Farmer Producer Company (FPC) Formation, Government Schemes & Tax Benefits

Agriculture is the backbone of India’s economy, with over 14 crore farmers contributing nearly 18% to the national GDP. Despite this, small and marginal farmers often struggle with low bargaining power, limited market access, price volatility, and lack of institutional finance. To address these structural challenges, the Government of India introduced the concept of the Farmer Producer Company (FPC)—a powerful hybrid model combining corporate efficiency with cooperative principles.

A Farmer Producer Company enables farmers to collectively operate as a company, undertake value addition, share risks, and access markets and finance on better terms. Governed under Part IX-A (Sections 378A to 378ZT) of the Companies Act, 2013, inserted through the Companies (Amendment) Act, 2020, FPCs are fast emerging as a transformative tool for rural prosperity.

What is a Farmer Producer Company (FPC)?

As per Section 378A(b) of the Companies Act, 2013, a Farmer Producer Company is a body corporate formed by primary producers and having objects restricted to activities specified under Section 378C.

In simple terms, an FPC is a company:

• Owned by farmers or producer institutions
• Registered under the Companies Act, 2013
• Operating on cooperative principles
• Providing limited liability and professional management

While it functions like a private limited company, its primary objective is farmer welfare, income enhancement, and sustainable agricultural growth.

Objects of a Farmer Producer Company (Section 378C)

An FPC can undertake one or more of the following activities:

1. Production & Marketing
   • Production, harvesting, procurement, grading, pooling, handling
   • Marketing, selling, export of primary produce
2. Processing & Value Addition
   • Processing, preservation, packaging
   • Purchase, sale, supply of equipment, seeds, fertilizers, inputs
3. Import & Services
   • Import of goods or services for the benefit of members
4. Power & Infrastructure
   • Generation, transmission, and distribution of power (especially rural/agri context)
5. Insurance & Risk Management
   • Crop insurance, risk mitigation, mutual assistance for members
6. Promotion of Cooperative Principles
   • Training, capacity building, and mutual support among farmers

Distinctive Features of a Farmer Producer Company

1. Democratic Governance – One Member, One Vote

Unlike private companies where voting rights depend on shareholding, every producer-member in an FPC has only one vote, irrespective of capital contribution. This ensures equality and prevents dominance by large shareholders.

2. Membership Criteria (Section 378H)

• Only primary producers can become members
• Minimum requirement:
  • 10 individual farmers, or
  • 2 Producer Institutions

3. Share Capital Structure (Section 378J)

• Only equity shares are allowed
• Shares are transferable only to other producer members
• No public issue or external equity dilution

4. Governance & Management (Sections 378O–378V)

• Minimum 5 Directors, all of whom must be producers
• Board tenure: Maximum 1 year
• CEO and internal auditor appointment mandatory

Benefits of Farmer Producer Company

1. Better Market Access

FPCs eliminate middlemen, allowing farmers to sell directly to bulk buyers, processors, exporters, and organized retail—ensuring better price realization.

2. Lower Input Costs

Bulk procurement of seeds, fertilizers, pesticides, and machinery reduces per-unit cost by 20–30%.

3. Risk Sharing

Losses due to crop failure, price fluctuation, or logistics are shared collectively, reducing individual farmer burden.

4. Limited Liability

Members’ liability is limited to unpaid share capital, offering financial protection.

5. Access to Finance

Banks and NBFCs prefer lending to FPCs due to structured governance and government-backed guarantees.

Government Subsidies & Schemes for FPCs

A. SFAC – Equity Grant & Credit Guarantee Scheme

• Administered by: Small Farmers’ Agribusiness Consortium (SFAC)
• Equity Grant: Up to ?15 lakh (max 35% of share capital)
• Credit Guarantee: Collateral-free loans up to ?1 crore
• Risk Coverage: Up to 85% of loan amount

B. Agri-Infrastructure Fund (AIF)

• Loan up to ?2 crore per project
• 3% interest subvention
• CGTMSE credit guarantee
• For cold storage, warehouses, pack houses, etc.

C. PMFME Scheme

• 35% capital subsidy
• Maximum ?10 lakh per unit
• Support for food processing & value addition through FPCs

D. Dairy Processing & Infrastructure Development Fund (DIDF)

• Loans up to ?100 crore
• 2.5% interest subvention
• Ideal for dairy-based FPCs

Income Tax & GST Advantages

Income Tax Benefits

• Section 80P deductions on:
  • Marketing of agricultural produce (100%)
  • Cottage industry profits
• Eligible for presumptive taxation under Section 44AD
• Lower effective tax burden compared to private companies

GST & TDS Relief

• Intra-member transactions often exempt
• Many agri-produce supplies fall under GST exemption

Eligibility for Incorporation of FPC

Parameter	Legal Requirement
Members	10 individuals or 2 Producer Institutions
Directors	Minimum 5 (all producers)
Authorized Capital	?5 lakh
Paid-up Capital	?1 lakh
Objects	Strictly as per Section 378C
Registered Office	Valid Indian address

 

 

How CA Dhiraj Ostwal Can Help

At CA Dhiraj Ostwal – The Business Strategist, we provide end-to-end FPC services, including:

• Farmer Producer Company Registration
• MOA & AOA drafting as per Section 378C
• Government subsidy & scheme advisory
• Income tax, GST & ROC compliance
• Financial planning & business structuring

Whether you are searching for a CA near me, CA in Pune, or the best CA in Pune for FPC advisory, our expertise ensures smooth compliance and long-term sustainability.

Conclusion

The Farmer Producer Company is one of India’s most powerful institutional mechanisms to uplift farmers—combining collective strength, corporate discipline, and strong government support. With proper legal structuring, professional compliance, and strategic planning, an FPC can deliver 20–30% income growth, reduce operational risks, and unlock national as well as global market opportunities for farmers. If you are planning to start or manage a Farmer Producer Company, seeking professional guidance from an experienced Chartered Accountant or  CA near me is not just beneficial—it is essential to ensure smooth registration, regulatory compliance, and long-term financial success.