About:
A person engaged in any activity connected with or related to any primary produce can be termed as Producer. Producer Companies can be defined as a body of farmers/agriculturists, legally recognized, to improve their standard of living, and ensuring a good status and providing them available support, incomes, and profitability.
Producer Company also includes horticulture, animal husbandry, floriculture, viticulture, bee raising, pisciculture, re-vegetation, forestry, forest products, produce of hand-loom and farming plantation products, handicraft and other cottage industries.
Producer Company being a corporate body have an object that maybe one or all of the following:
- Production
- Procurement
- Harvesting
- Grading
- Pooling
- Handling
- Marketing
- Selling, or
- Import/Export of primary product for the benefit of members
Registration – Producer Company
In order to register as Producer Company in India, the following condition must be fulfilled-
- Ten or more individuals, every one of them being a producer; or
- A combination of ten or more individuals and producer institutions; or
- Two or more producer institutions
When we look at the registration process of a Producer Company It is just similar to that of a Pvt. Ltd Co.
Name approval and DSC must be obtained.
The name of a producer company must end with the words Producer Limited Company.
After obtaining name approval from the MCA, the application for incorporation must be filed in the prescribed format for incorporating the Producer Company.
A Certificate of incorporation is issued by the Registrar if he is satisfied with the application for incorporation of Producer Company.
Now, the Producer Company is incorporated; it shall function similarly to a private limited company except to certain provisions. However, Producer co. doesn’t have a limit on the number of members, unlike a Private Limited Company.
- Producer Company must have a minimum capital of Rs. 500,000 in order to incorporate it as a producer company.
- The Board of Producer co. Shall be comprising a minimum of 5 directors and a maximum of 15.
- Producer Companies can be converted into a multi-state co-operative society. However, it can never be converted into a public company.
Further, the Producer Company must primarily deal with the produce of its active Members and is allowed to carry on any of the following activities by itself or through other entities – on behalf of the members.
- processing –including distilling, drying, brewing, preserving, canning, vinting and packaging of the produce of its Members;
- manufacture, sale or supply of equipment, machinery or consumables mainly to its Members;
- rendering consultancy services, technical services, training, research and development and all other activities promoting the interests of its Members;
- On the mutual assistance principles, providing education to its members and others;
- Finance for processing, procurement, marketing or other activities which includes extending the credit facilities or some other financial services to its Members
- Generating, transmitting and distributing power, revitalization of land and water resources, their use, conservation and communication relatable to primary produce;
- Ensuring the producer’s producers or their primary produce;
- promoting mutual assistance and techniques of mutuality ;
- facilities or welfare measures for the benefit of its members as may be decided by the Board;
- any other activity, ancillary or incidental to any of the activities which may promote the principles of mutual assistance and mutuality amongst the Members in any manner;
Loans and Investments
Producer Company need for financial support from time to time, as it consists of individuals who are primary producers
A Producer Company can provide financial help to its members through:-
- Loans and advances: Loans and advances can be given to the producer member against security and with a condition of repayment not exceeding beyond seven years from the date of disbursement of such loans or advances.
- Credit facility: This must be available with regard to the business of the company with a condition of repayment not beyond 6 months.
- NABARD Loan: NABARD provides support and financial assistance to meet the needs of Producer Companies. In 2011, NABARD, out of its operating surplus, set up an Rs. 50 crore Producer Organisation Development Fund (POF),.
Tax Benefit of Producer Company
According to this section 10(1) of Income Tax Act, 1961, income from Producer Company is exempt. However, these exemptions vary on the basis of the agricultural activity being carried out.
However, the Income Tax Act does not specify any specific tax benefit which essentially provides special tax benefits or exemptions to producer companies by its definition. But subject to the agricultural activity carried out by the producer company, certain tax benefits and exemption can be availed.
Hence, it is apparent that the tax benefit and exemption to a producer company is totally depending upon the activity it carries on.
