Page 29 - Banking Finance December 2020

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nurturing plays an important role in taking up viable procurement, collective marketing, and other recurring
business activities like aggregation of produce, collective costs connected with the project.
marketing, bulk procurement of inputs, primary processing,
etc. To meet the credit requirements of FPOs it is broadly Support from Government of India
categorized into three phases. The Govt. of India in the Union budget 2018-19, announced
1. Incubation and Early Stage: the following measures to promote FPOs for a prosperous
At this stage, the financial need of the FPOs revolves and sustainable Agriculture sector that enable farmers to
around the cost of mobilizing farmers, registration cost, enhance productivity through efficient, cost-effective and
cost of operations and management, training, exposure sustainable resource use and realize higher returns of the
visits etc. produce;
(i) Launching of "Operation Greens" for onion, potato and
2. Emerging and Growing Stage: tomato crops on the lines of Operation Flood with an
Once FPOs are incubated with grant support from allocation of Rs. 500 crores. The initiative aims to
promoting institutions, there are three ways to raise address price fluctuation in vegetables for the benefit
of farmers and consumers. It will promote FPOs, agri-
fund to meet their working capital and investment
logistics, processing facilities and professional
need. They include - Equity Financing, Credit Capital and
management.
Debt Financing.
(ii) With a view of encouraging enabling environment for
3. Matured Stage (Business Expansion): aggregation of farmers into FPOs and take advantage
As the FPOs move towards expanding their businesses, of economies of scale, the Govt. announced 100% tax
deduction for FPOs with annual turnover of up to Rs.
they need finance for quality improvement in products/
100 crores.
services. Here, finance is required for quality
improvement along the value chain of the produce. So Support from NABARD
the loan products mentioned below have been
introduced. Y Financial Intervention- by direct lending to PO in one
form of term loan and cash credit.

I. Loan Products with availability of Collateral/ Y Capacity building-Fund for skill development, training,
planning and technical extension etc.
Guarantee Cover
Y Market linkage for setting-up of marketing
a) Loans to POs/FPOs that are eligible for assistance
from SFAC towards equity/credit guarantee cover. infrastructure facilities for sale of produce.
b) Loans to FPOs and other POs that are not eligible Support from SFAC
for assistance from SFAC towards equity/credit
Y The entire government schemes for FPO are
guarantee cover and offering collaterals.
implemented by SFAC.
c) Loans to Promoting Institutions, for lending to POs. Y Equity grant- Matching Equity Grant Maximum of Rs.10
Lakh per FPO for enhances borrowing power and
II. Loan Products without Collateral//Guarantee
enables them to access bank finance.
Cover
Y Credit Guarantee Fund scheme- seek collateral-free
a) Loans to POs that are not in position to provide
loan up to 1.00 crore which in turn can seek 85 percent
collaterals. cover from the Credit Guarantee Fund.
b) Loans to start up FPOs/POs with small size of
business activities. Challenges
Y Lack of access to affordable credit for want of collaterals
The items eligible for assistance broadly include capital cost and credit history is one of the major constraints, the
such as cost of building, machinery and equipment for FPOs are facing today. Further, the credit guarantee
processing, specially designed vehicles for transportation cover being offered by SFAC for collateral free lending
etc. and working capital requirements for input supply, is available only to Producer Companies.

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