Producer Organisation Registered as Trust
Q.1. Can a PO be registered as a Trust?
Ans:
POs can be registered as a charitable trust.
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Q.2. What is a Trust?
Ans:
In simple words, it is a transfer of property by the owner to another for the benefit of a third person along with or without himself or a declaration by the owner, to hold the property not for himself but for another or another and himself.
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Q.3. How many parties are there in creating a Trust?
Ans:
A person who creates a Trust is called a settlor, the person to whom the property is transferred on trust is called a trustee and the person for whose benefit the property is transferred is called the beneficiary.
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Q.4. How many types of Trusts are there?
Ans:
There are two types of Trusts namely public trust and private trust. Private Trusts are generally formed for charitable or religious purpose, and are not intended to do commercial activities. A public charitable Trust is one, which benefits the public at large, or some considerable portion of it. While, the income from private Trusts is available to specified beneficiaries and not to the public at large.
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Q.5. What are the eligible purposes for establishing Public Charitable Trusts?
Ans:
In general, Trusts may register for one or more of the following purposes:
a. Relief of poverty or distress
b. Education
c. Medical relief
d. Provision of facilities for recreation or other leisure-time occupation (including assistance for such provision), if the facilities are provided in the interest of social welfare and public benefit
e. The advancement of any other object of general public utility, excluding purposes which relate exclusively to religious teaching or worship.
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Q.6. What laws in India govern Public Charitable Trusts?
Ans:
No national law (except the broad principles of the India Trusts Act 1882, which governs private Trusts) governs public charitable Trusts in India, although many states (particularly Maharashtra, Gujarat, Rajasthan, and Madhya Pradesh) have Public Trusts Acts.
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Q.7. What documents are required for registration of Trust?
Ans:
a. The application for registration should be made to the official having jurisdiction over the region in which the Trust is sought to be registered.
b. The application form should be submitted, together with a copy of the Trust deed. Two other documents which should be submitted at the time of making an application for registration are affidavit and consent letter.
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Q.8. What is a Trust deed?
Ans:
The main instrument of any public charitable Trust is the Trust deed, wherein the aims and objects and mode of management (of the Trust) should be enshrined. In every Trust deed, the minimum and maximum number of Trustees has to be specified. The Trust deed should clearly spell out the aims and objects of the Trust, how the Trust should be managed, how other Trustees may be appointed or removed, etc. The Trust deed should be signed by both the settlor/s and Trustee/s in the presence of two witnesses. The Trust deed should be executed on non-judicial stamp paper, the value of which would depend on the valuation of the Trust property.
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Q.9. How many Trustees are required?
Ans:
A Trust needs a minimum of two Trustees; there is no upper limit to the number of Trustees. The Board of Management comprises of the Trustees.
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Q.10. What are the sources of funds for the Trusts?
Ans:
The Trusts can mobilise funds through following means:
a. Donations
b. Gifts
c. Grants
d. Loans
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Q.11. What books of accounts are to be maintained by the Trusts?
Ans:
The Trust has to maintain following books:
a. Cash Book
b. General Ledger
It also has to finalise its annual accounts and get it audited from a Chartered Accountant.
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Q.12.Can NGOs take up business activities?
Ans:
Section 11(4A) of the Income Tax Act, 1961 has been amended with effect from 1-4-1992. Accordingly, if the income from business is incidental to the attainment of the objects of the non-profit organisation and separate books of account are maintained by such an organisation in respect of such business, the profit is not considered for taxation. In other words, the profit is fully exempt from tax. Income from a business undertaking which is itself held under Trust for charitable purpose [under section 11(1) (a)] is also exempt. Further, an activity resulting in profit need not always be treated as income from business. Income of a non-profit organisation from letting out halls (for private or public functions), rest houses or auditoriums does not amount to business.
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Q.13.Is the income of PO registered as Trust is exempt from Income tax?
Ans:
The income of a PO registered as Trust is not exempted from the income tax, as it is not a charitable purpose. .
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Q.14. What are the advantages of a Trust?
Ans:
a. Simple process of registration.
b. Simple record-keeping and even simpler regulations.
c. Low possibility of interference by regulator.
d. Exemption from tax due to charitable nature of operations
Q.15.What are the Disadvantages of a Trust?
Ans:
a. Tax exemption extended to societies may apply to public Trusts only to the extent the Income Tax department accepts their activities as being charitable.
b. As a charitable institutional form, a Trust, in essence, is inappropriate for for-profit, financially sustainable organisations like POs;
c. No system of equity investment or ownership, thereby, making it less attractive for commercial investors;
d. Commercial investors generally regard the investments in such entities risky, primarily on account of their lack of professionalism and managerial practices, and are, therefore, reluctant to commit large volumes of funds to Trusts;
e. In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organisations registered under the Societies Registration Act and the Trust Act are considered unincorporated bodies. Therefore, according to the law, they are not allowed to collect savings from general public.
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Q.16.What are the Disadvantages of a Trust?
Ans:
a. Tax exemption extended to societies may apply to public Trusts only to the extent the Income Tax department accepts their activities as being charitable.
b. As a charitable institutional form, a Trust, in essence, is inappropriate for for-profit, financially sustainable organisations like POs;
c. No system of equity investment or ownership, thereby, making it less attractive for commercial investors;
d. Commercial investors generally regard the investments in such entities risky, primarily on account of their lack of professionalism and managerial practices, and are, therefore, reluctant to commit large volumes of funds to Trusts;
e. In accordance with Section 45S of the RBI Act, 1934, no unincorporated bodies are allowed to accept deposits from the public. Organisations registered under the Societies Registration Act and the Trust Act are considered unincorporated bodies. Therefore, according to the law, they are not allowed to collect savings from general public.
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Q.17. What are the Documents required for registration of Producer Company as a Trust?
Ans:
a. Detail of all members or Trustees of the Trust with their address and PAN
b. Certified true copies of the Trust’s Registration Certificate
c. Certified true copies of Laws & by-laws of the Trust
d. Copy of income tax registration certificate
e. Audited Balance Sheet and Income & Expenditure account with Audit Report of last 3 years
f. The original copy of Trust Deed evidencing the creation of the Trust.
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Q.18. What is a Section 8 Company?
Ans:
​Section 8 Companies are those companies which are formed for the sole purpose of promoting commerce, art, science, religion, charity or any other useful object.
a. These types of companies can be either public company or private company having a limited liability.
b. Profits earned by these companies can only be applied for promoting its objects and cannot be distributed as dividend among its members.
c. These companies can be formed with or without share capital. In case they are formed without capital, the necessary funds for carrying the business are brought in the form of donations, subscriptions from members and general public.
Monitoring by the PO, POPI and Funding Agencies
Q.19. What is monitoring?
Ans:
Monitoring can be defined as a systematic collection and analysis of information of an ongoing project. It is aimed at improving the efficiency and effectiveness of the project implementation so as to derive maximum benefits for the producers/PO.
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Q.20. What is efficiency?
Ans:
Efficiency speaks about whether the output in terms of benefits exceed the expenditure. It is the ratio of output and input. Funding agency will monitor how efficient the POPI and PO has been in implementing the project. Similarly, the PO will monitor the same at the farmers ‘producers’ level. Certain parameters like the amount spent per farmer vis-a-vis the increase in income could be one indicator of efficiency. Higher the increase in income for the same amount spent, higher is the efficiency.
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Q.21. What is effectiveness?
Ans:
Effectiveness is a measure of the extent to which the project achieved the specific objectives it set. For example, if the objective of a project is to increase the income levels of all the farmers ‘producers’ engaged with the PO, we have to measure the extent of increase in income. Similarly, if one of the objective is to increase the volume of the produce, we shall measure the extent of increase. These assessments will indicate how effective the program has been. Higher the increase in income levels, higher would be the effectiveness of the project.
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Q.22.Who will monitor the Project?
Ans:
The project is to be monitored by the PO, POPI and funding agency.
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Q.23. What is to be monitored by the PO?
Ans:
The PO has to satisfy itself that it is able to function in a sound manner for meeting the expectations of all the stakeholders. It also needs to monitor work execution at the producer level. The PO has to prepare a work schedule/time line in consultation with the POPI for procurement of inputs, execution of works, marketing of produce. Accordingly, at each stage, review and monitoring has to be done by the PO. The PO has to evolve suitable formats for collecting data for the purpose of review and monitoring.
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Q.24. What is to be monitored by the POPI?
Ans:
The POPI has to monitor the work of the PO as well as ground level achievements. It has to assess the extent of progress of the work from time to time and if required suggest suitable measures. It has to arrange to design specific formats and provide to the PO. The PO will collect data in the specified formats and submit to the POPI and to funding agency. Besides the progress, the POPI should also monitor staff availability for the project, data on individual producer, cost involved, availability of inputs, volume of produce, income, verification of the books of the PO etc., and submit detailed report to the funding agency on the agreed intervals, say monthly, bi-monthly or quarterly.
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Q.25.What is to be monitored by the Funding Agency?
Ans:
The funding agency has to evolve suitable formats for the submission of returns by PO/POPI. The funding agency has to monitor the targets vis-a-vis achievements, quality of implementation, participation of members and adequacy of training programmes. Monitoring enables the funding agency to determine whether the resources available are adequate and capacity of the human resources to implement the project is adequate. Monitoring could be at desk level (office) or field level.
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Q.26. What is desk monitoring?
Ans:
Desk monitoring includes internal review of the project by the project funding agency. It is difficult for the funding agency or the POPI to conduct field visits at frequent intervals, hence based on the returns submitted by the agency, desk review of the progress could be done. The findings could be discussed in a forum where POs and POPIs can participate. Based on the discussions, bottlenecks in the implementation could be identified, discussed and remedial measures initiated.
The POPI will undertake review based on both the reports submitted by the PO and its own staff involved in the field. The review may involve the participation of PO at agreed intervals, so as to improve the implementation of the project.
At every level, i.e., at the level of funding agency, POPI and PO, suitable formats for submission of data and suitable templates for presentations need to be evolved. The returns to be submitted by the PO should include:
a. Business projections/ assumptions submitted in proposal and comparison with actual progress
b. Disbursements – Targets and achievements
c. Repayments – Dues and their repayment and overdue amount
d. Operations of Designated Account; and Up-to-date correspondence with borrower
e. Stock statements, annual report, latest balance sheet and P&L statements (If the review is after annual closing)
f. Any pending compliance with terms and conditions After obtaining the returns POPI and funding agency should:
a. Review progress
b. Identify problems in planning and/or implementation
c. If required make adjustments in release of funds to producers organization
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Q.27. Whether the desk level monitoring gives any ‘Early Warning Signals’? What are they?
Ans:
One of the objectives of desk monitoring is to identify the ‘Early Warning Signals’. There could be deviation in the implementation plan, violation of terms and conditions, shortfall in achievement, overdue amounts at the level of PO, operation of designated accounts, inadequacy of suitable field staff, reduced participation of PO or POPI or the producers, which are to be closely monitored and if required, an immediate field level monitoring needs to be taken up.
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Q.28. What is Field Level Monitoring?
Ans:
Field level monitoring involves collection of actual data at the field level. It involves collection of ‘elaborate’ data from the field level by interacting with the farmers/producers and other stake holders. Specific proforma on the pattern of the format suggested in Chapter 9 could be evolved for collection of data or depending upon the requirement suitable proforma need to be designed for collection of data.
Often, field level monitoring data on the following aspects is also important as these factors provide leads to the success or failure of the project:
a. Availability of inputs to members – timeliness
b. Technical support available to members – targeted Vs. actual frequency
c. Storage and processing arrangement – planned Vs. achievement
d. Marketing tie-up – planned benefits Vs. actual benefits
e. Targeted Productivity / Income growth Vs. Actual achievements
f. Members views regarding the services provided by PO and its efficacy
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Q.29. How to Plan Monitoring of Projects?
Ans:
Monitoring should be a part of planning process. It is desirable to frame monitoring parameters in the beginning of planning process itself. These parameters should be in line with the objectives of the project. Therefore, the funding agency, POPI and the PO have to begin gathering information about performance in relation to targets from the beginning itself. In fact, the first information gathering should take place when the project is planned.
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Q.30. What indicators can we suggest?
Ans:
Indicators are measurable or tangible signs that the project or the PO has to achieve. For example, some indicators are increase in productivity, production, income at the level of producers, improvement in the economy of the area leading to establishment of micro enterprises, increase in employment opportunities, community empowerment in terms of arresting migration, improvement in health and hygiene, infrastructure, women participation, women empowerment etc. Through the indicators one can ask and answer questions such as:
Who? – Who are befitting from the project? How many? - Number of people benefitted. How much? - What is the extent of benefit?
Some examples of Indicators could be as follows:
Please note that these are illustrative and are related to agriculture projects – they may or may not suit the needs of other Non-farm based projects.
Economic Development Indicators
a. Average size of land holding
b. Average size of irrigated area
c. Major crops with area and yield
d. Items of investment
e. Market price of the produce
f. Marketing facility
g. Rural Connectivity- connectivity with marketing centers
h. Power availability in hours per day
i. Average annual household income
j. Increase in the income level
k. New micro enterprises / Small businesses
l. Increase in number of people employed
m. Average weekly/monthly wages
n. Employment / Unemployment, by age group, occupation, season and gender
o. Default rates on loans
p. Percentage of people below the poverty line Social Development Indicators
a. Particpation of women in the project, federations/ PO
b. Infant mortality rates
c. Literacy rates, by age and gender
d. Retention rate in school
e. School completion rates
f. Number and causes of farmer’s/producer’s suicides
g. Housing, Drinking Water, Sanitation and Dwellings with electricity
h. Number of homeless
Institutional/ Organisational Development Indicators
a. Number of Producers actively particpating in the project
b. Attendance in the meetings
c. Attendence in the trainings
d. No of SHGs / SHGs linked to credit
e. Primary Agri-Co-operative Society, Other cooperatives, like weavers, fishermen, SC and ST Cooperative Societies, Other institutions available in the project area
f. Structure of different insitutions
g. Participation rate in elections, by age and gender
h. Participation in public meetings, by age and gender
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Q.31. What is the Methodology for monitoring?
Ans:
Primary data collection - It is done at the farmer’s/producer’s level
a. Through a survey; or
b. Through Focused Group Discussion
Secondary Data - The returns submitted by the PO, data available from the Government Departments and also published data from other projects.
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Q.32. What are the methods of sampling?
Ans:
There are 3 sampling techniques: random sampling, stratified sampling and cluster sampling Random sampling: Sampling of households on random basis Stratified sampling: The producers are categorized into different strata like big, medium and small. Data are collected from each strata in a specified proportion i.e., say, every fifth producer’s household data from the big producers, every third producer’s house hold data from small producers every second house hold data from the very small producers’ category Cluster sampling: In this case, data of only those producers households will be collected who are in the cluster for a specified period
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Q.33. What are the methods of sampling?
Ans:
There are 3 sampling techniques: random sampling, stratified sampling and cluster sampling Random sampling: Sampling of households on random basis Stratified sampling: The producers are categorized into different strata like big, medium and small. Data are collected from each strata in a specified proportion i.e., say, every fifth producer’s household data from the big producers, every third producer’s house hold data from small producers every second house hold data from the very small producers’ category Cluster sampling: In this case, data of only those producers households will be collected who are in the cluster for a specified period
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Concept of Producer Organisation
Q.34.What is a Producer Organisation (PO)?
Ans:
A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen. A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members. In some forms like producer companies, institutions of primary producers can also become member of PO.
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Q.35.What is the need for PO?
