GST- IMPACT ON INDIAN DAIRY INDUSTRY

Goods and Service Tax- Dairy Industry

Milk contributes close to the 1/3 of gross income of rural families and in the case of these without land, nearly half of their gross income.

Milk is a single agricultural crop that has highest value, more than combined value of wheat and rice. Milk production has show rapid growth of 4 to 4.5% per annum during the last 25 year livestock sector accounts for 28 to 30% of GDP of agriculture.

Milk offers the quality bioavailability of protein, mainly to the vegetarian. Milk is an important nutritional requirement of human beings therefore may also improve the health reputation of the farmer and people at big. Excessive price of milk and milk product shall make it unaffordable to poor strata of society.

The overall market size of the products — butter, tetrapack milk and butter oil is estimated to be around 25,000 crore.

Existing Taxation Regime:

According to the existing taxation regime there is no tax on any of the fresh dairy products like raw milk, pasteurised–packaged milk, dahi, chachh, lassi and their variants. None of the dairy products attract excise duty except for the sterilised-sweetened-flavoured milks that also in a very few states. Mandi fee that once was levied on ghee across India has been abolished except in Uttar Pradesh and Rajasthan and that too has been reduced to 2% only. Value-added tax is levied at 2-5% on milk powders, 5% on chakka (basic raw material for shrikhand), table butter, cream, and UHT milk packed in cartons.

It is widely expected that GST will be an amalgam of VAT, excise duty, octroi, entry tax, mandi fee, cess and so on. 

Under New Taxation (GST):

Milk, Cheese, Egg and Honey falls under HSN code chapter 04 of GST commodity tariff schedule.  The details about GST rate changes for sale of Milk, Cheese, Egg and Honey are being updated here. GST rates in India is being finalized within a couple of months, as Goods and Service Tax is being implemented from July 01,2017 in India.    The GST rates are imposed in India under 4 slabs. 

Nil GST RATE;

1. Fresh milk and pasteurised milk, including separated milk, milk and cream, not concentrated nor containing added sugar or other sweetening matter, excluding Ultra High Temperature (UHT) milk

2. Eggs Birds' eggs, in shell, fresh, preserved or cooked [0407]

3. Curd

4. Lassi

5. Butter milk

6. Chena or paneer, other than put up in unit containers and bearing a registered brand name.

7. Natural honey, other than put up in unit container and bearing a registered brand name.

5% GST RATE;

All goods not specified elsewhere.

 1. Ultra High Temperature (UHT) milk

2. Milk and cream, concentrated or containing added sugar or other sweetening matter including skimmed milk powder, milk food for babies, excluding condensed milk.

3.  Cream, yogurt, kephir and other fermented or acidified milk and cream, whether or not concentrated or containing added sugar or other sweetening matter or flavoured or containing added fruit, nuts or cocoa

4. Whey, whether or not concentrated or containing added sugar or other sweetening matter; products consisting of natural milk constituents, whether or not containing added sugar or other sweetening matter, not elsewhere specified or included.

5. Chena or paneer put up in unit container and bearing a registered brand name .

6. Birds' eggs, not in shell, and egg yolks, fresh, dried, cooked by steaming or by boiling in water, moulded, frozen or otherwise preserved, whether or not containing added sugar or other sweetening matter.

7. Natural honey, put up in unit container and bearing a registered brand name.

 8. Edible products of animal origin, not elsewhere specified or included.

12% GST RATE;

1. Butter and other fats (ghee, butter oil, etc.) and oils derived from milk; dairy spreads

2. Cheese

18% GST RATE;

1. Condensed milk

GOVERNMENT SUBSIDY SCHEME FOR VERMI COMPOST UNIT WITH DAIRY FARM

Government Subsidy scheme for Vermi compost Unit with Dairy farm or Milch Animal farm.

Establishment of Vermi-Compost unit with dairy farm or milch animal farm.

Subsidy 

Per Unit Rs 0.20 lakhs maximum.

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs. 0.050 lakhs (Rs 0.073 lakhs for SC/ST farmers) or actual whichever is lower.

