Mega Food Park Scheme of Ministry of Food Processing Industries

Analysis of the objectives of the Mega Food Park Scheme-MOFPI and the eligibility and financial criteria for availing the scheme.

The Mega Food Park Scheme has been initiated by the Government with the primary and established goal of provision of a mechanism to link agricultural production to the market by amalgamating the farmers, processors and retailers. The reason for the amalgamation of the parties in agricultural production and processing is to in order maximize value addition and minimize wastage. This will, in turn, increase in the farmers; income. Creation of employment opportunities would also be boosted through this, specifically in rural areas.

The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is the Body Corporate registered under the Companies Act, 2013. Moreover, the State Government, State Government entities as well as the Cooperatives are not required to form a separate SPV for the implementation of such Mega Food Park project as long as they fulfil all of the conditions prescribed within the guidelines of this scheme.

This scheme has been made on the basis of the “Cluster” approach which focusses mainly on the creation of state-of-the-art support infrastructure in a well-developed agricultural and horticulture area for the establishment of modern food processing units within all industrial plots provided within the park with well-defined supply chain system. Such mega food park systems primarily comprise of a supply chain infrastructure which included the collection of centres, primary processing centres, central processing centres, cold chain sectors as well as about 25-30 fully developed plots to encourage new entrepreneurs to establish their food processing industry.

Salient Features of the Scheme
  • The main aspect of the guidelines of the Mega Food Parks Scheme is to facilitate setting up of only food processing industries. Accordingly, only food processing industries that make food products fit for human / animal consumption may be permitted to be set up in the Mega Food Parks. Packaging facilities of food products as ancillary to the food processing industries will also be eligible for setting up in the Mega Food Parks therein.
  • This Scheme aims to facilitate the establishment of a strong food processing industry backed by an efficient supply chain that includes collection centres, primary processing centres and cold chain infrastructure. The food 2 processing units, under the scheme, would be located at a Central Processing Centre (CPC) with need based common infrastructure required for processing, packaging, environmental protection systems, quality control labs and trade facilitation centres.
  • On an average, each project shall have around 25-30 food processing units with a collective investment of around Rs. 250 crore that would eventually lead to an annual turnover of about Rs. 450-500 crore and creation of direct / indirect employment of about 5000 persons. Every fully operation MFP shall also benefit over 25000 farmers at an estimate. However, the actual configuration of the project may vary depending upon the business plan for each Mega Food Park.
 
Pattern of Assistance
  • This Scheme is to provide a capital grant at the rate of 50 per cent of the eligible project cost* in general areas and at the rate of 75 per cent of eligible project cost in difficult and hilly areas i.e. North East Region including Sikkim, J&K, Himachal Pradesh, Uttarakhand and ITDP notified areas of the States subject to a maximum of Rs. 50 crore per project.
  • Further, in the interest of expeditious implementation of the projects, the Ministry would engage a Program Management Agency (PMA) to provide management, capacity building, coordination and monitoring support. For meeting the cost of the above and also other promotional activities by the Ministry, office expenses & travel 3 expenses related to the scheme amounting up to 5% of the overall grant available, will be earmarked.
Components of Project Cost

