Subsidy for Organic Farming in India

The increasing and continued use of synthetic fertilisers and pesticides are starting to cause environmental deterioration and health problems. Therefore, there is an increasing need for organically farmed produce, as consumer awareness and environmental regulations continue to evolve. Organic farming requires biological and organic inputs in lieu of chemical inputs, and there is a need to augment the production of bio-fertilizers or organic fertilisers in India. Accordingly, the Government of India under National Project on Organic Farming provides capital investment subsidy for commercial production units manufacturing organic fertilisers / bio-fertilizers.  In this article, we look at the subsidy for organic farming in India, in terms of units manufacturing bio-fertilizers, bio-pesticides or fruit & vegetable compost.

Objectives of the Scheme

The capital investment subsidy scheme for commercial production units of organic/ biological Inputs is being implemented by the Department of Agriculture & Cooperation through National Centre of Organic Farming (NCOF) in collaboration with NABARD or NCDC. The main objectives of the scheme are to promote organic farming in the country by making available the organic inputs, to increase the agricultural productivity while maintaining the soil health and environmental safety, to reduce the total dependence on chemical fertilisers and pesticides, to convert the organic waste in to plant nutrient resources and to prevent pollution and environment degradation.

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Entities Eligible for Subsidy

New and existing units (expansion/renovation) engaged in the production of organic fertilisers or bio-fertilizer are eligible for subsidy under the scheme. If bio-fertilizer and/or bio-pesticides are manufactured, a subsidy can be availed by individuals, group of farmers/growers, proprietary firms, partnership firms, co-operatives, fertiliser industry, companies, corporations and NGOs. If a fruit & vegetable waste compost unit is envisaged, APMCc, Municipalities, NGOs and private entrepreneurs can avail subsidy under the scheme.

Project Location & Project Cost

There are no specific requirements for location under the scheme. Therefore, the entrepreneur can set up the unit at any place where it will be technically feasible and commercially viable. The estimated total cost for establishing a new bio-fertilizer or bio-pesticide production unit of 200 tonnes/annum capacity is about Rs.160 lakhs, and the estimated total project cost for establishing a new fruit and vegetable waste compost unit of 100TPD capacity is Rs.200 lakhs. The above mentioned estimated total project costs are just indicative, and the actual project cost for a project will depend on multiple factors such as capacity, location, technology, pricing of equipment, etc.,

Subsidy Component & Release of Subsidy

The scheme provides credit-linked and back-ended capital investment subsidy. It provides the Bio-fertilizer and bio-pesticides units with a capital subsidy of 25% of the total project cost subject to a maximum of Rs.40 lakhs per unit. Fruit & vegetable compost units are provided with a capital subsidy of 33% of the total project cost subject to a maximum of Rs.60 lakhs per unit. Project cost can include the cost of land purchased, civil works, plant & machinery, scientific instruments and equipment etc. Compute the value of the land in the project cost that must not exceed 10% of the project cost. The cost of the land and civil structures (buildings) should not exceed 50% of the total financial outlay.

The cost of land computed in the project cost can be reckoned towards the margin money required to be met by the enterprise. However, the cost of land will be computed in the project cost only when the land is to be purchased by the enterprise. Also, the cost of the land should be the purchase value and the value of that portion of the land, which is need-based for the project only will be considered.

NABARD will release the subsidy to the units financed by Commercial Banks, Regional Rural Banks and other institutions which are eligible for refinancing from NABARD. It will release the subsidy in two instalments. NABARD will release 50% of the subsidy amount to the financing institution on submission of project profile and claim form – after sanction and disbursement of the first instalment of the loan. The remaining 50% would be disbursed to the financing institution on the conduct of inspection and as per recommendations made by the officials from the financing institutions, NABARD/NCDC and NCOF/DAC. As the subsidy is back-ended, the subsidy will be kept by the financing institution in a subsidy reserve fund account, to be finally adjusted against loan amount of the bank at the end of the repayment period.

Tenor of Repayment

A time limit is 15 months for the completion of the project and it also offers a grace period of 3 months with justification.  If the project is not completed within the stipulated period, then the benefit of subsidy is withdrawn, and advance subsidy has to be refunded. For repayment of the loan, bio-fertilizer units, bio-pesticide units and fruit & vegetable compost units are generally allowed up to 10 years with a grace period of two years. The financing institution determines the rate of interest as per their norms.

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