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Are you ready to unite our Farmers??


Farmers Producer Organisation


The economy of India is an agricultural centric economy. Around 60% of population depends on agricultural activities for their livelihood. But, the primary producers and farmers have had a long struggle in India. In order to address these problems, the Government of India set up an expert committee, led by Y.K. Alagh (an economist) to look into the matter. In the year 2002, they introduced the Producer Companies concept to the Indian economy. Since then, they have helped primary producers gain access to input, credit, production technology, market etc.

What is a Producer Company?

A producer company can be defined as a legally recognized body of farmers/ agriculturists with the aim to improve the standard of their living, and ensure a good status of their available support, incomes and profitability. Under Companies Act 1956, a Producer Company can be formed by 10 individuals (or more) or 2 institutions (or more) or by a combination of both (10 individuals and 2 institutions) having their business objective as one of the following:

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

of the primary produce of the Members or import of goods or services for their benefit.

The main objective of the producer company is to facilitate the formation of co-operative business as companies and to make it possible to convert existing co-operative business into companies.

The objects given under section 581B are as follows:

“The objects of the Producer Company shall relate to all or any of the following matters, namely: (as given in the law)

  • 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.
  • Processing including preserving, drying, distilling, brewing, canning and packaging of the produce of its Members
  • Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
  • Providing education on the mutual assistance principles, to its Members and others.
  • Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members.
  • Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communication relatable to primary produce.
  • Insurance of producers or their primary produce.
  • Promoting techniques of mutuality and mutual assistance.
  • Welfare measures or facilities for the benefit of Members as may be decided by the Board.
  • Any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.

Note: Primary produce is a produce arising from agriculture by a farmer which includes animal husbandry, floriculture, horticulture, viticulture, re-vegetation, bee raising, forestry, forest products and farming plantation products, produce of hand-loom, handicraft and other cottage industries.

Incorporation of Producer Company as per Companies Act

Pre-Incorporation Checklist

  • Any 10 or more producers (Individuals) or any 2 or more producer institutions can join together to form a production company but there is no upper limit on the number of members.
  • A minimum capital of Rs. 5,00,000 is required to incorporate a producer company.
  • There should be minimum 5 directors (maximum of 15) in a producer company.
  • It can never be converted into a public company however it can be converted into a multi-state co-operative society

The steps for the Incorporation are:-


Acquire Digital Signature Certificate (DSC) of all subscribers/directors (details provided)


Kindly suggest few names, we will check its availability in MCA and apply.


The form will be an integrated form. This form also provides for applying for allotment of DIN, if an individual who is to be appointed as a Director does not have a DPIN or DIN.


After verification of SPICe by ROC, it approves SPICe along with MOA & AOA and issues Certificate of Incorporation.



  1. DIN of each Director, if the person not having valid DIN required to give the following details to obtain DIN through Spice Form.
  2. PAN Proof of each Director & Members


  1. Identity Proof of each Director & Members (any one from the following)
  • Voters ID card. Or,
  • Or,
  • Driving License. Or,
  • Aadhaar


  1. Residential Proof of each Director &(any one from the following not older than 2 months)
  • Latest Bank statement. Or,
  • Telephone Bill. Or,
  • Mobile Bill.


  1. Authorized capital & Subscription by each subscriber.
  2. Photograph of all


  1. Other Requirements: -


Sl.No Details Required Of Director & Members
1 Mobile Number
2 E-Mail ID


  1. Address proof of registered office of Company.
  • Notarized rent agreement with rent receipt not older than one month.
  • or, Building tax receipt, if it is owned property
  • No Objection Certificate from the owner.
  • Utility Bill not older than two months – (Telephone bill/Mobile Bill/Gas Bill/Water bill)

Management of Producer Companies

The Management of the Producer Company is vested in the Board of Directors and the ownership of the Company is vested in the Shareholders/Members. The Board of Directors in a Producer Company manage and operate the day to day affairs of the Company. An additional post of a Chief Executive is provided for as a linkage in the said Producer Company.

The Chief Executive Officer shall be an ex-officio director and shall not retire by rotation.

The qualifications, experience and the terms and conditions of Chief Executive

Officer shall be such as may be determined by the Board subject to the provisions contained in the Articles. The chief executive, who shall be entrusted with substantial powers of the management, shall manage the affairs of the Producer Company but subject to the superintendence, direction and control of the Board and is accountable to the Board for the performance of the Producer Company.