Ans:
The main aim of PO is to ensure better income for the producers through an organization of their own. Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale. Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays. Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.
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Q.36.What is a “Farmers Producer Organisation” (FPO)?
Ans:
It is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.
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Q.37.Can there be a PO for non-farmers?
Ans:
Yes. The PO is an organization of the primary producers. If the produce in question is a nonfarm item (for example, handloom or handicraft), then the PO will be that of non-farmers. The objective of the PO is to ensure better income realization to its members (who are producers) through aggregation and, if feasible, value addition.
Q.38.Can there be a PO for non-farmers?
Ans:
Yes. The PO is an organization of the primary producers. If the produce in question is a nonfarm item (for example, handloom or handicraft), then the PO will be that of non-farmers. The objective of the PO is to ensure better income realization to its members (who are producers) through aggregation and, if feasible, value addition.
Q.39.What are the essential features of a PO?
Ans:
a. It is formed by a group of producers for either farm or non-farm activities.
b. It is a registered body and a legal entity.
c. Producers are shareholders in the organization.
d. It deals with business activities related to the primary produce/product.
e. It works for the benefit of the member producers.
f. A part of the profit is shared amongst the producers.
g. Rest of the surplus is added to its owned funds for business expansion.
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Q.40.Who owns the PO?
Ans:
The ownership of the PO is with its members. It is an organization of the producers, by the producers and for the producers. One or more institutions and/or individuals may have promoted the PO by way of assisting in mobilization, registration, business planning and operations. However, ownership control is always with members and management is through the representatives of the members.
Q.41.Who can promote a PO?
Ans:
Any individual or institution can promote a PO. Individual persons or institutions may promote PO using their own resources out of goodwill or with the noble objective of socioeconomic development of producers. If, however, the facilitating agency wishes to seek financial and other support, then they have to meet the requirements of the donor/financing agency.
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Q.42.Who provides support for promotion of PO?
Ans:
NABARD, SFAC, Government Departments, Corporates and Domestic & International Aid Agencies provide financial and/or technical support to the Producer Organisation Promoting Institution (POPI) for promotion and hand-holding of the PO. Each agency has its own criteria for selecting the project/promoting institution to support.
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Q.43.Can an NGO promote PO?
Ans:
Yes, it can. The NGO may be a non-profit organization, but not the PO. The NGO can promote PO which will provide better income to the members. Sharing of profit among members is an important objective of the PO.
Q.44. What are the different legal forms of PO?
Ans:
Producer Organisation can be registered under any of the following legal provisions:
a. Cooperative Societies Act/ Autonomous or Mutually Aided Cooperative Societies Act of the respective State
b. Multi-State Cooperative Society Act, 2002
c. Producer Company under Section 581(C) of Indian Companies Act, 1956, as amended in 2013
d. Section 25 Company of Indian Companies Act, 1956, as amended as Section 8 in 2013
e. Societies registered under Society Registration Act, 1860
f. Public Trusts registered under Indian Trusts Act, 1882.
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Q.45.Is registration mandatory for a PO?
Ans:
It is preferable for the PO to work as a legal entity. Only such an entity can enter into legally valid contracts including mobilization of funds from other institutions. There are specific Acts under which the PO could be registered. It is also possible for a PO to migrate from one legal form to another. While choosing a legal form, the following factors may be kept in view:
a. Primary producers should benefit from the surplus generated by the PO.
b. Process of Registration should not be too demanding in terms of time and resources.
c. The legal form needs to fit into its business needs, organizational priorities, social capital and management capacity.
Q.46. What are the important activities of a PO?
Ans:
The primary producers have skill and expertise in producing. However, they generally need support for marketing of what they produce. The PO will basically bridge this gap. The PO will take over the responsibility of any one or more activities in the value chain of the produce right from procurement of raw material to delivery of the final product at the ultimate consumers’ doorstep. In brief, the PO could undertake the following activities:
a. Procurement of inputs
b. Disseminating market information
c. Dissemination of technology and innovations
d. Facilitating finance for inputs
e. Aggregation and storage of produce
f. Primary processing like drying, cleaning and grading
g. Brand building, Packaging, Labeling and Standardization
h. Quality control
i. Marketing to institutional buyers
j. Participation in commodity exchanges
k. Export
Q.47. How would a PO help the members?
Ans:
By aggregating the demand for inputs, the PO can buy in bulk, thus procuring at cheaper price compared to individual purchase. Besides, by transporting in bulk, cost of transportation is reduced. Thus reducing the overall cost of production. Similarly, the PO may aggregate the produce of all members and market in bulk, thus, fetching better price per unit of produce. The PO can also provide market information to the producers to enable them hold on to their produce till the market price become favourable. All these interventions will result in more income to the primary producers
Q.48. What are other benefits for the members of a PO (other than better income)?
Ans:
A PO is a collective of farmers (and non-farmers) who are the primary producers of a product (an agricultural produce or a manufactured product). It, therefore, can work as a platform to facilitate better access to government services, like PDS, MNREGA, Scholarships and Pensions, etc. It can liaison with the Government Departments for convergence of programmes, like drinking water, sanitation, health and hygiene.
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Q.49. Who can become member of a PO?
Ans:
PO is an organization of the producers, specifically the primary producers. All primary producers residing in the relevant geography, and producing the same or similar produce, for which the PO has been formed, can become member of the PO. Membership is voluntary. The procedure for obtaining PO membership depends on the bye-laws of the PO. The founder-members are those who were there at the time of formation of the PO. Other members join the PO later. However, all members enjoy equal rights. A primary producer can become member of a PO by submitting an application and a nominal membership fee. Some POs also charge annual membership renewal fee. Although primary producers obtain membership of PO voluntarily, the promoting institution should make efforts to bring all producers into the PO, especially the small producers.
Q.50. Who is a primary producer?
Ans:
Any person engaged in any activity connected with or related to any primary produce will be treated as producer. Primary produce means the produce of farmers from agriculture and allied activities or produce of persons engaged in handloom, handicrafts and other cottage industries, including any by-product and product resulting from ancillary activities thereof. Primary produce also includes any activity intended to increase the production or quality of aforementioned products or activities. Persons engaged in agriculture, horticulture, animal husbandry, fishery, sericulture, apiary, handloom, handicrafts, etc., can become members of appropriate PO. Persons engaged in collection of minor forest produce are also eligible for membership of PO although they gather these from forests and strictly are not producers.
Q.51.Can a person become member of more than one PO?
Ans:
Family is the unit of production in rural areas. Benefits from the PO will accrue to members in proportion to the volume/value of produce given to the PO. Therefore, one person from a family can provide the whole produce of the family to the PO and get the same amount of benefit as multiple members providing the same volume/value. If however there are two different POs in the vicinity, each for a different type of produce, say vegetables and milk, one person can become member of both these POs, if the family produces both milk and vegetables
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Q.52. Who will manage the PO?
Ans:
Each PO will have an elected Board of Management / Board of Directors as per the bye-laws. The Board can engage professionals to manage its affairs. In the initial years, professional and managerial assistance is usually extended by the POPI. As the leaders of the PO gain experience, they should take over the affairs of the PO completely.
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Q.53. Can a PO engage professionals to manage its business?
Ans:
All legal forms provide for engaging professional and other employees by the PO. Such persons should be paid out of the income of the PO. As far as possible, the income should come from value addition to the produce and not from price paid to members. If members get price less than the market, they will gradually move away from the PO. The professionals and other employees should be paid at par with the prevailing market to ensure that they remain for long with the PO. Compensation will also depend upon the business plan, ensuring a positive surplus.
Q.54. Can a PO procure produce from non-members?
Ans:
The objective of the PO is to ensure better income to the member-producers through aggregation and value addition. Therefore, procurement from non-members is usually not undertaken. However, market exigencies at times may necessitate such procurement. There should be provision in the by-laws of a PO to enable procurement from non-members during such exigencies.
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Q.55. Can a PO sell the produce in the commodity exchanges?
Ans:
Yes, it can. The PO can aggregate the produce of its members, and sell it using the commodity exchanges. The produce needs to meet the quality standards specified by the commodity exchanges, and be stored scientifically in approved warehouses. The PO can become a member of the Commodity Exchanges to do trading directly, or else it can sell through the exchange-approved brokers.
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Q.56.Can a PO export the produce of its members?
Ans:
Yes, it can. For exporting agricultural produce, all the members will have to follow Good Agricultural Practices (GAP). There are also other specific quality parameters that the importing countries impose for different produce which need to be complied with. For non-farm produce (handloom, handicrafts etc.), there are other quality specifications and other stipulations against using child labour, etc.
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Q.57.What important factors should be kept in view while facilitating formation of PO?
Ans:
Aggregating producers into collectives is one of the best mechanism to improve access of small producers to investment, technology and market. The facilitating agency should however keep the following factors in view:
a. Types of small scale producers in the target area, volume of production, socioeconomic status, marketing arrangement
b. Sufficient demand in the existing market to absorb the additional production without significantly affecting the prices
c. Willingness of producers to invest and adopt new technology, if identified, to increase productivity or quality of produce
d. Challenges in the market chain and market environment
e. Vulnerability of the market to shocks, trends and seasonality
f. Previous experience of collective action (of any kind) in the community
g. Key commodities, processed products or semi-finished goods demanded by major retailers or processing companies in the surrounding areas/districts
h. Support from Government Departments, NGOs, specialist support agencies and private companies for enterprise development
i. Incentives for members (also disincentives) for joining the PO.
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Q.58.At what stage of PO, should the member-producers be actively involved?
Ans:
POs that are formed primarily in response to external initiative often struggle to develop into sustainable businesses. Therefore, the members should be actively involved from the very beginning. The facilitating agency should facilitate a process that results in producers taking the initiative to set up the PO and let the members drive the process. Activities like awareness creation, identification of potential members should precede the actual formation formalities.
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Q.59. What is the optimal size of a Producer Organisation (PO) and what are the parameters?
Ans:
a. It is desirable to have a Farmer Producer Organisation (FPO) for farmers having their lands in contiguous micro-watersheds to address the issues relating to sustainability.
b. The productive land under an FPO may be around 4000 ha.
c. The PO may cover generally one or two contiguous Gram Panchayats for ease of management.
d. The number of farmer producers that need to be covered may be around 700 to 1000.
e. The cost of managing a Producer Organisation of the above nature may be around Rs. 2 lakh per month or Rs. 24 lakh per annum.
f. The total value of the produce of the farmers/non-farmers handled by the Producer Organisation may be around Rs. 2.5 crore, assuming that approximately 10% of the total turnover of the PO may be reasonably spent towards cost of management.
g. Further, the markets selected for the Producer Organisation for selling their produce may be within 200 KM to make their marketing activities viable
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Q.60. What are the design variables / factors governing the size of optimal size of a PO ensuring that the PO will be sustainable?
Ans:
a. A Farmers Producer Organisation is to be designed in such a way to cover all the lands that fall in one or two micro watersheds.
b. The sustainability of the farmers of the micro watersheds is already in existence with various types of productive activities of the farmers to take care of risk factors, like variations in the market prices of various produce, continuity of income etc. which include sustainable agricultural practices.
c. The secret to sustainability of a PO depends on comprehensive engagement of the PO with their members throughout the year.
d. The design variables for a PO are mainly size, scope, technology, ownership of resources, management and purpose. These variables need to be aligned to meet the sustainability requirements indicated in the earlier two points.
e. The size of the PO should be small to be able to be managed by the local talent available in the area of the PO.
f. The scope of the PO should be defined in such a way that there shall be good number of crops to be grown to maintain the soil health, support for allied activities like dairy, nutritional security of the local people and to mitigate risk.
g. The technology adopted by the PO should be such that majority of the local people or members of the families of the PO should be able to adopt to it and work with it with minimal training, effectively.
h. The management of the PO should take into account the incubation of the local youth in such a way that in a few years’ time, say in 3-7 years, local youth should be able to take over and manage the PO effectively.
i. The purpose of the PO at all times must be to serve the larger needs of the community and the ownership of the PO always should rest with all its members.
Q.61. What should be the minimum and maximum number of members in a PO?
Ans:
The minimum number of membership depends on the legal form of the PO. For example, 10 or more primary producers can incorporate a Producer Company under Section 581(C) of Indian Companies Act 1956 (same provisions are retained in the 2013 Act). There is no restriction on the maximum number of membership. Generally, the PO will require certain minimum scale of operation to remain in business. This operation scale/volume is known as break-even level. Studies have shown that a PO will require about 700 to 1000 active producers as members for sustainable operation.
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Q.62. Who can become a Producer Organisation Promoting Institution (POPI)?
Ans:
An NGO, a bank branch, a Government Department, a Cooperative Society or any Association or Federation can become a POPI. Basically, the POPI needs to be a legal entity so that it can enter into legally valid contracts with other institutions including the PO which they seek to promote. Support is available for POPIs from SFAC and NABARD for meeting part of the recurring cost incurred for promotion of the PO based on individual project considerations. Details are available in the website of NABARD, SFAC and Ministry of Agriculture, Government of India.
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Q.63. What are the roles and responsibilities of POPI?
Ans:
he primary responsibility of the POPI is to see that the PO reaches sustainable level of business and the staff of the PO acquire technical and managerial capability to run the business successfully when the POPI withdraws its support. The principal role of the POPI is, therefore, to build the capabilities of the Staff and Management of the PO through training and continuous hand-holding. The broad responsibilities of a POPI are indicated below:
a. Cluster identification
b. Diagnostic and Feasibility Studies
c. Business Planning
d. Mobilisation of Producers and Registration/Incorporation of PO
e. Resource Mobilisation
f. Development of Management Systems and Procedures
g. Business Operations
h. Assessment and Audit
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Q.64. What critical areas could be covered during training/ capacity building of BOD of POs/ other staff?
Ans:
The critical areas to be covered under training /capacity building of Board of Directors of a PO and staff of PO are as under:
a. Vision and Mission: The vision and mission of the PO is very important for the Board Directors as well as other staff. Creating value to the members by solving existing problems in the value chain, marketing and reasonable share of price realisation in the rupee spent by the consumer on the members’ produce, should be the focus. All other activities / services should be to engage the members comprehensively throughout the year and to reduce their expenditures and increase their welfare.
b. Good Governance: Governance which is responsible, transparent and keeping the interest of the members of the PO above all the considerations is a must for the success of a PO. Various aspects of good governance to be covered.
c. Sustainability: Another most important aspect to be covered in the training is that the PO should not venture into unsustainable ventures which may create short term profits and harm the long term interests / welfare of the community.
d. Networking: The success of a PO depends on the networking and continuous interactions with various stakeholders. The BODs and staff should have the understanding and importance of networking to obtain maximum benefits to their members under convergence mode.
e. Social Capital: The training should concentrate on making the PO relevant to the members at all times, which creates social capital and trust.
f. Statutory Requirements: The BoD and staff should have an understanding of the constitution of the PO, statutory provisions under which it is formed, various other requirements under the statute and compliance thereof.
g. Business Planning: The training should cover aspects of business planning to maximise benefits as well as to reduce the business risks. The aspects like DPR preparation, Balance Sheet Analysis, simple financial ratios for profitability, ratios that are seen by banks for financing, need to be covered.
h. Financial Management: The training also should cover management of the finances like maintenance of books of account, Management Information System, share capital, borrowings, savings, loans, cash flow, funds flow, receivables management, payables management, investments etc.
i. Monitoring: The BOD module should have various aspects of monitoring to ensure that the business goals are achieved and the business is carried out in a professional manner.
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Q.65. What support is available for PO from SFAC?
