INDUSTRIALIZATION SETUP OF AGRICULTURE SECTOR IN INDIA
Our prime minister promised to double farmers’ Income by 2022. Thus, government is promoting the concept the “Producer Company” to fulfil their commitment.
A producer company is a hybrid between a private limited company and a cooperative society. The objective of the Producer Company is production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary production of the members or import of goods or services for their benefit, provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution.
MANDATORY REQUIREMENT FOR A PRODUCER COMPANY
- Every producer company must have at least 5 and not more than 15 directors.
- A full-time chief executive should (CEO) be appointed by the board.
- Shall be entrusted with substantial powers of management as the board may determine.
ANNUAL GENERAL MEETING
- First AGM shall be conducted within 90 days from the date of incorporation.
- The Registrar may permit extension of the time for holding Annual General Meeting (not being the first annual general meeting) by a period not exceeding 3 months.
- The Producer Company shall in each year hold an Annual General Meeting and not more than 15 months shall elapse between the date of one Annual General Meeting to the next.
- The AGM shall be called by issuing at least 14 days’ notice.
- The proceedings of every AGM along with Directors’ Report, the audited Balance Sheet and Profit & Loss Account shall be filed with the Registrar within 60 days of AGM.
Producer company shall have a full time Chief Executive to be appointed by the Board amongst persons other than the members.
Every Producer Company shall have internal audit of its accounts carried out in such intervals and in such manner as specified by its articles, by a Chartered Accountant.
MEETINGS OF THE BOARD QUORUM
- Board shall meet at least once in every three months and at least four such meetings shall be convened in every year.
- The Chief Executive shall give notice for the board meeting at least 7 days in advance of the meeting. Meeting can be called with shorter notice, but the reasons thereof shall be recorded by the Board.
- Quorum 1/3rd of the total strength of Directors subject to a minimum 3 directors.
- Every producer company must maintain a general reserve in every financial year.
- Where there are no sufficient funds in any year for such transfer,
- The shortfall must be made up by members’ contribution in proportion to their patronage in the business.
- Members will initially receive only such value for the produce or products pooled and supplied as the directors may determine.
- The withheld amount may be disbursed later either in cash or in kind or by allotment of equity shares.
- Members will be eligible to receive bonus shares.
- An interesting provision is for the distribution of patronage bonus (akin to dividend) after the annual accounts is approved — patronage bonus means payment out of surplus income to members in proportion to their respective patronage (not shareholding).
- Producer Companies shall carry out an internal audit of its accounts, at regular intervals in accordance with its articles of association and such an audit shall be carried on by a Chartered Accountant.
- The auditor shall make an annual audit report to the members of the company on the accounts examined by him.
FORMATION OF PRODUCER COMPANY
- Any 10 or more Individuals; or
- Any 2 or more Producer Institutions; or
- Combination of 10 or more Individuals and Producer Institutions
DOCUMENTS REQUIRED FOR THE FORMATION OF PRODUCER COMPANY:
- KYC Documents of Proposed Members (PAN, Aadhar, Mobile, Email Id, Bank Statement, Passport Size photograph)
- Proof of Farming land (Copy of Khasra or Copy of Farmer Book or Khatauni)
- Statement from Agriculture Officer stating the subscribers are the farmers.
DOCUMENTS FOR THE PROOF OF REGISTER OFFICE PLACE
- Rent Agreement (if proposed register office is rented)
- Electricity bill
- NOC (Non objection Certificate) from Landlord
BENEFITS OF FORMING OF PRODUCER COMPANY
- Limited Liability
- Separate Legal Entity
- Separation of Management from ownership
- Increase Creditability
- Income Tax benefits: The Income Tax Act, 1961 specifically exempts tax on agricultural income under Section 10(1). However, the exemption for such agricultural income shall sometimes vary depending upon the kind of agricultural activity carried on.
- Loan at Lowest Interest Rate: Crop loan provided to its members for the period of six month at very lowest Interest rate.
- Even Company can take separate loan from Banks under NABARD Loan scheme.
Producer companies are a great concept to mobilise farmers together, eliminate middlemen, with greater market viability and bargaining power. It has the potential to transform Indian agriculture. What has changed is that the government has started treating agriculture as a business, granting loans, formulating schemes, this helps uplift marginalised farmers. The government is taking every step to ensure and provide more benefit to the Farmers.