Government’s Incentives for Dairy industry in India

Last Updated at: July 15, 2020
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Incentives for Dairy Industry in India

India has the largest cattle population in the world and has become the world’s largest milk exporter. Based on a study by the National Dairy Development Board of India – the demand for milk is likely to reach 180 million tonnes by 2022. India also exporters a large quantity of milk and animal-based products. However, the meat industry has also suffered huge losses during the pandemic. In this post, we provide an overview of some of the recent incentives announced for the benefit of the Dairy Industry in India. We also highlight how farmer producer organizations (FPOs) and dairy industry entrepreneurs can leverage these schemes. 

  1. Impact of coronavirus on the dairy and meat industry 

  2. Animal Husbandry Infrastructure Development Fund Scheme

  3. Dairy Entrepreneurship Development Scheme

  4. Pradhan Mantri Matsya Sampada Yojana

  • Dairy industry – In the initial days of the pandemic, the milk collection, processing, and sales witnessed a decline. However, the impact on the organized sector for the dairy industry was not as significant as that on unorganized milk farming. 
  • Meat industry – The coronavirus has severely hit meat and meat processing industries. The exports of buffalo meat fell by more than half in the lockdown period. People, out of caution, stopped consuming meat. This has led to mass culling of birds and below-cost sales of chicken and eggs in the poultry industry. By one estimate, the losses exceed 22,500 crores and impact 25 million farmers. 

Animal Husbandry Infrastructure Development Fund Scheme

The Cabinet Committee on Economic Affairs has recently approved a fund worth ₹ 15,000 crores. 

Eligibility for the scheme

Farmer Producer Organisations, Section 8 companies, private companies, individual entrepreneurs with at least 10% margin contribution. Therefore, the remaining 90% would be loan components made available to them by scheduled banks. 

Aims of the scheme

The government would help public, non-profit as well as private companies by giving a 3% subvention on the rate of interest. 

Moratorium on a loan payment

There will be a two-year moratorium on payment of the loan and a total repayment period of six years. 

Credit Guarantee under the scheme

To facilitate easy access to loans for companies operating in the dairy space, the government will provide a partial credit guarantee. Further, this would amount to 25% of the credit facility of the borrower. This fund worth a corpus of ₹750 crores would be managed by NABARD.  

Get legal advice 

Benefits of the scheme

  • The scheme envisages promoting private as well as cooperative organizations involved in dairy, animal and meat sector
  • Moreover, all entities engaged in value addition infrastructure, processing and setting up infrastructure for dairy and meat processing, the establishment of animal feed plants, etc. 
  • This would enhance returns for investors in the dairy sector significantly, while also promoting exports and value addition. 

Significance of the dairy sector for FPOs

  • Impact on farming incomes – The government in its official release notes a peculiar characteristic of the dairy industry in India. Additionally, unlike other agricultural sectors, in dairy, almost 50-60% of the final value of the product flows back to the farmers. 
  • Opportunity for development by private entities – This means that farming profits are strongly correlated with the growth of cooperation as well as private infrastructure in many regions. Moreover, the surveys by the government notes that investments through the Animal Husbandry Infrastructure Development Fund will leverage the value of seven times more than the investment made. 

Dairy Entrepreneurship Development Scheme

As part of the Startup India plan, the dairy entrepreneurship development scheme is a central government subsidy program for setting up dairy farms. 

Eligibility of the scheme – Under the scheme, individuals, cooperatives, NGOs setting up new farms are eligible. Additionally, even entities intending on upgrading their existing infrastructure, in the dairy industry are eligible for financial benefits 

Nature of financial benefit available

  • A capital subsidy of 25% of the total project cost for the general category and up to 33% for SC/ST farmers. The component wise subsidy ceiling will be subjected to cost arrived at by NABARD. Entrepreneur’s Contribution to loans beyond Rs. 1 lakh – 10% of the project cost is eligible for the subsidy. 
  • Moreover, the upper ceiling limit of subsidies ranges from ₹20,000 for setting up a vermicompost unit to ₹30 lacs for setting up a cold storage facility. 
  • Other eligible infrastructural components are – purchase of milking machines. Moreover, rearing of indigenous and crossbred cows, establishing a dairy parlor or veterinary clinics. 

Pradhan Mantri Matsya Sampada Yojana

Under this scheme for fisheries development, beneficiaries would be entitled to funding from the center. Launched in May 2020 a period of five years, it aims at boosting the production and productivity of the fishery sector in India. Therefore, it will also fund Infrastructure and sustainable post-harvest management of fish. 

