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Category: Producer Company

  • Unlocking the Potential of Farmer Producer Companies in Boosting Rural Economy

    Unlocking the Potential of Farmer Producer Companies in Boosting Rural Economy

    Introduction to Farmer Producer Companies (FPCs)

    Farmer Producer Companies (FPCs) are collective entities formed by farmers to improve their economic viability and enhance agricultural productivity. These companies are structured to function as business entities, providing smallholder farmers with a platform to engage in collective farming activities, access credit, improve market linkages, and enhance their bargaining power. 

    FPCs offer a way to address the fragmented and often inefficient nature of small-scale farming in rural areas, providing a sustainable solution for boosting the rural economy.

    Legal Framework and Regulations

    The concept of FPCs was introduced in India under the Companies Act, 1956, through an amendment in 2002. This legal framework allows FPCs to operate as corporate entities while retaining the cooperative principles of collective ownership and democratic governance. Farmer Producer Companies must adhere to the provisions of the Companies Act, 2013, which outlines the regulatory requirements for their formation, management, and operations. 

    This legal structure ensures that FPCs can access formal financial markets, enter into contracts, and undertake commercial activities, thus bridging the gap between smallholder farmers and larger market opportunities.

    Role of FPCs in Empowering Farmers

    Farmer Producer Companies (FPCs) play a crucial role in empowering farmers by providing them with a collective voice and the necessary resources to enhance their agricultural practices. By aggregating the produce of multiple farmers, FPCs enable smallholder farmers to achieve economies of scale, reducing costs and increasing their negotiating power. 

    This collective approach also facilitates better access to high-quality inputs, advanced farming technologies, and extension services, which are often out of reach for individual farmers.

    Enhancing Agricultural Productivity

    One of the primary objectives of Farmer Producer Companies is to enhance agricultural productivity. By pooling resources, FPCs can invest in modern farming equipment, adopt sustainable agricultural practices, and implement innovative techniques to increase crop yields. FPCs also facilitate knowledge-sharing and training programs, helping farmers stay updated with the latest advancements in agriculture. This collaborative approach not only boosts productivity but also ensures better quality produce, leading to higher incomes for farmers.

    Access to Finance and Credit

    Access to finance is a significant challenge for smallholder farmers, who often lack the collateral required for traditional loans. Farmer Producer Companies address this issue by providing a collective platform that improves farmers’ creditworthiness. Banks and financial institutions are more willing to extend credit to FPCs due to their structured organization and reduced risk profile. Additionally, FPCs can leverage government schemes and subsidies aimed at promoting agricultural development. This improved access to finance enables farmers to invest in better inputs, infrastructure, and technology, leading to increased productivity and profitability.

    Value Addition and Processing

    Farmer Producer Companies also focus on value addition and processing activities, which can significantly enhance farmers’ income. By engaging in activities such as sorting, grading, packaging, and processing, FPCs can increase the market value of agricultural produce. Value addition not only fetches higher prices but also opens up new market opportunities. 

    For instance, processing raw produce into finished goods like jams, juices, or packaged foods can cater to urban markets, providing a steady source of income for farmers. This diversification reduces the dependency on traditional markets and helps mitigate risks associated with price fluctuations.

    Market Linkages and Distribution

    Effective market linkages and distribution networks are essential for the success of Farmer Producer Companies. By acting as intermediaries, FPCs help farmers bypass middlemen, ensuring that a larger share of the final sale price reaches the farmers. FPCs can negotiate better terms with buyers, secure bulk orders, and establish direct connections with retailers and wholesalers. Additionally, FPCs can explore export opportunities, taking advantage of global markets. This improved market access ensures timely and fair payment to farmers, contributing to their overall economic stability.

    Community Development and Social Impact

    Beyond economic benefits, Farmer Producer Companies contribute to community development and social impact. By fostering a sense of collective responsibility and cooperation, FPCs strengthen social bonds among farmers. This collective approach encourages the sharing of resources and knowledge, leading to community-wide improvements in agricultural practices. 

    Farmer Producer Companies also play a role in promoting gender equality by encouraging the participation of women in farming activities and decision-making processes. Moreover, the increased income and stability provided by FPCs can improve the overall quality of life in rural areas, leading to better education, healthcare, and infrastructure.

    Challenges and Solutions

    Despite their potential, Farmer Producer Companies face several challenges that need to be addressed to ensure their success. One of the primary challenges is the lack of awareness and understanding of the FPC model among farmers. To overcome this, extensive awareness campaigns and training programs are needed to educate farmers about the benefits and functioning of FPCs. Another challenge is the limited managerial and technical skills among FPC members. Capacity-building initiatives, such as training in business management, financial literacy, and modern agricultural practices, can help address this issue.

    Access to markets and infrastructure remains a significant challenge for many FPCs. Investment in rural infrastructure, such as roads, storage facilities, and processing units, is essential to improve market access and reduce post-harvest losses. Furthermore, FPCs need to leverage digital platforms and e-commerce to expand their market reach. Government support, in the form of subsidies, grants, and policy interventions, is crucial to overcoming these challenges and ensuring the sustainability of FPCs.

    Conclusion

    Farmer Producer Companies (FPCs) have the potential to revolutionize the rural economy by empowering farmers, enhancing agricultural productivity, and improving market linkages. By providing smallholder farmers with access to finance, technology, and value addition opportunities, FPCs can significantly increase farmers’ income and contribute to rural development. 

    However, to unlock the full potential of FPCs, it is essential to address the challenges they face and provide the necessary support in terms of awareness, capacity building, infrastructure, and policy interventions. With concerted efforts from all stakeholders, FPCs can become a powerful tool for transforming the agricultural landscape and boosting the rural economy.

    FAQs

    What are farmer producer companies and how do they differ from traditional farmer cooperatives?

    Farmer Producer Companies (FPCs) are collective entities formed by farmers to improve their economic viability and agricultural productivity. Unlike traditional cooperatives, FPCs are registered under the Companies Act, giving them a formal corporate structure. This allows FPCs to engage in commercial activities, access formal financial markets, and enter into contracts, providing them with greater flexibility and opportunities for growth.

    What are some benefits of forming a farmer producer company for smallholder farmers?

    Forming a farmer producer company offers several benefits for smallholder farmers, including improved access to finance, better market linkages, reduced costs through economies of scale, access to modern farming technologies and inputs, enhanced bargaining power, and opportunities for value addition and processing. FPCs also foster a sense of collective responsibility and cooperation among farmers, leading to community-wide improvements in agricultural practices.

    How can farmer producer companies help to boost the rural economy?

    Farmer producer companies boost the rural economy by empowering farmers, increasing agricultural productivity, enhancing market access, and providing opportunities for value addition and processing. By improving farmers’ income and stability, FPCs contribute to overall rural development, leading to better education, healthcare, and infrastructure in rural areas. The success of FPCs also promotes rural entrepreneurship and creates employment opportunities, further stimulating economic growth.

    What types of products or services can farmer producer companies offer to consumers?

    Farmer producer companies can offer a wide range of products and services, including raw agricultural produce, processed and value-added products (such as jams, juices, and packaged foods), organic produce, and specialty crops. FPCs can also provide services like contract farming, supply of high-quality inputs, agricultural extension services, training programs, and farm machinery rental. By diversifying their product and service offerings, FPCs can cater to various market segments and increase their revenue streams.

    How can farmers be involved in the decision-making process and management of a farmer producer company?

    Farmers can be actively involved in the decision-making process and management of a farmer producer company by becoming members and participating in the democratic governance structure of the FPC. Members elect a board of directors, who are responsible for the overall management and strategic direction of the company. Regular general meetings provide a platform for members to voice their opinions, discuss issues, and vote on important decisions. Training and capacity-building programs can also help farmers develop the necessary skills to take on leadership roles within the FPC.

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  • FAQs – Farmer Producer Company

    FAQs – Farmer Producer Company

    As agricultural knowledge continues to progress, an increasing number of small and marginal farmers are recognizing the advantages of forming farmer-producer companies. Witnessing the success of their counterparts has sparked curiosity among these farmers about initiating their businesses, leading to a plethora of frequently asked questions FAQs- Farmer producer company that can prove to be insightful.

    FAQs – Farmer Producer Company

    What is the minimum number of persons required to register a producer company?

    A producer company, treated like a private limited company, can be registered with a minimum of two persons.

    How are the liabilities of members in a producer company limited?

    Members’ liabilities are limited to the unpaid amount of shares held by them. The company operates with limited liabilities restricted only by the share capital.

    What is the minimum paid-up authorized capital required for a producer company?

    As per the new circular, a producer company must have a minimum paid-up authorized capital of Rs. 5 lakh.

    Is there a limit on the maximum number of members in a producer company?

    Unlike traditional private companies, producer companies can have any number of members, providing a more inclusive structure.

    Can a producer company become a public limited company?

    No, a producer company shall never become a public (or deemed public) limited company, ensuring stability and control.

    Is members' equity in a producer company publicly traded?

    Members’ equity cannot be publicly traded but can only be transferred among members, preventing vulnerability to takeover by other companies or multinational corporations.

    Why should one opt for a producer company?

    Producer companies offer a statutory and regulatory framework that enables producer-owned enterprises to compete on a competitive footing. They facilitate the principles of mutual assistance and co-operation within a liberal regulatory framework.

    What opportunities does a producer company provide to existing cooperative institutions?

    Producer companies offer existing large multi-state cooperative institutions the voluntary opportunity to convert themselves into this new form, aligning with the principles of mutual assistance and co-operation.

    What are the key objects and activities of a producer company as per the Companies Act?

    The key activities of a producer company include production, harvesting, procurement, grading, marketing, processing, manufacturing, providing education, welfare activities, power generation, land and water resource management, insurance, and various allied or ancillary activities, including financing.

    What is the historical background of producer companies in India?

    Producer Companies were conceptualized to formalize and govern business activities related to agriculture, focusing on the challenges faced by farmers. Part IX A of the Companies Act, 1956, introduced in 2002, outlines provisions for producer companies, aiming to bring formalization and good governance to the agricultural sector.

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  • What is the Role of FPO?

    What is the Role of FPO?

    The FPO is a body of individuals that looks after the interest of the farmers and the primary agricultural producers. The government of India has also taken an initiative to launch more than ten thousand FPOs that will be functional for the growth and maintenance of what the farmer produces, and it is the role of the FPO to see that no farmer is deprived of the rights and amenities that are meant for them.

    It is one of the steadiest and the most sustainable sources of income generation for farmers or groups of farmers. With proper insurance facilities, growth-driven potential and ideas generated for the farmers to take care of their agricultural output daily, the producer organisation has a lot of things to do. It is the role of the FPO to check the production, the earnings of the farmers, and how they can double the farmers’ income. 

    A registered and experienced FPO gives professional handholding to all new FPOs in the market. This they do for around five years till the new company gets on its feet. The major role that the Farmer Producer Organisation plays is detailed as under:

    • To initiate the processes of income and revenue generation for the farmers. High-quality production and dissemination of ideas to promote revenue and profit enhance the farmer’s confidence in innumerable ways. 
    • The FPO also takes the initiative to give high-quality products, including seed, production, usage and quantity of insecticides and pesticides all at a lower rate than when the farmer has to buy from an open market. 
    • The FPO functions to check the need-based production units that are opened, what need-based agricultural products are launched into the market, and how to manage the post-production works. The organisation also looks after selling and buying equipment, machinery, cultivators, high-quality land tillers, sprinkler sets, and combined harvester machines. They can also hire large-scale equipment if needed. 
    • It is also the work of the FPO to go for major value addition like sorting, cleaning, grading, packaging and exporting food crops and other agricultural items. The processing and grading of agrarian items give them an idea about what agrarian products have the most significant market demand and how they can sell, negotiate, and earn profit. 
    • Apart from these, the Farmer Organisation also has to encourage the farmers to earn through innovative methods like sericulture, beekeeping, mushroom farming, etc. This is not just a new agrarian reform but is also much more popular among the people now. While the FPO is there, the farmers do not have to sell their agricultural products at a lower or lesser price. Also, the FPO sometimes makes an arrangement to take multiple products from many farmers, bring them, and sell them under one roof. This gives some amount of profit to everybody, and nobody is deprived. 
    • It is one of the major works of the FPO to check and see how agricultural production undergoes experimentation on each new day. New seeds, new crops, new ways of cultivating and tilling lands, and using organic and more environmentally-sustainable crop production methods can be made possible if the FPO harnesses proper agricultural knowledge and marketing capability. 
    • The FPO takes every initiative to know the points of negotiation they can do with the buyers. Since there is a complete absence of a middleman, it becomes easier for the farmers to sell their items for a fair profit. The FPO also knows the relevant processes of bargaining and going on for the customer demands. As of now, if we take the case of India, there are in total 4465 FPO clusters that are entrusted with the work of formation of the FPOs and looking after the farmers and their causes.
    Discover the benefits of Producer Company Registration. Learn how to empower agricultural producers through legal incorporation. Boost productivity and access government schemes. Click to unlock growth today!

    It is also the priority of the government to give adequate training to the FPOs so that they can give enough resources, knowledge, and handholding and also, and the CBBOs provide the initial training in this field. Now, considering the country’s agrarian economy, it is decided by the government authorities that the formation of the Farmer Organisation should take place in all those major aspirational districts where development is still very low. And add, there should be the formation of at least one FPO in each block of the district to facilitate economic growth and foster greater revenue for the farmer. For instance, in the North-Eastern part of India, the scenario needs to be agile and flexible.

    It is true that under the aegis and guidance of an FPO, the best and the primary benefit that the primary producers get is that they do not get duped by the intermediaries. There is no random price growth of crops, no stealthy way of buying and selling crops and fertilisers. With the help of the FPO, there is better community growth, which creates a harmonious economic relationship within the district and as part of the country. Market opportunities are increasing daily, as are the growing demand and the number of competitors. Hence, the role of an FPO becomes vital here. It needs to update itself on all the recent agricultural and farming developments and set future goals to sustain the livelihood of the farmers. 

    Conclusion: 

    It is the work of the FPO to check the overall development of the individual farmers and the organisations or institutions under a single, unified umbrella. The storage, logistics, transportation, import, export and profit segments remain within the best care of the FPO. 