Unless the articles otherwise provide to the contrary, the Chief Executive Officer need not be a Producer


Benefits for Producer Companies

The following are the benefits enjoyed by a Producer Company:-

  • The members of the producer company initially will receive the value for the produce pooled and supplied as determined by the directors. This amount will be given out later in the form of cash/ kind/ equity shares.
  • The members of the producer company will be entitled to get bonus shares in the same proportion to the shares held by them.
  • The surplus (after providing provision for payment of limited return and reserves) may be given as patronage bonus* to the members of the producer company.
  • Members of Producer Company are also eligible to get financial assistance by way of credit facility
  • IT Act does not essentially provide any special benefits or exemptions to producer companies by definition. However, the exemption for such agricultural income shall sometimes differ on the basis of the kind of agricultural activity undertakes. The Indian Income Tax Act, 1961(“the IT Act”) specifically exempts tax on agricultural income under section 10(1).

*Patronage bonus signifies a distribution of the surplus income to the members of the producer company in proportion to their respective patronage. Patronage, on contrary, is the participation by members in their business activities by using the services offered by Producer Company.

Loans and Investments

As mentioned above the Producer Company consist of individuals who are primary producers, and thus, are in need of financial support from time to time. Hence, a special provision under the Companies acts 1956 was passed for giving loans to producer members. A Producer Company can provide financial assistance to its members through:-

  • Credit facility: This is available to any member for a period not exceeding six months (such facility must be in connection with the business of the Company).
  • Loans and advances: These are provided to the producer member against security, repayable within a period not exceeding seven years from the date of disbursement of such loans or advances.
  • NABARD Loan: NABARD provides support and financial assistance to meet the needs of Producer Companies. In 2011, NABARD set up a Rs. 50 crore Producer Organisation Development Fund (PODF), out of its operating surplus.

NABARD support to Producer Organizations

 Support available under Producer Organization Development Fund

  • Institutions Eligible for Grant Assistance

1.1 Producer Companies (POs)/ Producers’ Organizations (POs), Primary Agricultural Cooperative Societies (PACS)/ Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) as Multi Service Centre (MSC), promoting/ facilitating /on-lending agencies, agribusiness incubators and other professional organizations providing capacity building/ handholding support to POs/ PACS/PCARDBs.

1.2 Subsidiaries of NABARD for supporting specific training/capacity building measures of POs (which are covered under on-lending) organized through a professional/ reputed agency.

1.3 Any other institution/ organization, as approved by NABARD, whose objectives/ activities are in conformity with the overall objectives of PODF.

  • Lending Institutions

The eligible lending institutions for the purpose of extending credit support to POs, PACS/PCARDBs as MSC would include commercial banks, regional rural banks, cooperative banks, small finance bank, subsidiaries of NABARD and such other institutions approved by NABARD.

  • Eligible Activities linked to loan

The following broad activities will be eligible for credit linked grant support to existing POs and PACS/PCARDBs as MSCs:

3.1 Producer Organizations

 3.1.1 Training/ Capacity Building

Various types of capacity building initiatives that could be supported are:

  1. Skill development in order to enable the members produce goods and commodities, both in farm and/ or off farm sector
  2. Business planning
  • Technological extension through classroom training,
  1. Exposure visits, tie up with agricultural university, expert meetings, etc.
  2. Tie-up with agribusiness incubators/ professional agencies for business facilitation/incubation services
  3. Any other capacity building initiatives, which directly benefits the POs

3.1.2 Market Linkage

  1. Setting up of marketing infrastructure facilities for sale of produce.
  2. Setting up of retail unit on the line of rural habitat and rural mart.
  • Facilitating marketing tie-ups between buyers of produce and Producers’ Organizations
  1. Forging partnerships between POs and local or large companies /retail chains, etc. towards suitable market linkages.
  2. Promoting convergence with schemes of various Ministries, Govt. Departments, Missions, etc., for creation of necessary infrastructure facilities, wherever possible.

3.1.3 Other purposes

  • DPR Preparation

Support for preparation of detailed project report (DPR) in case the project is to be sanctioned by the subsidiaries of NABARD. The grant amount would be within the overall cap of 20% of loan amount (max. Rs. 1.0 lakh or 0.5% of project cost), whichever is less.

  • Administrative Cost

The POs which directly avail credit facility from the lending institutions and without having support of any Promoting agency (or Promoting agency is not a corporate), may be given a maximum of 5% of the loan amount within the overall cap of 20%, as grant towards administrative costs. This facility is available to POs, which are less than 5 years old. In case, PO is more than 5 years old, the amount would be restricted to a 3 maximum of 2.5% of the loan amount, within the overall cap of 20%.

Other conditions are:

  • Support towards administrative cost will be extended only if it is found that the PO is facing viability problem as the administrative cost for the initial phase capitalized/ made a part of working capital and if the same is clearly justified in the sanction memorandum by the lending agency with proper financial analysis.
  • Grant towards administrative cost would be released directly to the PO and in such cases, separate incentive to promoting agency would not be available.
  • 20% of the grant amount sanctioned under administrative support will be given as advance. Thereafter, 60% would be released in 3 equal half-yearly instalments and the balance 20% will be given after satisfactory recovery of loan at the end of repayment period.
  • Incentive for the Promoting Agency

Need-based incentive can be given to the promoting agency (other than corporates), purely on a case to case basis as per the following guidelines;

  • A maximum of 5% of loan amount sanctioned (for PO less than 5 years old) and a maximum of 2.5% of sanctioned loan amount (for PO more than 5 years old) within the overall cap of 20% of loan amount, can be given as incentive to the Promoting agency. This support would be extended only if it is found that the PO is not able to compensate the Promoting agency for its efforts by bearing / incurring the administrative cost for the initial phase capitalized/ made a part of working capital.
  • 10% of the incentive will be given as advance, 70% would be given in equal instalments linked with each instalment of loan repayment and 20% balance at the end of repayment period based on satisfactory repayment.
  • The need for grant support may be clearly justified in the sanction memorandum by the lending agency with proper financial analysis.
  • Wherever this facility is given to the promoting agency, grant support towards administrative costs to the POs, would not be available.

3.2 Grant Support to PACS/ PCARDBs as MSC:

Eligible Activities The following activities can be supported under the grant component:

  • Knowledge dissemination centre – cost of one PC (need based).
  • Initial administrative cost to start new business activities i.e. reimbursing 50% of the salary of the additional staff engaged for the initial period up to 12 months (maximum 2 staff).
  • Activity specific training to farmers, if required. In case the loan is sanctioned to STCB/CCB, the concerned bank can factor service charges up to 2% from the grant component within overall limit (10% of the loan amount) of the grant.
  • Other need based trainings to the farmers for adopting best Management Practices, technology transfer, crop diversification, etc., may be supported from the existing funds like FSPF or under other developmental/ promotional programs.

4.0 Quantum of Grant support to existing POs and PACS / PCARDBs as MSC

  • The need based grant support up to a maximum of 20% of loan amount in the case of existing POs linked to availment of loan from the Lending Institutions will be considered for sanction, provided the activity considered for support, forms part of the project and its needs are clearly evaluated and justified in the loan sanction memorandum.
  • With a view to facilitating PACS / PCARDBs to become a MSC and extend a range of pre and post-harvest agro related services for the benefit of the farmer members, need based grant support not exceeding 10% of the loan amount, subject to the maximum of Rs.25 lakh per PACS/PCARDB, will be available to PACS/ PCARDBs, which are covered under refinance facility from NABARD / financed by subsidiaries of NABARD. The grant amount will not be utilized towards capital cost of the project.

5.0 Financial Support not linked to sanction of loan to Promoting Institutions/ Professional organizations / Training Establishment for building sustainable POs

(i) Grant support for specific activities not involving loan component, such as special studies, stakeholders’ Meeting/ Conference, Round Table, building the specialized capacities of existing POs, ICT interventions for improving marketing/ operational efficiency and such other critical interventions necessary for building sustainable POs.

(ii) Credit Guarantee Facility Contribution towards creation of risk fund / credit guarantee fund by NABARD for facilitating collateral free lending to POs by the subsidiaries of NABARD / Financing Banks. For this, separate guidelines have been framed by NABARD.

(iii) Any other promotional support any other promotional / developmental activity which is felt necessary for enabling a Producer Organization function in a better and profitable manner subject to specific approval of DMD / Chairman.


Way Forward

The objective of the procedure company to help farmers in producing, harvesting, pooling, handing selling, marketing, and help in exporting and importing for their benefits.

NABARD, SFAC, Government Departments, Corporates and Domestic and International Aid Offices give money related and additionally specialized help to the Producer Organization Promoting Establishment (POPI) for advancement and hand-holding of the PO.NABARD has created Producer Organization Development Fund (PODF) will be used to support Producers Organizations or Producer Companies by providing credit support, improving capacity and building market linkage. The objective of the fund is to meet end to end requirements of Producers Organization as well as to ensure their sustainability & economic viability.

The majority of farmers in India find it hard to realize the optimal value for their primary production due to lack of facilities and fragmentation of landholdings. But producer companies in India help them to utilize economies of scale to procure inputs at lowest cost rates, adopt new technologies, easy access to finance and loans, building up direct linkages to the market and develop facilities related to post-harvest processing.

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