Producer Companies: Protecting and benefiting the agricultural industry

Last Updated at: Dec 10, 2020
What are the benefits of One Producer Company_
In five years to 2023-24, the Indian Government plans to set up and support 10,000 new producer companies or Farmer Producer Organisations (FPOs). In these companies, farmers can come together as shareholders to expand the production and marketing of their agricultural output. Under new FPO guidelines, the government will provide financial support of up to Rs 18 lakh to new producer companies for the first 3 years.


A Company that is registered with the Ministry of Corporate Affairs (MCA), for the purpose of agricultural production and processing activities, is called a Producer Company. It comprises a committee of a minimum of 10 people and 2 institutions.

The producer companies’ concept has helped in the betterment of the way the agricultural industry works, allowing them to access the technological advancements along with offering profits on input amounts and channelizing the agrarian market. 

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These companies aim at improving the living standards, incomes, and profits for the individuals as well as groups. To register under the name of producer companies, the following objectives must be incorporated by the companies:

  • Harvesting
  • Grading
  • Pooling
  • Production
  • Marketing and selling
  • Import/export of goods and agricultural needs
  • Handling and several others

The primary purpose of the producer companies is to allow the co-operative businesses to register themselves as one company, availing the several agricultural benefits and enhancing their status.

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Objectives of producer companies

Under this, the producer companies must have the following objectives:

  • All the activities mentioned above must be a part of the working of companies.
  • Processing- This includes activities, namely canning, preservation, drying, distillation, brewing, and packaging, along with other steps involved in the complete agricultural processes.
  • The manufacturing of the technological equipment that has to be used mainly by the members of the company.
  • Assisting and rendering education about agricultural terms to the members of the company.
  • Providing all the services to the members right from consultancy, training to the development, along with the other agricultural activities involved.
  • Several measures must be provided to benefit the members of the company in one way or the other.
  • Providing technological services such as electricity, power, land resources, water resources, and others for agricultural produce.
  • Providing insurance facilities to both producers and the agricultural products so obtained.
  • Provision of mutual assistance to the members.
  • Financing and providing credit facilities to the members for carrying out various agricultural tasks.


The registration process of the producer company

The registration process of the producer company is exactly similar to the registration of Private Limited Companies. It is briefly carried out in the following steps:

  • Digital signature
  • DIN (Directors Identification Number) for directors
  • Approval of name for the company
  • After final approval by the MCA (Ministry of Corporate Affairs), the company is incorporated
  • Commencing the business

Benefits of producers company

The producers’ company concept has been introduced, keeping into consideration the growth of the agricultural industry. As such, the producers’ company offers benefits that include:

  • All the members who have provided and contributed their shares in terms of produce or products are provided with equity shares and cash amounts later. The amount so provided is as decided by the director. 
  • Bonus and surplus shares are provided in the ratio of shares offered and contributed by the members.
  • In the case of surplus income, the amount so provided depends on the work contribution made to the business by the members.
  • Financial assistance can also be granted in the form of a credit to the members for a period of up to six months.

Benefits on taxes to the producer companies

  • As per the Income Tax Act, 1961, the producer companies are exempted from paying all the taxes, i.e., no taxes are levied on the income generated from the agricultural produce. 
  • Depending on the type of agricultural activity taking place, the tax exemptions might vary for the income obtained.
  • To be very specific, no exemptions are provided to the producer companies. And they are focused more on the activities that are carried out.
  • Additionally, the option of loans is also provided to the company members that have to be repaid within three months-7 years.


As such, to ease out the process of setting up their business and earning profits on agricultural activities, the government introduced a well-planned concept of producer companies allowing the farmers to grow and earn credits by setting up their own business. With the benefits and tax exemptions so offered, the process of agricultural activities has also been made simpler and cheaper, leading to a boost in the income of all the small scale workers.

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