Patronage Distribution and Governance in VAPCOL: Girish Sohani's Dilemma

Abstract

Producer Companies (PCs) in India have been promoted as a fourth category of corporate entity and were incorporated in India's Companies Act, 1956 in 2002. They are a hybrid of small farmer collectives that possess the characteristics of cooperatives and limited companies. This case outlines the organization, management, and governance of one of the oldest PCs in India: Vasundhara Agri-horti Producer Company Limited (VAPCOL). Girish Sohani is the Chairman of VAPCOL, and he is concerned about the inconsistency in patronage distribution between its two producer–member states, Gujarat and Maharashtra. Operated under a three-tier arrangement, the second-tier structure in Gujarat and Maharashtra has not been uniform. For example, Maharashtra has a producer group, while Gujarat has been managed by a cooperative. This arrangement has led to an inequitable patronage return distribution between Maharashtra and Gujarat members. Sohani has contemplated whether transforming a producer group into a cooperative in Maharashtra, as similar to Gujarat, would address the patronage distribution problem adequately. He further conjectured whether an increase in the member contribution could improve the economic viability of the PC in the liberalized yet competitive agro-food business systems in India.

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