    If you want to get the essential information about what an FPO is and its functions, then you can check out the info on Vakilsearch. Under one roof, you get a lot of professionals dealing with companies, laws, acts, taxes, registrations, functions, compliance work etc. The ever-active support team makes your search more accessible, and in Vakilsearch, all your official documents remain safe in secure vaults.

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  • Easy Steps to Incorporate a Producer Company

    Easy Steps to Incorporate a Producer Company

    There are several perspectives from which you can look at a company in terms of categorizing it. A company can be private or public. A company can be listed or unlisted.

    A company can be a manufacturer, wholesaler or retailer. In this article, we are going to take a detailed look at a category of companies called Producer Companies

    .A producer company is a registered company under Companies Act in 2013. It carries important activities such as marketing, production, pooling, grading, selling, procurement, harvesting and handling of goods. It also includes processing like distilling, preserving, brewing, drying, venting, canning and packaging. A producer company also involves manufacturing and supplying machinery and equipment sales.

    In India the majority of them carry on activities such as production, procurement, harvesting, pooling, grading, handling, marketing, selling and export of main produce of its members or import of goods and services for their own benefit. Processing includes preserving, distilling, drying, brewing, canning, venting and packaging of the produce of its members. Producer Company also includes manufacture, supply or sale of machinery, equipment or consumables mainly to its members. 

    Click here to know more about Incorporation of Producer Company

    Types of Producer Companies

    There are five broad categories of producer companies. Let us take a look at those

    1. Production businesses – These are businesses that are primarily involved in production, manufacturing or procurement of the primary produce
    2. Marketing businesses – These are businesses that market, educate and promote the primary produce amongst the consumers
    3. Technical service businesses – These are businesses that conduct research into the existing practices of production and provide training and technical assistance to the producers of the primary products
    4. Financing Businesses – These are businesses that provide long term and short term financing to the producers of the primary product.
    5. Infrastructure businesses – These businesses provide ancillary infrastructural services that facilitate the production of the primary product such as electricity, irrigation etc.

    Silient Features of a Producer Company

    1. The producer company which is registered is treated as a private limited company.
    2. Producer companies are with limited liabilities and are limited only by share capital.
    3. The maximum number of the members in the company can exceed 50.
    4. It will never become a public limited company.
    5. Minimum 5 directors are necessary to run a producer company. All the directors must possess DIN (Director Identification Number) and DSC (Digital Signatures Certificates).
    6. Minimum paid-up certified capital to incorporate a producer company is of Rs.5 lakh.

    Why Incorporate a Producer Company?

    The following are some of the reasons why starting a producer company may be suitable for an entrepreneur.

    1. To offer a statutory and governing framework that generates the potential for producer-owned enterprises to compete with rival enterprises on a competitive footing.
    2. To provide for the process of registration and formation of “Producer Companies” which, inter alia carries the ideologies of “mutual assistance” and “Co-operation” within the more generous regulatory framework afforded by the company law with apt alteration.
    3. To provide an opportunity, to the present large multi-state cooperative societies and institutions, to voluntarily transform themselves into the new form of producer companies.

    Benefits to Members of a Producing Company

    1. Members will primarily receive only value for the products combined and supplied as the directors may regulate. The pending amount may be expended later either in the form of cash or in the form of allotment of equity shares.
    2. Members will be entitled to receive bonus shares.
    3. There is a provision for the circulation of patronage bonus after the annual accounts are accepted. Patronage bonus means payment out of excess income to members in the proportion to their respective patronage.

    Dispute Resolution

    Disputes relating to the producer’s companies are settled by arbitration or conciliation under the Arbitration and Conciliation Act, 1996 as if the parties to the disagreement have asserted in writing to such procedure.

    Audit and Internal Audit Requirements

    Producer Companies will carry out an internal audit of its accounts, at fixed intervals according to its articles of association. Along with the internal audit, annual audit report to the members of the company is also made by the auditor on examining the accounts. According to the information given by him after examining the accounts in the required format will give a true and fair view of the company.

    Tax Benefits

    The Indian economy is basically an agricultural economy. More than two-thirds of the population in India depends upon agriculture for their livelihood. The Indian Income Tax Act, 1961 Act, explicitly exempts tax on agricultural income under section 10(1). However, the exemption on the agricultural income sometimes varies depending upon the type of agricultural activity being carried on.

    It is to be noted that though the Income Tax Act does not give any specific benefits or exemptions to the producer companies as such, but conditional to the type of agricultural activity it carries on, some tax benefits can be availed.

    For example, if green tea leaves are grown and sold directly without any kind of processing, then the income derived from such a method is measured as agricultural income under the Income Tax Act and such income is 100 % tax-free.

    But if the green tea leaves are processed and the tea is manufactured only 60% of the income is derived from such kind of activity. Then it is measured as agricultural income and the tax exemption can be availed only on the 60% of that income. Thus, it is clear that the tax exemption to a producer company depends upon the kind of activity it carries on.

    Conclusion:

    So, these are some of the reasons as to why one should start a producer company in India. The producer company is registered as a private company.

    The companies have limited liabilities and are restricted by share capital. The maximum members in the company can be up to 50. Minimum 5 directors are required to run the producer company and every director should possess DSC(Digital Signatures Certificates) and DIN(Director Identification Number).

    The formalities regarding registering a producer company will require some kind of professional guidance and assistance in order to ensure that the process is free of errors and smooth.

    So if you have any queries or require help with starting your producer company, get in touch with us and we will ensure that our team of experts assist you with the right kind of advise and assistance.

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  • Why is FPO not successful?

    Why is FPO not successful?

    What Is FPO and How Does It Work?

    A Farmer Producer Organisation (FPO) is a group of small and marginal farmers who come together to pool their resources and negotiate better prices for their produce. FPOs typically buy produce from farmers at wholesale prices and then sell it to retailers or processors at a higher price. 

    In addition to negotiating better prices, FPOs provide other services such as storage, transport, and marketing support. This helps to reduce the costs and risks associated with farming, making it a more viable proposition for small farmers. There are currently over 1,000 FPOs operating in India, and the government is working to promote their growth as a key part of its rural development strategy.

    The Benefits of FPO

    A Farmer Producer Organisation (FPO) is a cooperative or association of small-scale farmers that work together to collectively market and sell their produce. FPOs can offer many benefits to farmers, including: 

    Improved Bargaining Power: By banding together, farmers in an FPO can negotiate better prices for their produce with wholesalers and retailers. 

    Reduced Costs: FPOs can pool resources and negotiate bulk discounts on inputs like seeds, fertiliser, and equipment. 

    Training and Technical Assistance: Members of an FPO can access training and support on good agricultural practices, business management, and marketing. 

    Access to Finance: FPOs can help members secure loans and other types of financing to invest in their farm businesses. 

    Better Market Access: FPOs can help connect farmers to markets for their produce, both local and export markets. 

    A Stronger Voice in Policy Debates: By representing the collective interests of small-scale farmers, FPOs can help shape agricultural policies that impact their members.

    Learn more about Benefits of Farmer Producer Companies

    Why Is FPO Not Successful in Some Countries?

    Farmer Producer Organisation FPO is not successful in some countries for the following six reasons: 

    Lack of clarity regarding the organisation’s objectives – FPOs are often set up without a clear idea of what they are trying to achieve, which can lead to confusion and disagreement amongst members.

    Insufficient technical and financial support – FPOs need access to adequate resources to succeed, but this is often lacking. This can make it difficult for them to attract and retain members and effectively carry out their activities.

    Poor governance and management – Many FPOs suffer from poor governance, leading to inefficiency and corruption. This can discourage farmers from wanting to join or remain involved with the organisation.

    Lack of farmer participation – In order for an FPO to be successful, farmers must be actively involved in its activities. However, many FPOs fail to engage farmers meaningfully, resulting in low levels of participation. 

    Intra-organisational conflict – Conflict between members of an FPO can arise for several reasons, such as differences in opinion over how the organisation should be run. If not managed effectively.

    Absence of a clear value proposition- One of the main reasons for the plight of farmers in India is the absence of a clear value proposition from Farmer Producer Organisations (FPOs). They are often not able to secure good deals for their members. 

    How to Make FPO More Successful?

    A Farmer Producer Company Registration (FPO) can be a powerful tool for farmers, giving them greater bargaining power, access to inputs and markets, and economies of scale. However, setting up and running an FPO is not without its challenges. Here are a few tips for making an FPO more successful. There are many factors that can contribute to the success of a Farmer Producer Organisation (FPO).

    Improve communication and coordination among members: One of the keys to a successful FPO is strong communication and coordination among members. This includes sharing information about best practices, choosing leaders who can effectively represent the interests of the group, and working together to resolve conflicts.

    Build a diverse membership: A diverse membership is essential for an FPO to be successful. This includes growers of different crops with different experiences and expertise. It also includes people from different parts of the supply chain, such as buyers, processors, and retailers.

    Create a clear mission and purpose: An FPO needs to have a clear mission and purpose to succeed. The mission should be specific enough to guide decision-making but flexible enough to adapt as the needs of the members change. The purpose should be something that all members can rally behind and support.

    Develop strong financial management: Financial management is critical for any organisation but especially important for an FPO. This includes developing a budget, tracking expenses, and raising money when needed. Strong financial management will help an FPO survive tough times.

    Invest in training and capacity building: Training and capacity building are also essential for an FPO to be successful. This could involve providing members training on financial management, crop production, marketing, etc. It might also mean investing in new equipment or resources that members can use.

     By following these tips, an FPO can increase its chances of success and positively impact its members’ lives.

    The Future of FPO

    The COVID-19 pandemic has had a major impact on the global economy. In the face of challenges such as climate change, falling prices, and rising costs, many farmers are struggling to stay afloat. Farmer Producer Organisations (FPOs) are increasingly important in providing support and stability to small-scale farmers. Here are six ways in which FPOs can help secure the future of agriculture:

    • By pooling resources, FPOs can help small-scale farmers to access the finance they need to invest in their businesses
    • The Agricultural Produce Marketing Committee (APMC) Act, 2017, which regulates marketing activities in the sector, is set to be liberalised. This will allow FPOs to trade directly with buyers, opening up new opportunities for growth
    • FPOs can provide much-needed training and capacity-building support to members, helping them to adopt best practices and improve their yields
    • By aggregating produce, FPOs can help farmers obtain better crop prices and reduce wastage
    • Technology is increasingly important in agriculture, and FPOs are well placed to take advantage of this trend. By investing in new technologies, they can improve efficiency and productivity levels
    • FPOs can also play a key role in linking farmers with input suppliers and markets for their produce
    • Through advocacy and policy engagement, FPOs can help to create a more conducive environment for small-scale agriculture
    • Finally, FPOs must be flexible and responsive to the needs of their members, which will vary depending on the local context. By doing so, they can ensure that they remain relevant and effective in the years to come.

    Conclusion

    India is home to the world’s second-largest population of farmers, and while their numbers are decreasing, they remain an important part of the country’s economy. The FPO model offers a new way for these farmers to come together and share resources in order to improve their livelihoods. This type of organisation has been successful in other countries and could offer similar benefits to Indian farmers.

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  • Minimum Paid-Up Capital for Producer Company

    Minimum Paid-Up Capital for Producer Company

    A Producer Company, sometimes known by its abbreviation PC, is a new form of legal company that exclusively consists of particular types of people, such as those that generate local goods such as farm goods, forest produce, craftsman goods, or any other type of output. Under section IX-A of the Indian Companies Act 1956, it was incorporated in 2003 as a legal body.

    A producer company is a business that is managed by the law and is made up of farmers and agriculturalists. The government founded it to enhance the living standard, earnings, and productivity of Indian farmers and agricultural workers. Contact Vakilsearch if you need assistance with Producer Company Registration. They deal with several requests for producer company registration each month.

    Benefits of Producer Company

    A Producer Company is a legally registered corporate entity formed under the Companies Act, 2013, by producers or farmers who cooperate to produce agricultural products, such as harvesting, processing, packaging, and marketing. Here are some benefits of a Producer Company:

    • Separate Legal Status
    • Limited Liability Protection
    • Access to Government Schemes
    • Opportunity to improve its members’ income and living standards
    • Better access to technology, markets, and finance

    Incorporation Process of Producer Company

    The incorporation of a Producer Company can be treated similarly to make it a private company. Here are the steps involved in the incorporation process of a Producer Company:

    • Obtain a Digital Signature Certificate (DSC) for the proposed directors
    • Obtain Director Identification Number (DIN) for the proposed directors
    • Apply for the name of the company to the Registrar of Companies (ROC)
    • Draft the Memorandum of Association (MOA) and Articles of Association (AOA)
    • File the incorporation documents with the ROC
    • Obtain the Certificate of Incorporation from the ROC

    It is important to consult legal counsel from Vakilsearch to ensure MCA-compliant producer company incorporation.

    Different Tasks a Producer Company Performs

    The producer firm is responsible for managing its members’ production. The following are a few key operations performed:

    • To inform the producer’s corporation’s members about the mutual help principle
    • Product processing for its members. Drying, brewing, canning, and packing are other preservation techniques used in the operation
    • Producing, selling, or providing its members with machinery, equipment, or other consumables
    • To carry out various activities to further the interests of the producer’s members, such as training, R&D, technical assistance, and consultation
    • Communication is linked to primary commodities, the transportation, generation, and distribution of electric power, and the regeneration of water and land resources
    • The board makes decisions on the welfare of the members
    • Marketing, handling financial transactions or doing other duties including offering credit facilities or providing further financial aid to fellow producers
    • To promote the employment of mutuality and assistance-based techniques; insurance for the producer and the main product
    • Additional initiatives that support producer members’ cooperation (or that are connected to the organisation’s basic objectives).

    A Producer Company is a unique business entity that exclusively serves the interests of its farmer members, promoting collective farming and enhancing socio-economic conditions. Governed by the Companies Act, it enables farmers to pool resources, share knowledge, and collectively engage in agricultural activities. With a focus on increasing income and productivity, a Producer Company fosters a sense of community, ensuring equitable profit distribution among its members. By providing a platform for joint decision-making and access to modern farming practices, these companies contribute to the overall growth and sustainability of agriculture, empowering farmers and strengthening rural communities.

