a Rs.50 crore Producer Organization Development Fund (PODF) for supporting producer organizations and adopting a flexible approach to meet the needs of producers. Under this scheme, financial support in the form of a grant and/or loans are provided for any registered Producer Organization, Producer Company, Producers Cooperatives, Registered Farmer Federations, MACS (Mutually aided Cooperative Society), Industrial Cooperative Societies and other registered federations set up by producers.

An organization will be defined or called as a Producers Organization or Producer Company, if:

It is formed by a group of producers for either farm or non-farm activities;
It is a registered body, and a legal entity;
Producers are shareholders in the organization;
It deals with business activities related to the primary produce/product;
It works for the benefit of the member producers;
Portions of profit are shared amongst the producers and the balance goes to the share capital or reserves.

Reason for Setting up Producer Organization Development Fund

Majority of the Indian farmers find it hard to realize optimal value for their produce due to fragmentation of land holdings and lack of post-harvest processing facilities. Majority of the Indian Farmers (85% of the 12.5 crore farmer households in India) are small and marginal farmers with landholdings of less than 2 hectares. This fragmentation in farmlands leads to disorganization and it is not viable for Indian farmers to adopt the latest technologies.

By organization of these farmers into producer companies or producer organizations, the farmers can utilize economies of scale to procure inputs at a lower cost, adopt latest technologies, get access to finance, build linkages to market, develop post-harvest processing facilities and gain more selling power. Thus the concept of producer company and the Producer Organization Development Fund are aimed at empowering farmers into creating organizations or clusters.

Loan for Producer Company or Producer Organization

The Producer Organization Development Fund (PODF) will be used to support Producers Organizations or Producer Companies by providing credit support, improving capacity and building market linkage. The objective of the fund is to meet end to end requirements of Producers Organization as well as to ensure their sustainability & economic viability.

Under the scheme, activities that fall within the domain of agriculture, allied sectors & non-farm sector are supported. Activities like harvesting, storage, processing, packaging and/or marketing of the produce/ product are eligible for support under the PDOF Fund.

To be eligible for assistance under the PDOF Fund, the Producer Company should be formed by the primary producers of agriculture & non-farm sector. The Producers Organization or company must act only for the benefit of the producers. Further, the shares of the producer company cannot be sold to non-producers and if an existing member desire to leave the producer company, then the shares can only be purchased either by existing producers or by enrolling a new primary producer.

Eligible Institutes to Avail Assistance

There are conditions to avail the assistance for which the basic eligibility has to be met. The following categories of companies are allowed:

Producer Companies (POs)
Producers’ Organizations (POs)
Primary Agricultural Cooperative Societies (PACS)
Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) as Multi-Service Centre (MSC)
and other professional organizations

The eligible category of companies can opt for the below type of assistance from the NABARD or the assistance will be provided for the below type of activities: