Advantages of a Producer Company

Introduction

Agriculture plays a major role in the Indian economy. The livelihood of over 66% of the population is based on agricultural activities. Due to low benefit costs, farmers, primary producers, and other critical manufacturers have faced a long battle in India. In order to solve these issues, the Indian government has established an expert committee, which was chaired by economist Y.K. Alagh. In 2002, they introduced the concept of producer companies to the Indian economy. In this article, we will know more about the advantages of a Producer Company and the functions of a Producer Company in detail.

What is a Producer Company?

A producer company can be defined as a group of farmers or agricultural workers who have received legal authorization with the goal of improving their living conditions and ensuring their good standing in terms of the resources, profitability, and income accessible to them. According to the Companies Act, 10 or more individuals and two institutions (or more) may form a producer company, or they may do this together if both have the same business objective and deal with one of the below categories listed below. They may also import goods or services for their own benefit.

• Procurement
• Harvesting
• Grading
• Production
• Pooling
• Marketing
• Handling
• Selling, or
• Export

Which Activities are Authorized For Producer Companies?

The benefits producer firm must deal with the products of its members, and it is permitted to engage in any of the following activities:

• Processing of the product by its members (processing shall include canning, brewing, drying, distilling, ventilating, and packaging);
• Manufacturing machinery, selling or supplying consumables or equipment to its producer members;
• Provide instruction to the producers who are members of the company and to others based on the mutual support principles;
• Providing training, research and development, consulting, technical services, and any other necessary activities in order to promote the interests of producer members;
• Generating, distributing, preserving, and transmitting energy, as well as communicating about primary products and revitalizing water and land resources,
• Insurance protecting the producer company’s interests and their major output,
• Promotion of the strategies including mutual support;
• Marketing, financing of procurement, processing, or further associated activities like granting credit facilities or providing the producer members with any other forms of financial support.
• Additional efforts with the intent to develop mutual cooperation between producer members.

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What are the Advantages of a Producer Company?

The advantages of Producer Company are listed below:-

• Separate Legal entity: The advantages and functions of a Producer Company stem from the fact that it is an organization or a legal body created under the Companies Act. It is considered as a separate Legal Entity so neither the owners nor the directors are accountable to the lenders of the Company.

• Tax Advantages: Companies with an annual revenue of more than Rs. 100 crore are eligible for a 100% deduction if they are classified as farmer-producer companies, and those who make a profit from such operations are exempt from paying taxes. As farmers are the main pillars of the national economy and the driving force behind its expansion, the Government of India has increased the benefits of Producer Companies to a 100% deduction for farmers.

• Easy Management: They can effectively change the Board of Management of the producer organization by submitting basic business structures with the Registrar of Companies. The Board of Management governs and manages the functions of a Producer Company.

• Investments And Loans: The government is providing financial support to these members of the producer businesses because they are the original producers and require funding from time to time. As a result, the government has established the NABARD bank to help producers and farmers. To address the demands of the producer companies, the bank aims to provide loans to farmers for terms which do not exceed six months.

• Constant Existence: The “unending succession” of a producer company can continue indefinitely until it is legally dissolved. A producer organization is unaffected by the takeoffs because it is a separate legal entity.

• Constructive Government: The government is accountable for considering and maintaining the interests of the members of a Company for the success of an organization.

• Support for the Procedure Company: The Producer Organization Promoting Institution (POPI) receives additional funding and devoted assistance from SFAC, NABARD, Departments of Government, and Corporate, Domestic, and International Aid Offices for the welfare of the Producer Organization.

• Assist the members: A Producer Organization will assist individuals in earning more income by performing the majority of the activities. The Producer Organization can purchase the items in bulk for a lower price. Also, shipping in bulk lowers the cost of transportation. The organization can also provide information to the producers, allowing them to keep their stuff until the market price rises considerably.

• Better Resources: A producer organization offers the primary farmers a wide platform to get better facilities. These employees of the Company are able to easily access government programs like MNREGA, Pension, Loan, PDS, and Scholarship.

Conclusion

A Producer Company is a community of farmers who have grouped together to improve their lives and living conditions. By establishing a farmer-producer company, the firm becomes a unique legal entity with a few tax benefits. In fact, it provides its members with a wide range of benefits, including bonuses, simple availability to low-interest loans, and much more. The key objective was to assist primary producers in gaining access to markets, credit, inputs, production technology, and other resources.

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