    A Producer Company’s Minimum Share Capital

    • The producer company’s minimum authorised capital is ₹5 lakhs
    • According to the Memorandum of Association, the company’s authorised Capital for producer company may also be greater than ₹5 lakhs
    • The authorised share capital needs to be adequate to accomplish the goals listed in the memorandum
    • Realistic authorised share capital is necessary
    • The Producer Company’s minimum paid-up capital is ₹1 Lakh.
    Empower farmers through seamless Farmer Producer Company Registration – streamline agri-business, boost rural economies! 🌾

    Why Should You Register Your Producer Company?

    The following are some of the main justifications for completing the production business registration:

    Simple Management

    By submitting quick documentation to the Registrar of Companies, the Board of Management of a producer business can be readily changed. The Board of Management of a producing firm is in charge of supervising its operations. 

    Owning Real Estate

    Producer corporations have the legal right to acquire, own, and dispose of property that is held in their name in other ways. The producer corporation is a business, hence the member has no right to any of the property that belongs to it.

    Greater Reputation

    Over unregistered producer organisations, producer corporations have greater credibility. Producer organisations are supervised and registered with the central government’s agencies. Additionally, the producer of the State government oversees organisations.

    Distinct Legal Entity

    Under the Act, producer corporations are recognised as legal entities. Therefore, a producer corporation has extensive legal authority and can both own property and incur debt. There is no obligation on the part of an organisation’s shareholders (Directors) to a production company’s debtors.

    Persistent Existence

    The business of a producer is a “permanent iteration.” It signifies that it has existed continuously or without interruption up until its formal dissolution. The death or removal of any member has no impact on production firms because they are separate legal entities. (Valium) Regardless of membership changes, it continues to be in operation.

    Basic Conditions for Registration of a Producer Company

    The production company may be incorporated using any of the following arrangements, under subsection (1) of section 581C of the Companies Act of 1956:

    • It takes more than two businesses to create a producer company
    • The producing firm must be formed with at least ten members
    • A combination of people and organisations is required for the registration of a private corporation
    • Furthermore, you need to fulfil the requirements listed below from the viewpoint
    • The production company must have a minimum of 5 directors and a maximum of 15 directors
    • Throughout the Financial Year, the production business is required to arrange at least four board meetings. Additionally, no more than three months should pass between two sessions. The capital of the fully paid-up shares must be at least ₹5 lakhs
    • A permanent CEO (Chief Executive Officer) is required to oversee the management and operations of the company
    • A production business might be thought of as having just equity share capital for producer company.

    Why Pick a Producer Company?

    • Because producer companies can benefit from a variety of federal and state programs, including the National Food Security Mission and the Rashtriya Krishi Vikas Yojana monies
    • A grant of up to ₹10 lakhs is given to each Producer Company under the Equity Grant Scheme in order to increase the capital base
    • The Credit Guarantee Fund (CGF) insures 85% of bank loans made to Producer Companies. Regardless of the type of production company you want to form, Vakilsearch is the finest place to handle everything that happens during company registration. So don’t hesitate to call them and receive support that is guaranteed. By handling all the paperwork, they can even help make your interactions with the government as easy as possible.

    Conclusion

    In conclusion, by establishing a producer business in India, the producer company concept will ensure that the necessary regulations are followed as well as that the farmers and other organisations would profit to the fullest extent possible. Therefore, it is also a positive development for India’s agriculture industry.

    The producer company is under no obligation to follow the Act’s requirements to become a public limited company. Just follow  Vakilsearch to get the most recent information about micro, small, and medium-sized enterprises (MSMEs), business advice, and a lot more.

    FAQs

    1. Whether Producer Company is a Private Company or Public Company?

    A Producer Company is a hybrid of a private and public company. It has the features of a private company, such as limited liability and a separate legal entity, and the features of a public company, such as the ability to have more than 200 members.

    2. Whether the limit of 200 members is applicable to Producer Company?

    No, the limit of 200 members is not applicable to Producer Companies. There is only a minimum requirement and no upper limit for the number of members in a Producer Company.

    3. Who can be a member in a Producer Company?

    Any individual or organization engaged in the production, harvesting, procurement, grading, pooling, handling, marketing, selling, or export of primary produce can become a member of a Producer Company. Primary produce refers to the produce of farmers, including raw material that is in its natural form.

    4. What if a member of the producer company ceased to be a primary producer?

    If a member of a Producer Company ceases to be a primary producer, they must inform the company within 30 days of the cessation. The company must then terminate the membership of the individual or organization.

    Also Read:

  • Which Act Is Applicable to Producer Companies?

    Which Act Is Applicable to Producer Companies?

    Provisions Related to Producer Companies: Under the Companies Act 1956, a certain description of agricultural production is given. All types of farming output that a farmer cultivates fall within the primary produce category. This includes animal husbandry, horticulture, fish-farming, viticulture, floriculture, sericulture, forestry, and hone gathering. 

    Meaning of a Producer Company

    As per the Companies Act of 1956, a Producer Company comprises ten individuals (can be even more), and there can be any two institutions (or even more), or it can be a suitable combination of both. This body has legal recognition and mainly has farmers and agricultural producers who want to improve their standard of living. Their main target is to ensure better income and much more profitable source generation for themselves and their company’s survival. 

    The producer company is engaged in harvesting, selling, procurement, grading, pooling, handling, and exporting agricultural material. They also aim to furnish all the necessary details that might be required for forming a cooperative company or converting some form of cooperative business into a large company. All of the objectives of a Producer Company are given as rules under section 581B, and these activities are enlisted as below.

    The Farmer Producer Company’s Goals

    The primary goal of the farmer producer company is to make it possible to turn co-operative businesses into companies and to make it easier to form new cooperative businesses.

    A producer company’s goals must, in accordance with the Act, relate to all or any of the following:

    a) Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary members’ production or import of goods or services for their benefit (as provided by the law) provided that the Producer Company may carry out any of the activities outlined in this clause independently or through another institution.
    b) Processing, which includes the preservation, drying, distillation, brewing, vinting, canning, and packaging of its members’ produce.
    c) Producing, selling, or providing machinery, equipment, or other consumables primarily to its Members.
    d) Educating its Members and others about the principles of mutual assistance.
    e) Providing technical services, consulting services, training, research and development, and any other activities necessary to advance the Members’ interests
    f) Age, transmission, and conveyance of force, rejuvenation of land and water assets, their utilization, preservation and correspondence appealing to essential produce.
    g) Producer or primary produce insurance.
    h) Promoting strategies for cooperation and assistance between people
    i) Government assistance measures or offices to support Individuals as might be chosen by the Board.
    j) Some other movement, subordinate or coincidental to any of the exercises alluded to in provisions (a) to (i) or different exercises which might advance the standards of commonality and shared help among the Individuals in some other way.
    k) Financing of the activities listed in clauses (a) to (j), which include providing its Members with credit facilities or other financial services, such as procurement, processing, marketing, or other activities.

    What Are the Authorised Activities of Producer Company?

    The following are the authorised activities of a producer company:

    • They are engaged in the work of production, in major harvesting of crops, procuring, grading, handling of materials, and agricultural pooling of techniques that help in agricultural improvement. Moreover, they are also associated with exporting all primary production and marketing and selling sources that might benefit the company members. 
    • The producer company is also associated with the preservation, drying, and distilling of agricultural items, vinting, brewing of millets, canning of fish and other products and high levels of packaging of all those products that the members produce over time. 
    • Suppose it is about machines or the supply of commercial and industrial machine parts or equipment. In that case, the producer company can also be attached to the members’ selling and manufacturing equipment. For the company professionals, the Producer company also gives mutual assistance and provides the right type of education to keep them safe amidst all odds. They also undertake major welfare measures for the members of the board. 
    • Apart from these, the works of the producer company also include technical service, consultancy, training, and research about agricultural products that are newly launched into the market. This is done keeping the interest of the members in mind. Additionally, it is the work of the producer company to check the transmission and distribution of power, how the land and water can be revitalised and how proper conservation of natural resources can be done.

    Learn more about Activities Authorised Under Producer Company

    The Relevant Provisions of Companies Act in Brief:

    One needs to check all the relevant provisions related to producer companies: 

    • A checklist and a few points are part of the pre-incorporation plan. These include coming together ten or more primary producers who may initiate a company. The minimum number of members needs to be 10, but there is no limit to the maximum number. 
    • There can be two or more institutions that can form a producer company. A capital of 5 lakhs is required; there should be five directors. There is a difference between a multi-state cooperative society and a public company. If you want to register as a producer company, you have to fill in all the papers that might lead to forming a multi-state cooperative society. 
    • There is a need for a digital signature online and the Director Identification Number or DIN, which should be procured to set up the initial stage of the company. After these two are obtained, one needs to file an application to be filled as part of the Registrar of Companies or ROC. 
    • There is a law under the Companies Act that if a name of a producer company is to be given, it should end with the terms ‘Producer Limited Company.’ When the registrar is satisfied with all the paperwork submitted, there is an approval done, and the issue of certificate of incorporation is given. 
    • Major documents must be submitted, including the director’s PAN card, their Aadhaar card, photo, email i.d., and a valid contact number. When the DSC is received, the director should go for the Director Identification Number after filling up the form for DIR- there should be self-attested identity proof, residential address proof, and a photo should be uploaded. 
    • Once these basic and initial steps are done, the name of the primary production company should be finalised. Form INC-1 given to the Registrar of Companies should contain around six names and the significance of why those names are given. The names must contain the Producer Company at their end. If all criteria are fulfilled, then the ROC approves the names. 
    • The next step is to go for the Memorandum of Association and enlist every objective the company aims to follow. There is a phrase called the Articles of Association that contains all the major by-laws of any company. A professional declaration needs to be drafted and uploaded as part of the form INC-8. 
    • Finally, when everything is done, an affidavit signature is needed by all those who subscribe to the forthcoming company. The same affidavit should contain a declaration that they are legally competent to operate as subscribers. 

    Conclusion: 

    The producer company has a huge responsibility in running a company and taking care of all the other individual groups. A sphere of mutual assistance is always built up as part of the company policies. At the same time, the Companies Act also enables the channelisation of insurance for the producers and whatever items they produce. If you want to learn more about producer companies in detail, their works, which are the laws that apply to them, you can get help from Vakilsearch. It is a one-stop solution for all your queries related to company acts, producer companies and the applicable laws.

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  • Reasons Why You Should Register Your Producer Company Online

    Reasons Why You Should Register Your Producer Company Online

    It is well known that more than half of India’s people depend on agriculture as their livelihood. About 58% of India’s population has agriculture as their primary source of livelihood. So much so that agriculture’s contribution to the Indian GDP increased from 17.8% in 2019-20 to 19.9% in 2020-21.

    However, Indian farmers continue to lack structure and access to the most modern tools and technologies for producing their crops. Not having adequate resources causes crop failure, causing farmers to suffer severe losses.

    In India, more than 15% of farmers commit suicide each year, and The Indian government has established a team of experts to investigate this issue. As a result, the Farmer Producer Company was formed.

    A farmer producer company is a group of farmers that combine to increase their revenue and improve their standard of living. In India, a Producer Company can be established with just 10 members and 2 institutions. The registration of a Producer Company requires a minimum of Rs. 5 lakh in the capital.

    Following Are Some Features You Need to Know About the Producer Company

    • With the aid of its members, the Producer Company can only conduct business in production, procurement, harvesting, grading, pooling, marketing, and dealing with the primary produce.
    • It can also finance its members’ participation in these activities by providing credit facilities.
    • It can only operate with its members and cannot engage directly with the general public. However, with a little paperwork and a simple procedure, one can add members to a Producer Company. 
    • Each producer receives a portion of the profits, with the remaining funds going to the reserves or share capital.
    • Additionally, the only type of organisation available to register a lending firm in India without RBI approval is Producer Company Registration.
    • It is created by a group of farmers for their agricultural or non-agricultural operations.
    • It is a registered agency and a legal entity.
    • The company’s producers are the company’s shareholders.
    • The corporation conducts business in connection with the production of primary. The corporation conducts business in connection with the production of primary produce.
    • It attends to the needs of its members and seeks to further the interests of its producer members.

    Producer Company is a cross between a company and a cooperative society. It combines the qualities of a cooperative organisation with the vitality and efficiency of a company, and it takes into account the distinctive features of cooperative business with a regulatory framework comparable to that of a firm.

    But why is it important to register your farmer producer company online?

    Benefits of Farmer Producer Company Registration

    • Limited Liability

    When you register as a producer company, it provides you with a separate legal entity, which means that you and the members of the company will have a separate identity from the company in the eyes of the law, therefore, providing you with the benefit of limited liability.

    • More Credibility

    A producer company provides farmers with more legitimacy than other unregistered farmer or agriculturist associations.

    • Acceptance of Deposits

    A registered business may accept ‘one-time’ or ‘recurring deposits’ as deposits. In addition, they have the ability to provide loans to farmers and members at very affordable interest rates.

    • Property Ownership

    A properly registered farmer company has the authority to buy, sell, or own real estate under its own name. Additionally, it has the right to accept deposits or grant loans to its agriculturalist members at relatively low-interest rates.

    • Easy Management and Registration

    The process of becoming a producer company is straightforward, and the firm can make changes to the Board of Management by submitting a few straightforward forms to the relevant ROC.

    All the benefits mentioned above of Farmer Producer Company Registration can be easily accessible to you by registering online with the help of many legal firms that specialise in registering and managing a Producer Company in India.

    Learn more about Benefits Available To A Producer Company

    Benefits for the Members of the Farmer Producer Company

    • The most significant benefit is that after a decision has been made by the directors of the relevant producer company, the members of the Producer Company receive the agreed-upon sum for the produce that has been pooled and supplied. 

    The remaining sum is distributed to the company’s shareholders as cash or equity shares.

    • Members of the producer company may receive a surplus as a patronage bonus (after making provisions for the payment of the limited return and reserves). Patronage bonuses are the distribution of surplus income among the production company’s members according to the volume of their patronage.