Ans:
Mainly two types of support is available to the POs from the Small Farmers Agribusiness Consortium (SFAC). Details are available at www.sfacindia.com.
a. SFAC operates a Credit Guarantee Fund to mitigate credit risks of financial institutions which lend to the Farmers Producer Companies (registered as Producer Company under Part IX-A of Companies Act) without collateral. This helps the FPCs (one form of PO) to access credit from mainstream financial institutions for establishing and operating businesses.
b. SFAC provides matching equity grant up to Rs. 10 lakh to the FPCs to enhance borrowing power, and thus enables the entities to access bank finance.
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Q.66. What type of financial support is available for PO from NABARD?
Ans:
NABARD provides financial support to the POs only through project mode through two financial products. A fund titled “Producers Organisation Development Fund” has been created by NABARD towards this end. Details are available at www.nabard.org (Financing and Supporting Producer Organisations).
a. Lending to POs for contribution towards share capital on matching basis (1:1 ratio) to enable the PO to access higher credit from banks. This is a loan without collateral which will have to be repaid by the PO after specified time. The maximum amount of such assistance is Rs. 25 lakh per PO with a cap of Rs. 25,000 per member.
b. Credit support against collateral security for business operations. Also, credit support without collateral security for business operations to FPCs which are eligible under Credit Guarantee scheme of SFAC. The credit product can be customised as per requirement of the business. In general, credit support is available for business activities and creation of assets like building, machinery, equipment, specially designed vehicles for transportation etc. and/or working capital requirements including administrative and other recurring costs connected with the project as composite loan. Capital expenditures like purchase of land, vehicles for general transportation & personal use, etc., will not be considered for support.
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Q.67. Are there other support available to the PO from NABARD?
Ans:
NABARD also provides technical, managerial and financial support for hand-holding, capacity building and market intervention efforts of the PO. Such support is available in the form of grant, loans, or a combination of the two based on the need of the situation, and is available only to those POs which avail credit from NABARD. Capacity building support will not be given in isolation in general. It would essentially be a part of the overall project having loan component. Grant, if any, will be maximum 20% of the loan amount. Capacity building should broadly cover any activity relating to functioning of a producer organization. Some such activities are given below:
a. Skill development in order to enable members to improve production/productivity
b. Business planning
c. Technological extension through classroom training
d. Exposure visits, agricultural university tie ups, expert meetings, etc.
e. Any other capacity building initiative which directly benefits the P.O.
f. NABARD through its Farm Sector Promotion Fund (FSPF) is providing financial assistance to various institutions including Farmers clubs for:
i. facilitating adoption of appropriate technologies by the agriculturists through the provision of training cum exposure visits, organizing for demonstrations on the use of the various technologies
ii. organizing financial credit counselling
iii. providing support for financial literacy
iv. Dissemination of appropriate technologies to the various people in need thereof
v. Promotion of Producer Organisation
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Q.68. How can NABARD help the POs in marketing their produce?
Ans:
NABARD also provides support to the POs to access markets for their produce. Some of these activities are as below:
a. Credit and/or grant support for setting up of marketing infrastructure facilities for sale of produce.
b. Support for marketing through rural haat and rural mart which had already been established through NABARD support.
c. NABARD may facilitate tie-ups with buyers for Producers Organization's produce.
d. Through existing schemes of National Horticulture Mission and Ministry of Agriculture, NABARD may support creation of infrastructure wherever possible.
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Q.69.What support is available to the POPIs from NABARD?
Ans:
NABARD provides incentives for the POPI for taking care of the PO within the overall ceiling of 20% grant support to the PO. The incentive scheme is as below:
a. Max 5% of loan amount for POs up to 5 years old
b. Max 2.5% of loan amount for POs more than 5 years old
c. The incentive is given 10% in advance, 70% linked to timely repayment of instalments and rest 20% at the end subject to satisfactory repayment.
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Q.70. What support is available for PO from Government of India?
Ans:
Government of India provides budgetary support to SFAC for its Equity Grant and Credit Guarantee Fund Scheme for the Farmer Producer Company. For creation of storage and other agricultural marketing infrastructure under the Integrated Scheme for Agricultural Marketing (Ministry of Agriculture, Government of India), FPOs are eligible to get higher subsidies. Details are available at www.agmarknet.nic.in. CAPART, Ministry of Rural Development also operates schemes through which support for some activities can be obtained by the PO. Details are available at www.capart.nic.in. Training institutions supported by the Ministry or Rural Development, Government of India (www. rural.nic.in) also impart skill and capacity building training which can be made use of by the PO for its members.
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Financial Management
Q.71.What is share capital?
Ans:
Share capital or equity means the total of the payments made to the company/society by all the shareholders Members (farmer producers/ institutions of farmer producers) on their shares. It represents a form of member commitment to the group and it defines each member's stake in the group. In a Producer Company it shall consist of only equity shares.
Q.72. What are the special aspects of equity share capital in case of POs?
Ans:
a. While finalizing the cost of share and the number of shares per member, the paying capacity of the economically deprived shareholders should also be considered.
b. There is no bar on the number of shares per member in the company Act.
c. It is suggested to have equal number of shares among the members to maintain a balance in the power structure of the PC.
d. The norms for distribution of share should be mentioned in the Articles of Association.
e. The eligible community members may apply through a membership application form (specified in the Act.) to the BoD. The General Body (GB) is the final authority to approve or reject the membership application.
f. The shareholders finalize the authorized capital of the company and the cost of each share.
g. Transfer of Share capital is limited to members on par value in a PC
h. The amount collected through shareholders could be used for registration fees and other processing related expenditures like fees for Company secretary, stationary, travel etc. In the books of accounts it can be shown as loan taken from the share capital. Once the company mobilises resources through business it can be repaid.
i. Minimum number of producers required to form a PC is 10, while there is no limit for maximum number of members and it can be increased as per feasibility and need.
j. There cannot be any government or private equity stake in the producer companies, which implies that PC cannot become a public or deemed public limited company
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Q.73. What is the authorised capital?
Ans:
Capital that a company/organisation has been authorized to raise by way of equity shares through the Articles of Association/Memorandum of Association. The minimum authorized capital at the time of incorporation of Producer Company should be Rs.5 lakh.
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Q.74. What is the issued capital?
Ans:
The share capital that has been issued to the members in their names is called issued capital.
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Q.75. What is the process for increasing the Authorised capital?
Ans:
a. The authorised capital could be increased keeping in view the requirements of the Company, by creation of new shares by passing an ordinary resolution in general meeting. The resolution cannot compel the existing shareholders to take the additional shares.
b. The alteration does not affect the company’s issued capital.
c. The Articles of Association of the company should confer this power, if not it should be suitably amended.
d. The changes will cost registration fee and notice of increase in share capital should be filed in Form No. 5 within 30 days of passing resolution for increasing the share capital along with the filing fee.
e. Amendment should be noted in every copy of Memorandum and Articles.
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Q.76. What is the procedure for Consolidation/Division/Cancellation of Share into Larger/Smaller Amount?
Ans:
a. For the consolidation/division/cancellation of shares, at first, it should be considered and approved by the Board in its meeting. In the same meeting the date/time for the general meeting and the notice of the meeting containing the necessary resolutions and explanatory statements may also be finalised and approved.
b. At the general meeting:
- The necessary resolution should be passed,
- Form No. 23 has to be filed within 30 days of passing the resolutions along with the filing fees and enclosures as prescribed in Schedule X to the Act with the Registrar of Companies.
c. In case of consolidation/division, the Members must be issued new certificates in lieu of the existing share certificates, by making appropriate entries in the register of members. Whereas, in cancellation of shares, a notice to the Registrar of Companies in Form No. 5, along with the fees as prescribed in Schedule X to the Act.
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Q.77. What is the procedure for Diminution of Capital?
Ans:
a. The Company may diminish the amount of its authorised or nominal (but not issued) capital by cancelling shares which have not been issued or agreed to be issued, if its Articles authorise such cancellation.
b. The diminution may be affected and it must be given to the Registrar within 30 days thereafter in Form No. 5.
c. It must be noted that the resolution does affect the Company from subsequently increasing its nominal capital by passing an ordinary resolution in general meeting.
d. In case of diminution, the cancelled shares that have never been issued or allotted to anyone are extinguished.
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Q.78. What is the procedure for issue of Bonus Shares?
Ans:
a. Any Producer Company may, upon recommendation of the Board and passing of resolution in the general meeting, issue bonus shares by capitalization of amounts from general reserves in proportion to the shares held by the Members on the date of the issue of such shares.
b. Proposed Bonus Shares should be well within the authorised capital of the Company.
c. If not, necessary steps should be taken to increase the authorised capital, by amending the capital clause of the Memorandum of Association.
d. A resolution should be passed in the general meeting duly convened and filed with the Registrar within 30 days together with requisite documents and fees.
e. Where the Company has availed of any loan facility from term lending institutions, prior permission is to be obtained from the institution as per the term lending agreement.
f. Form 2 should be filed with the Registrar within 30 days also with requisite fees.
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Q.79. Whether a Producer Company can give loans to its members?
Ans:
The Board may, subject to provisions in articles, provide financial assistance to the members of the Producers company by way of:
a. Credit facility, to any member, in connection with the business of the Company, for a period not exceeding six months.
b. Loans and advances, against security specified in articles to any Member, repayable within a period exceeding three months but not exceeding seven years from the date of disbursement of such loans or advances.
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Q.80. Whether a registered society can give loan to its members?
Ans:
A registered society can give loans only to its members. However, it can give loan to another registered society with permission of the Registrar. [Section 29(1)]. A society with unlimited liability cannot lend money on security of movable property withoutsanction of the Registrar. [Section 29(2)]. State Government, by issuing a general or special order, can prohibit or restrict lending of money on mortgage of immovable property by any registered society or class of registered society.
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Q.81. Whether a Producer Company can invest in Other Companies?
Ans:
The general reserves of any Producer Company should be invested to secure the highest returns available from approved securities, fixed deposits, units and bonds issued by the Government or co-operative or scheduled bank or in any other prescribed mode.
a. A Producer Company may acquire the shares of another Producer Company.
b. By passing a special resolution, it can also subscribe to the share capital, or enter into any agreement or other arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner with anybody corporate, for the purpose of promoting the objectives of the Producer Company.
c. Any Producer Company, either by itself or together with its subsidiaries, may invest, by way of subscription, purchase or otherwise, shares in any other company, other than a Producer Company, for an amount not exceeding thirty per cent of the aggregate of its paid-up capital and free reserves. However, with the prior approval of the Central Government by passing special resolution, a Producer Company can invest even in excess of 30% of the aggregate of its paid up capital and free reserves.
d. All investments by a Producer Company may be made if such investments are consistent with the objectives of the Producer Company.
e. The Producer Company, at its registered office, shall maintain a register containing particulars of all the investments, showing the names of the companies in which shares
Q.82. Whether it is necessary to maintain general and other reserves?
Ans:
a. Every Producer Company shall maintain a general reserve in every financial year, in addition to any reserve maintained by it, as may be specified in articles.
b. In a case where the Producer Company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be shared amongst the members in proportion to their patronage in the business of that company in that year.
Q.83. Whether it is necessary to maintain the Books of Accounts by a PC?
Ans:
a. Each Company, has to maintain ‘books of account’ for all the transactions.
b. Chief Executive Officer (CEO), every Director of the company (in absence of CEO), and every officer and other employee and agent of the company is responsible for keeping of ‘Books of Accounts’.
c. Proper ‘books of account’ of Producer Company should be kept at its registered office with respect to:
i. all sums of money received and expended by the Producer Company and the matters in respect of which the receipts and expenditure take place;
ii. all sales and purchase of goods by the Producer Company; the instruments of liability executed by or on behalf of the Producer Company;
iii. the assets and liabilities of the Producer Company;
d. in case of a Producer Company engaged in production, processing and manufacturing, the particulars relating to utilization of materials or labour or other items of costs.
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Q.84. What is a Voucher?
Ans:
A voucher should be prepared for each transaction and supporting documents (in original) should be attached to it, such as invoice, challan, bills, purchase orders etc.).
a. All the vouchers should be approved by the authorised official.
b. There are 3 types of vouchers to be maintained viz.; (1) Cash Voucher for cash transaction, (2) Bank Voucher for bank transaction and (3) Journal Voucher for internal adjustments.
c. Vouchers should be serially numbered along with the ongoing financial year and filed in a sequential order along with supporting documents.
d. Separate files should be maintained for Cash, Bank and Journal vouchers.
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Q.85. Whether it is necessary to prepare Balance Sheet and Profit and Loss account?
Ans:
Yes. Each Producer Company/organisation should prepare a balance-sheet and profit and loss account (along with needed annexure) of each financial year, which will be laid before the shareholders at the AGM of the company.
a. The balance sheet and ‘profit and loss’ account should be signed by two Directors (on behalf of BoD) and CEO of the company.
b. Every producer company has to file its Directors’ Report, the audited balance sheet and profit and loss account along with the proceedings and the annual return with the Registrar within 60 days from the day on which the balance sheet and profit and loss account were laid before the members at the annual general meeting.
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Q.86. What is the delegation of Financial Powers?
Ans:
A. To CEO
a. He can withdraw cash up to the limit of Rs. 5000/ (Rs. Five thousand) from the Company’s bank account;
b. The cash payment against any purchase of goods or services in any circumstances shall be limited to Rs. 500/- (Rs. Five Hundred Only).
c. All payments above Rs. 500/- (Rs. Five Hundred Only) shall be paid by cheque only. In case of non-acceptance of cheque by any institution or individual, cash payment only with the approval of a committee comprising of 3 directors.
d. Purchase of all consumable goods and services for use by the Company for its business operations or managing its affairs up to Rs. 5000/- (Rs. Five Thousand Only) following stipulated purchase procedure.
B. Advance from the Company
a. The work advance may be taken from the office by staff for the following purpose:
· Travel expenses and Daily Allowance(s);
· Procurement of official item(s);
· Any other purpose(s).
b. Scrutinise advance account of staff by concerned employee to ensure that previous outstanding balance(s) has been cleared;
c. Ensure proper approval of departmental head on the payment voucher or application for advance, before fresh advance is given to any staff.
C. Accounting for Advance Taken from the Company
a. Before request for advance is granted, ensure that the proposed expense is within the limits of Plan & Budget for the relevant year;
b. Ensure that purpose of work advance is mentioned on the voucher;
c. Also ensure that advance should be sanctioned only when the previous drawings are settled and it is urgent.
d. Ensure that accounts are settled within 15 days or immediately after the work is completed whichever is earlier.
Q.87. Whether it is compulsory to get the Audit of accounts?
Ans:
It is compulsory to conduct Internal Audit in the case of Producer Company/Organisation. Internal audit of its accounts should be carried out, at such interval and in such manner as may be specified in its Articles of Association, by a chartered accountant.
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Producer Organisation Registered as Non-Profit Society
Q.88. What is a society?
Ans:
A society may be defined as a company or association of persons (generally unincorporated) united together by mutual consent to deliberate, determine and act jointly for some common purpose.
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Q.89. Who can form a society?
Ans:
As per Societies Registration Act, 1860, a society can be formed by minimum seven persons eligible to enter into contract. Individuals (excluding minors but including foreigners), partnership firms, companies and registered societies are eligible to form a society.
Q.90. For what purposes a society can be registered?
Ans:
The society can be registered for any of the following purposes:
a. Grant of charitable assistance
b. Creation of military orphan fund
c. Promotion of literature, science and fine arts, etc.
d. Some states like Delhi and Gujarat also allow welfare and other purposes as eligible purpose.
