GlobalLinker

Legal requirements for starting an organic food business

Legal requirements for starting an organic food business

Legal & Compliance

Vakilsearch Staff

Vakilsearch Staff

2 Aug 2019, 15:27 — 10 min read

Background: The organic food market in India is growing at a rate higher than the global average and is expected to keep growing at a 25% CAGR through 2020. In their previous article Vakilsearch shared the top registration mistakes by startups in India. Here they explain the legal requirements for starting an organic food business.

 

Organic foods and supplements are grown naturally using manure, sunlight and without the synthetic application of fertilizers and chemicals. In recent times, organic farming has gained momentum and people have started to prefer organic products. Farmers are also slowly adapting to the change and are using chemical-free stuff for the growing the produce. The cost of production is also comparatively less. India at present is becoming a hub for organic products.

For starting a business, the person should have full knowledge and information about these organic foods and their emerging trends. The organic food business is governed by Section 22 of Food Safety and Standards Authority of India (FSSAI) and should be registered, certified, licensed and labelled. 

 

Also read: FSSAI registration & filing returns: All you need to know

 

Incorporation

For incorporating organic food business in India, the owner should decide an exclusive name for the business, and he should register the trademark for the business, thereby preventing other people to copy the ideas and process of the food business. The food business can be registered as Pvt Ltd. The company, Partnership firm, LLP and even a single person can run the business. The business can be registered under Udyog Aadhaar through MSME Online Registration.

Also, the Food Safety and Standards (Organic Food) Regulations checks that the business gets two systems of certifications. The Ministry of Agriculture and Farmers provides a Participatory Guarantee System (PGS) and the Ministry of Commerce and Industry provides a National Programme for Organic Production (NPOP).

It is mandatory to get an Indian Organic certificate that certifies the products are produced following the national standards for organic products. When the business gets a certificate under Pradhan Mantri Kaushal Vikas Yojana, they cannot export the products. The Agricultural and Processed Food Products Export Development Authority (APEDA) certificate makes it compulsory for the owners to have third-party certification for export.

License and permit

These food companies have to approach FSSAI for food license which is valid for five years.

  • FSSAI Registration license is given when the turnover is less than INR 12 lakhs
  • FSSAI State license is given when the turnover is more than INR 12 lakhs
  • FSSAI Central license is given when the turnover is above INR 20 crores

They should apply for any state government license for running the organic business and also permission from health departments. The owner has to file an Employee Identification Number (EIN).

Labelling

The FSSAI made the license mandatory. If the business gets the license, then the product should contain India Organic Certificate in all its products.  The entity should get a voluntary logo from FSSAI. The Food Safety and Standards (packaging and labelling) Regulations 2011 put forth that the following particulars must be labelled in the packet.

  • Name of the food, its ingredients and nutritional information.
  • Presence of any food additives, Veg/Non-veg
  • Complete details of the packer/ manufacturer
  • Net quantity
  • Details such as Lot no. / code no. /batch no.
  • Manufacturing date
  • Usage and expiry date
  • Instructions to be followed

The new laws make it mandatory for companies to obtain certification from either:

  • National Programme for Organic Production (NPOP)
  • Participatory Guarantee System for India (PGS-India).

Companies also have the option of getting a voluntary logo from FSSAI, which proves that their product is organic.

Also read: Trademark your brand to safeguard your brand

 

Other legal documents required

  1. PAN card
  2. Aadhaar card
  3. Voter ID
  4. Driving license
  5. Ration card
  6. Business agreement
  7. Memorandum of association
  8. Articles of association
  9. NOC (No Objection Certificate)
  10. Bank statement

Growth in the market

The online food business is growing at astounding rates, and the explosion is only expected to grow with experts predicting a 25% growth in the three years to follow. The growth in the organic farming sector, development of new products, research into genetically modified crops and help from the government have all played essential parts in sustaining and achieving this growth. As more and more people become aware of the advantages of organic products, these trends will only grow exponentially, and hence the government is trying its best to encourage companies to take up and utilise these opportunities for growth and innovation.

Struggles and hopes

The growth is extremely encouraging because, since its onset, the organic business has had to face a lot of hiccups and difficulties with the main ones being adulteration, low safety standards and a lack of general awareness. Organic food products also possess a high margin, but in comparison, the global organic food consumption is less 0.2% of India’s massive $300 billion economy. While the extent of opportunity has bettered thanks to the timely intervention of e-commerce platforms, the organic food industry is still a tough one to enter. Due to an underdeveloped and undernourished supply chain, small farmers find it difficult to have direct access to large scale markets where their products will fetch a reasonable amount.

To make matters more complicated, natural products require separate storage to prevent cross-contamination is increasing the logistical effort.  But as the new generation has better access to information, they are becoming more and more aware of the health benefits that organic food brings with it, and hence we see a number of people switching to such alternatives. Better resources concerning spending and growing popularity for natural products has made this growth possible for the organic food business. The government has also been extending an olive branch by releasing several new initiatives.

What the Government is and can do

  • The central government has formed the Participatory Guarantee System (PGS) to provide subsidies to small-scale farmers, and this initiative is being supported by the Pradhan Mantri Kaushal Vikas Yojana (PKVY) scheme.

  •  But as per current rules, these farmers are not given the right to export their products as that requires certification by the Agricultural and Processed Food Products Export Development Authority.

  • Another meaningful way in which the government could help such farmers is by offering subsidies to farmers who have just switched from conventional methods to organic methods because this shift will lead to a slight loss of yield which could put the farmer under financial duress.

  • Another section in which the government could improve is a budget allocation for agriculture because ever since the Green Revolution, the budget seems to be favouring a chemical-based method of farming and this does not help organic farmers as several states offer them less than two per cent of the budget.

  • Bringing outlaws that help in converting farmlands into organic farms will also go a long way in helping farmers like how Sikkim, was declared an “Organic State” as it produces only organic products.

  • Standardising policies with respect to fertilisers and making organic fertilisers more accessible by increasing their production and manufacture can help organic farmers improve their yield.

  • In 2017, the government launched the Jaivik Bharata logo and the Indian Organic Integrity Database Portal to help farmers and organic food businesses. State governments are also trying to do their part by authorising various certification agencies and have also undertaken several new initiatives to promote organic farming.

  • The Food Safety and Standards Authority of India, in a bid to help small farmers have agreed to relax certification norms for organisations and individuals whose annual income does not exceed INR 12 lakh. They have also directed officers to use these regulations as a form of encouragement rather than as a means to prosecute these farmers at least April 1, 2020.

  • They also have relaxed norms for organisations whose turnover falls below INR 50 lakh per annum by allowing them to sell products without certification from NPOP or PGS-India. But such organic aggregators will not be allowed to use the Javik Bharat logo.

 

Also read: Want to sell food online in India? Legal requirements you need to know


Image courtesy: freepik.com

 

To explore business opportunities, link with us by clicking on the 'Connect' button on our eBiz Card.


Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views, official policy or position of GlobalLinker.  

Posted by

Vakilsearch Staff

Greetings! We would love to work with you and your company. We look forward to connecting with business houses and MSME's.

Recommended articles for you

Got an inspiring story?
Get featured on SME inspirations

Already a member?

Log in

Got an inspiring story?
Get featured on SME inspirations

Already a member?

Log in

GlobalLinker - GET THE BIG BUSINESS ADVANTAGE

Visit mobile site