What is a farmers producer company?

​

A Farmers Producer Company (FPC) is an association formed by individual farmers or farmers' groups (or both) to promote their interests. While registering such a company is optional, it is similar to a cooperative but operates more like a private limited company. FPCs are expected to be formalized and incorporated under the Indian Companies Act, 2013.

Let us understand the Farmers Producer Companies in terms of their key features:

​

Democratic Governance

FPCs do not follow a one share, one vote rule; rather, all members have equal entitlement to vote irrespective of the number of shares they hold. So this calls for a wider participation of farmers dominating the decision-making with every member having a voice in the matters of the organization.

​

Objective

The primary goal of FPC is to maximize its members revenue through collective organization. In this aggregation, small producers can take advantage of economies of scale, which otherwise they may not be able to do so because of their low production capacity.

​

Market Access and Bargaining Power

This is to say that farmers can actually cut down on some of the agricultural marketing-related number of intermediaries when they unite, which results in producers receiving a really small fraction of what end consumers pay. Farmer Producer Companies give farmers a venue to bargain for better prices on their commodities and on their fertilizer and other material inputs.

Support from Government Initiatives

 The Indian government claims to have recognized the importance of FPCs in promoting the welfare of farmers and has taken steps in the form of various initiatives to assist in their formation and development. Tax incentives include those announced in the recent budget, such as: funds are set aside for training, access to credit, and technological assistance.

Current Status

 Today, there are more than 9,600 Farmer Producer Organizations (FPOs) in India, more than 8,600 of which are reportedly engaged in agriculture and related sectors. In states such as Gujarat, Maharashtra, and Madhya Pradesh, successful implementations have almost resulted in better seed production and market linkages.

​

Challenges Faced

 With benefits are plenty, whatever may flow on the road for FPCs, there are really serious challenges: problems of management, problems concerning supply chain commitment, and problems extracting proper modes of timely financial support.

In short, Farmer Producer Companies are a blossoming supportive force for small farmers who gain collective power within production and marketing systems, in addition to full democracy.

​​

​

Which is the biggest farmer producer company?​

 

To determine the biggest farmer producer company, we must take into consideration some aspects such as the default size of the operations, the quantity of farmers deployed within the company, and the amount of agricultural products controlled by the company.

​

In essence, farmer producer companies are being established by farmers to aggregate themselves and partake in the production and marketing activities together. These organizations enable smallholder farmers to pool resources, utilize better technology, and improve their competitive capacity in the market.

​

The biggest farmer producer company in India has been identified to be Sahyadri Farms. The company exports fruits and vegetables and has more than 8,000 farmer shareholders. Through collaborative marketing and better management of the supply chain, the welfare of the organization members has drastically increased.

​

A key component of Sahyadri Farms’ business is the control of quality and the establishment of reasonable practices. An adequate processing and packaging infrastructure has been developed to ensure that the agricultural products are fresh and meet the requirements for international export.

​

The other important aspect of the achievements of Sahyadri Farms is the effectiveness of assisted agriculture such that it increases the volume of agriculture at the local level through the provision of expanded access to the market and fair prices to the farmers for their crops.

Therefore, in conclusion, Sahyadri Farms tends to be the largest farmer producer company with respect to the scale of its operations and the number of farmers involved.

 

 

Who is eligible for FPO?​

In order to register a Farmer Producer Company, it is necessary to satisfy some basic membership requirements. Here are the major ones:

 

Minimum Membership

At least ten individual farmers must come together so that a Farmer Producer Company can be formed or two or more producer institutions can be the founding members of the company. This means that at least 10 members need to join together to form the company.

 

Type of Farmers

Members of the company are mainly small and marginal farmers having an area of land up to 2 hectares. This is based on the assumption that small-scale farmers will be able to wield some power in the agriculture markets which they do not have the capacity to do so singlehandedly.

 

Geographical Proximity

Members of the same FPC are expected to belong to the same district or village. This requirement ensures that members are bonded together and encounter similar agricultural circumstances and constraints.

 

Common Agricultural Practices

They are farmers of crops marketed under the FPC as that of similar kind or kindred. This uniformity simplifies structures of operation and marketing approaches, as well as resource use among members.

​

Legal Registration

Any one of the types – The Farmer Producer Company will have to be first incorporated under the Indian Companies Act of 2013 or through any other Cooperative legislation of the respective states.