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Q.91. Whether the certificate of registration issued to society is valid for life time?
Ans:
The certificate issued by the Registrar of Societies or any other competent authority is valid for a particular period and then it is to be renewed. For example, registration of society is valid for a period of 5 years in UP.
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Q.92.What are the documents required for inception of the society?
Ans:
A society for its inception requires following documents: a. Memorandum of Association b. Rules and Regulations.
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Q.93. What is a memorandum of association?
Ans:
Memorandum of Association is the charter of the society. It describes the objects of society’s existence and its operations..
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Q.94. What does Memorandum of association of a society contain?
Ans:
The memorandum of association shall contain the following things:
a. the name of the society;
b. the object of the society;
c. the names, addresses, and occupations of the governors, council, directors, committee, or other governing body to whom, by the rules of the society, the management of its affairs is entrusted.
A copy of the rules and regulations of the society, certified to be a correct copy by not less than three of the members of the governing body, shall be filed with the memorandum of association.
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Q.95. What is the purpose of rules and regulation of the society?
Ans:
The rules and regulations are framed to guide the members of the governing body and to regulate the functions of the society and its internal management.
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Q.96. What does the rules and regulations of a society contain?
Ans:
The rules and regulations generally contain
a. The conditions of admission of members.
b. The liability of members for fines, forfeitures under certain circumstances;
c. The termination of membership by resignation or expulsion or upon death;
d. The appointment and removal of trustees and their powers;
e. The appointment and removal of the members on the governing body
f. The requirement as to notice, quorum etc., for holding meetings and passing resolutions;
g. The investment of funds, keeping of accounts and for audit of accounts;
h. The manner of altering the objects and rules;
i. The matters to be provided in bye-laws;
j. The dissolution of society and the manner of utilizing the property upon dissolution
k. Such other matters as may be thought expedient with reference to the nature and objects of the society.
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Q.97. What does by laws of the societies provide for?
Ans:
The bye-laws of the society are subsidiary to the rules and regulations and usually provide for:
a. The business hours of the society
b. The activities of the society in furtherance of its objects;
c. The matters relating to enrolment of members, their removal, rights, applications and privileges,
d. The manner in which the society shall transact its business;
e. The mode of custody, application and investment of the funds of the society and the extent and conditions of such investment;
f. The arrangements for day-to-day transactions, the expenditure to be incurred therefor, the staff to be employed and condition of services of such employees;
g. The conduct of the general meetings and the procedure therefor;
h. Such other matters incidental to the organization and working of the society and the management of its business, as may be deemed necessary.
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Q.98. Who can be a member of the society?
Ans:
A person shall be eligible to become a member of Society, if he,—
a. is 21 years of age on the date of admission;
b. subscribes to the aims and objects of the Society;
c. has deposited the membership fee as prescribed in the Bye-laws of the Society; and
d. is not an insolvent or of unsound mind.
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Q.99. When a person ceases to remain a member of society?
Ans:
A person ceases to remain the member of the society:
a. Upon resigning and acceptance of his resignation
b. Upon death
c. On non – payment of dues ( period as prescribed in different state Acts)
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Q.100. What is the function of Governing body of Society?
Ans:
The Governing body of the society is the body by whatever name it is called, to which the management of its affairs are entrusted by the rules and regulations of the society.
Q.101. What are the sources of funds for the societies?
Ans:
The societies can mobilise funds through following means:
a. Donations
b. Gifts
c. Grants
d. Loans
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Q.102. What books of accounts are to be maintained by the society?
Ans:
The society has to maintain following books:
a. Cash Book
b. General Ledger
It also has to finalise its annual accounts and get it audited from a Chartered Accountant.
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Producer Organisation Registered as Producer Company
Q.103. What is a Producer Company?
Ans:
"Producer Company" means a body corporate
a. registered under amended Companies Act, 1956,
b. the terms of section 465 of the Companies Act, 2013, the provisions of the Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a producer company
c. the objects of producer company shall confirm to the activities included in 581B of the Companies Act, 1956
Q.104. Who are members of a Producer Company and their position in a company?
Ans:
a. In a producer company, only primary producers or producer organisations can become members
b. Membership is acquired by purchase of shares in a Producer Company
c. A Producer Company can act only through its members
d. Members create the company
e. Members can also wind up the company
f. Members act through their General Meetings
Q.105. What is the minimum share capital for a producer company?
Ans:
a. The minimum Authorized Capital of Producer Company is Rs.5 lakh.
b. The Authorized Capital of the company can be more than Rs. 5 lakh as indicated in the Memorandum of Association.
c. The authorized share capital should be sufficient for carrying out the objects mentioned in the memorandum.
d. The authorized share capital should be realistic.
e. The minimum paid up capital for Producer Company is Rs. 1 Lakh.
Q.106. What are the legal formalities for formation of a Producer Company?
Ans:
a. Obtain Digital Signature of the Nominated Director, who will be affixing DSC on all the documents to be submitted to RoC online, on behalf of the company.
b. Chose maximum 4 names for the Producer Company in order of preference.
c. Apply for the name availability in Form – INC1.
d. Once name is available, a letter is received from RoC indicating it. The documents to be submitted to ROC thereafter are:
e. Articles of Association (AoA).
f. Memorandum of Association (MoA).
g. Form No. INC-22 for Registered Office.
h. Form No. DIR-12 for Directors’ Appointment.
i. Apply on-line for Directors Identification Number (DIN) for the proposed Directors.
j. INC-7 – Affidavits by subscribers to Memorandum of Association to be filed, in case, if they have signed in Hindi.
k. Power of Attorney in favour of a consultant to authorize him to make necessary changes in MoA and AoA as required by the RoC.
l. Submit the documents to RoC for Incorporation of Producer Company.
m. Obtain Certificate of Commencement in INC-21
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Q.107. What is Digital Signature Certificate?
Ans:
a. Digital Signature Certificates are equivalent to the paper certificates e.g. Driving License, Pass port etc. The certificates serve as a proof of identity of a person for a particular purpose. DSCs are used by the people for filing various important documents on-line.
b. All documents need to be signed digitally and submitted online to the RoC as per MCA21 e-Governance programme and in accordance with Information Technology Act 2000.
c. Digital Signature Certificate (DSC) is to be obtained for signing documents of the PC for submission online by the authorized person of the PC.
d. Form for obtaining Digital Signature Certificate (DSC) is available from the Certifying Agencies of Certifying Authorities.
e. After filling the form, it is to be submitted to Certifying Authorities.
f. The DSCs are issued with one or two year validity normally and can be renewed thereafter.
g. There are three classes of DSCs namely Class 1, Class 2 and Class 3. Class -2 DSC need to be used by an individual for filing various forms for Producer Company or to file an Income Tax Return.
h. The cost of obtaining Class -2 (DSC) is market driven and depends on the Certification Agency and it costs Rs. 1000/- for one year and Rs. 1200/- for two years, as quoted by M/s Varacity an agent of M/s Safescript and (n)Code Solutions which are Certifying Authorities.
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Q.108. What is a Certifying Authority (CA) for Digital Signature Certificate and list the CAs?
Ans:
The IT Act provides for the Controller of Certifying Authorities (CCA) to license and regulate the working of Certifying Authorities. The Certifying Authorities (CAs) issue Digital Signature Certificates for electronic authentication of users. At present the following organisations are authorized as Certifying Authorities under CCA, Government of India.
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a. NIC (For Government Departments / Undertakings only) (http://nicca.nic.in)
b. (n)Code Solutions CA(GNFC) (www.ncodesolutions.com)
c. Safescript (www.safescrypt.com)
d. TCS (www.tcs-ca.tcs.co.in)
e. MTNL (www.mtnltrustline.com)
f. Customs & Central Exercise (www.icert.gov.in)
g. e-Mudhra (www.e-mudhra.com)
h. IDRBT
​
Q.109. What is Director Identification Number (DIN)?
Ans:
a. Ministry of Company Affairs (MCA) maintains the details of all the Directors of all the companies with a unique Identification Number which is called Director Identification Number (DIN).
b. Every director needs to have a DIN form MCA. DIN form is available on the website of MCA. Before formation of the PC all the Directors / Chairman should have DIN.
c. If any Director got a DIN, the same need not be obtained afresh.
d. MCA on online application provides DIN at a cost of Rs. 1000/- against identity proof. For identity only PAN Card, Voter ID Card, Passport or Driving License number is accepted.
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Q.110. How the company is named?
Ans:
a. Every Producer Company name should be unique.
b. Every Producer Company name should end with “Producer Company Limited” which indicates its status as Producer Company.
c. The Producer Company may be named in such a way that it inspires the entire membership and creates a sense of ownership for its members and is to be indicative of the objectives of the company.
d. It is a better idea not to use the name of the Producer Organization Promoting Institution (POPI) directly or indirectly in the Producer Company name. Using POPI name will not help in creating ownership in the minds of the members.
e. Apply for the name online to MCA in e-form INC-1.
f. A fee of Rs. 1000/- is to be paid along with e-from INC-1.
g. Digital Signature of the applicant for the name is to be attached.
h. If the name is not available, RoC will inform about the same. This necessitates submission of fresh set of names in the same application.
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Q.111. What is Memorandum of Association (MoA)?
Ans:
a. MoA is a document that indicates what activities the company can undertake. b. MoA needs to be prepared carefully to cover all the activities planned for the present and future of the Producer Company in a broad manner. c. MoA should be prepared and printed on both sides of the paper. d. It is to be subscribed/signed by the requisite number of subscribers/promoters in his/her own hand along with details like father’s name, occupation, address and the number of shares subscribed for, by them. e. MoA needs to be dated after the date of stamping of the Articles of Association (AoA).
Q.112. What is Articles of Association (AoA)?
Ans:
a. AoA is a document that specifies the rules for a company's operations.
b. It defines the company's purpose and lays out how tasks are to be accomplished within the organization.
c. It includes the process for appointing Directors and how financial records are handled.
d. AoA should be prepared and printed on both sides of the paper.
e. It is to be subscribed/signed by the requisite number of subscribers/promoters in his/her own hand along with details like father’s name, occupation, address and the number of shares subscribed for.
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Q.113. What is Articles of Association (AoA)?
Ans:
a. Copy of the letter of RoC confirming the availability of name.
b. MoA and AoA duly stamped and signed.
c. Form INC-22 indicating the Registered Office of the company with full address.
d. Form DIR-12 in duplicate with details about the directors of the company.
e. Form INC-7 on stamp paper declaring compliance with all and incidental matters regarding formation of companies.
f. Consent of each of the Directors along with form DIR-12.
g. An affidavit indicating that MoA is fully understood by the subscribers/signees, if they sign in Hindi.
h. Power of Attorney to the agent who is dealing with the RoC to make corrections in MoA and AoA, if necessary, to the satisfaction of the RoC.
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Q.114.What is Certificate of Commencement (CoC)?
Ans:
a. CoC is issued by the RoC as a conclusive proof of formation of a Producer Company.
b. Producer Company is effective and comes into existence from the date mentioned in the Certificate of Registration granted by the RoC.
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Q.115. What is the legal status of a Producer Company?
Ans:
a. On incorporation and from the date mentioned in the Certificate of Commencement (CoC), the company becomes a person in the eyes of law.
b. It has perpetual succession, meaning members may come and go, but it will go on until it is wound up by following the process of law.
c. It has a common seal, which is affixed on all the documents executed on behalf of the company in the presence of a director and signed by the authorized signatory or signatories.
d. It is empowered to hold the properties in its own name and has its own right.
e. It can enter into contracts in its own name.
f. It can sue others and can be sued by others.
g. In simple terms it has contractual capacity in the eyes of law just like any other person who has contractual capacity.
Q.116. How much time is taken for registration of a Producer Company?
Ans:
It may take anything between 2 to 6 months.
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Q.117. How much it costs for registration of a Producer Company?
Ans:
a. It is estimated that it may cost Rs. 40,000/- approximately. b. It depends on the fee charged by CA, Company Secretary and Authorized Agents etc.
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Q.118. Who will bear the cost of the registration of a Producer Company?
Ans:
a. Initially the promoters of the company will bear the cost of registration of the company.
b. The promoters are generally the Producer Organisation Promoting Institution (POPI) or the initial directors.
Q.119. Whether Producer Company reimburses the cost of registration to the promoters?
Ans:
The cost of registration may be reimbursed to the promoters duly approved by its general body in its first meeting with a resolution passed to that effect.
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Q.120. Who will run a Producer Company?
Ans:
The company is run / governed by members/shareholders, Board of Directors and Office bearers.
Q.121.Who are Board of Directors (BoD)?
Ans:
a. Board of Directors are elected by the members.
b. BoD may act collectively only through meetings.
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Q.122. Who are Office Bearers?
Ans:
c. An office bearer is a person who is selected / appointed to look after the dayto-day affairs of the Producer Company.
d. The office bearers include Chief Executive officer (CEO), Accountant, godown keeper, etc.
e. The company pays salaries to all the office bearers.
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Q.123. How to become a member of a Producer Company?
Ans:
a. By subscribing to the MoA.
b. By an agreement in writing to become a member and with an entry in the register
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Q.124. What is the authority of the members on the company?
Ans:
Members exert authority on the company only through General Meetings. The General Meetings alone can do the following:
a. Approve Budget and adopt Annual Accounts of the Company
b. Approve the quantum of withheld price
c. Approve the patronage bonus
d. Authorize the issue of bonus shares
e. Appoint an auditor
f. Declare a dividend and decide on the distribution of patronage
g. Amend the MoA and AoA
h. Specify the conditions and limits of loans that may be given by the Board to any Director
i. Approve any act or any other matter that is specifically reserved in the articles for decision for members
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Q.125. What are the rights of the members?
Ans:
a. to transfer one’s shares b. to vote on resolutions at meetings of the Company c. to requisition an extraordinary general meeting of the Company or to make a joint requisitions d. to receive notice of a general meeting; to attend and speak in a general meeting e. to move amendments to resolutions proposed at meetings f. in case the member is a corporate body, to appoint a representative to attend and vote at general meetings on its behalf g. to require the company to circulate its resolutions 25 h. to enjoy the profits of the company in the form of dividends i. to elect directors and to participate in the management of the company through them j. to apply to the Company Law Board in case of oppression k. to apply to the Company Law Board in case of mismanagement l. to apply to the court for winding up of the company m. to share the surplus on winding up n. to have a share certificate issued to him/her in respect of his/her shares
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Q.126. What are the rights of the members?
Ans:
a. to transfer one’s shares
b. to vote on resolutions at meetings of the Company
c. to requisition an extraordinary general meeting of the Company or to make a joint requisitions
d. to receive notice of a general meeting; to attend and speak in a general meeting
e. to move amendments to resolutions proposed at meetings
f. in case the member is a corporate body, to appoint a representative to attend and vote at general meetings on its behalf
g. to require the company to circulate its resolutions
h. to enjoy the profits of the company in the form of dividends
i. to elect directors and to participate in the management of the company through them
j. to apply to the Company Law Board in case of oppression
k. to apply to the Company Law Board in case of mismanagement
l. to apply to the court for winding up of the company
m. to share the surplus on winding up
n. to have a share certificate issued to him/her in respect of his/her shares
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Q.127. What are the voting rights of a member?
Ans:
a. In case of Producer Company comprising only of individual members or combination of individual members and producer institutions, then the voting rights shall be based on one vote per member.
b. In case of Producer Company consisting only of producer institutions, then the voting rights shall be based on the participation in the business of the Producer Company in the previous year.
c. The Producer Company can restrict the voting rights to only its active members provided it is authorized by its Articles of Association
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Q.128.How a member is ceased of his/her membership?