 

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Government’s Incentives for Dairy industry in India

316

India has the largest cattle population in the world and has become the world’s largest milk exporter. Based on a study by the National Dairy Development Board of India – the demand for milk is likely to reach 180 million tonnes by 2022. India also exporters a large quantity of milk and animal-based products. However, the meat industry has also suffered huge losses during the pandemic. In this post, we provide an overview of some of the recent incentives announced for the benefit of the Dairy Industry in India. We also highlight how farmer producer organizations (FPOs) and dairy industry entrepreneurs can leverage these schemes. 

  1. Impact of coronavirus on the dairy and meat industry 

  2. Animal Husbandry Infrastructure Development Fund Scheme

  3. Dairy Entrepreneurship Development Scheme

  4. Pradhan Mantri Matsya Sampada Yojana

  • Dairy industry – In the initial days of the pandemic, the milk collection, processing, and sales witnessed a decline. However, the impact on the organized sector for the dairy industry was not as significant as that on unorganized milk farming. 
  • Meat industry – The coronavirus has severely hit meat and meat processing industries. The exports of buffalo meat fell by more than half in the lockdown period. People, out of caution, stopped consuming meat. This has led to mass culling of birds and below-cost sales of chicken and eggs in the poultry industry. By one estimate, the losses exceed 22,500 crores and impact 25 million farmers. 

Animal Husbandry Infrastructure Development Fund Scheme

The Cabinet Committee on Economic Affairs has recently approved a fund worth ₹ 15,000 crores. 

Eligibility for the scheme

Farmer Producer Organisations, Section 8 companies, private companies, individual entrepreneurs with at least 10% margin contribution. Therefore, the remaining 90% would be loan components made available to them by scheduled banks. 

Aims of the scheme

The government would help public, non-profit as well as private companies by giving a 3% subvention on the rate of interest. 

Moratorium on a loan payment

There will be a two-year moratorium on payment of the loan and a total repayment period of six years. 

Credit Guarantee under the scheme

To facilitate easy access to loans for companies operating in the dairy space, the government will provide a partial credit guarantee. Further, this would amount to 25% of the credit facility of the borrower. This fund worth a corpus of ₹750 crores would be managed by NABARD.  

Get legal advice 

Benefits of the scheme

  • The scheme envisages promoting private as well as cooperative organizations involved in dairy, animal and meat sector
  • Moreover, all entities engaged in value addition infrastructure, processing and setting up infrastructure for dairy and meat processing, the establishment of animal feed plants, etc. 
  • This would enhance returns for investors in the dairy sector significantly, while also promoting exports and value addition. 

Significance of the dairy sector for FPOs

  • Impact on farming incomes – The government in its official release notes a peculiar characteristic of the dairy industry in India. Additionally, unlike other agricultural sectors, in dairy, almost 50-60% of the final value of the product flows back to the farmers. 
  • Opportunity for development by private entities – This means that farming profits are strongly correlated with the growth of cooperation as well as private infrastructure in many regions. Moreover, the surveys by the government notes that investments through the Animal Husbandry Infrastructure Development Fund will leverage the value of seven times more than the investment made. 

Dairy Entrepreneurship Development Scheme

As part of the Startup India plan, the dairy entrepreneurship development scheme is a central government subsidy program for setting up dairy farms. 

Eligibility of the scheme – Under the scheme, individuals, cooperatives, NGOs setting up new farms are eligible. Additionally, even entities intending on upgrading their existing infrastructure, in the dairy industry are eligible for financial benefits 

Nature of financial benefit available

  • A capital subsidy of 25% of the total project cost for the general category and up to 33% for SC/ST farmers. The component wise subsidy ceiling will be subjected to cost arrived at by NABARD. Entrepreneur’s Contribution to loans beyond Rs. 1 lakh – 10% of the project cost is eligible for the subsidy. 
  • Moreover, the upper ceiling limit of subsidies ranges from ₹20,000 for setting up a vermicompost unit to ₹30 lacs for setting up a cold storage facility. 
  • Other eligible infrastructural components are – purchase of milking machines. Moreover, rearing of indigenous and crossbred cows, establishing a dairy parlor or veterinary clinics. 

Pradhan Mantri Matsya Sampada Yojana

Under this scheme for fisheries development, beneficiaries would be entitled to funding from the center. Launched in May 2020 a period of five years, it aims at boosting the production and productivity of the fishery sector in India. Therefore, it will also fund Infrastructure and sustainable post-harvest management of fish. 

 

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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.