    Patronage, on the other hand, refers to a member’s involvement in commercial activity.

    • Members of the producing firm are also eligible for bonus shares, which are distributed in the same ratio as equity shares.

    Mandatory Documents

    • Photo and Pan
    • PAN and images of the current directors and shareholders
    • ID evidence for directors, members, and shareholders includes an Aadhar card, a driver’s licence, a passport, and a voters ID.
    • Address Verification: Bank Statement, Utility Bills (Landline, Mobile, and Electric)
    • Producer Assurance
    • Any additional evidence identifying a person as a serving member, such as a sarpanch letter, an income tax return (ITR) showing agricultural income, or evidence of registered address, utility bills, a lease, and a letter from the owner stating that there are no objections

    To fulfil all these mandatory document requirements is not easy. That is why people prefer to register their Producer company in online mode, which makes the process smooth and trouble-free.

    Conclusion

    Due to a lack of facilities and fragmented landholdings, the majority of Indian farmers struggle to achieve the best value for their primary crop. However, producer firms in India assist them in utilising economies of scale to obtain inputs at the lowest costs, adopting new technologies, having simple access to loans and financing, establishing direct links to the market, and developing post-harvest processing facilities.

    Farmer Producer Company is a group of farmers who band together to enhance their quality of life and better their way of life. The establishment of a farmer-producer company gives the business a distinct legal identity and offers the company a number of tax cuts and advantages. In addition, it offers members a number of advantages, such as bonuses, simple access to low-interest loans, and many more.

    Moreover, due to digitalisation, registering for a farmer producer company has now become easy and trouble-free. Many companies specialise in registering and managing producer company. Vakilsearch being one of them, is a platform that offers services to meet the legal needs of Producer Company in India. If you are thinking about registering a Farmer Producer Company, reach out to Vakilsearch and make your process hustle-free!

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  • How do You Get a Producer Certificate?

    How do You Get a Producer Certificate?

    Getting a Certificate For a Producer in India is not the easiest, requiring some documents, time, and patience. However, if you have a product that you want to launch in the market and sell to customers, then getting your own producer certificate is an essential step. This certification will help you in launching your product in the market by proving that it meets the standards set by FSSAI or the Food Safety and Standards Authority of India. There are two ways to get a Certificate For Producer in India as a manufacturer or as an individual who wants to sell products under their brand name. Both involve different processes and documents but are simple once you know what you need and where to find it. Let’s take a look at how you can get your own Certificate For Producer in India as either a manufacturer or brand owner.

    What is a Producer Certificate?

    A Certificate For Producer certifies that FSSAI has approved your product for production and distribution. It’s mandatory for food products that come under the FSSAI Act, 2006. 

    Processed Food Producer-Processed Food Manufacturer: You will get this certification if you produce or manufacture any processed food product.

    Natural or Organic Product Producer or Manufacturer: If you produce organic or natural products such as jams, fruit juices, and organic food items, you need this certification. 

    Spices, Herbs, and Dry Fruits Producer: You will recieve this certification if you are producing or manufacturing spices, dry fruits, or herbs. 

    Animal Product Producer: If you are producing milk, eggs, fish, or meat, then you will get this certification.

    What Does a Certificate for Producer Do?

    The Ministry of Agriculture issues a Certificate For Producer in India. It’s used to encourage the export of agricultural products from India. The certificate is valid for six months; after that, the producer must reapply. 

    The Foundation Certificate is issued to a producer who wants to export agricultural products for the first time. The Export Certificate is issued to a producer who has exported agricultural products from India, and the certificate is necessary to export goods and services from India. 

    The purpose of the Certificate For Producer is to ensure that producers meet certain standards, such as quality and safety, before they can export their goods and services. To obtain a Certificate For Producer, producers must first apply to the Indian government. 

    How to Get a Producer Certificate as a Manufacturer?

    The process for getting a producer certificate for manufactured products differs from one for organic or natural products. You will also have to get a license from the State Food and Drug Administration (FDA) in the state where you want to operate. So you will have to get a license from all states where you want to operate. 

    Get a license and conduct risk analysis: The first thing to do is get a license for your product from the FDDA in the state of your manufacturing plant. f
    Conduct a risk analysis: Once you have your license, you must conduct a basic risk analysis. This is the first step toward getting your Certificate For Producer. You will have to get the FSSAI code of compliance books and check the regulations for your product. This will help you determine standards. 

    • Prepare and submit documents: Once you have your risk analysis report, you will have to prepare and submit the documents
    • Proposed product risk analysis: Your proposed product risk analysis report for your product
    • Manufacturing process: A detailed description of your product manufacturing process
    • Equipment and facility: The details of your manufacturing equipment and facility
    • Product details: The details of your product, such as pH, product description and packaging details
    • Process flow diagram: A diagrammatic flowchart of your production process. This will help the authority understand all your procedures
    • Quality manual: A manual that describes the quality management systems and procedures in your plant
    • Standard Operating Procedures (SOP): These procedures will help you maintain cleanliness, hygiene, and food safety in your facility.

    How to Get a Producer Certificate as an Individual or Brand Owner?

    If you are not manufacturing a product but selling products under your brand, then you will have to get a license to use your brand name and sell products. You can recieve a producer certificate for a product that you don’t manufacture but sell under your brand name, and this is called a “conditional license”. 

    Get a license for your brand name: You will have to get a license for your brand name from the state FDA. Once you have your license, you will have to conduct a risk analysis for your products. This is the first step toward getting a Certificate For Producer.

    Prepare and submit documents: Once you have your risk analysis report, you will have to prepare and submit the documents.

    Proposed product risk analysis: Your proposed product risk analysis report for your products.

    Manufacturing process: A detailed description of the process of manufacturing the product. 

    Product details: The details of your product such as pH, product description and packaging details. 

    Process flow diagram: A diagrammatic flowchart of the production process. This will help the authorities understand all your procedures. 

    Quality manual: A manual that describes the quality management systems and procedures in your plant. 

    Standard Operating Procedures (SOP): These are the procedures that will help you maintain cleanliness, hygiene, and food safety in your facility.

    The Benefits of Having a Certificate For Producer

    India is the world’s second-largest producer of food, and the agricultural sector employs more than half of the country’s workforce. In recent years, the government has been working to promote the growth of the agricultural sector, and one of the initiatives is the Farmer Certificate For Producer. The certificate provides many benefits for farmers, including preferential treatment in government schemes, priority access to credit, and discounts on agricultural inputs. The certificate also helps create a level playing field for small and marginal farmers, who often face difficulties competing with larger farmers. As a result, the Farmer Certificate For Producer is an important tool for supporting India’s agricultural sector growth.

    Click Now: Producer Company Incorporation

    Conclusion

    Getting a Certificate For Producer is the first step for launching any food product in the market, and it is a must for any food product that comes under the FSSAI Act. There are two ways to recieve a Certificate For Producer. One is for a manufacturer and the other for an individual or brand owner. A manufacturer will have to get a state FDDA and conduct a risk analysis for their products. An individual or brand owner will have to get a license for their brand name from the state FDDA and conduct a risk analysis for their products. Once you have your risk analysis report, you will have to prepare and submit the necessary documents.

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  • NABARD Schemes for Farmer Producer Company

    NABARD Schemes for Farmer Producer Company

    Indian farmers are the backbone of the country’s economy. They grow food for the entire nation and makeup nearly 60% of India’s total workforce. However, the farmer-producer companies are not getting the benefits their hard work deserves. These companies are not able to find good sources of finance. NABARD, the National Bank for Agriculture and Rural Development, is here to change this. NABARD is a nationalised bank that provides financial services to farmer-producer companies that are working in the agriculture sector. NABARD offers various schemes for fpo.

    Farmer Producer Company

    A farmer producer company is a combination of a cooperative society and private limited companies. A farmer producer company is an entity that has been set up to provide collective marketing of agricultural produce. The essential features of an FPO are:

    • A group of producers come together to carry out farm-related activities
    • It is a legally registered company
    • Producer members become shareholders of the company
    • It deals with procurement, production, harvesting, cultivation, marketing, selling and other allied activities of the primary producers
    • A part of the profit earned is distributed among its members
    • The remaining profit is held as a reserve e for business growth and expansion.

    India is majorly based on agriculture, but due to farmers being unorganised, it is difficult for them to procure bulk inputs and adopt new technologies as they lack finances. They also suffer a lot since they are unable to get a good price for their produce when sold individually. Thus, by bringing them under the organised sector, producers can buy inputs and other goods at a lower price, thereby providing them economies of scale and good bargaining power for the sale of their produce.

    Producers Organisation Development Fund (PODF)

    As an initiative for supporting Producer companies, NABARD (National Bank for Agriculture and Rural Development) formed this fund on 01 April 2011 with an initial corpus of ₹50 Crores. Through this scheme, Farmer producer organisations (FPO) shall be given financial support by way of grants or loans. It also aims to help FPOs increase their capacity and provide market linkage.

    Eligible Organisations

    The following organisations are eligible to get loans from the fund:

    • Registered Producer Companies
    • Producers cooperatives
    • Registered Farmer federations
    • Mutually aided cooperative society
    • Industrial cooperative society
    • Other registered federations

    Eligible Activities

    • Financial Support
    • Direct lending by way of term loans
    • Working capital loan
    • Composite loan covering both term loan and working capital
    • Subordinated debt
    • Capacity Building
    • Business development
    • Skill development in both farm and off-farm sectors
    • Technological extension
    • Training, Exposure visits
    • Agricultural University tie-ups
    • Market Linkage
    • Setting up marketing infrastructure facilities
    • Tie-ups with buyers for the purchase of bulk produce
    • Partnership with large corporates

    Terms and Conditions

    • The Farmer Producer Organisation must be registered
    • It must work for the benefit of the producer members
    • The activities may fall within the domain of agriculture, allied sectors & off-farm sector only
    • The activities for which funding is granted include cultivation, harvesting, packing, marketing, storing, selling, etc. of the produce 
    • The performance will be checked based on the latest audited financials
    • Generally, projects with a duration of around 7 years are considered
    • NABARD’s assistance is limited to a maximum of 90% of the project cost. However, it may vary depending on the project and risk involved
    • The rate of interest is decided by ALCO
    • The financial assistance shall be secured by way of hypothecation/mortgage of assets created out of the fund, mortgage or other immovable property, hypothecation of other movable property, personal or corporate guarantee, etc.
    • The repayment period will be around 7-10 years with a moratorium of 1-2 years.

    Procedure to Obtain the Grant/Loan

    • Application
    • The eligible organisations should send a concept note containing the details of the entity and the proposal
    • The Concept note shall be sent to Regional Offices
    • Appraisal
    • It shall be appraised by RO or HO depending on the case
    • After approval, the organisations must submit a Detailed Project report
    • RO shall scrutinise it, and a joint field visit will be undertaken if the proposal is found to be suitable
    • RO/HO shall carry out due diligence of the entity to analyse the technical, economic and financial details
    • On completion of due diligence, working capital and term loan assessment shall be done along with risk assessment
    • Sanction and Disbursement
    • After getting the above reports, the RO shall prepare a draft sanction memorandum and forward the same to HO
    • After sanctioning by HO, the funds will be released as per their guidelines
    • Monitoring the end use of funds
    • During the period of the loan, NABARD shall continuously monitor the entity’s activities. The entities must also submit Half Yearly Progress Reports to NABARD, RO and HO in the format prescribed
    • Eligible entities need to give an undertaking that they will properly utilise the funds received from NABARD for the specified purpose
    • If the entities misuse or divert the funds, NABARD shall recall the amount along with interest and penalty
    • NABARD shall have the right to access the books of accounts of the entity.

    Other Schemes by NABARD

    In 2014-15, the government of India, in consultation with NABARD, created a fund called PRODUCE (Producer Organisation Development and Upliftment corpus) fund with an initial capital of ₹200 crores. The main objective of the fund was to promote FPOs by establishing around 2000 more farmer producer organisations. Under the scheme, the Producer Organisation Promoting Institution (POPI), Resource Support Agencies and the FPOs are supported.

    Agriculture includes both farm and off-farm activities. Thus in order to promote the off-farm sector, such as handloom, handicraft, etc., the NABARD launched a scheme called OFPO (off-farm producer Organisation), similar to FPOs. People carrying out off-farm activities can come together and form OFPO so that they can also benefit from economies of scale.

    The Government of India has announced a new scheme called Central Sector Scheme for Formation and Promotion of 10,000 FPO. NABARD is also one of the implementing agencies for the above scheme. It aims to provide financial assistance and credit accessibility to FPOs. It also helps to improve cost-effective production and create job opportunities for many.

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  • What Are the Process Involved in Registering a Producer Company?

    What Are the Process Involved in Registering a Producer Company?

    In order to know about the Producer Company registration process, it is essential to know first what FPO is. It stands for Farmer Producer Organization. One of the major works that fall under the purview of the work of the FPO is to take care of the production, procurement of agricultural products, grading, pooling of multiple products, handling and marketing of agricultural products etc. The primary producers need to take care of the distribution of the materials all over the country, and the FPO also takes care of the overall export of goods. 

    What Are the Chief Aims of the Fpo? What Are the Registration Processes for It?

    The Farmer Producer Company aims at the overall development of the individual farmer or the small groups for their profit, account stability and if they can get the best price for their products. The producer company can preserve, dry, distil, brew, can and package all the products the members/ groups produce. It is also the task of the Farmer Producer Company to check the manufacturing, selling and significant machinery and equipment supplies for the members. Proper and valid registration needs to be done as this educates the people about the developments in their sector. 

    The benefit of proper registration is that it allows the producer company to avail of the technical services, training, and adequate research about products sold in the market. When the company is registered with all the legal papers, it can utilise the land and water resources to benefit the members. Along with that, proper and timely legal registration gives much weightage to the company as an entity. They look for the insurance of the producers, and with an official registration, mutual assistance and cooperation are nurtured as part of the company. 

    Steps to Register an Producer Comapany

    It can be registered under the Cooperative Society’s Act. It includes all the rules related to Cooperative Societies in India under the terms of the individual state. There can also be a provision of existing autonomously as a cooperative society. 