Ans:
d. By completely transferring his/her shares
e. By forfeiting his/her shares
f. By a valid surrender
g. By death
h. By the company selling his shares in exercise of its right under its Articles of Association
i. By order of a court or any other competent authority attaching and selling the shares, in satisfaction of a decree or claim
j. By the official assignee disclaiming his shares, on his adjudication as an insolvent
k. By rescission of contract of membership, on the grounds of misrepresentation or mistake
Q.129.How many Board of Directors are permitted in a Producer Company?
Ans:
d.A producer company can have a minimum of 5 Directors and not more than 15 Directors.
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Q.130.What are the powers and functions of the Board?
Ans:
a. The Board is responsible for formulating, supervising and monitoring the performance of the Producer Company.
b. It should not act on the areas reserved for General Body.
c. It should not exercise executive powers.
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Q.131.What are the matters, which the Board generally deals with?
Ans:
a. Determination of the dividend payable;
b. Determination of the quantum of withheld price and recommended patronage to be approved at General Body Meeting;
c. Admission of new members;
d. Pursue and formulate the organizational policy, objectives, establish long term and annual objectives, and approve corporate strategies and financial plans;
e. Appointment of Chief Executive Officer (CEO) and other officers, as may be specified in the AoA. Control CEO and other officers by exercising superintendence and direction;
f. To sanction any loan or advance to members, who are not directors or their relatives, in the course of its business;
g. Ensure proper books are maintained;
h. Acquire or dispose property of the company in the day-to-day affairs of the business;
i. Investment of the funds in the day to day business;
j. Ensure annual accounts are placed before the Annual General Meeting (AGM) with the auditor’s report.
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Q.132. Who appoints the Board of Directors?
Ans:
a. The names of the first Board of Directors are indicated in the MoA
b. The AGM elects the directors in the first meeting and thereafter whenever required
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Q.133. What is the period of tenure for the Directors?
Ans:
The tenure of a director appointed by AGM is minimum one year and a maximum of 5 years.
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Q.134.Who is an expert Director?
Ans:
a. Any person who is having expert knowledge in running the Producer Company can be co-opted by the Board as an expert director.
b. Expert directors will not have right to vote in the election of Chairman.
c. Expert directors should not exceed one fifth of the total number of directors.
d. Expert director can become a Chairman.
Q.135.Who is an alternate Director?
Ans:
If a regular director is out of the State in which the meetings are held, for a period of 3 months or more, another person can be appointed as director in his place, who is called an alternate director. The tenure of the alternate director must be not less than 3 months. The moment the original director returns, the alternate Director ceases to be the Director.
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Q.136.How the Directors are remunerated?
Ans:
Generally the Directors are reimbursed the cash expenditure incurred by them for attending the board meetings like expenditure on travel, lodging and food. However, if any Director, spends more time for the company, provisions may be made for providing fixed allowances like communication allowance, fixed daily allowance etc.
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Q.137. What should be the qualification of a Director?
Ans:
Only individuals can be directors of a company. No educational qualification or minimum holding of shares is required. Hence any individual can become a Director as per Section 465(1) of Companies Act, 2013.
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Q.138. What is the procedure for removing directors?
Ans:
a. The shareholder directors of the company can be removed before the tenure by passing an ordinary resolution at a general body meeting.
b. The Director ceases his post on completion of the tenure which ranges from 1 to 5 years.
Q.139.What is the procedure for resignation of Director/s?
Ans:
a. Any Director can resign from his post by giving intimation to the company in a manner indicated in the AoA.
b. If AoA do not indicate any procedure for resignation, then a Director can resign by giving reasonable notice. The resignation is deemed as accepted the moment the notice is given.
c. In case of Chief Executive Officer or Managing Director or whole-time Director, mere notice of resignation will not be deemed as resignation. Their resignation will be governed by the terms and conditions of the appointment. In this case acceptance of the resignation is required to get relieved of their duties.
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Q.140.What is the accountability of a Director in a Producer Company?
Ans:
a. A director or an officer who fails to provide information to a member or a person, for whom he is required to provide information about the Producer Company, the Director is liable for imprisonment for a term extending to 6 months and with a fine equivalent to 5% of turnover of the company in the previous year
b. If there is a failure for convening an Annual General Meeting or other general meetings, the Director shall be punishable with a fine extended up to Rs. 1 lakh. In case the default continues, an additional fine extended up to Rs. 10,000/- per day.
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Q.141. Who appoints the CEO and what are his/her functions?
Ans:
a. A full time CEO is appointed by the Board of Directors as per AoA
b. The CEO is to be other than a member
c. The CEO is accountable to both the Board of Directors and members
Q.142. What are the functions of a CEO?
Ans:
The functions of a CEO include the following:
a. Do administrative acts of routine nature including managing the day-to-day affairs of the Company;
b. operate bank accounts or authorize any person, subject to the general or special approval of the Board;
c. make arrangements for safe custody of cash and other assets of the Company;
d. sign business related documents as may be ‘authorized by the Board’ for and on behalf of the Producer Company;
e. maintain proper books of account, prepare annual accounts, place the audited accounts before the Board and in the Annual General Meeting of the Members;
f. furnish the members with periodic information to appraise them of the operation and functions of the Company;
g. make appointments to posts in accordance with the powers delegated to him by the Board;
h. assist the Board in the formation of goals, objectives, strategies, plans and policies;
i. advise the Board with respect to legal and regulatory matters concerning the proposed and ongoing activities and take necessary action in respect thereof;
j. exercise the powers as may be necessary in the ordinary course of business;
k. discharge such other functions, and exercise such other powers, as may be delegated by the Board;
l. to provide timely information to the Members and Board of Directors for scheduled company meetings or emergency or short notice meetings.
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Q.143.What is the minimum qualification for appointment of a CEO in a producer company?
Ans:
a. As indicated in AoA, the qualifications, experience and the terms and conditions of service of the Chief Executive shall be such as may be determined by the Board.
b. The Chief Executive Officer (CEO) of a Producer Company shall be a full time employee of the company.
c. The CEO shall be appointed by the Board of Directors of the company amongst persons other than members.
d. The CEO shall be ex-officio director of the Board and such director shall not retire by rotation
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Q.144.What are the advantages of a Producer Company?
Ans:
a. A Producer Company is a hybrid between a Private Limited Company and a Cooperative Society, thus enjoying the benefits of professional management of a Private Limited Company as well as mutual benefits derived from a Cooperative Society.
b. Ownership and membership of a Producer Company is held only by “primary producers” or “Producer Institution/s” and member’s equity cannot be traded. Hence, nobody can take over the company or deprive the primary producers of their organisation.
c. The clauses of Private Limited Company shall be applicable to the producer companies except the clauses specified in Producer Company Act from 581-A to 581-ZL which make it different from a normal private or limited company (refer the Producer Company Act for details). This enables a professional framework for a Producer Company.
d. The liability of the members is limited to the unpaid amount of the shares held by them. Hence, the private assets of the members are safe from company losses.
e. The minimum paid-up Capital being Rs. 1 Lakh and minimum authorized capital being Rs.5 lakh for a PC, it easy to mobilise the small amount.
f. Minimum number of producers required to form a PC is 10 while there is no limit for maximum number of members and the membership can be increased as per feasibility and need. This helps even 10 individuals start a Producer Company which is easy.
g. There cannot be any government or private equity stake in the Producer Companies, which implies that PC cannot become a public or deemed public limited company. Hence, any Government or other corporate threat is non-existent in professional functioning of the company.
h. The area of operation for a PC is the entire country giving flexibility to expand and do business in a free and professional manner.
Q.145. What are the limitations of a Producer Company?
Ans:
a. A Producer Company is to be registered as per the Part IXA of Indian Companies Act 1956, Reference Section 465(1) of the Companies Act 2013. It is a must to register the company and non-registered entities are not given the benefit of the Act.
b. Registration of a Producer Company is a bit difficult, generally requiring the services of a consultant.
c. The registration of a Producer Company is a sometimes time consuming process.
d. The members cannot transfer their shares freely.
e. Getting a professional CEO at an affordable cost is little difficult.
f. The Producer Company should follow the statutory provisions of Indian Companies Act and should comply with the mandatory prescriptions of the Act without fail which is little difficult for the illiterate members to understand.
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Producer Organisation Registered as Section 8 of The Companies Act, 2013
Q.146.What advantages do the Producers Organisations get on registering themselves as Section 8 companies?
Ans:
Section 8 Company is preferred as compared to Trust, society because of following reasons:
a. Section 8 Company has uniform law across the country.
b. Section 8 Companies are also preferred, as compared to others, in foreign funding because of stringent disclosure norms and regulatory provisions under Companies Act, 1956 and Foreign Contribution Regulation Act.
c. The Central and State Governmentsrecognised Section 8 Company in various Schemes implemented by them.
d. A wide range of activities can be taken up.
e. Exempted from using the word Private Limited or Limited
f. Members/Owners easily transfer ownership in shares and interest by the manner provided by the Article of Association.
g. The continuation of an incorporated Section 8 Company is unaffected by the death of any of its owner(s) or the transfer of its shares to a new entity/person
Q.147. What are the disadvantages of a Section 8 Company?
Ans:
The followings are the disadvantages of Section 8 Company:-
a. Profits cannot be distributed as dividends to members and it will be applied for promoting its objects only.
b. Alteration in the objects clause of the Company requires prior approval of Central Government.
c. In comparison to Society and Trust, registration of Section 8 Company and complying with other terms & conditions are costly. Also, if there is any breach of law, a Section 8 Company has to bear penalties and fines.
d. Section 8 Companies also fall under the definition of Company under Income tax. Therefore, same rate of tax is applicable to Section 8 Companies which is applicable to the normal profit making company.
e. Generally, complete closure or winding of Section 8 Companies takes around 1-2 years and involves compliance of various formalities. Moreover, in certain cases, it requires the approval from the High Court.
Q.148. What are the essential conditions for PO to get registered as Section 8 Company?
Ans:
For registration of Section 8 Company, the following conditions must be fulfilled:-
a. Minimum 2 Shareholders (for Private Limited Co.) and 7 Shareholders (for Public Limited Co.)
b. Minimum 2 Directors (for Private Limited Co.) and 3 Directors (for Public Limited Co.)
c. DIN (Director Identification Number) is required for every director.
d. At least one Director of the PO should obtain Digital Signature.
e. Memorandum of Association
f. Articles of Association
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Q.149. What documents are required to be filed for obtaining Certificate of Commencement as a company?
Ans:
For Grant of License the following documents are also required:-
a. Three Copies of Memorandum of Association and Articles of Association
b. Three Copies of list of names, descriptions, addresses of promoters/directors
c. Three Copies of Statement showing estimates of future income and expenditure
d. Three Copies of Statement giving in brief description of work done or proposed to be carried out after incorporation
e. Three Copies of Statement specifying the grounds on which the application is made
f. Declarations by all the directors of the company as per the prescribed proforma
g. Declaration by Chartered Accountant or advocate of Supreme Court or of a High Court,
an attorney or pleader entitled to appear before High Court or a Company Secretary that the Memorandum & Articles of Association have been drawn up in accordance with the provisions of the Act.
h. Documentary Evidence in support of addresses of promoters
i. All due diligence documents shall be notarized/attested by a gazetted officer or CA/CS/CWA
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Q.150. What is Director Identification Number (DIN)?
Ans:
Any individual who intends to become a Director of a company shall have Director Identification Number (DIN) which is mandatory for e-filing of forms and documents with the Registrar of Companies and PAN cannot be used as an alternative to DIN. DIN is also mandatory for directors of Indian companies who are not citizens of India. But, DIN is not mandatory for directors of foreign company having branch offices in India. Further, only a single DIN is required for an individual, irrespective of the number of directorship held by him/her. Documents and information required for getting DIN (Director Identification Number) of Director:-
a. Self-attested PAN Card of Director
b. Self-attested address proof of Director
c. Affidavit
d. Self-attested colour photo of Director
e. e-mail id of Director
f. Mobile No. of Director
g. Educational qualification of Director
h. Current occupation of Director
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Q.151. What is Director Identification Number (DIN)?
Ans:
Any individual who intends to become a Director of a company shall have Director Identification Number (DIN) which is mandatory for e-filing of forms and documents with the Registrar of Companies and PAN cannot be used as an alternative to DIN. DIN is also mandatory for directors of Indian companies who are not citizens of India. But, DIN is not mandatory for directors of foreign company having branch offices in India. Further, only a single DIN is required for an individual, irrespective of the number of directorship held by him/her. Documents and information required for getting DIN (Director Identification Number) of Director:-
a. Self-attested PAN Card of Director
b. Self-attested address proof of Director
c. Affidavit
d. Self-attested colour photo of Director
e. e-mail id of Director
f. Mobile No. of Director
g. Educational qualification of Director
h. Current occupation of Director
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Q.152.What is a Digital Signature or a Digital Signature Certificate?
Ans:
Physical documents are signed manually. Similarly, electronic documents, for example eforms, are required to be signed digitally using a Digital Signature Certificate. Documents required for getting Digital Signature or Digital Signature Certificate are as follows:-
a. Self-attested PAN Card of Director
b. Self-attested address proof of Director
c. One colour photo
Q.153.What is Memorandum of Association of a Producer Company?
Ans:
Memorandum of Association is a Charter document by which a company is registered. It contains the name of the company, state in which registered office of the company is situated, objects of the Company, authorised capital and capital subscribed by the shareholders of the Company.
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Q.154. What is Article of Association of a Producer Company?
Ans:
Article of Association is the bye laws for the internal management of a company and defines the relationship between members and directors.
Q.155. What is the Registered Office of a Producer Company?
Ans:
Registered office is the principal place of business and is used for all official communication of the company. The registered office does not have to be necessarily owned by the company, it may be in a rented premises. Also, a company can change its registered office any time after following specific procedures as mentioned in the Companies Act, 1956 within the same state or in a different state from the state in which it was originally registered.
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Q.156.After registering a Producer Organisation as Section 8 Company whether any more registrations are required?
Ans:
If a Section 8 Company gets registered under section 12A and 80G of Income Tax Act, it enjoys the following benefits:-
a. Registration under Section 12A of Income Tax Act:- Income of Section 8 Company is exempt if it is registered under Section 12A of Income Tax Act. This is a one-time registration.
b. Registration under Section 80G of Income Tax Act: Donors can claim tax deductions for donations to the Producer Organisation, if it is registered under Section 80G of Income Tax Act. This needs to be renewed after expiry of the validity period.
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Producer Organisations as Cooperative Society
Q.157. What are the legal provisions for registering a PO be as a Cooperative Society?
Ans:
Producer Organisations can also be formed and registered as a Cooperative Society under the following Acts:
a) Cooperative Societies’ Act of Individual State
b) Autonomous Cooperative Societies’ Act existing in many States (minimal State intervention)
c) Multi State Cooperative Societies’ Act, which is a Central Act
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Q.158. What are Statement of Objects for Cooperative Societies?
Ans:
a) The Cooperative Society can be established for purpose/s of credit, production or distribution
b) Unlimited society is not the best form of cooperation for agricultural commodities. However, such societies do exist and are working in several States. Unlimited society can distribute profits with the permission of State Government
Q.159.How are Societies registered?
Ans:
a) A society which has as its object the promotion of economic interests of its members in accordance with cooperative principles can be registered as a Society
b) Similarly, a society established with the object of facilitating operation of such a society can also be registered under the Act
c) A registered society can be member of another society, but liability of such other society must be limited, unless State Government directs otherwise
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Q.160. Who can form a society?
