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Rural Godown Scheme

Background:

It is well known that the small farmers do not have the economic strength to retain the produce with them till the market prices are favourable.  There has been a felt need in the country to provide the farming community with facilities for scientific storage so that wastage and produce deterioration are avoided and also to enable it to meet its credit requirement without being compelled to sell the produce at a time when the prices are low.  A network of rural godowns will enable small farmers to enhance their holding capacity in order to sell their produce at remunerative prices and avoid distress sales.  Accordingly, Grameen Bhandaran Yojana, a Capital Investment Subsidy Scheme for Construction / Renovation of Rural Godowns was introduced in 2001-2002 and extended upto 31.03.2007. The Scheme has now been approved for implementation during the years 2007–12, with modifications in its operational guidelines for new projects to be sanctioned after 26 /06 /2008. Accordingly, revised operational guidelines of the scheme are applicable for new projects sanctioned on or after 26 /06 /2008 to 31.03.2012.

Objectives:

The main objectives of the scheme include creation of scientific storage capacity with allied facilities in rural areas to meet the requirements of farmers for storing farm produce, processed farm produce  and agricultural inputs; promotion of grading, standardization and quality control of agricultural produce to improve their marketability; prevention of distress sale immediately after harvest by providing the facility of pledge financing and marketing credit;  strengthen agricultural marketing infrastructure in the country by paving the way for the introduction of a national system of warehouse receipts in respect of agricultural commodities stored in such godownsand to reverse the declining trend of investment in agriculture sector by encouraging private and cooperative sectors to invest in the creation of storage infrastructure in the country.

 SALIENT FEATURES

Eligible Organizations

i)  The project for construction of rural godowns can be taken up by individuals, farmers, Group of farmers/growers, Partnership/ Proprietary firms, Non-Government Organizations (NGO’s), Self Help Groups (SHGs), Companies, Corporations, Co-operatives, Local Bodies other than Municipal CorporationsFederations, Agricultural Produce Marketing Committees, Marketing Boards and Agro Processing Corporations in the entire country. Assistance for renovation of rural godowns will, however, be restricted to godowns constructed by cooperatives only.

Location

ii)         Under the scheme, the entrepreneur will be free to construct godown at any place, as per his/her commercial judgment except for  the restriction that it would be outside the limits of Municipal   Corporation area.  Ruralgodowns constructed in the Food Parks    promoted by the Ministry of Food Processing Industries shall also be eligible under the scheme for assistance.

Size

iii)         Capacity of a godown shall be decided by an entrepreneur.  However, subsidy under the scheme shall be restricted to a minimum capacity of 100 tonnes and maximum capacity of 10,000 tonnes.  No maximum ceiling on subsidy in the case of projects of rural godowns of Cooperatives assisted by NCDC.

iv)        Rural godowns of smaller size upto 50 tonnes capacity will also be eligible for subsidy under the scheme as a special case based on viability analysis depending on the topography/special requirement of the State/Region.  In hilly areas*, rural godowns of smaller size upto 25 tonnes capacity will also be eligible for subsidy.  For this,  NABARD will issue appropriate guidelines.

*where the project site is located at a height of more than 1000 meters above mean sea level.

 

Conditions for Scientific Storage

v)     Godowns built under the scheme shall be structurally sound on account of engineering considerations and functionally suitable to store the agricultural produce. The general conditions for scientific construction will be as follows:

a)       The construction of godown shall be as per Central Public  Works Department/State Public Works Department   specifications or any other standard specifications laid down in this behalf.   The godown shall be properly     ventilated, shall have well fitted doors, windows and ventilators and shall be waterproof (control of moisture from floor, walls and roof etc.)

b)    The godown structure shall have protection from rodents.

c)    The godown shall have protection from birds (windows / ventilators with jali).

d)    The openings of godown such as doors, windows etc. shall    be     designed in such a manner that the godown can be  sealed for effective fumigation etc.

e)   The godown complex shall have an easy approach road, pucca internal roads, proper drainage, arrangements for effective control against fire and theft and also have arrangements for easy loading and unloading of stocks.

vi)        The entrepreneur may obtain a license to operate the godown, if so required by the concerned State Government, under the State Warehousing Act or any other relevant laws.  All Rural Godowns to be constructed under the Scheme in future, should be confirming to the technical specifications relating to the implementation of the Negotiable Warehouse Receipt System (NWRS). The rural godowns of 1000 tones capacity and more shall be considered as eligible for assistance under the Scheme, only on giving an undertaking alongwith the application that they would be implementing the Negotiable Warehouse Receipt System. DMI in consultation with the Department of Food and Public Distribution and NABARD shall modify godown specifications to meet the requirements of implementation of Negotiable Warehouse Receipt System and NABARD shall ensure that these specifications are in-built in the eligibility criteria for giving subsidy to the rural godowns of any size under the Scheme.

