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.
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.
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).
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.
The new laws make it mandatory for companies to obtain certification from either:
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
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
Image courtesy: freepik.com
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Posted byVakilsearch Staff
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