    Apart from that, there can also be a part of registering the FPO as a Nonprofit society. One needs to know the details about this: if there is any producer organisation/organisation, they can register themselves under the society’s Act. This society can constitute an association of persons who have a common goal, who stand united, to determine and jointly take recourse to a common plan of action. As per the provisions of the Society’s Registration Act of 1860, there can be around seven persons minimum needed to form a society. Only minors are not allowed to be a part of society. 

    Apart from the registration parts mentioned above, the Company registration process can also be done under the proforma of a charitable trust. In simple terms, it can include a transfer of property from an original owner to another to assure some kind of benefit for a third person. This can be done with or without themselves from the end of the owner to another person, by the owner’s declaration, to ensure property holding not for the owner but the other person. It is also to be noted that if an FPO registration is done in the form of a trust, then the person who initiates the trust is known as the settlor, and that person to whom the property goes is known as the trustee. Also, the person who reaps the benefit of this transfer of ownership is called the beneficiary. 

    Documents Required for Producer Organisation Registration

    Below is given a list of documents that are required for registration:

    • PAN card and photo identity proof are required for each member who wants to register as part of the FPO. 
    • Aadhar card, voter identity card, driving license, or passport must be submitted as citizen identity proof.
    • Apart from these, for address proof, one must submit a bank statement, mobile bill, electricity bill of the house or the rented apartment, and landline telephone bill, if any.
    • The final part is the producer proof. This includes Khasra/ Khatuni, ITR with a show of IT return, a letter from the Panchayat or the Sarpanch, and any letter that might show the person ‘X’ as the producer. 

    On average, there is a time duration of fifteen days to get the Farmer Producer Organisation registration paper. The complete cost for registration can vary, but the cost breakup includes some of the major parameters like Digital Signature Certificate, Director Identification Number, MOA, AOA and some types of Incorporation fee, stamp duty, PAN and TAN application, INC 22, CA certification, professional fee and also GST. 

    It is also to be noted that if all the papers are correct and the FPO registration is done, the FPO can also provide necessary emergency loans to the members. The producer can also accept Fixed and Recurring deposits as a company for the benefit of its members.

    Conclusion: 

    If you want to know more about Producer Organisation registration, you can check out Vakilsearch. It gives you news and updates about legal terms, company registrations, business compliance, partnerships, etc. The registration involves paperwork and submission of proper documents on time. Vakilsearch can be an ideal destination where you find the right support and customer service related to Producer Organisation registration. 

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  • How FPO is helpful to farmers?

    How FPO is helpful to farmers?

    A Farmer Producer helps to support and sustain the livelihood of the farmers, the rural handicraftsmen and fishers, weavers and all those attached to agricultural works. Suppose the primary producers have a complete umbrella-like corporation of their own. In that case, individual outputs and individual incomes will not matter. Under the same umbrella, all of their demands, profits and shares can increase, contributing to their overall development. FPO can be a general name for any type of producer like any agricultural farmer. The small farmers can form a consortium where their needs, demands, growth and scale of profits should be channelised, enabling them to work toward the country’s progress. This can include some non-farm and also some artisan products. 

    An FPO Registration helps the small-scale producers not to fall into the traps and become victims of the intermediaries. The right amount of profit, monetary and saving benefits that they are entitled to everything is given by the FPO. The FPO works very transparently in assuring the farmers of their genuine rights and how they can reap maximum benefits from any type of work they do. With this FPO, the farmers can go for an easier way to bargain with the customers directly and sell their products. This will also enhance the primary producer-consumer relationship. 

    It is also to be noted that there can also be a Producer corporation for non-farm items. If someone deals with non-farm products, like artisan or rural handicraftsmen, the non-farm products will come under the domain of the Producer corporation. There can be an aggregation of all the small non-farm producers, and the main idea is to generate better profit and income. There can be a person related to the FPO, there can be more than one person, and there can be one or more institutions or corporation that might fall under the guidance of the FPO. Right from mobilisation, business planning, strategy etc., the work of the FPO goes a long way in ensuring the best possibilities for the farmers. This includes a better lifestyle, revenues, and profit. Business planning and operational methods are done keeping in mind the general upliftment of the people. 

    What Are the Key Points of Fpo?

    If you want to know more about the Farmer Producer Company, you can go through the following points:

    • A group of producers look for farm-related or no-farm activities that are essentially done, keeping the country’s overall economic benefit in mind. 
    • It is a legal and registered body, and no unofficial work systems or transactions can work as a part of it. In the case of an FPO, the producers remain and work as the company’s shareholders. The part of the profit is shared and distributed equally among all the producers; hence, there is no stopgap or lacunae in the part of the profit. 
    • After the producers take their share of the profit, the surplus gets distributed for the betterment of the business and how the business output can be enhanced. 
    • The FPO mainly deals with all business activities related to the primary product and the producer. 

    One additional point that can be considered is who promotes the FPO. Any individual or Company can try to promote the FPO as per their own will, which adds to the FPO’s overall value and working system. Even an NGO can promote a Farmer Producer Company if it considers feasible. 

    How Does the FPO Help the Farmers?

    It is the work of the FPO to look for the overall development of the farmers so that they are not cheated at any point. It is also the work of the FPO to check the overall development of the farmer’s concern. They can work under the legalities of the Cooperative Societies Act or the Mutually Aided Cooperative Societies Act. These can be beneficial for the overall betterment of the Indian economy. 

    While filling up the details to register as the FPO, the agenda and the working procedures should be maintained very clearly. The FPO looks after any government control over the farmers, how can the revenues be made into a floating part, how can the distribution of revenues happen through several active and useful channels etc. In addition, the FPO’s work is to maintain its stance as a cluster-based business entity that cannot be dissolved suddenly. Some rules and regulations govern the working of the FPO; it provides the right education and information sharing regarding the right and the share of the farmers and how can they concentrate on their betterment. 

    Learn more about What are the Benefits of Farmer Producer Companies

    Generally, when the FPO works, it works under the mechanism of one district product so that there is no confusion in creating a balance as part of the farmers’ produce and sell items. Moreover, it is the work of the FPO to see that the benefits of any farmer are not compromised on any racial, ethnic, monetary, religious or political ground. They also help in the processing, marketing and export of items for a fair price to a large number of other countries. In addition, their work is also to negotiate on better terms with most of the corporates that benefit and profit the farmers. There is no need for an intermediary when the FPO takes charge. 

    Conclusion: 

    Certain laws govern the working of the FPO. The FPO must work well for the betterment of the farmers, and try to promote, sell, and distribute the farming products and share the profits among them. Along with that, it is also the work of the FPO to take care of any unforeseen circumstance that might hamper or delay the growth of the farmers or groups of farmers. 

    For more information about FPO’s formation, working, and benefits, you can check out the most informative platform, Vakilsearch. It gives you a succinct idea of how an FPO works and its benefits to consumers.

  • What Is FPO Benefits And Status?

    What Is FPO Benefits And Status?

    Organisations comprised of farmers and producers are referred to as FPOs. An FPO is a group that is made up entirely of farmers. The Farmers Producers Organization covers all agricultural inputs, including marketing and processing services for small farmers. Lets check what is FPO benefits and status of it.

    FPO

    To produce, harvest, procure, grade, pool, handle, market, sell, primary export products of the Member, or import products and services for their advantage, the Farmer Producer Corporation is incorporated as a Limited, 2013. In agriculture, produce is anything that has been raised or harvested.

    Producer Company’s major goal is to provide farmers with a better income by creating their organisation. Small farmers cannot reap the benefits of large-scale agricultural production because they lack the volume (inputs and output) to do so. There is also a lengthy chain of middlemen in agricultural marketing whereby the producers/farmers get just a tiny portion of the value paid by the final customer. 

    Since farmers are the principal customers and providers of inputs, they have more negotiating power in the Farmer Producer Company. A Producer Company, on the other hand, focuses mainly on farming and post-harvest processing. Incorporation of producer company have been conceived and organized to formalize and regulate agricultural economic operations, including farmers and agriculturists (referred to as ‘Producers’).

    To join Producer Company, you must be a “producer,” “producer institution,” or a combination of the two. As a producer, any individual who engages in any activity directly or indirectly linked to the production of any primary produce shall be considered. 

    Primary products include all by-products and products originating from supplementary operations, such as those produced by farmers from agriculture or by those working in handloom, handicrafts, or other cottage industries.

    In this context, a “Producer Institution” refers to a producer corporation or any other organization that accepts the assistance of the Producer Company and Producer Businesses by its articles of incorporation and has only producers or producers and otherwise FPO and Producer Businesses as members.

    List of FPO Benefits

    • The members’ responsibility is limited by the number of unpaid shares they own. As a result, the company’s losses are not covered by the wealth of its members.
    • In a way, it’s like a cross between a corporation and a cooperative society, with all the advantages of both professional administration and the shared gains of both.
    • Comparatively more liberated than Cooperative Societies regarding company management, the Companies Act 2013 governs the registration of producer companies.
    • If feasible and necessary, the number of individuals may be expanded. There is no limit to the number of members.
    • The Producer Company must be entitled to all tax and other discounts, licenses, advantages, rights, and exemptions provided to the inter-State cross-organization under any legislation.
    • Admission to the organization is open to individuals and producing institutions (corporations and unincorporated ones).
    • Farm-related earnings are not taxed if a producer company’s yearly sales are less than Rs. 100 crore.
    • The Producer Company’s Board of Directors has the authority to hire and designate specialists to handle the company’s day-to-day operations.
    • Favored by financial institutions, including banks, as well as governmental and non-governmental organizations that supply Producer Company with technical, managerial, and financial assistance.
    • Producer Companies may operate across the nation, allowing them to grow their company in a free & professional way.

    Learn more about Benefits Available To A Producer Company

    Members of the Farmer Producer Company Get the Following Benefits:

    • The farmers/producers have a lot of experience and know-how. Producer companies typically need assistance marketing their products, which is where the Producer Company takes over responsibility from when raw materials are procured until their completed products are delivered to end-users.
    • FPC will increase its income by purchasing inputs in bulk, which will lower the total production cost, and then selling or marketing the products in bulk, which will raise the price of each unit of production.
    • If a producer company is exclusively composed of producer organizations, the voting rights should be based on involvement in the business, and “one vote per member” shall apply.
    • Members’ responsibility is restricted to the unpaid value of their shares so long as they meet their financial obligations. As a result, the company’s losses are not covered by the wealth of its members.
    • According to the articles, the Producer Company’s board can give financial support to members via credit facilities and loans and advances.

    Status of FPO

    The display chassis FPO command may determine whether any of the router’s FPCs are malfunctioning. Detailed information on the router’s FPCs may be found in the command output. All of these states are possible for the status of the system.

    Traction

    As part of the Doubling Farmers’ Income concept, policymakers and development organisations seek to organise farmers into collectives, such as Farmer Producer Organizations (FPOs). Five-year tax reductions were included in the 2018 budget to aid FPOs. The Indian government plans to establish 10,000 FPOs around the nation in the next five years as part of its 2019 budget. 

    FPCs may be made more financially feasible with the help of this central plan, which is being implemented by the agricultural ministry. As well as having access to pooled, inexpensive resources, the government will supply them with technology interventions to improve their production.

    The Issues and Challenges

    NABARD-commissioned research has shown that FPOs raise farmers’ net incomes by improving access to inputs & agro-services, institutional finance, marketing facilities, and the efficiency of farming operations. Some issues and policy gaps remain in the ecosystem. Several significant obstacles and concerns must be overcome to develop viable FPOs.

    • Professional Management Dearth or Inadequate

    The boards of directors of Farmers’ Organizations must be democratically chosen and overseen by CEOs and other senior staff who are well-versed in the business, well-trained, and well-qualified. There is, however, a lack of skilled workers in rural areas who can effectively run FPOs.

    • Inadequate Credit Availability

    Due to a lack of collateral and a history of good credit, FPOs have difficulty getting loans at reasonable rates. In addition, the credit guarantee covers. Only Producers are eligible for SFAC’s collateral-free loan programme.

    Organisations stockholders with a minimum of 500 members. A huge number of FPOs, notably those based in the United States. Little and medium-sized FPOs are unable to get access to the programme.

    Conclusion of FPO Benefits and Status 

    Lack of amenities and land fragmentation make it difficult for most farmers in India to attain the best value for the primary output. Regarding purchasing inputs at the lowest prices, adopting new technologies, getting access to financing and loans, and developing direct links to the market, producers in India benefit from the economies of scale provided by producer businesses.

    When farmers band together to enhance their lives and raise their quality of life, the Farmer Producer Organization is born. The establishment of a producer company creates a distinct legal entity for the business and entitles it to several tax breaks and perks. Other than that, it gives members various advantages, including bonuses, low-interest loans, and more. Vakilsearch can help you with any legal information and services regarding these topics.

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  • What Is the Procedure to Get a Producer Certificate?

    What Is the Procedure to Get a Producer Certificate?

    To benefit its members, the establishment of a producer company should have as one of its primary goals the acquisition of goods and services and the production, harvesting, grading, pooling, handling, marketing, selling, or exporting of the product.

    To help co-operatives become corporations, the production company acts as a facilitator. The idea for a farmer producer organisation company was born to help farmers in India who are in financial distress.

    The Procedure to Get Registration as a Producer Company

    This is the method to register a producer company:-

    • Applicant

    There is no upper restriction on the number of producers (Individuals) who may come together to create a production business.

    Any two or more producing institutions may form a producer company. To start your production firm, you’ll need at least $500,000. Ideally, a production firm should have five directors (up to 15). It cannot be transformed into a multi-state cooperative society.

    • Receipt of Electronic Signing

    DSC is required for both the Subscriber requesting the name’s availability and the prospective Directors. Class-II DSC is needed for e-Filings under MCA21, according to the Ministry of Corporate Affairs. Any DSC Vender, such as E Mudra, may be used by the Subscriber.

    • Acquire the DIN Standard

    To become a director, a person must first get a DIN, which is mandated by Section 153. DIN e-form DIR-3 must be submitted and certified by a working professional to be obtained.