​

Paid-Up Capital

It must have a minimum paid-up capital. The paid-up capital is usually set at ₹1 lakh or $1,200. The paid-up capital will serve as a financial basis of the company's operation.

Equity Structure

33% of its shareholders must be small, marginal, and landless tenant farmers according to the Agriculture Census data, which are issued periodically by the Ministry of Agriculture, Government of India.
 

Board Representation

The FPC should have a properly elected Board of Directors consisting of at least five members with the requisite requirement of having member farmers as their representatives and having at least one woman member.

Business Plan Requirement

The FPC shall have a business plan and budget for at least 18 months that proves the viability of the revenue model.

Bank Account and Audit Compliance

The FPC shall maintain a scheduled commercial bank account and its accounts shall be audited by a Chartered Accountant for at least one full financial year before availing some of the benefits or funding.

A group of farmers, by achieving these criteria, can very efficiently organize themselves into an FPC to improve their bargaining power, get better-quality inputs, improve profitability, and achieve economies of scale in production and marketing.

​

 

​

What are the benefits of FPC?​

The FPCs unleash a number of benefits that enable economic viability and operational efficiency within smallholder farmers. Generally, the advantages expected of the FPCs include:

1. Increased Income for Producers

The main objective of an FPC is to achieve high income for its members through collective organization. It enables farmers with less than 100 hectares to attain economies of scale not otherwise possible. This collective effort enables them to bargain better input and output pricing conditions.

2. Bargaining Power

FPCs reluctantly increase the bargaining power of small producers vis-à-vis bulk buyers and suppliers. This is most important in agricultural marketing where an intervening chain normally squeezes down the price paid to the producer. By collaborating, members are better able to negotiate relative terms.

3. Increased Financial Access

Financial assistance is provided to FPCs in the form of loans and grants under any government scheme available to strengthen agricultural cooperatives. Such funding would enable them to invest in improved technology, infrastructure, and practices that ultimately lead to increased productivity.

4. Legal Recognition and Identity

Under the Indian Companies Act of 2013, FPCs have a separate legal status, which provides them access to independent authority and credit facilities and credibility in the marketplace.

5. Tax Benefits

FPCs registered as corporate entities enjoy wide-ranging deductions of taxes, especially if they are operating in the Indian market with a turnover of 100 crores or more. The financial incentives become available, justifying the reinvestment of profits into subsequent operations.

6. Promotion of Best Management Practices

FPC promotes good governance with a member democratic structure decision-making system where each member has equal voting albeit with varying share size. This framework promotes transparency and accountability in the organization.

​

7. Support for Supply Chain Management

Producers' companies are working across the agricultural supply chain and cover such functions as procurement of raw materials, harvesting, grading, production, marketing, and export of agricultural products. Properly managing all these components helps streamline operations and minimize costs.

 

8. Capacity Building and Training Opportunities

FPCs-farmer producers companies-not only educate and train their members on best practices in agriculture but also on resource management and production techniques. Such capacity building is crucial to improved productivity and quality.

​

9. Facilitation of Ancillary Activities

Besides core agricultural functions, FPCs can also engage in ancillary activities such as grain processing, manufacture of local machinery, consultancy, seed marketing, and technical assistance to other producers.

 

     In summary, the Farmers Producer Companies are an important mechanism for the enhancement of smallholder farmers' livelihoods by supporting these farmers with collective bargaining strength, access to financing, legal recognition, tax benefits, improved management practices, opportunities for training, and support in a number of areas within agricultural production.

 

​​What is the work of FPC?

​

The FPC helps small-scale farmers, economically viable as well as sustainable, with the provision of a correct platform for the farmers to team up and combine their power. The works and functions of an FPC can be highlighted by:
 

Aggregation of Produce 

The primary purpose of an FPC is the aggregation of the produce of the members produced. Jointly, farmers can acquire economies of scale, hence they will be able to command better prices for all that they produce. Furthermore, it reduces the number of middlemen in the supply chain and hence adds more value to the producer.

​

Input Procurement

FPCs gain through purchasing inputs such as seeds, fertilizers, pesticides and other equipment together. Such kind of bulk purchase results in low cost acquisition for the member firm which would reduce their production costs thereby enhancing the profit for the company.