Ans:
a) A society can be formed with at least 10 members of age above 18
b) If object of the society is creation of funds to be lent to its members, all the members must be residing in the same town, village or group of villages or all members should be of same tribe, class, caste or occupation, unless Registrar otherwise directs
c) The provision of minimum 10 members or residing in same town / village, etc. is not applicable, if a registered society is a member of another society
d) The last word in the name of society should be ‘Limited’, if the society is registered with limited liability
e) Registrar is empowered to decide whether a person is agriculturist or non-agriculturist or whether she / he is resident of the same town / village, etc. and his decision would be final
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Q.161. What are the rights and liabilities of members?
Ans:
a) A society can be formed with at least 10 members of age above 18 b) If object of the society is creation of funds to be lent to its members, all the members must be residing in the same town, village or group of villages or all members should be of same tribe, class, caste or occupation, unless Registrar otherwise directs c) The provision of minimum 10 members or residing in same town / village, etc. is not applicable, if a registered society is a member of another society d) The last word in the name of society should be ‘Limited’, if the society is registered with limited liability e) Registrar is empowered to decide whether a person is agriculturist or non-agriculturist or whether she / he is resident of the same town / village, etc. and his decision would be final
Q.162. How will the society be managed?
Ans:
a) Each society will be managed by a Committee or the Governing Body
b) Officers of a society include a Chairman, Secretary, Treasurer, Members of Committee or other persons empowered under rules or bye-laws to give directions in regard to business of society
Q.163. Is the registered society a body corporate?
Ans:
a) A registered cooperative society is a body corporate with perpetual succession and common seal (just like a company)
b) It can hold property, enter in to contracts, institute and defend suit and other legal proceedings, and
c) Do all things necessary for the purpose of its constitution
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Q.164. Are there any restriction on loans by the Society?
Ans:
a)· A registered society can give loans only to its members; however, it can give loan to another registered society with permission of the Registrar
· A society with unlimited liability cannot lend money on security of movable property without sanction of the Registrar
· State Government by issuing a general order, can prohibit or restrict lending of money on mortgage of immovable property by any registered society or class of registered society
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Q.165. Who will inspect the affairs of society?
Ans:
a. Registrar can hold an enquiry or direct some person authorised by him to hold enquiry in following circumstances:
i) Of his own motion
ii) Request of the Collector
iii) Application by majority of Committee Members of society or
iv) At least one-third of members of society
b. All officers and members shall furnish necessary information to the Registrar or to a person authorised by him
Q.166. Can a society be dissolved?
Ans:
a) Registrar, after inspection or inquiry, or on application received from 75% of members of society, may cancel the registration of society, if in his opinion, the society should be dissolved
b) Any member can appeal against the order of the Registrar within two months to the State Government or other revenue authority authorised by the State Government
c) If no appeal is filed within two months, the order of dissolution shall become effective d) If appeal is filed, the order will become effective only after it is confirmed by appellate authority
Q.167. Are provisions of Companies Act, applicable to a registered cooperative society?
Ans:
The provisions of Companies Act are not applicable to a registered cooperative society
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Q.168. What role State Government / State Cooperative Bank can play in developing PACS as PO to serve as a Multi Service Centre (MSC)?
Ans:
PACS can either use their own sources or avail credit facilities from StCB or CCB. In such a case, the grant support from PODF is not available. CCB or RRB can avail of refinance facilities as per the usual terms & conditions. Regional Office will keep a track of the facilities being developed at PACS level and monitor the same at regular interval. In cases where loan is from the StCB or DCCB, or own resources are being used and financial support from NABARD is not being taken, NABARD could guide in project formulation, if necessary, so as to enable best utilisation of funds. Financial support to PACS acting as a MSC / PO is also available through Producer Organisation Development Fund (PODF) of NABARD.
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Business Planning
Q.169. What is the concept of value chain development?
Ans:
Value chain comprises all the activities at different yet interlinked stages that add value to a particular product through the different phases of production, including procurement of raw materials and other inputs. Usually, there are many actors along the value chain for producing, transforming/processing and bringing goods and services to end-consumers through a series of sequential activities. When the produce originates from agriculture, we call it an agricultural value chain. Let us take the case of milk. For producing milk, the farmer requires milch cattle, feed and fodder and shed for the cattle. After milking (once/twice a day), the milk is taken to the collection centre where the volume, fat and SNF contents are measured. From the collection centre, milk is transported to the Bulk Milk Chilling Unit, where the milk is filtered and chilled to keep it fresh. From there, it goes to Milk Processing Plant, where bacteria is de-activated through pasteurization, and different types of milk and milk products are made. Liquid milk (whole milk, toned milk, vitamin-A fortified milk) is made into packets and sent to wholesalers. The retailers get milk packets from the wholesalers and sell to the consumers through milk booth and/or through door delivery. Processed milk products like butter, curd, cheese, ghee etc., also reach the end-consumers from the processing facility thorough the same channel. The whole chain from purchasing of milch cattle to delivery of milk packets to consumers is the value chain for milk. Though value is added at each stage, major addition takes place through Milk Chilling, Pasteurisation and Processing. All the persons/agencies undertaking one or more activities in this chain are called the actors in the value chain.
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Q.170. What is value chain intervention?
Ans:
The PO may choose to undertake any one or more than one activity of the value chain. In the example above, the PO may manufacture/procure concentrate feed and supply it to the farmers. It can purchase milch cattle in bulk from outside the state for the members. It can establish Bulk Milk Chilling Unit or Milk Processing Plant. It can purchase refrigerated vans for transport of milk and milk products. It can establish milk parlours to sell milk and milk products to the end-consumers. Any such activity will be a value chain intervention. The key is to choose the intervention where the value-addition (and therefore the margin) is high, and which can be effectively managed by the PO keeping in view competition in the market.
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Q.171. What is the benefit from Value chain concept?
Ans:
The benefits may be in terms of pricing, both for input supply, output delivery and services. In Agricultural value chains, benefits may come from the following, which would result in cost reduction or revenue maximisation
a. Business Processes: Aggregation, segregation and logistics
b. Productivity: Man, material, money, input and output
c. Warehousing: Space, costs and logistics
d. Processing : Own vs. out-source
e. Products: Whole foods to processed foods and to derivatives
f. Risk mitigation
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Q.172. What is a business plan?
Ans:
Business plan is a succinct document that specifies the components of a strategy with regard to the business mission, external and internal environments and problems identified in earlier analysis. A business plan is not written each time a modification to a strategy is made. It should be written when a new venture is developed or a major new initiative is launched. Sincere contemplation is needed about the business concept, the business opportunity, the competitive landscape, the essential elements for success, and the people who will be involved. The exercise will often lead to more questions, and these new questions must be properly researched to gain deep insight into the issues and challenges that lie ahead. In short, the business plan must contain answers to the questions “Who/What/Where/When/Why/How/How Much”.
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Q.173. What is business planning?
Ans:
The business planning process starts with Generation of Business Ideas, followed by Opportunities & Threats Analysis leading to Identification of suitable Business Opportunities. Once Business Opportunity is identified, a Marketing Plan is prepared. The final part of the process deals with the Financial Plan.
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Q.174. Why should a PO prepare a business plan?
Ans:
Every business irrespective of size needs planning. Business planning is essential for growth and sustainability. It provides broad ideas to meet the expected and unexpected opportunities and obstacles the future holds. In case of a PO, it is all the more essential since most of the members will be acting as businessmen for the first time. A business plan helps the PO in the following ways:
a. It helps in examining viability of the venture in a particular market.
b. It provides guidance to the PO for organising and planning activities.
c. It serves as an important tool in accessing finance/funding. If the financier is comfortable with the business plan, the PO will be asked to prepare a Detailed Project Report (DPR).
Q.175. What are the elements of a business plan?
Ans:
The business plan provides broad parameters for achieving the goals of the PO. A typical business plan will contain the following:
a. Executive summary
b. Business Description
c. Industry/Sector analysis
d. Marketing plan
e. Operations plan
f. Financial plan
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Q.176. What is included in an executive summary?
Ans:
The executive summary is an abstract containing the important points of the business plan. Its purpose is to communicate the plan in a convincing way to important audiences, such as potential investors, so they will read further. It may be the only chapter of the business plan a reader uses to make a quick decision on the proposal. As such, it should fulfill the reader’s (financier’s) expectations. It is prepared after the total plan has been written. The executive summary should describe the following:
a. The industry and market environment in which the opportunity will develop and flourish
b. The special and unique business opportunity—the problem the product or service will be solving
c. The strategies for success—what differentiates the product or service from the competitors' products
d. The financial potential—the anticipated risk and reward of the business
e. The management team—the people who will achieve the results
f. The resources or capital being requested—a clear statement to your readers about what you hope to gain from them, whether it is capital or other resources
Q.177. What is included in a Business Description?
Ans:
The business description explains the business concept by giving a brief yet informative picture of the history, the basic nature, and the purpose of the business, including business objectives and why the business will be successful. The purposes of the business description are to:
a. Express clearly understanding of the business concept
b. Share enthusiasm for the venture
c. Meet the expectations of the reader by providing a realistic picture of the business venture
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Q.178. What is Industry Analysis?
Ans:
Understanding the industry, the competition, and the market in which the business will operate is fundamental to the business plan. The analysis will help in identification of a real opportunity that solves a real problem of the members. The result of the analysis will:
a. Provide thorough understanding of the business environment
b. Guide in developing an effective marketing plan
c. Persuade the readers of business plan of the realistic potential of the venture
d. What special technology, innovation, new perspective, or unique concept will the business offer to the customer?
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Q.179. What is Marketing Plan?
Ans:
The marketing plan describes how the product will be sold, how the business will motivate the customer to buy. The purpose of developing and including the marketing plan in the business plan is twofold:
a. The process of designing a coherent marketing plan, that is an integral part of the overall business plan, will help the business to test ideas, explore options, and determine effective strategies for success.
b. The result of a well-conceived and coherent marketing plan will convince the business plan reader about the competence of the business.
Q.180. What is Marketing Strategy?
Ans:
The marketing plan is the first step in developing any new strategy. It should be based on a realistic assessment of the external environment. Marketing strategy largely determine resource needs in other areas. For example, the strategy to seek a large share of a market will require a significant commitment of resources of various kinds. How the business chooses to promote and distribute the product will have huge implications on organizational, production, human resource and financial plans.
Q.181. What is market analysis?
Ans:
The market analysis should cover details about:
a. The overall market
b. Changes in the market
c. Market segments, their attractiveness, profitability
d. Target market and customers
e. Description of customers
f. Competitors – Direct and indirect
Q.182. How do you choose a marketing strategy?
Ans:
After choosing the market segment that the PO wishes to target and having carried out the SWOT analysis, the suitable marketing strategy should be chosen. The choice depends on a variety of factors including the image that the PO wants to project about the product and the organization, its sales objectives like whether it wants rapid penetration or is content with slow penetration of the market etc. The PO may choose one or more combinations of strategy, but needs to strategically plan a right mix of the 4 Ps (Product, Price, Place & Promotion – called the Marketing Mix) to develop an appropriate marketing strategy.
Q.183. What is Operations Plan?
Ans:
Operations is the work (activity) of the business. It is transforming of the raw materials into products to be sold to the customer. The operations plan gives an overview of the flow of the daily activities of the business and the strategies that support them. The main purpose of the operations plan section is to show that the business is focused on the critical operating factors that will make it successful. It should contain the critical success factors affecting how the business creates value for the stakeholders of the business, and the breakeven point.
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Q.184. What is break-even point?
Ans:
It is that volume of operation of the business at which unit sales equals operating costs. The breakeven point determines how many units of the product must be sold to break even, to cover the cost of production. It is the point at which the business will have no profit, no loss.
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Q.185. What is Financial Plan?
Ans:
The financial plan translates all the other parts of the business - the opportunity, the operating plan, the marketing plan, the management team—into anticipated financial results. It contains the current status and the future projection of financial performance of the business. The financial plan represents the best estimates of the risks involved, and the return on investment. Three financial areas are generally discussed in the financial plan:
a. Capital requirement and financing pattern
b. Financial projections including cash flow statement
c. Financial returns (Return on Investment, Internal Rate of Return, Net Present Value)
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Q.186. What is a ‘Budget’?
Ans:
A budget is a forecast of all cash sources and deployments. Budgets help to determine how much money one has or can access, where to use it, and whether the financial targets will be achieved. It shows the flow of money into, through and out of the business. The three basic elements of a budget are:
a. Sales revenue
b. Costs
c. Profits
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Q.187. How does one generate business ideas?
Ans:
Identification of specific business opportunity is largely a reactive process. Some of the ways to hit upon a business idea are given below:
a. The idea can be a solution to a problem experienced by primary producers. For instance, collective sale of agricultural produce to the bigger market will reduce the role of middlemen and ensure better price to producers. Collective purchase of agricultural inputs like seeds, fertilizers, pesticides, etc., and selling them to the producers reduces per unit cost while ensuring quality of the inputs.
b. It can be for use of new technology or material to meet a widely felt need. An idea of creating an agro service center for hiring tractor, power-tiller, transplanter, harvester, thresher etc., on rental basis to the small farmers can reduce cost of production besides increasing productivity. Similarly, establishing a Bulk Milk Chilling Unit for milk producers can be a good business idea.
c. It can be for establishing an Agri-Clinic for providing fee-based extension services.
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Q.188. How do you identify business opportunities and threats?
Ans:
Once a few business ideas are generated, each idea must be critically evaluated with respect to the external business environment for identifying the business opportunity and threats. Every idea must be evaluated to know whether it is worth pursuing. The opportunities and threats of each ideas are analysed in terms of the following attributes:
a. Size of the market
b. Its stability i.e., the demand for the product long term or purely temporary?
c. The extent to which the market is dissatisfied with the existing solution
d. Level of competition, high, medium or low
e. Price and quality sensitivity of the market
f. Barriers to entry/exit
g. Changes in government’s policies such as subsidy, availability of low cost funds, etc.
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Q.189. How do you identify the risks and provide safeguards?
Ans:
Identification of risks and possible safeguards is an integral part of the Opportunity/Threat analysis. The goal is not to eliminate risk altogether (an impossible proposition) but to identify them and assess whether they can be managed or minimised through operational resilience. If the risks or threats seem unmanageable then one may discard the business idea all together. Even after starting the business, the risks continue to remain in the business environment, internally and externally both. Hence, it is important to develop risk assessment mechanism and risk mitigation strategy. There are five key steps in the development of this strategy.
a. The first step is to identify and map the processes/factors that would have the biggest impact on earnings, if disrupted. For example, bad monsoon will severely affect crop production in rain-fed areas thus reducing earning of the PO considerably.
b. The second step is to identify critical infrastructure —including processes, relationships, people, regulations, plant, and equipment—that supports the PO’s ability to generate earnings. For example, if there is break-down in the Bulk Milk Chilling Unit, the whole stock of milk will be spoilt and go waste, besides adversely affecting the supply chain.
c. The third step is to identify the main vulnerabilities. Vulnerability is inability to cope with the adverse effects of an event or risk. For example, storage, processing and trading of commodities can come under new regulation, imposing conditions, which the PO may find difficult to comply with, at short notice.
d. The fourth step is to identify the weakest links, the elements on which all the others depend. For example, if there is a single buyer for all produces, this is the weakest link.
e. The last step is to develop planned response to mitigate the risks. For example, the enterprise may build redundancies in some critical infrastructure like a spare refrigerated van for ferrying chilled milk.