    • Formal Submission of a Name Request

    To accurately portray its role as a Producer Company, the suffix Producer Company Limited must be used. The lack of the term “private” in the name does not imply that the firm is open to the public.

    Name the proposed producer firm with “Producer Limited Business” as the final word of its name, indicating the company’s primary goals as clearly as possible. There must be an application lodged for incorporation with a state’s Registrar of Companies, based on the location of the production company’s registered office.

    • Creating By-Laws and By-Laws of Corporations

    MOA and AOA drafting are parts of the process leading up to the Registrar’s decision on name accessibility. Remember that the significant objectives should match those listed in e-Form INC-1.

    The company’s charter and internal laws and regulations are outlined in these two papers. Because of this, the document must be written meticulously and with the help of specialists. The directors/promoters write the MOA and AOA with the help of professionals.

    • Association Memorandum & Terms of Association Stamping

    It is also necessary that the required number of subscribers sign the Memorandum & Articles of Association, i.e. at least ten persons, at least two of whom are producers and at least two of which are producers’ institutions. 

    As a condition of signing on to the memorandum, each Subscriber must write in their hand the name, profession, address, and the number of shares they have purchased. 

    There will also be a witness to the signatures of all the subscribers. Sign and write your name, your father’s name (if applicable), and your employment and residence in your hand.

    • Appointees for the First Directors

    Directors of the production company will be designated in the AOA for 90 days after the registration of the producer company. During that time, the first directors will hold office.

    An exception is an interstate cooperative society established as a Producer Company and must appoint its first director within 365 days of registration.

    The production company’s board of directors shall have a minimum of five members and a maximum of fifty members, respectively. They have a minimum of one year and five years of service.

    E-Filing With the Registrar of Companies for Documents and Forms

    • Form DIR-3 and a self-attested Proof of identity, address evidence, and a picture of the director are required to receive the Director Id Number (DIN).
    • The last step is to decide on the name of a production firm. Form INC – 1 must be submitted to the Registrar with six names and the meaning of the names in the order of preference. The word PRODUCER COMPANY should appear at the end of the name.
    • A list of papers must be created upon approval of the ROC’s name. The document that serves as its charter, the Memorandum of Association, must include all of the company’s goals. The by-laws of the firm will be included in the Articles of Association.
    • A professional’s statement must be in the form of INC-8. Subscribing members of an LLC must execute an affidavit stating they have the legal authority to act on their behalf.
    • The owner whose address will be used as the company’s registered office must provide a utility bill and a letter of authorisation (NOC). The form will be accompanied by a leasing agreement if not owned. A copy of the prepared papers will be added to Form INC-7, INC-22, and DIR-12 and submitted on the ROC website.
    • The ROC will issue the producer Certificate of Incorporation, and the firm may begin its commercial activities if all requirements are met.
    • If a subscriber has completed a power of attorney, that person may sign the Memorandum of Articles on behalf of the Subscriber. This document must be provided by the Subscriber’s legal representative for them to execute the Memorandum and Articles of Incorporation on behalf of the corporation. Allows an individual (professional) to make any necessary changes to their registration at the date of submission.

    Following Incorporation, the Following Tasks Must Be Completed Immediately:

    • Formally designate at least two signatories to the company’s bank account.
    • To do business, you’ll need a PAN number from the Income Tax Department and a TIN from the Commercial Tax Department. In addition, the Business Tax Department requires the business to register for Service Tax, and the Excise Department requires the company to register for VAT.
    • Request a commercial power supply connection for the PC’s office from the relevant agency/board.
    • Setting up the company’s headquarters involves arranging furnishings, fixtures, and a prominent sign.

    Conclusion 

    According to this conclusion, farmers and producers will benefit from a producer company. Farmers now access various resources, including input, financing, production technology, and a market. 

    The advent of Producer Company has also brought hlelp to farmers who are struggling to make a living. For more information and legal support, you can visit the website of Vakilsearch.

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  • What are the Activities Authorised Under Producer Company?

    What are the Activities Authorised Under Producer Company?

    Activities Authorised Under Producer Company: Agriculture is the backbone of India’s economy. Agribusiness is the primary source of income for almost 60% of the country’s residents. There has been a protracted fight for primary producers and farmers in India.

    The Indian government formed an expert group under the leadership of economist Y.K. Alagh to investigate these issues. They brought the idea of producer corporations to India in 2002. Several resources such as inputs, financing, manufacturing technologies, and markets have since been made available via their efforts.

    The Meaning of a Producer Company

    Producer Companies are groups of farmers/agriculturists committed to improving their living conditions and ensuring that their support, revenues, and profitability are maintained at a high level of quality. It is pzossible to form a Producer Company with ten persons (or more) or two institutions (or more) with a commercial purpose of marketing, grading, export, selling, or other companies.

    • In the interests of its active members, it is also necessary that the Farmer Producer Company engages in any of the following actions on their behalf, whether directly or via third parties.
    • Preservation, drying, distillation, brewing, vinting, canning, and packaging of its members’ products are all included in the processing.
    • Producing and supplying machinery, equipment, and consumables mainly to the company’s employees and contractors
    • Educating its members and the public about the benefits of mutual help;
    • Serving its members by providing technical and consulting services, as well as training, research, and development;
    • Energy production and distribution; the revitalisation of land and water resources; their utilisation; the conservation and communication of primary produce; and the development and transmission of electricity
    • Production or principal product insurance;
    • Cultivating a spirit of cooperation and mutual aid;
    • Whatever the Board deems appropriate in terms of member well-being and convenience
    • In any other way, promote the members’ concepts of reciprocity and mutual help, whether or not they are directly related to any of the activities above;
    • Lending provides other financial services to its members for purchase, processing, marketing, and the like.

    The Advantages of Registering a Production Company

    A Producer Company’s ownership and membership are restricted to “primary producers” or “Producer Institutions,” and one cannot trade the member equity. Due to this finding, there is no way to take over or deprive primary producers of their livelihoods.

    There must be a minimum of 10 producers to create a PC, although the maximum number of members is limitless. As a result, even a production business with just ten members is easily formed.

    The Private Limited Company Act provisions apply to producer businesses, except the clauses mentioned from 581-A to 581-ZL of the Producer Company Act, that set it apart from a conventional private or limited company. This way, a manufacturer’s firm has a structured appearance of professionalism.

    Those who possess shares are only liable for the amount they owe on those shares. Consequently, the personal assets of members are safeguarded against company losses.

    Learn more about Benefits of a Producer Company

    Production Firms’ Legal Responsibilities

    The Producer Company must deal with the products of its members and is permitted to do the following:

    • Preserving, brewing, vinting, dehydrating and packing its members’ products are all examples of the term “processing.”
    • Supplying its producer members with equipment, machinery, and consumables;
    • Educate the producer members of the production firm and others on the concepts of mutual help
    • All other necessary actions for the benefit of the producer members’ interests; to provide consulting services, technical services training, R&D
    • Regeneration and conservation of natural resources via renewable energy, as well as the transmission and distribution of electricity.
    • Primary-produce and farmer insurance;
    • To encourage the practice of reciprocity and cooperation amongst people, and
    • Members’ well-being, as determined by the Board;
    • Supporting its producer members financially, whether via the provision of financing or any other means of obtaining goods or services.

    Any additional activity that is not directly related to the primary goals of the production business but instead serves to foster mutual help and the ideals of mutuality among its members.

    According to the Companies Act of 1956, “primary produce” refers to a farmer’s agricultural output that includes animal husbandry, the cultivation of plants and flowers such as roses and orchids, and the rearing of birds and bees. It also provides produce from hand-looming, handicraft and other cottage industries and the products of forestry and farming plantations.

    The Steps to Getting Started

    Similar to a Private Limited Company, establishing a Producer Company is straightforward. The proposed initial directors of the firm must first get digital signatures (DSCs) and director identification numbers (DINs). An application for name reservation must be submitted to the appropriate Registrar of Companies after Digital Signature (DSC) and Director Identification Number (DIN) have been acquired (ROC).

    The name of a producer firm shall conclude with “Producer Limited Company” as mandated by the Act. To create the Producer Company, an application for incorporation must be submitted to the Registrar of Companies (ROC) after the ROC has authorised the proposed name. The Registrar will issue a Certificate of Incorporation to the Producer Company if he is satisfied with the application and the needed documentation.

    Loans and Investment Opportunities

    A specific provision was introduced in the Companies Act 1956 to allow producers to get loans. Members of a Producer Company may be eligible for financial support via the following methods:

    • Access to Credit:

    For a maximum of six months, any member may use this benefit (such facility must be in connection with the business of the Company).

    • Advances and Loans:

    These loans and advances are made available to producer members in exchange for collateral and must be repaid within seven years of the distribution date.

    • A Nabard Loan:

    Producer Companies benefit from NABARD’s support and financial aid. Out of its operational surplus, NABARD established an Rs. 50 crore Producer Organization Development Fund (PODF) in 2011.

    Learn more about NABARD Schemes for Farmer Producer Company

    • Inheritance (Taxability of Producer Company)

    Agribusiness revenue is free from federal income taxes under Section 10(1) of the Tax Reform Act of 1961. However, the agricultural income exemption given by Section 10(1) may vary depending on the kind of agricultural activity being carried out.

    The Income Tax Act defines no unique tax advantage that gives producers special tax benefits or exemptions. On the other hand, specific tax incentives and exemptions are available based on the producing company’s agricultural activities.

    For example, income from the sale of green tea leaves is tax-free under the Income Tax Act since it is an agricultural income. To put it another way, only 60 percent of the money generated from the processing of tea leaves will be deemed agricultural, and 40 percent would be taxed. 

    Conclusion 

    To be granted a Certificate of Incorporation for a Producer Company, Registrars must be satisfied with the application for incorporation. Following incorporation, a producer company will operate in the same manner as a private limited company, except for a few exceptions. Regarding producer companies, there is no restriction on the number of members they may have. 

    Furthermore, even though the name of a Producer Company ends with the words “Producer Limited Company,” it must not be regarded as a public limited company under any circumstances. For guidance related to legal subjects and enquiries, visit the website of Vakilsearch.

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  • What Are the Benefits Available to a Producer Company?

    What Are the Benefits Available to a Producer Company?

    Producer company are directly associated with the Indian agricultural segment. It is important to note that each producer firm is related to Indian agriculture and contributes to national productivity. Lets have a look at what are the benefits available to a producer company.

    Is India an Agri-Based Country?

    As per the data available from recent economic outlooks, India is said to be an agriculture-intensive country. The readers need to note that almost 66% of the national population is dependent for livelihood on agriculture. As far as the value chain is concerned, producer companies and farmers are an important part of the value chain. 

    Why Are Producer Companies in Battle With Farmers and the Indian Government?

    It has been noted in the recent past that production companies and farmers have been in legal tussle with the Indian Government. This is because of the low benefit costs that producer companies suffer from. However, the government has set up expert committees to help the producer companies at the end of the day. Such expert committees prove beneficial for the producer companies as they allow them to access credit facilities, help with the supply chain governance, or help the producer companies invest in sustainable technology. 

    Learn more about NABARD Schemes for Farmer Producer Company

    How Many Producers Are Required to Form a Producer Company?

    Experts from the agricultural field state that ten or more primary producers are required to form a farmer producer company. Who are the so-called primary producers? Primary producers are farmers who work in the agricultural fields to contribute to grain production. They then come together, to form a producer company.

    How Are Such Companies Incorporated?

    Such companies are incorporated per the clause specified in 581B, which contains 11 items. Going through the legal clause, it is understood that the maximum number of team members required to form a producer company should not exceed 50. However, going through the legal clauses, it is understood that the maximum number of directors shall be 5. 

    Are Producer Companies Also Private Companies?

    The incorporation of a producer company can also be treated similarly to make it a private company. However, it is important to consult legal counsel to take care of the incorporation process. 

    What Are the Benefits of Producer Company?

    As a legally incorporated entity, Producer Company enjoys several benefits, which can include the following:

    • Separate Legal Status, which can give an independent authority
    • Enabled and specified benefits related to tax deductions and redemptions
    • Benefit of Management
    • Getting financial incentives such as loans and opportunities for investment
    • Acquiring land or working towards a better brand presence
    • Benefits of Good Governance

    A producer company can thus be a ‘legally authorised body of the farmers ‘ who work towards producing crops and market the same. At the same time, such companies are liable to manage the supply chain framework in the agricultural market and manage several functions like

    • Procurement of raw materials
    • Harvesting of crops (UnFinished items)
    • Grading of crops
    • Production of special crops
    • Pooling of resources
    • Marketing of agri-based production
    • Handling of agricultural stocks
    • Selling, or
    • Export of Agri production items

    What Are the Major Objective of Such a Legal Entity?

    Such legal entities work towards the formation of cooperative businesses in order to help poor farmers to market their products in a wider context.   

    Do Producer Companies Have Other Authorised Activities To Be Performed?

    Yes, experts suggest that such firms are involved with various activities such as 

    • Processing of grains which do include a variety of processes such as brewing, dyeing, canning etc
    • Manufacturing of local machineries to facilitate agricultural production to a large extent
    • Grant education and necessary training to team members and other producers related to improving the quality of production till a large extent
    • Sale and supply of agricultural equipment to other producers
    • To provide technical facilitation services
    • Producer companies can also undertake consultancy services on the board’s discretion
    • Marketing of seeds to facilitate the production of crops in remote areas
    • Providing financial assistance to other producers and the team members
    • Any other ancillary activity defined as per norms

    What Are the Kinds of Tax Benefits?

    Such producer companies are registered as legal entities to facilitate a 100% tax deduction. As a matter of fact, a hundred percent tax deduction is applicable to producer firms which have a 100 crores of turnover in the Indian market. Tax benefits have been provided to legally registered producer firms, as such firms facilitate agricultural productivity growth across the nation. As a matter of fact, a 100% tax deduction can help the poor farmers till a large extent.

    What Are the Benefits of a Producer Company?

