BASICS OF PRODUCER COMPANY

A producer company registration means getting a legally recognized body of farmers/farmers aimed at improving their living standards and ensuring the good status of their available support, income, and profitability.

What is a Producer Company? 

The producer’s main objective is to promote the creation of cooperative business as companies and make it possible to turn established cooperative business into companies.

A Producer Company may be created by 10 individuals (or more) or 2 institutions (or more) or by a combination of both (10 individuals and 2 institutions) whose business purpose is as follows: Procurement Production Harvesting Grading Pooling Handling Advertising Distribution, or Export of Members’ Primary Products, or Import of Goods or Services for their benefit.

Why is the Producer Company Registration’s aim and how this helps Society at Large?

Production, processing, procurement, grading, pooling, storage, marketing, sale, exporting Members’ primary output or importing products or services for their profit, provided that the Producer Company may involve any of the activities listed in this provision either by itself or by another organization.

Processing including curing, drying, distilling, brewing, canning, and packaging its Members’ products. Also, it includes manufacturing, selling or providing the members with machinery, equipment or consumables.

  1. Guiding leaders & others on the principles of mutual assistance.
  2. Rendering technical services, advisory services, training, research & development & all other initiatives to support members’ interests.
  3. Generating, transmitting and distributing electricity, revitalizing water resources, utilizing them, sustaining and communicating primary output.
  4. Producers’ insurance or main products. 
  5. Promoting mutual-assistance strategies.
  6. Welfare programs or services for Members, as the Board can decide.

Any other operation, ancillary or incidental to any of the above activities or other activities, which may otherwise promote the principles of mutuality and mutual assistance among members.

Advantages of Producers Companies: 

The following are the advantages enjoyed by a producer company:

  • Originally, members of the producer company earned the profit for the commodity pooled and supplied as determined by the directors. This balance will be distributed in the form of cash/type/equity shares.
  • Producer business members would be eligible to receive bonus shares in the same proportion as their assets.
  • The surplus (after making provision for payment of minimal return and reserves) can be provided to the producer’s members as patronage bonus*.
  • Patronage incentive means the allocation of surplus profits to producer representatives about their respective patronage. Patronage, on the contrary, includes participants in their commercial practices using the facilities provided by the manufacturer.

LOANS AND INVESTMENTS: 

As noted above, the Producer Business consists of individuals who are primary producers and who require financial help from time to time. Therefore, a special clause under the company acts 1956 was passed to grant loans to producers representatives.

A producer company can provide financial assistance to its members through credit facility: this is open to any member for a duration not exceeding six months (such facility must contribute to the company’s business).

These are issued as protection to the producer member, repayable within seven years from the date of disbursement of these loans or advances.

NABARD Loan: NABARD offers funding and financial aid to meet producers’ needs. NABARD generated an Rs. 50 crore Producer Organization Development Fund (PODF) from its operating surplus in 2011.

Economic Gain (TAXABILITY OF PRODUCER COMPANY) Section 10(1) of the Income Pay Act, 1961, exempts farm profits. However, the exemption for agricultural income granted under section 10(1) often varies depending on agricultural activity.

The Income Tax Act does not define any specific tax benefit which, by its definition, provides specific tax benefits or exemptions to producers. But, due to the producer company’s agricultural operations, other tax advantages and exemptions can be used.

For example, income from selling grown green tea leaves is an agricultural income under the Income Tax Act and is 100% tax-free. Nevertheless, if the tea leaves are further processed for tea production, then 60% of such income would be considered as agricultural income and 40% of such income taxable.

Thus, it is evident that a producer’s tax gain and exemption depend entirely on the operation it carries out.

Simple REQUIREMENT AND FEATURES; 

  • Any 10 producer(s) or more (individuals) can form a production company together, but the number of members is without an upper limit, or a producer company may be established by any 2 or more production institutions.
  • To incorporate a manufacturing company, a minimum capital of 500,000 is required.
  • In a producer company, there should be at least 5 directors (maximum 15).
  • It can never be turned into a public corporation but can be converted into a multi-state cooperative society.
  • There must be at least 5 managers in the production business.
  • The producer is always a private limited company.
  • Producer Business shall be subject to Section IXA of the Business Act, 1956.
  • Producer company voting rights are based on a single vote for each member.
  • No person who has any business interest contrary to the Producer Company’s business shall become a Member of the Company.
  • Every manufacturing company shall deal mainly with the products of its active members for the execution of any of the objects set out in this section.
  • The company’s name shall terminate with the name “Producer Company Limited,” as set out in the Memorandum.
  • By the provisions of Sections 581F and 581 G, the AOA and MOA of the producer business are prepared.
  • A quorum at a General Meeting shall comprise one-fourth of the total membership.
  • The production company’s share capital shall consist only of equity shares.

CONCLUSION:

In 2002 the idea of “producer enterprise” was launched given the pressing problems of farmers and farmers (collectively referred to as ‘producer’) in India, such as farmwork, technical developments, policy changes, etc. and the goal was to enhance governance and the channelling of agricultural activity.

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