Q.190. What support is available from government departments for market linkage?
Ans:
Many State Governments have schemes for preferential procurement of produce from POs. For example, procurement of certified seeds through POs has been implemented by the Government of Chhattisgarh. The facilitating agency should be able to get the relevant information from the respective Governments.
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Q.191. What support is available from corporates for market linkage?
Ans:
The corporates need continuous supply of desired quality produce for processing and value addition. Therefore, they prefer to enter into contract with few producer organisations who will meet their requirement. Usually the following mechanisms are adopted:
a. Retail chains tie up with POs for procurement.
b. Corporates extend dealership for farm machinery and inputs to POs.
c. Corporates provide primary processing machinery to PO with buy-back arrangement for the produce.
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Q.192.What are the functions of the Food Safety and Standards Authority of India (FSSAI)?
Ans:
The Food Safety and Standards Authority of India (FSSAI) has been established under Food Safety and Standards Act, 2006 which consolidates various acts & orders that have hitherto handled food related issues in various Ministries and Departments. FSSAI has been created for laying down science based standards for articles of food and to regulate their manufacture, storage, distribution, sale and import to ensure availability of safe and wholesome food for human consumption. It has been mandated to perform the following functions:
a. Framing of Regulations to lay down the Standards and guidelines in relation to articles of food and specifying appropriate system of enforcing various standards thus notified.
b. Laying down mechanisms and guidelines for accreditation of certification bodies engaged in certification of food safety management system for food businesses.
c. Laying down procedure and guidelines for accreditation of laboratories and notification of the accredited laboratories.
d. To provide scientific advice and technical support to Central Government and State Governments in the matters of framing the policy and rules in areas which have a direct or indirect bearing of food safety and nutrition.
e. Collect and collate data regarding food consumption, incidence and prevalence of biological risk, contaminants in food, and residue of various contaminants in foods products, identification of emerging risks and introduction of rapid alert system.
f. Creating an information network across the country so that the public, consumers, Panchayats, etc., receive rapid, reliable and objective information about food safety and issues of concern.
g. Provide training programmes for persons who are involved or intend to get involved in food businesses.
h. Contribute to the development of international technical standards for food, sanitary and phytosanitary standards.
i. Promote general awareness about food safety and food standards.
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Q.193. What regulations need to be complied with for food processing and marketing?
Ans:
The FSSAI has enacted regulations in 2011 covering licensing, food product standards, packaging, and labelling and food additives. The details of these regulations may be accessed from their website www.fssai.govin. Some of these regulations are listed below:
a. FSS (Licensing and Registration of Food Business) Regulation, 2011
b. FSS (Packaging and Labelling) Regulation, 2011
c. FSS (Food Product Standards and Food Additives) Regulation, 2011
d. FSS (Contaminants, Toxins and Residues) Regulation, 2011
e. FSS (Prohibition and Restriction on Sales) Regulation, 2011
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Q.194. What is AGMARK?
Ans:
AGMARK is a certification mark employed on agricultural products in India, assuring that they conform to a set of standards approved by the Directorate of Marketing and Inspection, an agency of the Government of India. The present AGMARK standards cover quality guidelines for 205 different commodities spanning a variety of Pulses, Cereals, Essential Oils, Vegetable Oils, Fruits & Vegetables, and semi-processed products like Vermicelli.
Q.195. What type of tests are conducted on agricultural products by AGMARK?
Ans:
The testing done by AGMARK laboratories include chemical analysis, microbiological analysis, pesticide residue, and aflatoxin analysis on whole spices, ground spices, ghee, butter, vegetable oils, mustard oil, honey, food-grains (wheat), wheat products (atta, suji, and maida), gram flour, soybean seed, bengal gram, ginger, oil cake, essential oil, oils and fats, animal casings, meat and food products.
Q.196.What is India Organic Certification Mark?
Ans:
India Organic is a certification mark for organically produced food products manufactured in India. The certification mark certifies that an organic food product conforms to the National Standards for Organic Products established in 2000.
a. Those standards ensure that the product or the raw materials used in the product were grown through organic farming, without the use of chemical fertilizers, pesticides, or induced hormones. The certification is issued by testing centres accredited by the Agricultural and Processed Food Products Export Development Authority (APEDA) under the National Program for Organic Production of the Government of India.
b. Even though the standards are in effect since 2000, the certification scheme and hence the certification mark came into existence in 2002.
Q.197.What is a Vegetarian Mark?
Ans:
Packaged food products sold in India are required to be labelled with a mandatory mark in order to be distinguished between vegetarian and non-vegetarian. The symbol is in effect following the Food safety and standards (packaging and labelling) act of 2006, and got a mandatory status after the framing of the respective regulations (Food safety and standards (packaging and labelling) regulation in 2011. According to the law, vegetarian food should be identified by a green symbol and non-vegetarian food with a brown symbol.
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Q.198. What is product certification by Bureau of Indian Standards (BIS)?
Ans:
The Bureau of Indian Standards, empowered through an Act of the Indian Parliament, known as the Bureau of Indian Standards Act, 1986, operates a product certification scheme by which it grants licences to manufacturers covering practically every industrial discipline from Agriculture to Textiles to Electronics. The certification allows the licensees to use the popular ISI Mark, which has become synonymous with Quality products for the Indian and neighbouring markets over the last more than 55 years. The Bureau's predecessor, the Indian Standards Institution began operating the product certification Scheme in 1955.
Q.199.What is Hazard Analysis Critical Control Point (HACCP) system?
Ans:
a. Hazard Analysis and Critical Control Point (HACCP) is a process control system designed to identify and prevent microbial and other hazards in food production. It includes steps designed to prevent problems before they occur and to correct deviations as soon as they are detected. Such preventive control system with documentation and verification are widely recognized by scientific authorities and international organizations as the most effective approach available for producing safe food.
b. HACCP involves a system approach to identification of hazard, assessment of chances of occurrence of hazards during each phase, raw material procurement, manufacturing, distribution, usage of food products, and in defining the measures for hazard control. In doing so, the many drawbacks prevalent in the inspection approach are prevented and HACCP overcomes shortcomings of reliance only on microbial testing.
c. HACCP enables the producers, processors, distributors, exporters, etc., of food products to utilize technical resources efficiently and in a cost effective manner in assuring food safety. Food inspection too would be more systematic and therefore hassle-free. It would no doubt involve deployment of some additional finances initially but this would be more than compensated in the long run through consistently better quality and hence better prices and returns.
Q.200. What is the role of Central Food Technological Research Institute (CFTRI), Mysore?
Ans:
Central Food Technological Research Institute(CFTRI), Mysore (A constituent laboratory of Council of Scientific and Industrial research, New Delhi) came into existence during 1950 with the great vision of its founders, and a network of inspiring as well as dedicated scientists who had a fascination to pursue in-depth research and development in the areas of food science and technology. CFTRI is an ISO 9001:2008 and ISO 14001:2004 organisation and accredited by National Accreditation Board for Testing and Calibration Laboratories (NABL) for chemical and biological testing of samples.
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Q.201. What arrangements need to be made to procure appropriate technology?
Ans:
The PO will require some technology-based equipment or plant & machinery to run its business and organisation. At an elementary level where the PO is engaged only in aggregating the produce without any primary processing, it would still require computer systems and printers to manage its inventory, generate receipts and for office administration. For scientific storage and handling of the produce, it may require scientific godowns, safety equipment etc. While acquiring technology, the following factors should be considered:
a. Life-cycle of technology- The life-cycle of computer systems is about three years while that of grader/separator may be 10 years. For short life-cycle technology, it is desirable to go for the latest version.
b. Cost - The latest technology is invariably more expensive. Therefore, it is desirable to look for appropriate technology which is reasonably priced.
c. Competition – If other players in the market use the latest technology to produce better products, the PO needs to go for better or the same technology to meet market competition. A less attractive product will not sell in the market.
d. Source – The reputation and experience of the supplier institution is also a key consideration while acquiring technology. Untested technology and new technology firms entail additional risk. The technology may not work optimally. The firm may not be able to provide support say three to five years after acquisition.
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Q.202. What are the main sources of technology?
Ans:
Many ICAR institutions, State Agriculture Universities and KVKs help the POs to acquire appropriate technology. For food processing, CFTRI, Mysore is an important source of technology. CSIR institutions are also resource centres of many industrial technologies. In addition, industry associations, commodity boards, government departments are also great sources of technology advisory. The PO may explore as many sources as possible before finalising the technology and the vendor. Advanced planning, scheduling, and group buying (purchasing all related equipment together in one lot) will result in cost reduction and a more efficient business operation. Just-in-time delivery, negotiated bulk pricing, and end-of-life renewal clauses are all essential in technology procurement.
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Q.203. Can the PO enter into twinning arrangement with research institutions?
Ans:
Many research institutions and technology suppliers can provide twinning arrangement to the PO. Under such arrangement, professional service will be rendered by the research institution through continuous deployment of its professionals to build the technical and managerial capacity by providing hand-holding support to the staff of PO. The duties and responsibilities of the research institution may include:
a. Building up the capacity of staff
b. Designing and implementing suitable management system
c. Developing capacity to provide technical service and consultancy
d. Designing and preparing courses and curricula for building capacity
e. Conducting applied research to address specific problems
f. Bridging the gap between PO’s performance and national benchmarks
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Q.204. How will the research institutions, commodity boards and KVKs help the PO through twinning arrangement?
Ans:
These institutions can act as technology guide as twinning partner for the POs. While some public sector institutions may provide their service free or on nominal cost, private technology companies would require to be adequately compensated. In general, the twinning partner can provide the following services:
a. Evaluate available technologies and suggest the most appropriate technology
b. Design the specifications for technology procurement
c. Evaluate technology vendors and their technical and financial bids/quotations
d. Train staff of the PO to use the technology
e. Depute own technical personnel to the PO for initial period to provide hands-on training to the operating staff of PO
f. Train staff of PO to undertake repair and maintenance periodically
g. Assist the PO to access local, national and international markets
h. Advice on solutions to specific problems being faced by the PO
Q.205. What role corporates can play to assist the POs?
Ans:
Corporates can support the POs financially and technologically through CSR initiatives. The following activities can be taken up:
a. Training and capacity building of producers in better technology
b. Providing support for common infrastructure
c. Bulk supply of agricultural inputs to POs
d. Providing support for acquiring technology, plant and machinery
e. Establishing quality control and testing labs to meet market specifications
f. Bulk purchase of produce of the POs for further processing
g. Marketing the produce in collaboration with the PO
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Funding Arrangements
Q.206.What are the different financial requirements of a producer company/organisation?
Ans:
Any business will have financial requirement to start the business and run the business. The capital requirement will depend on the nature and volume of business which would vary from case to case. The cost will include both fixed and running cost.
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Q.207. What is fixed cost?
Ans:
a. Fixed cost is the expenditure which will normally be a one-time expenditure. The expenses on minimum office setup with furniture, fixtures and other equipment like computer, printer, Almirahs, Internet/ telephone connections are fixed cost.
b. Normally the PCs are engaged in the activities of procurement, aggregation and grading of raw produce before sale. In such cases, Infrastructure like warehouse, weighing machine, graders/ sorters, etc. will be required for any PC, which is also a fixed cost. These infrastructure can be purchased or can be taken on rent depending upon the situation.
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Q.208. What is Term loan?
Ans:
Long term loans, required to meet the fixed cost, like buying machinery or setting up infrastructure.
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Q.209. What is running or working capital requirement?
Ans:
The cost required by a PC its day to business is called ‘running cost’ or working capital requirement. The working capital of any business unit is calculated based on the following criteria:
a. Procurement of Raw material, storage cost, processing, transportation, insurance, etc.
b. Management and administration cost for day to day activity, which may include Staff salary, (Manager/CEO, Production Officer, Accountant, Marketing officer, etc.) travel, rent, electricity, water, telecommunication, Phone /Fax, Stationary, Cleaning, Meeting Expenses of BoD /GB, License fee, Insurance & Other statutory fee and Other Miscellaneous Expenses
c. Training and capacity building of BoDs and PC functionaries: Training on subjects, like provisions in the Act, rules and regulations, statutory compliances, roles and responsibilities of BoD and General body, banking operations, and also by exposure visits to the successful PCs
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Q.210. What are Working capital loans?
Ans:
It is a short term loan, required for running existing operations of the Producer Organization; which can be used for buying raw materials (for example, seed, fertilizer, etc., in case of farm sector and leather, thread, etc., in case of non-farm sector, depending on the type of unit) or building inventories. Working capital loan may be a part of a composite loan (term loan + working capital) or separate limit. There are different methods of working out the working capital limit. Normally banks provide 20% of the annual turnover as working capital loan.
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Q.211.What are the broad terms of financing for Working Capital?
Ans:
The broad terms of financing would be as under
a. Limits and sub-limits
b. Security: Primary & collateral
c. Margin requirement
d. Rate of Interest
e. Commission and other fee
f. Drawing power
g. Submission of Stock statement and Financial Statements
h. Stock Audit
i. Insurance
j. Repayment Terms: Working Capital Loans are short term loans and are generally payable in 12 months period, from the date of disbursement/sanction, depending upon the operating cycle. The borrowers are sanctioned a limit for meeting their operating expenses and are free to draw and repay as many times as required, within the sanctioned limit and within 12 months period.
k. Types of Documents/ agreements to be signed
i. Loan agreement
ii. Hypothecation agreement (term loan / working capital)
iii. Mortgage (equitable / registered )
iv. Demand Promissory Note (DPN)
v. Deed of guarantee (personal / bank / govt. guarantee
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Q.212. How the Term loan requirement is assessed?
Ans:
A term loan is a loan granted for the purpose of acquisition of capital assets, such as construction of factory buildings, purchase of machinery, modernization, rationalization of plant and is repayable from out of the future earnings of the enterprise, in phases/instalments, as per a pre-arranged schedule. Term Loans is sanctioned for a fixed term, normally for a period of more than 3 years, depending upon the cash flow generation from the business enterprise and economic life of the assets created. The term loan is only one of the source to meet the total Project Cost. The total project cost is assessed on the basis of expenses to be incurred for the following purpose;
i. Land
ii. Factory building/shed/godowns/administrative building
iii. Machinery
iv. Furniture and Fixtures
v. Technical knowhow / research & development
vi. Pre-operative & contingencies
vii. Margin Money for working capital
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Q.213. What are the broad terms of financing Term Loan?
Ans:
The broad terms of financing Term Loan are as under:
a. Margins and sources of margins
b. Disbursements in phases
c. Security: Primary & collateral and Guarantee
d. Rate of Interest
e. Commission and other fee
f. Insurance
g. Repayment: Term loan is repayable in instalments (monthly, quarterly, half yearly or yearly or depending on the harvest seasons, mainly for crops and horticulture schemes), depending upon the activity supported and the cash flow generation from the project and economic life of the asset created.
h. Types of Documents/ agreements
i. Loan agreement
ii. Hypothecation agreement (term loan / working capital)
iii. mortgage (equitable / registered )
iv. DPN
v. Deed of guarantee (personal / bank / govt. guarantee) The following details would also be required to be made available for sanction of loan.
ü Land: The business may be on existing land or on a leased land. Normally banks do not fund for purchase of land and the cost of land has to be borne by the Organization and the amount may be treated as Margin for the project.
ü Factory building/Shed/Godowns/Administrative: Plan, approved by the appropriate authority, for construction of the Factory Building/Shed/Godowns/Administrative Building. The estimate for construction of the above structure shall be from the Chartered Engineer/Architect along with time frame for construction in different phases. Clearances from different regulators.