 I. Core Processing Facilities
  • The Central Processing Center: The cost of civil work & equipment for common facilities such as testing laboratory, cleaning, grading, sorting and packing facilities, dry warehouses, specialized storage facilities, cold storage including Controlled Atmosphere Chambers, Pressure Ventilators, variable humidity stores, pre-cooling chambers, ripening chambers etc., cold chain infrastructure including reefer vans, packaging unit, irradiation facilities, steam sterilization units, steam generating units, Food incubation cum development centers etc.
  • The Processing Centres and Farm Proximate Collection Centres: They will comprise of components like cleaning, grading, sorting and packing facilities, dry warehouses, specialized cold stores including pre-cooling chambers, ripening chambers, reefer vans, mobile pre-coolers, mobile collection vans etc.
  • All the above mentioned facilities are only illustrative and the exact nature of facilities may vary from project to project based on specific requirements as appraised by the concerned bank. However, it is desirable to allocate at least 25 percent of the eligible project cost towards creation of above mentioned core processing facilities.
II. Enabling Basic Infrastructure
  • This includes site development including development of industrial plots, boundary wall, roads, drainage, water supply, electricity supply including captive power plant, effluent treatment plant, telecommunication lines, parking bay including traffic management system, weighbridges etc. at the PPC and CPC level.
  • Further, of the total proposed cost of captive power plant, cost not exceeding Rs.10 crore shall be considered as eligible project cost for grant assessment.
  • Thus any additional cost towards setting up of captive power plant 4 would be required to be met exclusively from SPV’s contribution through equity and debt. The SPV has to demonstrate a firm plan to ensure good quality and assured power supply to prospective units in the Park.
 III. Factory buildings
  • In consonance with the demand in the area, the Mega Food Park may provide standard factory sheds for Micro and Small Enterprises (MSEs) which are to be built on a maximum of 10 per cent of the area of CPC as part of plug and play facilities for MSEs as well.
IV. Land
  • Here, at least 50 acres of land for the project shall be arranged by the SPV either by purchase or on lease of at least 75 years.
  • All such registered value of land would be taken as part of the project cost and contribution/share of the SPV. The GoI grant shall not be used for procurement/purchase of land. The land and/or infrastructure taken on lease for PPCs / CCs, the lease period should be at least 25 years.
V. Non-Core Infrastructure
  • This comprises of all support infrastructure such as administrative buildings, training centre including equipment, trade and display centre, crèche, canteen, worker’s hostel, offices of service providers, labour rest and recreation facilities, and marketing support system.
  • But the cost of non-core infrastructure facilities not exceeding 10 percent of the eligible project cost, would be eligible for grant purpose.
VI. Project Implementation Expenses
  • Includes the cost of hiring the services of domain consultants by the SPV’s for preparation of DPRs, supply chain management, engineering/designing and construction supervision.