Credit Linked Assistance

vii)                 Subsidy  under  the  scheme  is  linked  to  institutional  credit  and  will be   available to only such projects as are financed by Commercial Banks, Regional Rural Banks, State Cooperative Banks (SCBs),  State Co-operative Agricultural and Rural Development Bank (SCARDBs), Agricultural Development Finance Companies  (ADFCs), North Eastern Development   Finance Corporation(NEDFI), Urban Cooperative Banks etc. Loan to the entrepreneurs from banks for the  construction of godowns would carry an adequate long-term repayment period.

viii)       Assistance under the scheme shall be available on capital cost of construction of godown including the cost of allied facilities like boundary wall, internal road, platform, internal drainage system, weighing, grading, packaging, quality certification, warehousing  facilities which are functionally required to operate the godown.

Pledge Loan Facility

ix)   The farmers keeping their produce in the godowns shall be eligible to avail pledge loan on hypothecation of their produce. The terms and conditions governing pledge loans viz. margin, rate of interest, period of pledge, amount etc. will be as per the guidelines issued by RBI/NABARD and as per normal banking practices followed by the financial institutions.

Training

x)       A general awareness programme on the scheme for the farmers and a training programme for the entrepreneurs for construction, maintenance and operation of rural godowns will be organized by the National Institute for Agricultural Marketing, Jaipur (NIAM) and other National/State level Institutions.

Implementation Period

xi)        Implementation of the scheme shall be continued beyond 31.03.2007 upto 31.03.2012.

xii)       The modified scheme will be applicable to all new projects for construction / renovation of rural godowns in respect of which loans are sanctioned on or after 26/06/2008  upto 31/3/2012.

 

Nodal Agency

xiii)        The scheme shall be implemented by the Directorate of Marketing and Inspection (DMI), an Attached Office of Department of Agriculture & Cooperation.  A list of Regional/ Sub Offices of DMI is enclosed at Annexure-VI.

Target

xiv)       Under the Modified Scheme, creation of new 85 lakh tonnes and renovation of 5 lakh tonnes of  rural storage capacity is targeted.(Total 90 Lakh M.T.)

xv)       The sanction of projects in a State would be restricted to a maximum of 18  lakh tonnes (20% of the total capacity of 90 lakh tonnes envisaged during the XI Plan), but in specific circumstances the unused quota of a State can be diverted to another State by a conscious decision taken by a Committee to be constituted in the Ministry of Agriculture for this purpose.     

 xvi)      5 lakh tonnes  would be reserved for  small  farmers  and  5 lakh tonnes for cooperatives during the XI Plan but a conscious decision for diverting this reserved quota to other categories can be taken by the Committee to be constituted in the Ministry as stated above

Insurance

xvii)      It will be the responsibility of the owner of the godown to have the insurance for the godown.

Subsidy

xviii)     Rate of subsidy shall be:-

(a)     33.33% of the capital cost of the project in case of projects located in North – Eastern States,  hilly areas and those belonging to Women Farmers/ their self help groups / co-operatives and SC/ST entrepreneurs & their self-help groups/ Co-operatives subject to a maximum ceiling on subsidy of Rs.62.50 lakh.  No maximum ceiling on subsidy in the case of cooperatives assisted by NCDC;

(b)        25% of the capital cost of the project      to all categories of farmers (Other than Women Farmers), agriculture graduates, cooperatives and State/ Central Warehousing Corporations subject to a maximum ceiling on subsidy of Rs. 46.87 lakh.  No maximum ceiling on subsidy in the case of cooperatives assisted by NCDC;

(c)        15% of the capital cost of the project to all other categories of individuals, companies & corporations etc., subject to a maximum ceiling on subsidy of Rs. 28.12 lakh; and

d)         25% of the capital cost of the project for renovation of godowns of cooperatives with assistance from NCDC.

