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The IUP Journal of Management Research

Financial Sustainability: A Study on the Current Status of Farmer Producer Companies in Northeast India

Article Details

Pub. Date	: Apr, 2019
Product Name	: The IUP Journal of Management Research
Product Type	: Article
Product Code	: IJMR21904
Author Name	: Shivam Kakati and Arup Roy
Availability	: YES
Subject/Domain	: Management
Download Format	: PDF Format
No. of Pages	: 20

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Abstract

This paper assesses whether the Farmer Producer Companies (FPCs) of Northeast India are financially healthy and will continue to work in the foreseeable period. The study analyzes financial sustainability of four FPCs based on their economic performance, bankruptcy, sustainable growth, net financial liabilities, asset sustainability, auditors’ comment on CARO items, Working Capital Cycle (WCC), and Cash Flow from Operating (CFFO) activities. The study included only those companies which were operating for more than two years and had published their reports to Ministry of Corporate Affairs, India. The study used secondary data collected from the website of Ministry of Corporate Affairs, India, for the financial year 2015-16. AAPCL and YMPCL are found to be financially sustainable, while GSPCL and BTPCL might face survival issues in the near future. GSPCL could be considered moderately financially unsustainable, while BTPCL has high chances of nearing bankruptcy in the near future, if the management does not try and solve their financial problem.

Description

Farmer Producer Companies (FPCs hereafter) were given the legal status in 2003, under Part IXA of the Companies Act, (Amendment) 2002. FPCs are private joint stock companies, where producers (farmers) pool their resources to get better economies of scale, easy access to market and new technology, increased earnings, etc. The prime reason for these companies to come into existence is to overcome the drawbacks of the cooperative society model of being supply-side oriented and inability to freely operate in the competitive market. The FPC model is a hybrid model of ‘private company’ and ‘cooperative society’. Hence, they have to balance their goals in terms of profitability and welfare. FPCs will have to survive in a very narrow stretch, i.e., sustain both financially and socially. A lean on any side by the FPCs would lead to their losing the very meaning of existence.