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY SCHEME FOR ESTABLISHMENT OF PRIVATE VETERINARY CLINIC

Government Subsidy scheme for Private Veterinary Clinic

Establishment of Private  Veterinary  Clinic 

Subsidy 

Per Unit Rs 2.6 lakhs maximum for mobile clinic and Rs 2.0 lakhs for stationery clinic

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.0.65-0.50 lakhs (Rs0.866-0.666 lakhs for SC/ST farmers) or actual whichever is lower.

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY FOR DAIRY MARKETING OUTLET OR DAIRY PARLOR UNIT

Government Subsidy scheme for dairy marketing Outlet or Dairy Parlor

Establishment of dairy marketing Outlet or Dairy Parlor

Subsidy 

Per Unit Rs 1.0 lakh maximum

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.0.25 lakhs (Rs0.33 lakhs for SC/ST farmers) or actual whichever is lower.

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY FOR ESTABLISH COLD STORAGE FACILITY FOR MILK & MILK PRODUCTS

Government Subsidy scheme for Cold storage facilities for Milk and Milk Products

Establishment Unit of Cold storage facilities for Milk and Milk Products

Subsidy 

Per Unit Rs 33.0 lakh maximum

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.8.25 lakhs (Rs11.0 lakhs for SC/ST farmers) or actual whichever is lower.

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY- PURCHASE OF MILK PRODUCTS( SWEETS) PROCESSING EQUIPMENT'S

Government Subsidy scheme on dairy processing equipment for manufacturing of indigenous milk products Sweets/Mithai

Establish Unit Purchase of dairy processing equipment for manufacturing of indigenous milk products Sweets/Methai

Subsidy 

Per Unit Rs 13.20 lakhs maximum

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.3.30 lakhs (Rs.4.40 lakhs for SC/ST farmers) or actual whichever is lower. 

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY ON DAIRY PRODUCT TRANSPIRATION FACILITIES AND COLD CHAIN

Government Subsidy scheme on Dairy product transportation facility and Cold chain Unit 

Establishment of dairy product transportation facility and Cold chain Unit 

Subsidy: 

Per Unit Rs 26.50 lakh maximum

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.6.625 lakhs (Rs8.830 lakhs for SC/ST farmers) or actual whichever is lower. 

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY SCHEME- MILKING MACHINE/BULK MILK COOLER UNIT

Government Subsidy scheme on milking machines /milk testers/bulk milk cooling units (upto 5000 ltr capacity)

Establish Unit Purchase-of milking machines /milk testers/bulk milk cooling units (upto 5000 lit capacity)

Subsidy 

Per Unit Rs 20.0 lakh maximum

25% of the project cost (33.33 % for SC -/ ST farmers) as back ended capital subsidy. subject to a ceiling of Rs.5.0 lakhs (Rs.6.67 lakhs for SC/ST farmers) or actual whichever is lower. 

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behalf of their members, Dairy Cooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lnstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

GOVERNMENT SUBSIDY SCHEME- DAIRY UNIT PROJECT OF COWS AND BUFFALO'S

Government Subsidy scheme on dairy  units of Indigenous/ crossbred cows/ buffalos

Establishment of small dairy units with crossbred cows/ indigenous description milch cows like sahiwal, Red Sindhi, Gir, Rathi etc/ graded buffalos upto 10 animals. For SHGs, Cooperatives societies, Producer companies unit size will be 2-10 animals per member

Subsidy:

Subsidy Unit Cost Pattern of Assistance Rs 6.00 lakh for 10 animal unit - minimum unit size is 2 animals with an upper limit of 10 animals.

25% of the project cost (33.33 small dairy units with for 10 animal % for SC ,' ST farmers), as back ended capital subsidy. Subsidy shall be restricted on prorate basis to a maximum of 10 animals subject to a ceilling of Rs 15000 per animal or 20,000 for SC/ST farmers or or actual whichever is lower Beneficiaries may purchase animals of higher costs. 'however, the subsidy will be restricted to the above ceilling.

