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Capital Investment Subsidy Scheme

Capital Investment Subsidy Scheme

Capital Investment Subsidy Scheme

Growing awareness for healthy and safe food has underlined the importance of organic farming, which is a comprehensive system based on the fundamental principle of minimising the use of external inputs and avoiding the use of synthetic fertilisers and pesticides.  In view of this challenge, under National Project on Organic Farming, a Capital Investment Subsidy Scheme for Commercial Production Units for organic and biological inputs has been introduced. The scheme is implemented by the Department of Agriculture, Cooperation and Farmers’ Welfare through the National Centre of Organic Farming in collaboration with National Cooperative Development Corporation (NCDC) or NABARD.  In this article, we will look at Capital Investment Subsidy Scheme in detail.

Objective of the Scheme

Main objectives of the Capital Investment Subsidy Scheme are listed as follows:

  • To promote organic farming by making available the organic inputs such as bio fertilisers, Biopesticides and fruit and vegetable market waste compost and thereby better return for the produce.
  • To reduce the total dependence on chemical fertilisers and pesticides by increasing the availability and improving the quality of biopesticides, biofertilizers and composts in the country.
  • To increase agricultural productivity by maintaining soil health and environmental safety.
  • To prevent environmental degradation and pollution by proper conversion of organic waste.
  • For converting the organic waste in to plant nutrient resources.

Eligible Organizations

The eligible organisations for the Capital Investment Subsidy Scheme are listed as follows:

  • Individuals
  • Private entrepreneurs
  • Biofertilisers and Biopesticides production Unit
  • Fruit and Vegetable Waste Compost Unit
  • Group of farmers/growers
  • Proprietary
  • Partnership firms
  • Co-operatives
  • Fertiliser industry
  • Companies and Corporations
  • NGOs
  • APMCs
  • Municipalities

Conditions for Setting Up

The Conditions for Setting up of Commercial Production unit is explained in detail below:


Under the Capital Investment Subsidy Scheme, the entrepreneur can set up the unit at any place where it is commercially viable and technically feasible. The existing units can be considered for technological up-gradation or expansion of the existing capacity.

Project Cost Details

The project cost will be depended upon the capacity, architects, technology, invoice prices of the machines subject to norms of appraisal of financing bank and NABARD.

  • The estimated cost of establishment of the fruits and vegetable market Waste Compost unit of 100TPD capacity is about Rs 200 lakh
  • The estimated cost of establishment of new BiofertilizerBiopesticide production unit of installed capacity of 200 tonnes/annum is about 160.00 lakh.

The condition for Computing the Project Cost

  • Project cost can include the cost of the land purchased, plant and machinery civil works, scientific instruments and equipment
  • The value of land to be computed should not exceed 10% of the project cost.
  • The cost of the land and cost of civil structures should not exceed 50% of the total financial outlay.
  • The cost of land calculated in the project cost can be reckoned towards the margin money required to be met by the enterprise
  • The cost of land will be computed only when such land is to be purchased by the enterprise.
  • The cost of the property should be the purchase value and not the market value of the land.
  • The value of a particular portion of the land which is need-based for the project only will be considered.

Quantum of Subsidy

The Capital Investment Subsidy Scheme provides credit linked and back-ended capital investment subsidy as described below.



Quantum of Subsidy


Biofertilisers-Biopesticides Unit 25% of total financial outlay subject to the maximum of Rs 40 lakh per unit, whichever is less.


Fruit & Vegetable Market Waste Compost Unit 33% of total financial outlay subject to the maximum of Rs. 60 lakh per unit, whichever is less

Release of Subsidy

NABARD releases the subsidy to the units financed by the Commercial Banks,  State Cooperative Banks (SCBs), Regional Rural Banks (RRBs), State Cooperative Agricultural and Rural Development Banks (SCARDBs), Urban Cooperative Banks (PUCBs), Scheduled Primary and such other institutions which will be eligible for refinance from NABARD.

  • NCDC  will release subsidy to projects financed by it in the cooperative sector
  • The subsidy will be released in two instalments as advance subsidy and final instalment subsidy

Pattern of Assistance

For Biofertilizer-Biopesticide production unit

Sl.No Pattern of Assistance
1 Owner’s contribution 25-33%
2 Subsidy from Central Government of India subject to the maximum ceiling 25%
3 Bank Loan 42-50%

For Fruits and Vegetable Market Waste Compost unit

Sl.No Pattern of Assistance
1 Owner’s contribution 25-33%
2 Subsidy from Central Government  subject to the maximum ceiling 33%
3 Bank Loan 34-42%

Term Loan

Up to 50% of the project cost will be raised as term loan from the financing banks. As the subsidy is back-ended, the eligible amount of subsidy (25%) would be initially allowed as a term loan to the beneficiary. The repayment schedule will be drawn as per the total loan amount; the subsidy amount is adjusted after liquidation of net bank loan.

The financial institution will provide working capital separately for undertaking the business.

Rate of Interest

The interest rate to the ultimate borrower will be decided by the financing bank.


The security details will be as based on the norms prescribed by the Reserve Bank of India (RBI) from time to time and as per the rules of financing banks.


Repayment period

The repayment period for Biofertilisers/ Biopesticide Unit will depend upon the cash flow and may generally be upto ten years with a grace of 2 years.

The repayment period  for the Fruit and Vegetable Waste Compost Unit will depend upon the cash flow and may generally be up to 10 years with a grace period of 2 years

Time Limit for Completion

  • The time limit of a maximum of 15 months is prescribed for the completion of the projects from the date of sanction by the scheduled bank.
  • If the reasons for the delay are justified, a further grace period of 3 months may be allowed by the participating bank.
  • In case the projects are not completed within the stipulated period, the benefit of subsidy is withdrawn, and advance subsidy will be refunded.


The entrepreneur will ensure assets created under the Capital Investment Subsidy Scheme until the repayment of the loan.

Capital Investment Subsidy Scheme Application Procedure

The application procedure for the Capital Investment Subsidy Scheme is explained in detail below:

Step 1: Interested promoter will have to submit the project proposal for term loan and subsidy to Bank on the application form as prescribed by the concerned bank along with project report and other supporting documents for appraisal and sanction of loan

Step 2: Bank after appraisal, sanction and disburse the first instalment of the loan. Provide a brief project profile-cum-claim form for advance subsidy in the prescribed format along with the bank’s sanction letter to the Regional Office (RO) of NABARD.


All claims for the release of subsidy will be forwarded to the NABARD by the Controlling Officers of the banks.

Step 3: NABARD on receipt of project profile cum claim form, from a participating bank, will sanction and release fifty percentage advance subsidy to the participating bank for keeping the same in the Subsidy Reserve Fund Account (Borrower-wise).

Step 4: When the project is nearing completion, the promoter will have to inform the bank who will initiate action for inspection by the Committee consisting of officials from the bank, NABARD and the implementing agency to ensure that the unit conforms to technical & financial parameters.

Step 5: After the inspection is conducted, the bank will submit the claim form for the final subsidy in the prescribed format to NABARD.

Step 6: The inspection report of Committee and completion certificate should invariably be enclosed with a claim form for the final subsidy claim.

Step 7: NABARD will release the final subsidy to banks which will be replenished by the implementing agency.