Are you a farmer producer company? Looking for Financial Assistance? No worries. You are at the right place. We hereby present to you some of the NABARD schemes for the Farmer producer company.
Indian farmers are the backbone of the country’s economy. They grow food for the entire nation and makeup nearly 60% of India’s total workforce. However, the farmer-producer companies are not getting the benefits their hard work deserves. These companies are not able to find good sources of finance. NABARD, the National Bank for Agriculture and Rural Development, is here to change this. NABARD is a nationalised bank that provides financial services to farmer-producer companies that are working in the agriculture sector. NABARD offers various schemes for fpo.
Farmer Producer Company
A farmer producer company is a combination of a cooperative society and private limited companies. A farmer producer company is an entity that has been set up to provide collective marketing of agricultural produce. The essential features of an FPO are:
- A group of producers come together to carry out farm-related activities
- It is a legally registered company
- Producer members become shareholders of the company
- It deals with procurement, production, harvesting, cultivation, marketing, selling and other allied activities of the primary producers
- A part of the profit earned is distributed among its members
- The remaining profit is held as a reserve e for business growth and expansion.
India is majorly based on agriculture, but due to farmers being unorganised, it is difficult for them to procure bulk inputs and adopt new technologies as they lack finances. They also suffer a lot since they are unable to get a good price for their produce when sold individually. Thus, by bringing them under the organised sector, producers can buy inputs and other goods at a lower price, thereby providing them economies of scale and good bargaining power for the sale of their produce.
Producers Organisation Development Fund (PODF)
As an initiative for supporting Producer companies, NABARD (National Bank for Agriculture and Rural Development) formed this fund on 01 April 2011 with an initial corpus of ₹50 Crores. Through this scheme, Farmer producer organisations (FPO) shall be given financial support by way of grants or loans. It also aims to help FPOs increase their capacity and provide market linkage.
Eligible Organisations
The following organisations are eligible to get loans from the fund:
- Registered Producer Companies
- Producers cooperatives
- Registered Farmer federations
- Mutually aided cooperative society
- Industrial cooperative society
- Other registered federations
Eligible Activities
- Financial Support
- Direct lending by way of term loans
- Working capital loan
- Composite loan covering both term loan and working capital
- Subordinated debt
- Capacity Building
- Business development
- Skill development in both farm and off-farm sectors
- Technological extension
- Training, Exposure visits
- Agricultural University tie-ups
- Market Linkage
- Setting up marketing infrastructure facilities
- Tie-ups with buyers for the purchase of bulk produce
- Partnership with large corporates
Terms and Conditions
- The Farmer Producer Organisation must be registered
- It must work for the benefit of the producer members
- The activities may fall within the domain of agriculture, allied sectors & off-farm sector only
- The activities for which funding is granted include cultivation, harvesting, packing, marketing, storing, selling, etc. of the produce
- The performance will be checked based on the latest audited financials
- Generally, projects with a duration of around 7 years are considered
- NABARD’s assistance is limited to a maximum of 90% of the project cost. However, it may vary depending on the project and risk involved
- The rate of interest is decided by ALCO
- The financial assistance shall be secured by way of hypothecation/mortgage of assets created out of the fund, mortgage or other immovable property, hypothecation of other movable property, personal or corporate guarantee, etc.
- The repayment period will be around 7-10 years with a moratorium of 1-2 years.
Procedure to Obtain the Grant/Loan
- Application
- The eligible organisations should send a concept note containing the details of the entity and the proposal
- The Concept note shall be sent to Regional Offices
- Appraisal
- It shall be appraised by RO or HO depending on the case
- After approval, the organisations must submit a Detailed Project report
- RO shall scrutinise it, and a joint field visit will be undertaken if the proposal is found to be suitable
- RO/HO shall carry out due diligence of the entity to analyse the technical, economic and financial details
- On completion of due diligence, working capital and term loan assessment shall be done along with risk assessment
- Sanction and Disbursement
- After getting the above reports, the RO shall prepare a draft sanction memorandum and forward the same to HO
- After sanctioning by HO, the funds will be released as per their guidelines
- Monitoring the end use of funds
- During the period of the loan, NABARD shall continuously monitor the entity’s activities. The entities must also submit Half Yearly Progress Reports to NABARD, RO and HO in the format prescribed
- Eligible entities need to give an undertaking that they will properly utilise the funds received from NABARD for the specified purpose
- If the entities misuse or divert the funds, NABARD shall recall the amount along with interest and penalty
- NABARD shall have the right to access the books of accounts of the entity.
Other Schemes by NABARD
In 2014-15, the government of India, in consultation with NABARD, created a fund called PRODUCE (Producer Organisation Development and Upliftment corpus) fund with an initial capital of ₹200 crores. The main objective of the fund was to promote FPOs by establishing around 2000 more farmer producer organisations. Under the scheme, the Producer Organisation Promoting Institution (POPI), Resource Support Agencies and the FPOs are supported.
Agriculture includes both farm and off-farm activities. Thus in order to promote the off-farm sector, such as handloom, handicraft, etc., the NABARD launched a scheme called OFPO (off-farm producer Organisation), similar to FPOs. People carrying out off-farm activities can come together and form OFPO so that they can also benefit from economies of scale.
The Government of India has announced a new scheme called Central Sector Scheme for Formation and Promotion of 10,000 FPO. NABARD is also one of the implementing agencies for the above scheme. It aims to provide financial assistance and credit accessibility to FPOs. It also helps to improve cost-effective production and create job opportunities for many.
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