Eligible Beneficiaries:

i) Farmers, Individual Entrepreneurs and Groups of Unorganized and Organized Sector. Group of organized sector, includes Self-Help Groups on behal.f of their members, Dairy ooperative Societies, Milk unions on behalf of their members, Milk federation, Panchayati Raj lrlstitutions (PRls) etc.are eligible under the scheme.

ii) An applicant will be eligible to avail assistance for all components under the scheme but only once for each component.  However, more than one member of a family can be assisted under the scheme provided they set up separate units with separate infrastructure at different locations. The distance between the boundaries of two such farms should be at least 500 m.

iii) Priority shall be given to projects being implemented in a cluster mode covering dairy farmers/women in SHGs, Cooperatives and Producer Companies including creation of facilities of processing, value addition and marketing of milk produced in the cluster

Pattern of Assistance:

a) Back ended capital subsidy @ 25% of the project cost for general category and @ 33 % for St & SC farmers.
b) Entrepreneur contribution (Margin) for loans beyond Rs.1 lakh* -10% of  project cost minimum.

Financial Institutions: 
 Eligible for re-finance under the scheme.

a. Commercial Banks
b. Regional, Rural and urban Banks
C. State Cooperative Banks
a. State Cooperative Agriculture and Rural Development Banks: and
e. Such other institutions, which are eligible for refinance from NABARD  Linkage with credit

Sanction of project by banks (Financial Institutions):

 The entrepreneurs will prepare a project as per norms of the scheme and submit to the Bank for sanction of the project. The bank shall appraise the project as per the administrative approval issued by DADF from time to time and if found eligible, sanction the total outlay excluding the margin, as a bank loan. The loan amount shall be disbursed in suitable installments depending on the progress of the unit. After the disbursement of the first installment of the loan, the financial institution /bank shall apply to the concerned Regional Office of NABARD for sanction and release of subsidy amount.
All the financing banks shall be required to forward their subsidy claims through their controlling office to the concerned NABARD Regional Office within two months of disbursement of first installment of the bank loan.

Rate of lnterest : 

Applicable on the loan amount under the scheme Rate of interest on loans shall be as per banking guidelinies and the declared policy of the  concerned bank. The bank may charge interest on the entire loan amount, until the subsidy portion is received; and from the date of the receipt of the subsidy, interest shall be charged only on the effective bank loan portion i.e. bank loan minus subsidy.

Time limit for Completion of the project : 

Time limit for completion of the project (except for calf rearing units where disbursements are expected to continue upto two years) would be as envisaged under the project, subject to a maximum period of 9 months from the date of disbursement of the first installment of loan.
 This maximum period may be extended by 3 months in cases where justification provided by the beneficiary is found adequate by the financing bank.
ln case, the project is not completed within the stipulated period, benefit of subsidy will  not be available; the advance subsidy placed with the participating bank.

Security/Surety:

Security for availing the loan be as per the guidelines issued by RBI from time to time.  The beneficiary contribution of 10% shall not be required for loans less than Rs.1 Iakh or any amount as specified in the RBl guidelines, as revised from time to time

Repayment:

Repayment Period will vary between 3-7 years depending on the nature of the activity and cash flow. Moratorium/ Grace period may range from 3 to 6 months in case of dairy farms to 3 years for calf rearing units to be decided by the financing bank as per as needs of individual project.
The recovery of the loan will be based on the net loan amount only. Subsidy shall be adjusted by the concerns bank after the net bank loan (Bank loan minus subsidy) and interest thereon has been repaid.
Repayment Schedules shall be drawn on the total bank loan taken in a manner that the subsidy amount is adjusted after liquidation of the net bank loan (excluding subsidy).

Adjustment of subsidy: 

 Capital subsidy will be back ended (adjusted againist last few installments of repayment of the bank loan) with a minimum lock-in period of 3 years, and. shall be refunded if the account becomes a Non Performing Account (NPA).