Implementation Process
 
Special Purpose Vehicle (SPV)
  • All of the responsibility of execution, ownership and management of the Mega Food Park would vest with a Special Purpose Vehicle (SPV) registered under the Companies Act, 2013. However, State Government/ State Government entities/Cooperatives applying for the project under the scheme will not be required to form a separate SPV whatsoever.
  • The Anchor Investor in the SPV, who holds a majority stake, with or without any other promoters of the SPV, shall be required to set up at least one food processing unit in the park with an investment of not less than Rs. 10 Crore. This Anchor Investor will have at least 51% stake in such processing unit(s).
  • The establishment of alcoholic beverage unit as an anchor unit will not be allowed. State Government/ State Govt. entities/ Cooperatives will not be required to set up Anchor unit in the park either.
  • Only one Mega Food Park project will be sanctioned in a district.
  • This Food Processing unit to be set up by the Anchor Investor in the Mega Food 5 Park shall be completed and commissioned along with the commissioning of the Mega Food Park project by the SPV.
  • The preference for sanctioning assistance under the Scheme may be given to those SPVs which focus on processing of wide range of perishable products.
Program Management Agency (PMA)
  • The Ministry shall appoint a Program Management Agency (PMA) for assisting the implementation of the Scheme. The PMA must be a reputed institution with extensive experience in project development, management, financing and implementation of infrastructure projects.
  • The role of PMA is as follows:
  1. Assisting the Ministry in organizing workshops/media campaigns aimed at sensitizing the potential stakeholders about the scheme.
  2. Assisting the Ministry in inviting Expression of Interest for projects under the Scheme.
  3. Assisting the Ministry in selection of projects through evaluation/appraisal of techno-feasibility reports and DPRs submitted for Mega Food Park projects. Appraisal of the DPRs will include examination of financial viability and sustainability of Ownership & Management structure of the projects.
  4. Assisting the evaluation of any amendments to the projects/DPRs.
  5. Assisting the SPVs in achieving financial closure and obtaining necessary clearances from various authorities for the Project. 7
  6. Assisting the Ministry in release of the grant under the Scheme.
  7. Monitoring and reporting the progress of the Mega Food Park projects to the Ministry.
  8. Maintenance and updating of the database of the projects on monthly basis in the software decided by the Ministry.
Expression of Interest
  • While responding to the notice inviting Expression of Interest (EoI) by Ministry for selection of Projects, a proposal for the proposed Mega Food Park will be submitted by the promoters/Special Purpose Vehicles.
  • This proposal should tentatively identify the locations of the CPC and PPCs, availability of land, potential investors for food processing units in the park, proposed level of investment including the estimated project cost and the proposed means of finance, the number and type of food processing units, and requisite backward and forward linkages. The proposals having ownership and possession of suitable land with Change in Land Use (CLU) for the project will be given preference here.
In-Principle Approval
  • All the proposals submitted in response to the EoI will be evaluated by the Program Management Agency (PMA). The applicants will be invited to make a presentation of their proposals before the Technical Committee (TC).
  • Then the PMA will undertake evaluation on a scale of 100 points on the basis of EoI proposals while the TC will undertake independent evaluation on a scale of 50 points on the basis of the presentation made by the applicants. The final evaluation report along with the recommendations of the TC will be placed before the Inter-Ministerial Approval Committee (IMAC) for consideration of “In-Principle Approval” to the projects.
  • If the SPVs / IAs fail to submit all requisite documents along with other documents needed for the Final Approval, within 4 months from the date of issue of “In Principle Approval”, the “In-Principle Approval” will automatically stand cancelled, unless extension of time is granted by the Ministry otherwise.
Final Approval
  • Such a project will be accorded Final Approval on fulfilment of the following conditions:
  1. The submission of Detailed Project Report (DPR) comprising of technical, 9 commercial, financial and management aspect of the project and its appraisal/recommendations of the PMA and Technical Committee. This DPR must include cluster analysis which depicts the availability of raw materials, legible contour survey report and contour plan/maps of the proposed land, site analysis for element like soil analysis, flood history, onsite features etc. for realistic cost estimate of land development and construction, detailed master plan along with sectional drawings and building plan giving clear picture/title of drawings and other relevant details, construction cost certified by Chartered Engineer, cost of plant and equipment backed with quotations from equipment and machinery suppliers etc. and its appraisal/recommendations of PMA and Technical Committee.
  2. The submission of the proof for possession of at least 50 acres of contiguous land by the SPV for the CPC. The land should have permission for change of land use for industrial /infrastructure purposes.
  3. The submission of the proof for incorporation of SPV and execution of Share Subscription Agreement (SSA) amongst the members of SPV, as per draft SSA to be given by the Ministry.
  4. The new plan to fund the project duly supported by proposed equity / contribution, clearly suggesting the contribution from each of the shareholders and sanction of term loan from the bank along with bank appraisal report.
  5. All the requisite proof of appointment of Project Management Consultant (PMC). The PMC for the project should be selected from the agencies empanelled by the Ministry.
Assistance and Revisions in Project Cost
  • As there exist several complexities and challenges with a supply chain linked agricultural infrastructure projects of this nature, the SPV / IA may dovetail assistance available under various other schemes of Central and State Governments, which would improve the viability of the projects. While 11 dovetailing such assistance, it will be ensured that there is no duplication of assistance for the same component/activity of the project.
  • This revision in project cost after final approval of the project may be considered by the IMAC therein.