    A producer company provides its members in the agricultural sector with a structured and collective business platform, facilitating better access to resources and markets. Here are some of the benefits:

    Distinct Legal Entity

    A Producer Company’s advantages stem from its status as a separate legal entity, established under relevant legislation. This confers extensive legal recognition, enabling it to own property and incur obligations independently. Consequently, the individuals involved bear no personal liability for the company’s debts

    Tax Benefits

    Farmer-producer companies enjoy significant tax benefits, including 100% deduction for those with an annual turnover below ₹100 crore, with profit exemption. This initiative by the Indian government aims to support farmers, recognising their vital role in the economy

    Simplified Management

    Producer companies can easily alter their Board of Management by registering basic structures with the Registrar of Companies. This board oversees the company’s functions and operations

    Financing and Investment

    Government support, facilitated through institutions like NABARD, is crucial for providing financial assistance to producer company members. This ensures continued funding for initial producers, with NABARD offering loans for up to six months to meet their needs.

    Continuity of Existence

    A producer company enjoys perpetual succession, unaffected by the departure or demise of any member, ensuring legal continuity until dissolution.

    Effective Governance

    Government responsibility includes safeguarding the interests of producer organisation members, ensuring their success and sustainability.

    Support for Producer Organisations

    Various entities, such as SFAC, NABARD, and government departments, offer financial aid and dedicated assistance to promote the establishment and development of producer organisations.

    Member Assistance

    Producer organisations empower members to increase income by facilitating bulk purchases at lower prices, reducing transportation costs, and providing market information to maximise profits.

    Enhanced Facilities

    Producer organisations serve as platforms for farmers to access government services more efficiently, including MNREGA, pension, loans, PDS, and scholarships, thereby improving their overall welfare.

    Conclusion

    Producer companies are an aggregation of farmers in the country or local crop producers who are legally bound to accept terms and conditions. Such firms actually work towards a wholesome benefit in the Indian agricultural segment and help the poor farmers gain through increased crop production. It is understood to be a mutual structure per certain business functions that pull together several local producers or farmers. Any particular activity executed by such firms needs to be legally acceptable, and chances of fraudulent activities need to be stopped as far as the supply of crops from the point of production is concerned. Assuring lawful payment to each of the stakeholders such firms are formed under the legal guidance of professionals associated with the field of agriculture. However, you can approach Vakilsearch a legal firm in order to know more about the formulation of such companies if need be. 

    Frequently Asked Questions

    What is a producer company, explain with an example?

    A producer company is a type of organisation formed by primary producers like farmers, artisans, or individuals engaged in the production of goods. It aims to improve their income and standard of living by collectively undertaking agricultural or related activities. An example will be Vanilla India Producer Company Ltd (VANILCO).

    What is the tax benefit of a farmer producer company?

    The producer company can enjoy specific tax benefits and exemptions based on its agricultural activities. For instance, revenue generated from the sale of cultivated green tea leaves qualifies as agricultural income under the Income Tax Act, 1961 rendering it fully exempt from taxation.

    What are the objectives of the producer company?

    The aim of a Producer Company is to promote the interests of its members by aiding in activities related to producing, marketing, selling, and exporting their main products. Moreover, the company has the authority to import goods or services necessary for its members’ well-being.

    What are the features of a producer company?

    A producer company enables farmers and artisans to collectively engage in agricultural or related activities, promoting mutual assistance and sustainability. Its features include limited liability for members, democratic management, and profit-sharing based on contributions. It empowers rural communities, fosters cooperative spirit, and facilitates access to markets and resources for small-scale producers.

    What is the role of FPO in agriculture?

    FPO in agriculture helps farmers to pool all their resources, help small-scale farmers, with inputs and technical assistance to processing and marketing.

    Can producer companies accept deposits?

    In a producer company, you have the option to enlist agriculturist members, receive deposits in the form of RD/FD, offer maturity benefits, extend loans to farmer members, and levy interest on those loans.

    Who is eligible for FPO?

    Farmers, milk producers, fishermen, weavers, rural artisans, craftsmen, and primary producer institutions constitute the membership and stakeholders of the FPCs/FPOs.

    What is the subsidy of FPO?

    The subsidy for Farmers Producer Organisations (FPOs) aims to bolster the agricultural sector by providing financial support to FPOs. This assistance often covers various aspects of FPO establishment and operation, including but not limited to training programs, capacity building initiatives, infrastructure development, technology adoption, marketing support, and administrative expenses. By subsidising these elements, governments and relevant agencies seek to enhance the efficiency, productivity, and sustainability of FPOs, ultimately empowering farmers and rural communities to thrive in the agricultural value chain.

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  • How To Register A Producer Company In India

    How To Register A Producer Company In India

    In the midst of the COVID-19 and lockdown, a producer company from Kadur, Karnataka, has come forward to extend their assistance to farmers in order to help them sell their produce on the local market. There are 81 Farmer Producer Companies with the approval of the State Horticulture Department of Haryana involved in supplying fruits and vegetables from their member farms to the end-consumers within their respective areas. These companies are committed to ensuring uninterrupted supplies of fruits and vegetables.

    Click here to get FPO registration

    Activities of a Producer Company

    1. Production, procurement, harvesting, pooling, grading, marketing, handling, selling and export of the primary produce of members. Provided that the Producer Company shall continue these activities themselves or through other institution;
    2. Processing including drying, preserving, brewing, venting, canning, distilling and packaging of the produce;
    3. Manufacture, supply or sale of machinery, equipment or consumables to its members;
    4. Imparting of knowledge on the mutual assistance principles to its members;
    5. Delivering technical services, consultancy services, training and other activities for the promotion of interests of its members;
    6. Insurance of producers and or the primary producer.

    Procedure for Incorporation

    Applicant: Any person (10 or more) being a producer, or two or more producer institutions, or a combination of the above, can incorporate an Indian Producer Company.

    Filing of Name: File an application in FORM-1A along with a fee of Rs.1000. The application has to be made to the Registrar of Companies of the state where the producer company office is proposed to be located. A name that is available and one that best defines the purpose of your producer company is to be selected. When the ROC informs about the availability of the name, a MOA and AOA of the company is drafted in accordance with the rules of Sec. 581F and 581G respectively.

    MOA and AOA: These documents have to be stamped by the appropriate authority in agreement with the rules of the Indian Stamp Act, 1899 either physically or electronically. These documents have to be signed by each producer. The date will be the date of stamping.

    Object: The object clause in MOA must specify all the matters which are specified in Sec. 581B.

    Appointment of the First directors– The AOA of the company mentions the first directors of the producer company who hold office till directors are appointed within a period of 90 days of the registration. The minimum number of directors is 5 and maximum 50.

    Filing of Documents

    1. AOA and MOA duly signed, dated and stamped.
    2. Power of Attorney
    3. Statutory declaration in the e-Form- 1(on Stamp paper) declaring compliance of all and incidental matters regarding the formation of companies.
    4. Payment of stamp duty electronically through the MCA portal. In case it is not paid electronically, then original stamped physical copies of the uploaded e-Form-1, AOA, MOA along with a copy of the challan in the concerned office of ROC has to be submitted.
    5. Filling of Form-18
    6. Filling of Form-32
    7. Registration Fees

    Certificate of Incorporation

    The registrar issues an incorporation certificate having a CIN consisting of 21 digits within 30 days of the receipt of the documents required for company registration in India.

    Documents Required

    • Copy of PAN Card of all the directors
    • Passport size photographs of the directors
    • Copy of the voter identity card/Aadhaar Card
    • Copy of the Rent agreement(If it is a rented property)
    • Water/Electricity bill (Business Place)
    • Copy of the Property papers (If owned property)
    • Landlord NOC
    • What is a Producer Company?

    A producer company is a unique business entity in India that combines features of a cooperative society and a Private Limited Company. It aims to benefit its member producers by providing a robust legal structure. Only business entities registered as Private Limited Companies are eligible for Producer Company registration, and their names must end with “Producer Company Limited.” These companies are formed by individuals and institutions engaged in primary production activities.

    Objectives of the Farmer Producer Company 

    The main objectives of a farmer-producer company are:

    1. a) Facilitating the formation of cooperative businesses as companies and converting existing cooperative businesses into companies.
    2. b) Engaging in activities related to production, harvesting, procurement, grading, pooling, handling, marketing, selling, and exporting primary produce of its members, or importing goods or services for their benefit.
    3. c) Processing, preserving, drying, distilling, brewing, canning, and packaging the produce of its members.
    4. d) Selling machinery, equipment, or consumables mainly to its members.
    5. e) Providing education and technical services for the mutual assistance and benefit of its members.
    6. f) Engaging in activities related to power generation, land and water resource revitalization, conservation, and communication related to primary produce.
    7. g) Offering insurance for producers or their primary produce.
    8. h) Promoting mutual assistance principles and welfare measures for its members.
    9. i) Undertaking any other activity that promotes mutuality, mutual assistance, and benefits the members.

    Additionally, a producer company can provide financial services like credit facilities to its members for procurement, processing, marketing, and other related activities.

    Overall, a producer company serves as a cooperative platform for primary producers to collectively enhance their economic prospects and improve their livelihoods.

    Benefits of the Farmer Producer Company

    The benefits enjoyed by members of a Farmer Producer Company are as follows:

    1. Fair Value for Produce: Members of the producer company receive a fair value for their pooled and supplied produce, as determined by the directors. This value can be given later in the form of cash, kind, or equity shares.
    2. Bonus Shares: Members are entitled to receive bonus shares in proportion to the shares they hold in the producer company. This provides them with additional ownership and benefits.
    3. Patronage Bonus: The surplus income of the producer company, after setting aside provisions for limited return and reserves, may be distributed as a patronage bonus to its members. This bonus is given based on the members’ participation and usage of the services offered by the producer company.

    Overall, being part of a Farmer Producer Company allows members to earn fair returns for their produce, gain additional ownership through bonus shares, and receive patronage bonuses based on their active participation and support for the company’s activities.

    Procedure of Farmer Producer Company Registration in India

    The procedure for Farmer Producer Company registration in India involves the following steps:

    1. Online Application: The proposed members need to make an online application in the e-form called Spice+ on the MCA portal. This form is available under the services section of the MCA portal, and applicants can access it after creating an account.
    2. Filing Part A and Part B: The Spice+ e-form is divided into two parts. Part A is used to legalize the proposed name of the company. Part B provides various services, including incorporation, DIN (Director Identification Number) allotment, PAN (Permanent Account Number) allotment, TAN (Tax Account Number) allotment, EPFO registration, ESIC registration, GSTIN allotment, Profession Tax registration, and opening of a bank account.
    3. Certificate of Registration: After applying, the Ministry of Corporate Affairs typically takes around 30 days to grant the certificate of registration from the date of receipt of the application.

    By following this process, prospective members can register their Farmer Producer Company in India with ease and efficiency.

    • Cost and time for Producer Company registration

    Generally, it takes 10 to 15 days to register a Producer Company and its costs are around Rs. 15,000/- (inclusive of all taxes and fees). 

    • Producer Company Incorporation Checklist

    For incorporating a Farmer Producer Company in India, the following mandatory documentation is required:

    • PAN & Photographs:

    PAN and photographs of active directors and shareholders.

    • ID Proof:

    Aadhar card, Driving License, passport, or voter ID of the Directors, members, and shareholders.

    • Address Proof:

    Bank statements and utility bills such as landline bills, mobile bills, and electricity bills.

    • Producer Proof:

    Sarpanch letter, Khasra – Khatuni, Income Tax Return (ITR) with Agriculture Income, or any other proof of a person serving as a member.

    • Registered Address Proof:

    No objection certificate from the owner, utility bill, or rent agreement.

    Having these documents ready will facilitate a smooth and efficient process of incorporating your Farmer Producer Company in India.

    Conclusion

    It is our hope that the information provided has answered your question; however, if you require additional assistance, please do not hesitate to leave a comment.

    FAQs

    How do I register a Producer Company?

    To register a Producer Company in India, you need to follow these steps: 1. Obtain name approval for the business from the Ministry of Corporate Affairs (MCA). 2. Prepare the Memorandum of Association (MOA) and Articles of Association (AOA) of the company. 3. File the incorporation application with the Registrar of Companies (ROC) along with the necessary documents

    What is the difference between FPO and Producer Company?

    The difference between FPO and Producer Company is that FPO stands for Farmer Producer Organization, which is a group of farmers who come together to pool their resources and market their produce. A Producer Company, on the other hand, is a company formed by producers engaged in activities related to producing, particularly by farming, to carry on any of the following activities by itself or through other entities on behalf of the members

    How a Producer Company is formed?

    The procedure for forming a Farmer Producer Company is similar to the one for forming a private limited company. The registration process takes around 32-35 business days, subject to government authorization. The mandatory documents required for registration include identity proof, address proof, documents of the premises, and legal drafts

    How do I register my farmer producer Organisation?

    You can register your farmer-producer organization with the help of our experts. All you need to do is request a callback, our incorporation professionals will take it from there.

    What are the rules for a producer company?

    The rules for Producer Company include that every member shall initially receive only such value for the produce or products pooled and supplied as the Board of Producer Company may determine. Every member shall, on the share capital contributed, receive only a limited return, and the surplus, if any, remaining after the payment of limited return, may be disbursed as a patronage bonus amongst the members in proportion to their participation in the business of the Producer Company

    What is the minimum capital of a producer company?

    The minimum capital of a Producer Company is Rs. 5 lakhs, and it must have at least ten producers to register the company. The company can have a maximum of 15 directors and a maximum of 200 members if it is willing to function as a private company

    What is the minimum number of members in a Producer Company?

    In India, a producer firm must be registered with a minimum of ten people.

    What is the difference between a Producer Company and a private company?

    The difference between a Producer Company and a private company is that a Producer Company is formed by ten or more producers, two or more producer institutions, or a combination of ten or more producers and producer institutions. A private company, on the other hand, is formed by two or more persons and has a maximum of 200 members

    Read more,

  • Producer Companies Under Companies Act

    Producer Companies Under Companies Act

    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

    1. Persons involved in an activity connected with, or related to, primary produce can own producer companies.
    2. The members must be mandatorily primary producers.
    1. 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.
    2. Name of the company shall end with the words ‘Producer Company Limited’.
    3. 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.
    4. 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.”