OPPORTUNITIES FOR SMALL ENTERPRISES -DAIRY

Opportunities for small entrepreneurs


Dairy market in India is quite huge and according to an estimate the unorganized milk and milk product market is about Rs 470 billion while the market for processed organized dairy segment is only Rs 10000 crores. The market is currently growing at round 5% pa in volume terms. There is an impressive level of processing i.e. 22% in organized sector. The dairy exports in 2007–08 rose to US$ 210.5 million against US$ 113.57 last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011. India with its population of more than 1 billion and diverse food habits, cultures, tradition and religions, offer great market for milk and milk products. Milk products with well defined quality characteristics and packaged in attractive containers can be marketed at different places. Most dairy food delicacies are value added products generating high profits. The milk products produced include curd, ghee, khoa, chhana, paneer, shrikhand , milk powder, whitener ,condensed milk, malted milk food, ice cream and a variety of milk sweets, some of which are now produce d by the organized dairy industries as well, are major value added products from the Indian dairy sector.  The market for traditional dairy products in India is estimated to be US $ 10 billion, being the largest and fastest growing segment of the Indian dairy industry.

Opportunities for small entrepreneurs:

• Milk production
•  Setting up milk processing units
•  Supplying equipment and machinery to dairy plants
•  Ancillary unit supplying packaging materials
•  Supply spare parts and consumables
•  Supply of fuel
• Transportation and distribution of milk
•  Maintaining cold chains
• Production of value added milk products which are used as base material for other food products

• Fodder supply and processing  unit
• Clean Milk production
• Organic milk production

BANK LOAN ON IMPORTANT COMPONENT OF DAIRY BUSINESS - BANKABLE DAIRY PROJECTS

Banks provide loans on following components of dairy business.

India annually produce 120 MT milk, especially  by 70 million of small farmers and 147 million house hold depend on dairy. Milk production growth rate was an average  4.3 percent in the 1990s to 3.8 percent per annum in the 2000s.According to Government of India, demand for milk projected to grow to at least 180 MT 2020-21.Meeting this demand from domestic supply would required production will grow at 5.5 percent per annum.
Growing demand will be achieved by aiming animal productivity, strength & expend milk procurement infrastructure in rural area and enhance milk processing capacity and marketing.To accomplish second white revolution goal NDDB project investment about 2040 Cr. under National Dairy Plan.

Banks provide loans for following important components of dairy business:

·         Cattle and buffaloe breeding and calf rearing

·         Frozen semen banks and A.I. centers

·         Small, medium and commercial dairy units

·         Salvage of dry pregnant buffaloes from city dairies

·         Production of perennial Lucerne as green fodder

·         Fodder production on gochar lands( common village grounds) in the village

·         Silvi-pastoral schemes for production of fodder grasses, fodder trees, timber/fuel trees.

·         Conservation and storage of dry fodder and fodder banks

·         Production of fodder seeds

·         Mini and major cattle feed plants

·         Urea-molasses brick manufacturing units

·         Mobile veterinary service

·         Setting up of private veterinary practice

·         Electronic milk testers for dairy cooperatives

·         Equipment and machinery for processing of liquid milk and milk products

·         Other dairy machinery like milking machines, milk tankers,

·         Construction of milk houses for collection of milk from producers.

·         Manufacturing, storage and marketing of value added indigenous milk products.

Schemes and Funds on Dairy :

Sl.No.	Component	Maximum total project cost             (Rs. in lakhs)
1.	Establishment of small dairy farms-Ten animal unit (buffaloes/cross breed cows) for milk production	Rs.3.00 lakhs per unit (upto ten animals) -Any Non Operation Flood areas. -The total cost depends on the infrastructural facilities required.
2.	Purchase of milking machines / milkotester / bulk milk cooling unit etc.	Rs.15.00 lakhs Milking Machine, Milk-o-tester Bulk Milk Cooling units (upto 2000 lts capacity)
3.	Purchase of dairy processing equipment for manufacturing indigenous milk products.	Rs.10 lakhs per unit -Unit cost depends upon the quantum of milk to be handled and the type of products to be manufactured -The total cost depends upon the investment on civil structures, type and source of machinery.
4.	Establishment of dairy product transportation facilities including cold chain.	Rs.20 lakhs per unit -Unit cost depends upon the quantum of milk/milk products to be transported / handled and the type of products to be transported -The total cost depends upon the investment on type and source of transport vehicle and machinery
5.	Cold storage facilities for milk and milk products.	Rs. 25 lakhs per unit - Unit cost depends upon the quantum of milk/milk products to be stored and the type of products to be stored -While the cost depends upon the investment on type and source of machinery used.
6.	Establishment of private veterinary clinics.	Rs.2.00 lakhs per unit for Mobile clinics and Rs.1.5 lakhs for Stationary clinic -  Area of operation from 8 to 10 villages having 5000 to 6000 cattle units.

