Knowledge Center

Nov 13

Posted by:Amani Nagda
Government Subsidies for Food Processing Units

The Rural development lender NABARD gives out loans, from the Rs 2,000 cr. amount which has been collected in budget, at interest rate of 9.5% towards the food processing industries.

These loans will be provided for food processing units in a food park and also for thecreation of infrastructure at food parks.

The scheme consists of a one-time capital grant of 50% of the project cost (excluding land cost) which issubject to a maximum cost of Rs 50 cr. in general areas, and 75% of the project cost (excluding land cost) subject to a ceiling of Rs 50 cr., in difficult and hilly areas, including the areas of north east region and J&K.

The development of food processing industry in the country is ranked and placed as a top priority by the Government of India as it happens to be one of the most critical links in the agricultural unit of value chain. Taking this agenda even more further, the Finance Ministry of India, in 2014, announced of a set up of a Special Fund worth Rs. 2,000 cr. in NABARD in order to provide direct term loans which would be at affordable rates of interest in order to help the Designated Food Parks (DFPs) as well as the food processing units in the DFPs. 

The objectives of the fund are listed below:

·         To act as a catalyst for the development of the food processing sector on a cluster basis in our country, India.

·         In order to reduce wastage during the long process of the agricultural produce.

·         In order to create employment opportunities for the masses especially in rural areas, where there are not much job opportunities.

Scope of Financing from the Fund

The Fund provides Term loans for the following:

·         For the development as well as the establishment of the entire infrastructure required in DFPs.

·         For augmentation as well as modernization and creation of additional infrastructure in the required DFPs.

·         The Setting up of individual food processing units or setting up of any other unit that is established for supporting the operations of said food processing units within the DFPs.

·         For the modernization of the existing processing units in the DFPs which results in the process of technology upgradation, improvement in product quality, reduction in costs, automation, increased efficiency etc.    

Who are the eligible borrowers?

The following are termed as the eligible from the Fund for term loan assistance from NABARD and its scheme: 

  • State Governments
  • Joint Ventures
  • Federations of Cooperatives
  • Farmers’ Producer Organizations
  • Corporates
  • Companies
  • Special Purpose Vehicles (SPVs)
  • Entities promoted by State Governments or Government of India
  • Cooperatives
  • Entrepreneurs

The NABARD loan is available for a very wide range of processes, which results in value addition and an enhanced food storage life. This scheme has become like a boon in the food industry helping them to come up and flourish as a whole.


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