xix)       Capital  cost  of  the  project  for  the purpose of subsidy  under the scheme shall be calculated as follows:

a)         For godowns up to 1000 tonnes capacity – Project cost as appraised by financing Bank or actual cost or Rs 2500/- per tonne of storage capacity, whichever is lower;

 b)         For godowns exceeding 1000 tonnes capacity – Project cost as appraised by Bank or actual cost or Rs 1875/- per tonne of storage capacity, whichever is lower.  However, for godowns exceeding 10,000 tonnes capacity, the subsidy would be restricted to that admissible for capacity of 10,000 tonnes only, subject  to the relaxations made under para 3 (xviii) above for projects of the cooperatives;

 c)         For renovation of godowns by cooperatives with assistance from NCDC – project cost as appraised by Bank / NCDC or actual cost or Rs.625/- per tonne of storage capacity, whichever is lower.

xx)        No beneficiary shall draw subsidy for the godown project or any of its component  from more than one source.

xxi)       The capacity of godown shall be calculated @ 0.4 M.T. per cu. mtr.

Release of Subsidy

 xxii)    Subsidy for the projects under the scheme shall be released through NABARD for projects financed by Commercial, Cooperative and Regional Rural Banks,  ADFCs, SCBs, SCARDBs, NEDFI and scheduled PUCBs and other institutions eligible for refinance from NABARD and through NCDC for projects financed by NCDC or by Cooperative Banks in accordance with its eligibility guidelines.

Adjustment of subsidy in Borrower’s Account

xxiii) The subsidy released to the bank / NCDC for an individual project will be   kept in a separate borrower-wise account. The adjustment of subsidy will be back ended. Accordingly, the full project cost including the subsidy amount, but excluding the margin money contribution from the beneficiary, would be disbursed as loan by the banks. The repayment schedule will be drawn on the loan amount in such a way that the total subsidy amount is adjusted after full bank loan component net of subsidy with interest is liquidated but not before 5 years from the date of disbursement of first instalment of loan.

No interest chargeable on subsidy portion

xxiv) The subsidy admissible to the promoter under the scheme will be kept in the Subsidy Reserve Fund Account (Borrower-wise) in the books of the financing banks. No interest would be charged on this by the Bank.  In view of this, for purposes of charging interest on the loan component, the subsidy amount should be excluded.  The balance lying to the credit of the subsidy reserve fund account will not form part of demand and time liabilities for the purpose of  SLR/CRR.

 

4.       INSTITUTIONAL LENDING

A.      Eligible Financing Institutions

    The eligible financing institutions under the scheme are:-

i)        Commercial Banks, Regional Rural Banks (RRBs), State Cooperative Banks (SCBs), State Co-operative Agricultural and Rural Development Banks (SCARDBs), Agricultural Development Finance Companies (ADFCs), Scheduled Urban Coop. Banks, North Eastern Development Finance Corporation (NEDFI), and such other institutions eligible for refinance by NABARD.

ii)       NCDC and Cooperative Banks recognized by NCDC in accordance with its eligibility guidelines.

B.      Term  Loan

i)  Minimum 50% of the project cost (46.67% in case of NE States, hilly areas, Women Farmers/ their self help groups / co-operatives and SC/ST entrepreneurs & their self-help groups/ Co-operatives ) is to be raised as term loan from the financing banks. As the subsidy is back-ended, eligible amount of subsidy would be initially allowed as term loan to the beneficiary. The repayment schedule will be drawn on the total loan amount (including subsidy).  The subsidy amount will be adjusted after liquidation of bank loan (net of subsidy) but not before 5 years from the date of disbursement of first instalment of term loan.

ii)       Depending upon the cash flow, the term loan would carry an adequate long term repayment period, not less than 5 years including a grace period of one year.

iii)      Rate of interest to borrowers on term loan shall be as per RBI guidelines.  Interest will be chargeable from the date of the first disbursement of loan.

iv)      The   financial   institution   may   also provide working capital separately for undertaking business by entrepreneurs.

v)       NCDC may follow its own norms for period of term loan, its  repayment, moratorium, interest rate etc.

About Araju Patel

Araju Patel -A grand son of Farmer, Management Graduate, Technopreneur. Creativity and Knowledge sharing is his passion. He is passionate about agriculture and technology. Agriculture is in his blood and technology is first love. So, He become a Founder as well Editor-in-chief for TheAgriReporter.com.

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