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  • Analysis: What Were The Three Farm Bills That Led To The Farmers’ Protest?

    Analysis: What Were The Three Farm Bills That Led To The Farmers’ Protest?

    Introduction

    During the monsoon session of the parliament in 2020, three bills were passed and were enacted into legislation with the signature of the president. The passing of these laws caused a huge uproar amidst the agricultural diaspora of the country with protests erupting nationwide, seeking the rescinding of the bills. So strong was the antipathy towards the bills that the protests continued through harsh winters and a year and a half of lockdown during the COVID-19 pandemic. Analysis: What Were The Three Farm Bills That Led To The Farmers’ Protest?

    The three bills were called the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020, Farmers (Empowerment and Protection) Agreement of Price Assurance, Farm Services Bill, 2020, and the Essential Commodities (Amendment) Bill, 2020. The intent behind these farm bills was to attract and involve private investors directly into the process of procurement of farm produce, essentially transforming it into a free market. This article examines the three Acts and the major contentions surrounding them.

    Farmers’ Produce Trade And Commerce (Promotion And Facilitation) Act, 2020

    Also known as the APMC (Agricultural Produce Market Committee) Bypass Act, gives the centre an overriding power over the inconsistent provisions of the APMC Acts of individual states through Clause 14 of the Act.

    APMC (Agricultural produce market committee) is the regulating body that was incorporated to protect farmers from middlemen. The committee ensured that the farmers could directly sell their produce on a rate fixed by the market committee. However, due to rampant corruption within the committee the bill sought to remedy the problem.

    Clauses 3 & 4 give farmers the freedom to engage in intra-state or inter-state trade of their agricultural produce from sources that are not restricted to the physical markets created under various state Agricultural Produce Marketing Committee laws (APMC Acts).

    Clause 6 prohibits the collection of any market fee or cess under the State APMC Acts on the trade of farmers’ produce outside the APMC mandis.

    Basically, this Act empowers the Central Government to frame rules and regulations with regards to the sale of farm produce.

    The Opposition argued that the aforementioned ‘benefits’ under the Act would lead to the corporatisation of agriculture. The biggest criticism of the Act was the omission of a fixed Minimum Support Price (MSP), which guaranteed that the government will procure the unsold produce at a minimum support price in the event of a lack of demand. Local farmers feared that they may not find an adequate demand for their produce if it is privatised.

    Most farmers were small landowners and did not have the means to transport their produce at long range distances. Consequently they would have been forced to sell their produce in the local market at a price lower than the MSP.

    Farmers (Empowerment And Protection) Agreement Of Price Assurance, Farm Services Act, 2020

    This farm bill sought to create a legal framework for contract farming in India wherein farmers could enter into a direct agreement with a buyer to sell the produce at predetermined prices. Entities that could enter into an agreement with farmers to buy their agricultural produce include individuals, companies, firms, and societies. Farming agreements could cover mutually accepting terms between farmers and the entities including the supply of various resources for farming, farming technology, and the quantity of produce.

    This farm bill also provided for a three-tier dispute resolution system: 

    • The conciliation board, comprising representatives of parties to the agreement
    • The sub-divisional magistrate 
    • An appellate authority

    The principal concern with contract farming is regarding the negotiating power of the parties involved. Corporates or rich sponsors may not necessarily pay a fair price to the farmers for their produce due to the lack of the farmers’ ability to fairly negotiate or afford any sort of long-standing legal proceeding in the event of a dispute. 

    Further, the entire farmer industry will fall into the hands of the capitalists who exploit the land and the farmers for their own private needs, impacting the agro-ecological diversity of the country.

    Essential Commodities (Amendment) Bill, 2020

    This farm bill intended to restrict the powers of the government for the production, supply, and distribution of certain key commodities by editing and removing certain products such as onions, potatoes, cereals, and pulses from the list of essential commodities. The intent here was to assure private entities that there would be minimum interference from the government in regulating the produce.

    Stock limits on farming produce were to be based on a price rise in the market.  They may be imposed only if there is: 

    (i) a 100 per cent increase in the retail price of horticultural produce, and 

    (ii) a 50 per cent increase in the retail price of non-perishable agricultural food items. 

    Moreover, the increase is to have calculation over the price prevailing during the preceding twelve months. Or an average retail price over the last five years, whichever is lower.

    The changes in the regulation of stock limits in the farm bill were introduced to harness the financial resources of the private sector as well as foreign direct investment in the agricultural industry. Additionally, the stock limit regulation would not be applicable to value chain participants of agricultural agreements if their stock limit remains within their installed capacity. Moreover, this would legitimise hoarding, with the government having no information on the location and ownership of stocks. 

    The Problem With APMC

    As mentioned before, the Agricultural Produce Market Committees (APMC) are the marketing boards established by state governments to eliminate the exploitation of farmers by intermediaries; where they are forced to sell their produce at extremely low prices. Further, APMCs are physical markets where sales are through auction and meant to ensure worthy prices and timely payment to the farmers for their produce. 

    However, the ground reality of APMCs is that against the requirement of 42,000 mandies (markets) required for a country of our size, only 7000 exist. A huge percentage of the farmer population is unable to transport all of their produce to far off mandis and end up selling it to private parties while paying the mandi fee at the same time. 

    The present Act that overrides the provisions of the existing APMCs will only create a parallel market. It is with completely different regulations. APMCs is a market where traders will require to get a licence, pay a fee. Additionally, allow the government to obtain price intelligence. 

    Additionally, the state government will lose its ability to regulate the trade of produce with the entry of private sponsors. Moreover, this will lead to the collapse of the mandis.

    These Acts will not formulate in consultation with the actual stakeholders – the farmers. They fail to provide farmers with guaranteed prices (MSP), oversight of the players. Likewise, transactions, and prices do not empower the state government to regulate the market.

    Constitutionality Of The Laws

    The Seventh Schedule of the Constitution contains three lists that distribute power between the Centre and the States. The Parliament has exclusive powers to legislate on the subjects in the Union List; the states alone can legislate on subjects in the State List; the Concurrent List has 47 subjects on which both the Centre and states can legislate. But in case of a conflict, the law made by Parliament prevails. 

    The State List contains eight entries with terms relating to agriculture: Entry 14 (agricultural education and research, pests, plant diseases); 18 (rights in or over land, land tenures, rents, transfer agricultural land, agricultural loans, etc.); 28 (markets and fairs); 30 (agricultural indebtedness); 45 (land revenue, land records, etc.); 46 (taxes on agricultural income); 47 (succession of agricultural land); and 48 (estate duty in respect of agricultural land). However, the Union List and Concurrent List do not refer to matters relating to agriculture, giving state legislatures exclusive powers. 

    Entry 33 of the Concurrent List mentions trade and commerce, production, supply and distribution of domestic; and imported products of an industry over which Parliament has control in the public interest; foodstuffs, including oilseeds and oils; cattle fodder; raw cotton and jute. Moreover, it cannot be said that ‘foodstuffs’ is synonymous with the term agriculture; that would make all the state-exclusive powers on the agricultural sector redundant.

    The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, and The Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 do not mention, in the Statement of Objects & Reasons, the constitutional provisions under which Parliament has the power to legislate on the subjects covered.

    To determine the constitutionality of any legislation, the “doctrine of pith and substance” must be put into use. Further, the character of the legislation and the extent to which the legislation impinges on other Lists will have consideration. Moreover, the Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 flies in the face of Entry 28 of the State List (markets and fairs). And, The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020 impinges on Entries 14, 18, and 46 of the State List. Therefore, it can be inferred that the legislation does not hold up to the test of constitutionality. Hence, we must now await the Court’s decision which will decide the fate of the Indian Agriculture Market.

    Conclusion

    Laws and their provisions affect the functioning of a society. At the same time it may not always make sense to the common man given that the policies and frameworks are created from a macro economic point of view and not everyone understands the big picture. If you have any legal queries or are in need of legal assistance, do get in touch with us so that our team of lawyers can understand your requirements and help you with your needs .

  • Analysis Of Three Farm Bill

    Analysis Of Three Farm Bill

    In the 2020 monsoon session, the Indian Parliament witnessed the approval of three pivotal bills related to agriculture, a move that sparked widespread protests and heated debates. Signed into law by the President, these bills have ignited a storm of opposition, raising questions about their effectiveness and constitutional validity. In this article, we delve into the intricacies of the Three Farm Bill Acts, exploring their key highlights, the issues surrounding them, and the constitutional debates they have triggered.

    The Three Farm Acts: An Overview

    • Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Act, 2020

    This act, often referred to as the APMC Bypass Act, wields significant power through Clause 14, which overrides inconsistent provisions of State APMC Acts. It grants farmers the freedom to engage in intra-state or inter-state trade of their agricultural produce beyond the confines of physical markets established under various state APMC Acts.

    Key Provisions

    Clauses 3 & 4: Allows farmers to trade their produce outside APMC mandis, without incurring market fees or cess under State APMC Acts.

    Clause 6: Empowers the Central Government to frame rules and regulations under the Act.

    Issues

    Corporatisation Concerns: The Opposition contends that the Act may lead to the corporatization of agriculture, raising fears of exploitation due to the absence of a fixed Minimum Support Price (MSP).

    Transportation Challenges: Small landowners, constituting a significant portion of farmers, may struggle to transport produce over long distances, potentially selling at prices lower than MSP.

    • Farmers (Empowerment and Protection) Agreement of Price Assurance, Farm Services Act, 2020

    This Act aims to establish a legal framework for contract farming in India, allowing farmers to enter into direct agreements with buyers for the sale of produce at predetermined prices.

    Key Provisions

    Sponsorship Inclusions: Entities like individuals, companies, firms, and societies can engage in agreements with farmers.

    Dispute Resolution: A three-tier dispute resolution system is introduced, involving a conciliation board, sub-divisional magistrate, and appellate authority.

    Issues

    Power Imbalance: Concerns arise about the negotiating power of parties, with corporations potentially not offering fair prices to farmers, impacting their livelihoods.

    Corporate Control: The Act may lead to increased corporate control over the agricultural sector, potentially exploiting both land and farmers for private gains.

    • Essential Commodities (Amendment) Bill, 2020

    This amendment limits the government’s control over the production, supply, and distribution of certain key commodities, subjecting them to market-based stock limits.

    Unlock the potential of your agricultural endeavors with seamless Producer Company Registration. Elevate your business, foster growth, and navigate the path to success effortlessly. Let’s cultivate prosperity together!

    Key Provisions

    Market-Based Stock Limits: Restrictions on stock limits can only be imposed under specific conditions, such as a 100% increase in horticultural produce retail prices.

    Issues

    Hoarding Concerns: The amendment raises concerns about legitimizing hoarding, as the government may lack information on stock locations.

    Impact on Private Investment: While aiming to boost private sector investment, the amendment may compromise the government’s ability to regulate and control agricultural markets.

    APMC Dilemma: Unraveling the Complex Market Dynamics

    Agricultural Produce Market Committees (APMCs) play a crucial role in regulating agricultural markets. These committees were established to protect farmers from exploitation by intermediaries, ensuring fair prices and timely payments for their produce. However, only 7000 of the required 42,000 mandis exist, leaving farmers with limited options.

    Concerns with Overriding APMCs

    Parallel Market Creation: Overriding existing APMCs might lead to the creation of a parallel market with different regulations, potentially causing the collapse of traditional mandis.

    License Requirements: Traders in APMCs may face additional license requirements, hindering the smooth flow of transactions.

    Impact on State Regulation: Private sponsors could undermine the state’s ability to regulate produce trade, potentially resulting in unregulated markets.

    Constitutional Dilemans: Assessing Constitutionality of the Farm Bills

    n the intricate web of constitutional provisions, the Seventh Schedule of the Indian Constitution plays a pivotal role in delineating the distribution of powers between states and the central government. Understanding the constitutional validity of the Three Farm Acts necessitates a closer examination of these lists and the principles they entail.

    The Constitutional Framework

    1. Union List, State List, and Concurrent List

    The Union List grants exclusive legislative power to Parliament over certain subjects.

    The State List confers exclusive legislative power to state legislatures on specific matters.

    The Concurrent List allows both Parliament and state legislatures to legislate on designated subjects. In case of a conflict, the law made by Parliament prevails.

    1. Entries in the State List

    The State List comprises eight entries related to agriculture, covering aspects such as education, land rights, markets, agricultural indebtedness, and more.

    1. Absence of Agriculture in Union List and Concurrent List

    Notably, matters related to agriculture are absent from the Union List and Concurrent List, indicating that state legislatures hold exclusive powers over agricultural issues.

    1. Concurrent List Entry 33

    Entry 33 of the Concurrent List deals with trade and commerce, production, supply, and distribution of goods, including various agricultural products.

    1. ‘Food’ vs. ‘Agriculture’

    The distinction between ‘food’ and ‘agriculture’ is crucial. Equating them could potentially render state-exclusive powers in the agricultural sector redundant.

    The Constitutional Dilemma

    1. Parliament’s Power Questioned

    The Farmers’ Produce Trade and Commerce Act, 2020, faces a challenge regarding Parliament’s power to legislate on agricultural matters.

    1. Objects & Reasons of the Farm Services Act

    The statement accompanying the Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, asserts that Parliament lacks the authority to legislate on the subjects covered under the Farmers’ Produce Trade and Commerce Act, 2020.

    1. Doctrine of Pith and Substance

    The constitutionality of a law is often determined by applying the ‘doctrine of pith and substance,’ which focuses on the law’s true nature and impact.

    1. Impact on State List Entries

    Entry 28 of the State List, which deals with markets and fairs, is allegedly contradicted by the Farmers’ Produce Trade and Commerce Act, 2020.

    1. Impacts on Entries 14, 18, and 46

    The Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020, is said to impact entries related to agricultural education, land rights, and agricultural income.

    In Conclusion: The Future Awaits Judicial Verdict

    The constitutional validity of these acts is not merely a legal debate but a matter that directly impacts the livelihoods of millions of farmers across the nation. As the legal proceedings progress, the nation watches with bated breath, awaiting a resolution that will shape the future of Indian agriculture and determine the boundaries of legislative authority.

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