A new set of laws has been passed on Agriculture Produce Marketing Committees (APMCs). As part of the India 2020 plan, the agriculture sector of the country will be further regulated. AIF is one of the measures the government has taken to facilitate the development of farmgate infrastructure, among other measures. It was launched with a budget of ₹ 1 lakh crore. AIF continues to put an emphasis on aggregating farmers through farmer producer companies, which will increase their bargaining power and give them the opportunity to develop community assets.
In generic terms, Producer Companies can be said to be a way to improve the standard of living of those involved in the agricultural sector. Being an agrarian economy, nearly 60% of the Indian population rely on agriculture for their livelihood, and fighting for the benefits for the same is no less than a herculean task. The challenges which are indicative of the lack of good governance and formalization in the agricultural sector, include climate issues, mobilization of resources, policy changes, and technological advancements, coupled with their limited asset and capital base. These pressing issues have led to the evolution of Producer Companies brought in by the Ministry of Corporate Affairs, based on the report of a high-powered committee under the chairmanship of Dr. YK Alagh, through a bill for the amendment of the Companies Act, 1956 by inserting Part IX A.
Producer Companies
Producer Company as per the Companies Act, 2013
In generic terms, Producer Companies can be said to be a way to improve the standard of living of those involved in the agricultural sector. Such companies are deemed to possess the goodness of co-operatives and the dynamicity of companies. The Companies Act, 2013 holds no provision with regards to the Producer Companies and with the enactment of the new act, the former act stands repealed. However, as per the provision of the said Act, Part IX A of the Companies Act, 1956 shall be applicable to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies. A producer company is a company incorporated under Companies Act 2013 (formerly the Companies Act 1956) and shall carry on prescribed activities as mentioned in Section 581B of Companies Act 1956, to name few,
- Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import goods for their benefit
- Processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members
- Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
- Promoting mutual assistance, financial services and welfare measures of producers or their primary produce.
Formation and Registration
Section 581C of the Companies Act, 1956 provides for the association of 10 or more people who are producers. Two or more producer institutions or a combination of the two for the formation of a producer company. The registrar after being satisfied that all the required documents necessary for registration are complied with may issue a certificate within 30 days of receipt of such documents. Producer companies are the ones which are limited by shares as the liability of the members is limited. It is limited to the number of shares purchased by them.
Essential traits
- Persons involved in an activity connected with, or related to, primary produce can own producer companies.
- The members must be mandatorily primary producers.
- Such companies are also termed as Companies with Limited Liability wherein the liability of the members will be limited to the amount, if any, unpaid on the shares.
- Name of the company shall end with the words ‘Producer Company Limited’.
- For the purpose of the application of law and administration, the producer company on registration will be deemed. As if it is a private company in keeping with part IX-A.
- There is no limit as to the maximum number of members.
They are hybrids of companies and cooperatives. Producer Companies gained momentum ahead of cooperatives. Because cooperatives are welfare-oriented and not commercial. Additionally, they are promoted by the States, meaning increased state involvement. Management under central legislation is also considered more liberal than government control.
Management
As per the Act, the number of directors ranges from 5 to 15. The number of directors can be more than five but less than 15. But it is pertinent to note that in case of an interstate co-operative converted into a producer company. Such companies can also have more than 15 directors. However, such privilege is available only for one year from the date of such incorporation. Directors for such producer companies are to be appointed within 90 days from the date of incorporation.
Audit
The auditors of producer companies are required to exceptionally cover and make special reports. Indeed, an internal audit by contracted bookkeepers are essential for interior review of records. The Act has not made it necessary for restricted organizations but recorded organizations are required to comply with the provision.
Dispute Resolution
With regards to the development, administration or business of producer’s organizations is to be referred to the Arbitration and Conciliation Act, 1996. However, the verdict given will be final. And it cannot be challenged which is unjust on the ground that mediation grant can be claimed against in high courts.
Tax benefits
Under Section 10(1) of the Income Tax Act, 1961, income derived from agriculture is exempted from tax. However, it must be noted that the said act does not per se give any special benefits or exemptions to producer companies. But certain tax benefits can be availed based on the kind of agricultural activity.
Conclusion
To conclude, the Producer Company concept will not only ensure the necessary regulations are followed. This is also a progressive step for the betterment of its members and the agricultural industry as a whole.
According to Thomas Jefferson, “agriculture is our wisest pursuit, because it will, in the end, contribute most to real wealth, good morals, and happiness.”
