The Union agriculture ministry has prepared a concept paper on allowing farmers to form private limited companies. The value of the landholding of the farmer will be considered as equity.
The agriculture secretary, RCA Jain told FE that there would be no problem under the existing law to allow farmers to form private limited companies on basis of equity participation as per their landholdings. The amendments to the Companies Act recognises producers cooperatives as companies. The farmers are producers of crops and they can very well come together and form companies of their own.
Mr Jain said that while the voting rights of the members of the company will be purely on individual basis as per cooperative principles, the sharing of the profits will be on the basis of the landholdings. In case of losses or liquidation of the company, farmers landholdings will remain untouched and not considered for the purpose. The settlement of losses will only be met out through cash reserves or from assets other than landholdings, he said.
He said this would be a unique concept of a rural based company by farmer to be experimented for the first time in India. Here the farmer has nothing to invest in cash expect for leasing out his land to his own company. The farmers cooperative has not been much successful. This concept is a hybrid of the principles of cooperative and company culture. As per cooperative principles the voting rights is one vote per individual while profits will be shared in terms of landholdings.