​

Marketing Support

FPCs offer marketing support to their members in the form of brand identity, hence allowing direct connectivity with the consumer or larger market. In most cases, marketing support through this means involves packaging and branding or some form of local and national marketing. This is always to give maximum visibility in sales.
 

Credit and Access to Financial Facilities

Some FPCs are credit focused for providing access in collaboration with the financial institution or governmental programs so that sufficient quantity is available with farmers either for technology or for extension.

​

Training and Capacity Building

FPCs regularly organize training sessions for their members in the areas of best agricultural practices, sustainable farming methods, financial literacy, and business management skills. These include capacity building vital for enhancing productivity and sustainability.

 

Value Addition

Some FPCs are involved in value-added processing, including the transformation of tomatoes into sauces or grains to flours, besides their direct marketing-related activities. Some bring better opportunities for income maximization among farmers together with a reduction in post-harvest losses.

​

Advocacy and Representation

FPCs are the voice of farmers in front of the government regarding policies and market regulations. They advocate for policies that favor smallholder farmers, ensuring proper representation of their interests in diverse discussions.

 

Social Welfare Activities

Apart from the economically oriented role, a number of FPCs engage in social projects with a view toward enhancing the members' and the community's quality of life. These may include health services, educational programs

​

   To conclude, a Farmers Producer Company encompasses a wide range of activities geared toward empowering smallholder farmers through collective action, increasing their bargaining power in markets, lowering costs by providing their service, access to critical resources and training, advanced advocacy for farmers' rights, and thus raising their income levels.

 

​

Is FPO tax free?​

The taxation status of Farmer Producer Companies in India is not altogether one of exemption from taxation; these companies receive certain deductions and favorable treatments according to the provisions of the Income Tax Act, 1961.

 

Exemption for Agricultural Income

According to Section 10(1) of the Income Tax Act 1961, agricultural income is free from taxation. It encompasses income invariably obtained from agricultural undertakings, including crop husbandry, horticulture, livestock production, and other associated activities.

 

Processing Activities

On the other hand, where the produce becomes subject to some processing (like in the transformation of tea leaves into tea), such income can be considered that part thereof which constitutes agricultural income. This is 60% of the total income arising from the processing. So that becomes an exemption income and the other 40% will be liable to income tax.

 

Conditions of Exemption

They usually have to satisfy the conditions for exemption or is themselves an FPC engaged in primary agricultural production. In other words, if an FPC performed activities that do not conform to the definition of agriculture or the Income Tax Act does not define the FPC as an agricultural producer, then it may attract tax.

 

Other Benefits

In addition to the exemption of agriculture income, they also avail of a number of deductions under government schemes for the promotion of agriculture and rural development.

 

Thus, Farmer Producer Companies are free from taxation on large extents of exemptions related to their agricultural income. But, they are not free from tax as there are restrictions on processing activities and other non-agricultural activities.

 

 

How to register a farmer producer company?​

In terms of setting up a farmer producer company (FPC), this involves some steps to make them comply with those mentioned in the Companies Act, 2013, India. This is a comprehensive, yet revised step-by-step process of registering a farmer producer company.

​

Stage 1: Obtain Digital Signature and DIN for Directors and Shareholders

First, obtain the Digital Signature Certificate for all proposed directors and shareholders. The digital signature is useful in signing several documents at the time of registration. After that, you have to apply for the Director Identification Number (DIN) that will not require you to apply for DIN separately since the spice offers this option.

​

Stage 2: Select a Company Name and Get Approval

After these two, you will have to choose a name for yourself. It must be unique in itself and should not have been taken up by other entities. This will then be applied along with the Reserve Unique Name charge. The Registrar of Companies will check the originality of the name before granting approval.

 

Stage 3: Fill Registration Form or Incorporation Application

You may now fill in the incorporation application using the SPICE form, depending on whether the company name has been approved or not and it encompasses the purpose of the company, the address of business, and directors and shareholders' detail.

​

Step 4: Drafting the MOA and AOA

Post the approval of the name by the ROC ,the next step involve the preparation of two important documents, namely MOA and AOA. While the MOA provides the scope of activities to be undertaken by the company, the AOA enunciates the internal rules governing the conduct of the affairs of the company. These are mandatory documents to be submitted along with your application for incorporation.

 

Step 5: Filling Out an Agile Pro Form

Once you correctly fill out the SPICE form, you will fill out an Agile Pro Form as well. This is a form in which you will explain the particulars of GST registration along with bank account details of your company.

