The new companies bill dilutes the progressive intent of the 'producer company'
There is a need to develop different kinds of institutions that would involve farmers as stakeholders in the growth process. The potential and problems of co-operatives and self-help groups, not to mention recent attempts to reform those institutions, are well known. Now, there seem to be problems arising from the way in which producer companies are dealt with in the new Companies Bill, 2011, which was passed in the winter session by the Lok Sabha. A "producer company" is one composed of 10 or more individuals, each of whom is a producer in any two or more producer institutions. As the bill earlier indicated, the government's position on the second amendment to the Companies (Amendment) Act, 2002, which introduced the concept of producer companies, was that the norms under the existing legislation would continue to regulate producer companies until it was replaced. This introduced needless uncertainty into an institution that had been performing reasonably well. Now, it appears that even this provision has been dropped from the bill, which is pending in the Rajya Sabha. I must declare a vested interest in this issue, because the producer company amendment to the Companies Act, 2002, was designed by a committee I chaired.
A few years ago, based on recommendations of the Irani committee on company law, the chambers of commerce had suggested that the provision for producer companies be dropped. A number of industrial and non-governmental organisations that had set up producer companies were uneasy about the proposal and had approached me. I had written to the prime minister, and he was kind enough to send me a sympathetic letter that said he would write to the then minister of corporate affairs to examine closely the provision for producer companies. Subsequently, the ministry of corporate affairs confirmed this position.