Abstract
The book under review is a timely addition to the literature on the subject. Indian agriculture has increasingly been turning smallholder based over time. Smallholders have certain inherent disadvantages in terms of access to resources, especially capital and have low bargaining power in markets. Linking smallholders to markets is important for food security and poverty reduction. However, smallholders are not homogeneous across as well as within groups (Arias et al. 2013). Cooperatives have been considered a better option for organizing smallholders though most of them have remained ineffective due to a host of factors which are too well known. As an alternative, in India, the Companies Act, 1956 was amended in 2002 incorporating Part IXA (Section 581A to 581ZT) allowing formation of producer companies (PCs) and also allowing the existing cooperatives to convert themselves into PCs. Since then, several NGOs and even government agencies have involved themselves in promoting PCs in India including the National Bank for Agriculture and Rural Development (NABARD) which started supporting producer organizations through its Producer Organisation Development Fund (PODF) since 2011 with a corpus of ₹500 million. The announcement of Producer Development and Upliftment Corpus (PRODUCE) of ₹2,000 million in the Indian Union Budget 2014–2015 for the promotion of 2,000 producers’ organizations during the next two years, came as a shot in the arm for the producer organizations. Of late, it has been increasingly held that producer organizations can be the panacea for most of the problems faced by smallholders in particular, and agriculture in general. We may note here that producer organizations can be of many types depending on their registration under different Acts including those registered under the Companies Act, 1956 as amended in 2002. The book under review focuses on PCs.
Given this context, this book evokes interest across policy and practitioner circles as organizing farmers is considered the major solution to the problems of smallholders. The book dwells on producer companies in four states of India, namely, Madhya Pradesh, Maharashtra, Gujarat and Rajasthan. Madhya Pradesh, of these states, has been in the news for the District Poverty Initiative Project (DPIP) funded by the World Bank to float PCs converting the common interest groups (CIGs) of farmers. The book has seven chapters including an introduction (Chapter 1) and summary, major problems and recommendations (Chapter 7) and one chapter each devoted to four states covered. Chapter 2 deals with the global experience about cooperatives and PCs. The analysis is based on a sample of 24 PCs spread across the four states. Half of them were registered in or before 2008 and the rest after 2009 or 2010. The sample is drawn out of 67 PCs present in these states at the time of study in 2011–2012. Thus, it is a fairly representative sample that the study has covered.
The book discusses international experience of PC-like organizational forms prevailing in Sri Lanka (farmer companies), Denmark, New Zealand, Australia (cooperative companies) and India (cooperatives) as a prelude to a state-wise discussion of PCs. Thus, the authors provide a perspective to the discussion that follows. One unmistakable conclusion that emerges from global experience is that tax policy (exemption) has great effect on the shape and the tendencies of the PCs. The experience of farmer companies in Sri Lanka revealed that most of them failed because of politicization, lack of managerial and entrepreneurial skills, lack of sound business plans and management, mistrust between the company and the farmers, and farmers’ perception of the farmer company as a service provider. It is not difficult to understand and relate these findings to the cooperatives in India, which the authors discuss at some length. Member centrality and member control, according to the authors, are the two important aspects of the design of cooperatives that can lead to success.
The authors discuss the organization and the performance of PCs in four states with focus on three aspects: (a) the basic profile of the PC covering date of registration, share capital, size and type of membership, number of professional managers and number of employees; (b) number of users of services, proportion of business from non-members, average size of holding; and (c) details of business, turnover and profit/loss. The book covers detailed analysis of each of the PCs and identifies the problems and special features, if any, thereof. It also compares, wherever possible, PCs promoted by different types of promoters such as NGOs, government or farmers’ organizations to understand what works. One more important analytic the authors brought in is the awareness and the perception of the members on business and ownership and how they relate themselves to the PC in terms of patronage.
It is not the intention of the reviewer to give a summary of the findings of the book; that kills the curiosity of the reader in the book. However, it is essential to discuss a few conclusions that the reviewer feels need more critical examination. But, before that, a highlight of the merits of the book is in order.
The book has been published at a time the government in India is keen to upscale the producer organizations and there is general interest in producer organizations including PCs such that it is hoped, that the PCs can impart bargaining power to small producers through aggregation that lends scale and scope. There are hardly any studies covering performance of a good number of PCs. NABCONS (2011) and Nayak (2013) were the only two other studies on producer organizations so far. The latter gave a brief profile of 55 producer organizations and 21 detailed case studies. The present book is important for evidence-based fine tuning of the policy, as it analyzes the performance and problems of PCs.
The book’s coverage of global experience of farmer companies/co-operatives provides the setting for the analysis in the book which also discusses some international innovative experiments in farmer aggregation in the last chapter while synthesizing the findings from state-wise analysis. What worked elsewhere and what did not gives the reader a good perspective. The authors suggest joint stake companies on the lines of those operating in a few other countries. This is another useful perspective. A detailed analysis on different aspects of PCs and highlighting their problems is another highlight of the book.
The book, however, falls short of certain expectations and suffers a few deficiencies. First, the book could have computed certain performance ratios that would help compare the performance across heterogeneous PCs. Second, it is not clear if the authors surveyed all the members to assess awareness and perception of members or the results are based on a sample survey (for example, Table 5.4, p. 95). Third, the authors make several observations and conclusions, but, a critical discussion of these would have helped readers. For example, the authors observe that non-members contributed to the business of PCs to a varying extent. Was it essential for PCs to serve non-members when they could hardly cover a small proportion of their own members due to working capital shortage? Another conclusion the authors make is that the PCs should be treated on par with the cooperatives for tax and other concessions. If PCs have to be treated like cooperatives, why should there be a separate legal provision to register PCs? The authors were expected to have made some critical comments here instead of echoing general opinion. Fourth, the authors could have worked out economics of PCs including the cost of promotion, if they had access to such data. They could have worked out breakeven point for PCs. The economics and the market realities should not be mixed with concern for producer organizations. We may analyze their performance, treating them as business entities and then suggest a time-bound package for helping them overcome teething troubles, the ultimate aim being to enable PCs to evolve into independent, vibrant market players. As of now, there are many hidden costs while promoting such initiatives which are not loaded to the costs. If social benefits far outweigh these costs, one may need to go for social cost–benefit analysis. Fifth, the authors used millions as units in the text and lakhs in tables which leads to difficulty in reading with reference to tables. Editing could have been done carefully as there are several spelling and other errors which reduce the readability. The book, on the whole, is a welcome addition to the literature on the subject and will be useful for policy makers and academicians alike.