FPO / Rights Issue — SEBI Filing

A Farmer Producer Organisation (FPO) is a legal entity formed by primary producers — farmers, fishermen, or other agricultural producers — to improve their bargaining power and access markets collectively. FPOs may be registered as a Producer Company under Section 378A of the Companies Act 2013 (inserted by the Companies Amendment Act 2020), as a Cooperative Society under the respective State Cooperative Societies Act, or as a Society under the Societies Registration Act 1860. The most commercially viable form is the Producer Company under the Companies Act 2013, as it combines cooperative principles with corporate governance, allows equity participation, and can access the Government of India's scheme for Formation and Promotion of 10,000 FPOs launched by the Ministry of Agriculture and Farmers Welfare with a budget outlay of Rs 6,865 crore.

Under Section 378C of the Companies Act 2013, a Producer Company must have a minimum of 10 producers as members (individuals) or 2 producer institutions as members at the time of incorporation. There is no statutory minimum paid-up capital prescribed for a Producer Company, unlike for other types of companies, but the Companies Act 2013 requires that shares be issued only to members who are primary producers. The Articles of Association must restrict the transfer of shares to persons who are not producers, and the voting rights follow a one-member-one-vote principle under Section 378E regardless of shareholding, distinguishing it from a regular private limited company. Central and State Government equity support is available under the FPO scheme through NABARD, SFAC, and NCDC as implementing agencies.

Under Section 10(1) of the Income Tax Act 1961, agricultural income is exempt from income tax irrespective of the entity type, so FPO income from cultivation and sale of produce by its own members is generally agricultural income. Section 80PA of the Income Tax Act 1961 (inserted by the Finance Act 2018) provides a 100% deduction on profits and gains of a Producer Company derived from eligible business for five consecutive assessment years starting from the year of registration, subject to the total turnover not exceeding Rs 100 crore in the financial year. For AY 2026-27 and earlier (ITA 1961 applicable), this deduction is available; for TY 2026-27 onwards under the Income Tax Act 2025, equivalent provisions are expected to be mapped. Additionally, cooperative FPOs may claim deduction under Section 80P for business income if structured as a cooperative society.

A Producer Company registered under the Companies Act 2013 must hold an Annual General Meeting within 90 days of the close of each financial year under Section 378ZK, and must present audited financial statements and the Board's report. Annual filings with the Registrar of Companies include Form AOC-4 (financial statements) within 60 days of the AGM, and Form MGT-7A (annual return for small companies or OPCs, applicable if turnover is below Rs 2 crore) or Form MGT-7 otherwise, within 60 days of the AGM. The accounts must be audited by a CA appointed under Section 139 of the Companies Act 2013. FPOs receiving government grants under the 10,000 FPO scheme must also submit utilisation certificates to the implementing agency (NABARD/SFAC/NCDC) per the terms of the scheme guidelines.

Yes, an FPO can export agricultural produce by obtaining an Import Export Code from the Directorate General of Foreign Trade under Section 7 of the Foreign Trade (Development and Regulation) Act 1992. Exporting FPOs are eligible for benefits under the Agricultural and Processed Food Products Export Development Authority (APEDA) Export Development Fund, and may avail duty drawback under Section 74 or Section 75 of the Customs Act 1962 on inputs used in exported produce. The Agricultural Export Policy 2018 specifically encourages FPO-led cluster-based exports and provides for dedicated export-focused FPOs with infrastructure support. For GST purposes, exports are zero-rated under Section 16 of the IGST Act 2017, so the FPO may either export under a Letter of Undertaking without paying IGST or claim a refund of accumulated input tax credit under Section 54 of the CGST Act 2017.