Release of Funds

When such a project has been accorded its Final Approval by the Inter-Ministerial Approval Committee (IMAC), such a grant shall be released by the Ministry subject to fulfilment of conditions prescribed for each instalment as below:
  • The first instalment of 30 percent of total grant under the Scheme shalll be released subject to fulfilment of following criteria:
  1. The establishment of Trust and Retention Account and signing of the TRA Agreement with any Schedule - A Commercial Bank and Regional Rural Banks (RRB).
  2. The drafting of the TRA Agreement, clearly giving mode of account operation and duties/responsibilities of lending bank, SPV and PMC,  which must be shared by the Ministry with SPV / IA.
  3. The appointment of Ministry’s Nominee Director on the Board of the SPV.
  4. A representative of State Government will be appointed as a nominee of the Ministry. Tenure of the Ministry nominee will be co-terminus to the operationalization of the project.
  5. The proof of increase in authorized capital of SPV to allow stipulated equity contribution as per approved means of finance for the project.
  6. An expenditure certificate from Chartered Accountant confirming expenditure of at least 10 percent of the eligible project cost on the project components. Such expenditure shall be from the bank term loan and promoter’s equity proportionately. However, State Governments and its entities will not be required to incur proportionate expenditure.
  7. An award of contracts worth at least equivalent to 30 percent of total project cost including at least 20 percent of approved components of basic enabling infrastructure.
  8. The recommendation of PMA confirming the fulfilment of above conditions.
  • The second Instalment which represents 30 percent of the approved grant assistance shall then be released to the SPV subject to fulfilment of following criteria:
  1. The Utilization Certificate for the first instalment.
  2. The proof of proportionate expenditure by SPV from term loan and equity equivalent to the grant amount that was released during the first instalment.
  3. The proof of proportionate contribution by SPV from term loan and equity in TRA account, of the eligible project cost equivalent to percentage of grant to be released as second instalment.
  4. The submitting of documents as proof of possession of land for all PPCs along with construction schedule.
  5. The proof of commencement of construction of Standard Design Factory sheds for SMEs.
  6. The proof of allotment of at least 25% of total allotable plots as per approved DPR.
  7. The further recommendation of the PMA confirming the fulfilment of above conditions.
  • Further the third instalment representing 20 percent of approved grant assistance will be released to SPV subject to fulfilment of following criteria:
  1. The utilization Certificate for the grant released as 2nd instalment.
  2. The proof of proportionate expenditure by SPV from term loan and equity equivalent to the grant amount released as 2nd instalment.
  3. The proof of proportionate contribution by SPV from term loan and equity in TRA account equivalent to the grant amount to be released as the third instalment.
  4. The certificate from PMC confirming completion of at least 40 percent of construction of PPCs and proof of expenditure of at least 40 percent of the total proposed cost for PPCs as per approved DPR.
  5. The certificate from the PMC confirming completion of at least 50 per cent construction of Standard Design Factory sheds for SMEs.
  6. The proof of allotment of at least 50% of all total allotable plots as per approved DPR.
  7. The recommendation of the PMA confirming the fulfilment of above conditions.
  • The fourth and final instalment representing 20 percent of approved grant assistance will be released to SPV subject to successful completion of project and commencement of operations. This criteria for completing this project are as follows:
  1. The utilization Certificate for the grant released as third instalment.
  2. The proof of expenditure of 100% envisaged contribution of SPV including term loan and equity on the approved project components.
  3. The certificate from PMC confirming completion of the project as per approval.
  4. The proof of allotment of at least 75 percent of total allotable plots as per approved DPR and commencement of operations in at least 25 percent of the units.
  5. The completion and commissioning of the Processing unit(s) of the Anchor Investor in the Park.
  6. The further recommendation of PMA confirming the fulfilment of above conditions.

The fund released by Government of India shall be kept in a separate bank account as stipulated in Trust & Retention Account (TRA) Agreement. In the event of SPV / IA withdrawing from executing the Project, SPV / IA shall return the amount of grants-in-aid released by MOFPI together with the interest accrued thereon, within a period of not more than 60 days of acceptance of its withdrawal by MOFPI. Any accrued interest shall be calculated at the SBI Benchmark Prime Lending Rate prevalent at the time or 10% per annum, whichever is higher. In the event of failure of the SPV in refunding the grant amount along with interest within period specified, a penalty may be imposed by the Ministry.
 
Role of State Government
  • The State Government’s role has been provided in the following areas:
  1. Giving assistance to SPVs in the procurement/purchase of suitable land.
  2. Provision of all the requisite statutory clearances including permission for sub-leasing of land by SPV, wherever needed, for setting up the MFP and its components thereof and providing the necessary assistance for Power, Water, approach roads and other external infrastructure to the project
  3. Provision of flexible and conducive labour environment and consider special facilities like exemption of stamp duty, VAT/Sales Tax exemption etc. for the MFP and the units located in the MFP.
  4. The monitoring of the implementation of this project.
  5. The nomination of a suitable officer to be appointed as Ministry’s nominee Director in the SPV.
  6. Provision of a fast track single window agency to facilitate clearances and permissions required for the project.
 
Conclusion
 
The scheme aims to execute the Vision 2015 of the Ministry of Food and Processing Industries. The aim of amending the 11th Fifth Year Plan to include the Mega Food Parks Scheme is to increase the processing of perishable items to 20%, with an increase of about 14% from the present rate. The government is also eyeing at increasing India’s share in the global food trade.

Currently, there are 22 operational Mega Food Parks under the scheme, which are in-line with India’s ambitious Atma Nirbhar Bharat and Make in India vision. The scheme is strongly going ahead and will surely reap good results for India’s agricultural sector and for Indian economy.