ü Machinery: Quotations for purchase of requisite machinery with details of capacity of each of the machinery (including DG Sets & Electricity Poles & connection charges), the post sales services and the taxes and landing costs, if any, cost of erection/ grounding the machinery.
ü Furniture: Quotations for purchase of requisite furniture.
ü Technical Knowhow / Research & Development: A copy of the Agreements entered into and the total cost involved shall be provided by the potential Borrower.
ü Pre-Operative & Contingencies: Details of these costs
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Q.214. What are different sources of Finance for PC/PO to meet the financial requirement?
Ans:
The finance can be arranged from the following sources.
a. Own Resources: The reserve and surpluses of previous years are the source for personal financing. However, in case of a new PC this opportunity will not be there.
b. Suppliers’ Credit and Advance Payment from Buyers: Suppliers’ Credit can be obtained from credit companies or from potential buyers and sellers. The producers who sell their products to the PO, can sell on credit. PO can get part payment in advance from prospective buyers. It can get agriculture inputs from the Agro dealers on the conditions of payment after sales. But mostly this type of finance is not available for start-up businesses or a new venture.
c. Equity: In case of a PC the equity comes from the members and no external financier can participate in the equity investment.
d. Grant support: The PC being a small holders’ organization may seek capital support and other assistance from the Government under certain government schemes. Two major initiatives to support Farmer Producer Organisations (FPOs) (i) support to the equity base of FPOs by providing matching equity grants, and (ii) setting up of a Credit Guarantee Fund to provide cover to banks which advance loans to FPOs without collateral has been announced by GoI. The Schemes will be implemented by Small Farmers’ Agribusiness Consortium (SFAC). Details are given in Appendix ii. Funding may also be available from the Department of Rural Development and Panchayats, Ministries of Agriculture and Cooperation or Horticulture or Food Processing GoI and or state Governments under various schemes like National and State Horticulture Mission, Small Agribusiness Consortium. World Bank, bilateral/ multilateral donor agencies and corporates under CSR may be other possible source of funds/grants from Producer organisations. The POs will have to develop a financially viable business plans for the purpose
e. Debt financing: This is the most preferred way of financing a new business. Here it is a direct obligation to pay the interest on the money lent by the financier. The biggest advantage is that the financier does not have control over the business as opposed to equity financing. The important point to be noted in this is the rate of interest charged. However, it is not easy to raise debt financing for a producers company without collateral and margin.
Q.215. How POs can access finances from various rural financial institutions?
Ans:
The banks provide Short Term loan to meet working capital requirements and Medium to Long Term Loan for acquisition of capital assets (Term Loan) for any business. A composite loan to take care of both short and long term financial requirements loan is also sanctioned by Banks. The finance will depend on the nature and volume of business which would vary from case to case. The FPOs will have to approach the bank with a financially viable business plan/Detailed Project Report. The banks will generally require the following information/ data for sanction of loan;
a. A business plan and Detailed Project Report (DPR) as a formal application for availing the credit support
b. Margin money contribution
c. Details of project management (Executive team and Board of Directors with qualification and experience) of PO
d. Details of dedicated team for execution and monitoring of the project
e. Details of proposed business plan
f. Financial requirements for executing the business plan
g. Last 3 years audited financial statements (Balance Sheet & P/L statement) with notes on accounts & annexure. In case the PO is to be formed or in case it is less than three years old the projected financial statements may be submitted
h. Details of earlier/ current loans/ grants if any (sanction letters) availed from other Banks/ FIs/ Dev. Agencies/ Individuals
i. Details of security / collaterals to be offered
j. Copies of Registrations (Certificate of Incorporation/Commencement of business/Society Registration/FCRA/Trust Deeds etc.) & MA/AAs
k. Copies of PAN/TAN/Sales Tax Registration
l. Copies of approvals for reliefs in Taxation (I-T & Sales Tax)
m. Copies of agreements, if any, entered into for Lease / Confirmed Orders
n. Details of Associate companies (with audited financials for 3 years)
Q.216. How POs can access finances from various rural financial institutions?
Ans:
A DPR is a formal application for availing the credit support from any funding agency. It should provide details about the organization, Business plan, Marketing Plan, Operation and Management Plan, Financial projections and financial requirements. Although there would be some NGOs and Producer Organizations that are experienced in preparing DPRs, typically a Producer Organization would require assistance in preparation of the DPR through experts/ professional, which may involve some cost.
Q.217. Is any support available for preparation of DPR?
Ans:
SFAC provides Project development Facility (PDF) for Equity Grant and Credit Guarantee Fund Scheme for the preparation of Equity Grant Application and Detailed Project Reports (DPR) through empanelled consultants/institutions. SFAC will cover the full cost of preparation of DPR. This facility will be available for FPC only. FPC desirous of assistance may approach the nearest empanelled consultant or SFAC directly. In addition to three broad categories of support (i.e. credit support, capacity building & market linkage) under PODF, NABARD provides grant support for preparation of DPR up to 0.5% of the project cost or Rs. 1.0 lakh whichever is lower, subject to the fact that the project is sanctioned by NABARD. The grant assistance would be within the overall cap of 20% of the loan amount.
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Q.218. If Banks do not provide credit facility, what are the options available for POs?
Ans:
A newly formed PO does not have enough share capital, reserves and credentials for doing successful business, therefore mobilizing funds from banks is difficult in the initial phase. With all the costs included, the PO may face huge financial burden from the beginning and the idea of setting up PO may not even take off. To overcome the problem, the POs may adopt the following business model in the initial years before they generate reserves and establish credentials.
a. Choose those activities in the initial years which require very less capital or no capital and which are risk free.
b. Take Dealership of seeds and fertilizers from the companies and work as commission agents. POs can earn good margin and a business relationship with those companies which resulted in getting credit limit in the subsequent years.
c. Dealership from various companies for various agriculture implements like water pump sets, mechanized plough, etc., which they can sell to their members at a reasonable price and earn commission.
d. Procurement of agriculture produce. The POs identified the prospective buyers and arranged buy back guarantee from them. Sell was organized at the farm gate level, therefore no transportation and storage cost were involved at the PO level. PO ensured a transparent transaction between the buyers and sellers (members and nonmembers both) and by doing so they earned some margin from the buyers.
e. Many POs took the advantage of GoI scheme, which provide 80% of the value of produce as loan against pledge of Warehouse Receipts (WHR) without collateral.
The successful demonstration of such business would build their credentials among the members and other stakeholders. Further, Demonstration of fair trade practices is very important for the PO. These small activities give POs the opportunity to demonstrate such practices. Both the members and the trade and industry with whom PO does the business appreciate such fair practices and it builds reputation for the PO.
Q.219.What are the broad impact parameters which could be considered for the PO projects?
Ans:
The broad objectives of the project will set parameters of impact. Impact should match and fulfil the objectives of the project. The following broad parameters could be considered for assessing the impact:
a. Farmer’s/producer’s income
b. Agriculture and rural development
c. Migration
d. Market
e. Quality of Life
f. Environmental
g. Women development with specific reference to gender issues
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Q.220. What is the Impact on producer’s income?
Ans:
The impact of the project is directly related to the improvement of the individual producer’s post period income when compared to the pre-project period. The increase in income could be ‘direct income’ and ‘indirect income’. Direct income is derived from increase in productivity and production. Indirect income is derived through timely availability of inputs and marketing arrangements at the door step of the farmer. This could be assessed in terms of person days and income could be assessed. The indirect income could be added to direct income and the total income could be compared with the pre-project income.
Total income from the project per producer per annum may be compared with the baseline income. Producer-wise data need to be collected in the house hold format. Analysis could be carried out by collecting data by land holding size and compare the same and gap in the income levels could be assessed. Further, this data also may give leads to how the project helped small producers.
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Q.221.. What is impact on Savings, Investment and Credit?
Ans:
a. How much the individual producer saved, where he/she has saved and quantum of amount saved, needs to be assessed?
b. Investment could be in purchase of land, cattle, agriculture implements, construction of wells, construction of house, purchase of jewelry, marriage and education of children etc. Changes in these need to be assessed.
c. Whether the farmers/producers have availed any loans from banks or any other source because of the increased bargaining power. Is there any decrease in credit from banks in view of loans from PO? Such aspects may be seen.
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Q.222. What is the impact on Agriculture and Rural Development?
Ans:
The agriculture related impact could be on productivity, production, increase in cultivated area, increase in irrigated area and cropping intensity. For example, in FPO initiative, farmer/producer wise data on increased yield, production, cultivated area, irrigated area and cropping intensity may be seen. Further, investment in land levelling, creation of water resources, etc., will give how much additional area has been brought under the cultivation. This speaks about the quality of land which is developed due to the development of wasteland in the project area. Due to trainings and capacity building of the farmers/producers, there may be improvements in quality of the produce at the production, harvesting and storage level. The benefit from the improved quality on the price of the commodity could be assessed.
a. Further, is there any development in rural economy in the form of establishment of micro enterprises, creation of more jobs etc., could be established from the number of new industries and number of people employed in these areas. Data related to trainings, like no of trainings, no of people trained, type of skill development trainings provided also could be assessed and the impact of trainings on the package of practices can be analyzed.
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Q.223. What is impact on migration?
Ans:
In the project areas, generally it is observed that there is reduction in migration and in some cases there is reverse migration. The level of reduction in migration and the extent of reverse migration need to be assessed. For this the level of migration has to be assessed under pre and post project situation.
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Q.224. What is the impact on Market/Mandi?
Ans:
The PO may be able to have better say in the Market/Mandi management. The PO may transact in produce which is in tune with the market demand in terms of both quality and quantity. The PO gets better price for their produce and rejects may be reduced.
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Q.225. What is the Impact on Quality of Life of the producer?
Ans:
Implementation of projects brings changes in the quality of life like improvement in the food security, changes in the consumption pattern, housing, health & hygiene, education of children etc,. Study and analysis of data related to these aspects is essential to assess the living standard of the people of the project area.
a. Food security: The ‘food insecurity’ is an important aspect. The assessment of scarcity of food in pre and post project period gives an indication of the impact on the food security and quality of food intake.
b. Improved consumption basket: Under developmental projects, it is observed that there is a relative reduction in the percentage of food expenditure and rise in the nonfood consumption items and other items showed improvement in the quality of life of producers in the post period scenario. There will be changes in the pattern of consumption like consumption of a variety of vegetables milk, milk products, poultry, meat, fruits etc., which will definitely indicate changes towards a better living.
c. Housing condition and sanitation facility: Housing is the first step in indicating better quality of life and sanitation is also associated with it. Assessment of immovable assets viz., house and sanitation facilities, during pre and post project gives an indication on the housing conditions and health improvements.
d. Adequate Safe Drinking Water: Safe drinking water is a key to healthy life of the family and also a relief to women as fetching water from long distance is one of the curses for them. Study of source of drinking water in each producer’s house and the project impact on the development of infrastructure in the project area gives an idea of the changes brought by the project.
e. Health and Family Planning: How many respondents reported to have vaccination such as, polio, BCG, tetanus, etc. What is the percentage of deliveries in houses/ local village level, government hospitals and private hospitals? The extent of awareness and acceptance of family planning among sample households.
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Q.226. What is the impact on Environment?
Ans:
Increase in the efficiency of irrigation water due to installation of water conservation systems or due to adoption of techniques or due to awareness, improvement in water use efficiency, usage of organic fertilizers or decreased use of chemical fertilizers and pesticides to improve the quality of soil, quality of ground water, plantation of trees or usage of renewable energy sources etc. How many farmers/producers are adopting these techniques? How many farmers/producers were involved in awareness programmes related to sustainable development of agriculture?
Q.227. What is the impact on Women Development with specific reference to gender issues?
Ans:
The women development related impact on account of their participation in the project needs to be examined in detail with reference to specific gender issues. The issues related to their social status, responsibility, roles in decision making, participation in family activities as well as their own development of capability and economic independence needs to be assessed. These may be assessed in the following ways:
a. What is the percentage of women participating in the project/programme?
b. How many women are there in the village level, federation and PO level institutions? How the project helped in gender equity?
c. How many women are participating in SHG programme?
d. Education of girl child i.e. any increase in the admission of female children in schools?
e. How many women adopted family planning measures?
f. In decision making with regard to the use of their income, how many of them took decision on their own, how many consulted family and in how many cases there was no consultation?
Q.228. What is impact on Development Ethos and Work Culture?
Ans:
Is there any impact of the project with qualitative changes leading towards positive development environment with participation of the poor farmers/producers? Any decrease/stop in consumption of alcohol and other addictions?
How the project brought unity among the farmer’s/producers for collective marketing, procuring of inputs?
Improvement in these aspects may be assessed in the following ways:
a. What is the percentage of families which could work on their own?
b. How many desire to shoulder the responsibilities in village development?
c. How many endorsed the women participation in development?
d. How many endorsed the view of positive socio-cultural change in their society?
e. How many beneficiaries accepted the positive role and help of PO in development of village community?
f. How many beneficiaries accepted that the present project will help their children for better education?
g. How many respondents’ actively participating in the working of PO/Federation/ cluster/village level committee?
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Q.229. What are the components of the Project Execution Plan?
Ans:
Typically the Project Execution plan includes the following elements:
a. Project Objectives and Priorities
b. Critical Analysis
c. Organisation, Roles and Responsibilities
d. Project Strategy, Implementation, Supervision and Monitoring
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Q.230. What are the Project Objectives and Priorities?
Ans:
Project particulars, including the sponsor’s name, the project name and reference and details of the business approvals.
a. Project Objectives: The important project objectives which will be addressed by implementing the project.
b. Budget and programme: Project components and the costing. Component wise cost and the total cost of the project.
c. Funding source: How the budgeted amount will be met? It includes the sources of funds and the quantum of funds required from each source.
d. Approvals and consents: The clearances from Pollution Control Boards may be required. Similarly licence to carry out the business may be required.
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Q.231. What is meant by Critical Analysis?
Ans:
The perceived threats or constraints have to identified and specified in critical analysis. With any project, there will be critical issues, risk and uncertainties which could threaten the project. How these risks would be addressed? A suitable institutional monitoring mechanism has to be placed to assess the risks and take remedial measures from time to time.
Q.232. Describe the Organisation, Roles and Responsibilities?
Ans:
The project should specify the names, addresses, telephone, fax, etc., details of all departments /sections involved in the project, including stakeholders. Names and responsibilities of other key personnel within each department. The roles, responsibilities, accountabilities, delegated financial authority for design, procurement, construction, commissioning and handover should be defined. To execute the plan effectively the PO should constitute Project Execution Team headed by a Project Manager who will be the in-charge for project planning and execution.
Project Execution Team - It is the unit which is responsible for the complete execution, operation, maintenance, finance, and monitoring of the project. It is responsible for the implementation of the project and work allocation to various departments like execution, finance and monitoring. The Project Execution Team headed by a Project Manager will be supported by the following three units:
Design and Execution Unit: Procurement of works, milestones and reconciliation with design programme, tendering procedures and procurement programme. Safety and Environment, Progress Reporting, Definition of standards, Quality Management, Site Controls and Inspections, Defects Rectification. Commissioning, Operation and Maintenance. Set time lines for the implementation of the project. Machinery procurement installation, operation and maintenance.
Cost Consultant- CA and Auditors: Financial and cost & expenditure control. Costing, tendering, taxes, Insurances, risk assessment and developing control mechanisms and fund management.
Monitoring Team – Monitoring the implementation of the project and also the outcomes / impact of the projects from time to time and reporting to the system for information and necessary action.