​

Essential Documents Required for Producer Company Registration

These documents must be submitted:

- Passport copies of all shareholders and directors

- PAN card for all shareholders and directors

- Voter ID or some other government-issued ID.

   In this way, after following all these steps, one suitably registers a farmer producer company dealing with the growth of agricultural production and the enhancement of members' livelihoods.

​

What is the cost of FPO registration?

The registration of a Farmer Producer Company (FPC) in India entails certain costs, and these costs can significantly vary based on several factors, including the nature of the chosen service provider for the registration process and the requirement of any services therein. This usually covers                                           

 

                 steps                                                                                                 FEES                  

    Farmer Producer Company Registration Fee                                    ₹13000 To ₹50000       

    Government Fee                                                                                        ₹8000                   

     Professional Fee                                                                                        ₹5000                   

 

First, this price may be affected by any promotions or discounts from service providers that offer to reduce the overall cost. For example, some may offer discounts for early registration or other cash back deals that may reduce registration fees even further.

Though the fee structure is standard, additional expenses should also be thought of by prospective applicants-those expenses that might accrue during that process, for instance, such as consulting with a lawyer about legal fees or the charge of state-specific fees.

 

​

What are the rules for farmer producer company?

​

1. Formation and Membership

An FPC will have to be promoted either by at least 10 primary producers or by two or more producer organizations. Members are to be only primary producers or producer groups. This ensures that only those who directly engage with production will be allowed to join. Members buy shares in the company and have voting rights.

 

2. Governance

FPCs function in a participatory democracy wherein each member is entitled to one vote, which remains the same no matter how many shares are owned. The governance procedure allows for collective member decisions at the general meetings.

​

3. Capital Requirements

The minimum authorized capital of a Producer Company is Rs. 5 lakh with a minimum paid-up capital of at least Rs. 1 lakh. The authorized share capital should be realistic and should be sufficient to fulfill the objectives of the Memo of Association.

​

4. Objectives and Activities

The activities of Producer Companies are to operate in accordance with the provisions contained in Section 581B of the Companies Act, 1956, in synonymy with the means for production, harvesting, processing, and marketing of agricultural products. FPCs seek to raise the income of their members by means of pooled resources and increased bargaining power with buyers and suppliers.

​

5. Legal Compliance

FPCs must comply with the provisions of the Companies Act, 2013, especially those which relate to Part IXA dealing with producer companies. They must maintain proper records and submit necessary documents for registration and thereafter statutory compliance with the prescribed authorities.

​

6. Financial Management:

FPCs must have transparent financial management and audited accounts to earn the management's faith in their members. Other than that, these FPCs may also

assistance for financial and technical assistance available under various agricultural policies.

 

7. Business Operations

FPC works through a system of collective decision-making in which all the members participate. Several business activities that can promote the benefit of its members include bulk buying of input supplies or collective marketing of their produce.

​

8. Winding Up

Dissolution is rightfully applied once the producer, through their members, sees that it does not serve its ideal purpose as it is chalked out. Farmer Producer Companies have been set up for the purpose of empowering the primary producer with collated action and are bound by certain legalities governing their very formation and working.

 

 

What is the minimum capital for FPO?

 

The norm put forth in the Companies Act, therefore, sets forth capital requirements for establishment of the Farmer Producer Company in India. The required minimums are:

​

Authorized capital

It should not be less than Rs.5 lakh. It can be altered in accordance with the needs of the company as enshrined in the Memorandum of Association (MOA).

 

Paid-up capital

The minimum amount of paid-up capital should be at least Rs.1 lakh. This is the actual member contribution required at the time of registration.

Pragmatic requirement of capital is a must. It must be ensured that both Authorized and Paid-Up capital should match the reality and be sufficient to run the activities as laid out in the memorandum of the company.

Minimum paid-up capital requirement ensures that the initial operations and activities that will be aimed at furthering the productivity and income of its members are sufficiently established to allow for the organization of farmers or producer organizations.

 

To summarize, it is: formation of a Farmer Producer Company requires:

-Minimum Authorized Capital of Rs. 5 lakh,

-Minimum Paid-Up Capital of Rs. 1 lakh.

These are the financial prescriptions for starting the Farmer Producer Company which should serve adequately to fulfill the financial requirements for smooth running of the company and achieving its goals.

​

​​​​​​​​​​​​​​​