To reduce casualties due to food decay and to increase food production, the Government of India prioritizes the growth of food processing industries. As an initiative for fulfilling the above purposes, the government has been providing subsidies to establish food parks in India. One major loan for the food processing industry in India is the National Bank for Agriculture and Rural Development (NABARD) loan that evolved in the year 2014.
As a percentage of Gross Value Added (GVA) in manufacturing and agriculture, food processing contributes significantly. Exports and investments in this sector also account for 13% of India’s GDP and 6%, respectively.
Additionally, NABARD provides financial assistance for rural infrastructure development through the Rural Infrastructure Development Fund (RIDF), National Infrastructure Development Fund (NIDA), and Warehouse Infrastructure Fund (WIF). These initiatives of both NABARD and the government of India will have a profound impact on the food processing sector.
The loan budget is 2000 Cr INR according to the guidelines announced by NABARD. This new loan has subsidies for a food processing unit in India with nominal interest rates to set up food processing units. Here we will explore NABARD’s operational guidelines and procedures for food processing loans.
What Are the Objectives of The NABARD Loan?
The National Bank for Agriculture and Rural Development (NABARD) loan aims to:
- Primarily develop the food processing sector in India
- Create job opportunities for people living in the rural area
- And finally, to reduce the agricultural waste produced
NABARD Loan applies to all post-harvest activities like cleaning, waxing, grading, labelling, ripening, packing, packaging, storing, canning, tinning, freezing, etc. These may add value to the food product and increase its lifetime while storing the food product prepared from the produce.
Some units that undertake the processing include:
- Horticulture crops like fruits, vegetables, mint, herbs, mushrooms, and other plantation crops
- Meat and poultry
- Milk and milk products
- Seafood products like fish, lobsters, prawns, etc.
- Cereals and pulses
- Oilseeds and oil products
- Forest produce
- End consumer food products like bakery items, confectionery, snacks, etc.
- Tinned/ canned/ frozen ready to eat food
- Beverages, soft and hard drinks, carbonated drinks, alcoholic drinks, non-alcoholic drinks, bottled juices, and water
- Health foods and health drinks
- Spices, flavorings, food colors, preservatives, and other ingredients may be required in food processing
- Other Activities
Who is Eligible for NABARD Loan?
Under the NABARD scheme, food processing units that are in food parks will only fall under the eligible entities. Food processing units under the food parks that are eligible for NABARD Loan are:
- Ministry of Food Processing Industries (MOFPI), Government of India promoted food parks
- Ministry of Food Processing Industries (MOFPI), Government of India promoted Mega food parks
- Designated food processing/ agro-processing/ multi-products and de-notified areas of SEZs (Special Economic zones)
- Food Parks/ food processing industrial estates promoted by State Governments
- Any other area that has developed potential infrastructure and designated as a Food Park by the Ministry of Food Processing Industries (MOFPI), Government of India
Types of entities in the above-designated food parks that are eligible for NABARD loan includes:
- State government entities
- The government of India promoted entities
- Joint ventures, cooperatives, and federations of cooperatives
- Limited companies and private limited companies
- Individual businesses (proprietorship)
Activities That Can Get NABARD Loan
Under the NABARD scheme, a loan will be provided by the lender either directly or in-consortium with the other lenders. NABARD term loan will be provided with concessions in the rate of interest for:
- Developing/ Establishing the infrastructure required for the Food Parks
- Augmenting/ modernizing/ creating additional infrastructure in the designated Food Parks
- Modernizing the existing processing units in the designated Food Parks to achieve in-process technology up-gradation, automation, increased efficiency, product quality improvement, cost reduction, etc.
- Setting up individual food processing units or any other unit that is established for supporting the operations of the food processing units within the designated Food Parks
About NABARD Term Loan
NABARD provides term loans up to 75% of total project costs for corporates, companies, joint ventures, and individual entrepreneurs. The tenure of the term loan can be extended up to 7 years, and the current prime lending rate (PLR) is 9%. It also offers a risk premium rate of 1% based on the borrower’s credit profile. Also, NABARD shall request for collateral security to sanction the term loan based on the borrower’s profile.
What Are the Documents Required?
The following are the documents that you shall require to secure a NABARD term loan:
- Registration certificate
- Certificate from the auditor
- PAN card
- State policy on Food and Agro-processing
- Profiles of director(s) and shareholders
- Registered Deed Details
MSME Loan for Food Processing Industry India
NABARD provides 25% for the Micro, Small, and Medium Enterprise (MSME) sector. This sector provides food processing businesses with MSME loans. MSME loan for food processing unit allows you to purchase a piece of new equipment or inventory, pay your staff, or expand your business. There are 9 related schemes, including:
- Producer Organisations Development Fund (PODF)
- Dairy Venture Capital Fund
- Establishing Poultry Estates and Mother Units for Rural Backyard Poultry
- Establishment/Modernisation of Rural Slaughter Houses
- Commercial Production Units of Organic Inputs
- Poultry Venture Capital Fund
- Credit Linked Capital Subsidy (CLCS)
- Swarozgar Credit Card
- NABARD Warehousing scheme
This loan aims to encourage food processing units in India, as discussed above. MSME loans cover units like:
- Fish and seafood industry
- Poultry farming industry
- Dairy industry
- Food grain milling industry
- Meat processing industry
- Processed food like carbonated drinks and bottled drinks
- Tinned or canned ready to eat foods
- Confectionery, bakery items, and
- food packaging industry
The Bottom Line
The above loan for the food processing industry in India can be used in the states of Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, Uttar Pradesh, Odisha, Maharashtra, Madhya Pradesh, Punjab, and others to develop their food processing units. They may vary from micro to small to medium to mega, but the NABARD scheme provides loans to cover the various interests in developing the food processing unit in India.