The article explains the process of formulation of producer firms in the context of agri-production in India. It also makes the readers understand the several benefits of the same operations.
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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