SWOT ANALYSIS OF INDIAN DAIRY

India Dairy industry profile

India is the world leader in milk production with total volume of 121.8 million tons. Driven by steady population growth and rising income, milk consumption continues to rise in India. Dairy market is currently growing at an annual growth rate of around 7 per cent in volume terms. The market size of Indian dairy industry stands at around US$ 45 billion.

Since India’s population is predominantly vegetarian; milk serves as an important part of daily diet. Indians use milk in various preparations such as in brewing tea and coffee, in making yogurt or curd and in preparing many Indian dishes. For most households, milk is also a popular beverage due to its nutritional value.

In India, rural households consume almost 50 percent of total milk production. The remaining 50 percent is sold in the domestic market. Of the share of milk sold in the domestic market, almost 50 percent is consumed in fluid form, 35 percent is consumed as traditional products (cheese, yoghurt and milk based sweets), and 15 percent is consumed for the production of butter, ghee, milk powder and other processed dairy products (including baby foods, ice cream, whey powder, casein, and milk albumin).

Most dairy products are consumed in the fresh form and only a small quantity is processed for value addition. In recent years, however, the market for branded processed food products has expanded. Although only around 2 per cent food is processed in India, still the highest processing happens in the dairy sector, where 35 per cent of the total produce is processed, of which only 13 per cent is processed by the organised sector.

Key facts

ñ 65 per cent of the milk is sold in “loose” form

ñ Only 5 per cent of the milk is sold through retail chains

ñ 70 per cent is delivered to the homes by ‘milk agents’

ñ Carton milk or packaged milk has been growing at 24 per cent annually.

ñ Most branded FMCG companies are keen on launching flavored dairy products whose market size is pegged at US$ 166 million

Porter competitive analysis

ñ Threat of competition is high as there are no entry barriers and consequently there are many brands and local players making up the competitive rivalry

ñ Threat of substitutes is low as milk is an essential item for beverages like tea, coffee etc. Also traditional consumption habits make milk a favourite with most households in India

ñ  Bargaining power of suppliers is low because suppliers mainly comprise rural households and small co-operatives

ñ  Bargaining power of consumers is high because of competition in the organized sector and large unorganized market in rural areas

Main Players

Milk products - Amul, Britannia, Vijaya, Verka and Vadilal

Cheese products- Amul, Britannia, Dabur (Le Bon) are the leading players. Other prominent players include Verka, Nandini, Vijaya and Vadilal

Dairy Whiteners - Nestle, Amul, Britannia, Dynamix Diary, Sterling Agro, Haryana Milk Foods, Mohan Food, Modern Dairy, K Dairy

Regulatory changes

ñ Dairy sector was de-licensed in 1991

ñ No industrial license is required fro dairy industry

ñ Foreign equity participation permitted to the extent of 51 per cent in dairy processing sector

ñ Excise duty on dairy machinery has been fully waived off

Key legislations:

·         Milk and Milk Products Order 1992: With following controls

–        Collection areas/milk sheds specified

–        Processing capacity fixed

·         Revised MMPO in 2002: Controls stand withdrawn 

·         The production, distribution and supply of milk products are controlled by the Milk and Milk Products Order, 1992. The order sets sanitary requirements for dairies, machinery, and premises, and includes quality control, certification, packing, marking and labeling standards for milk and milk products

·         The Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply and Distribution) Act, 1992 and Rules 1993