Clarification on Scheme for Mega Food Park

Ministry of Food Processing Industries (MoFPI) has recently floated Expression of Interest (EoI) for submission of proposals for setting up Mega Food Parks in India. After this announcement, there were several representations seeking clarifications on the applicability of the Scheme for Mega Food Park. To address such queries the MoFPI has issued further Clarification on the Scheme for Mega Food Park vides a Circular dated 17.02.2021. In the present article, we are covering the Clarifications issued by the MoFPI in respect of the Mega Food Park Scheme.

Gist of Notification

The circular contains detailed clarification on various issues of the Mega Food Park Scheme in the form of frequently asked questions (FAQs) categorized in the following parts;

Clarification on Land Requirement for setting-up Mega Food Parks
Clarification on Formation of a Special Purpose Vehicle (SPV)
Clarification on Eligible Project Cost
Types of industries permitted in Mega Food Park
Clarification on Procedure for proposal submission for Mega Food Park Project
Set up an anchor unit with Mega Food Park

Mega Food Park Scheme

Mega Food Park Scheme is a component of the Central Sector Umbrella Scheme – Pradhan Mantri Kisan Sampada Yojana (PMKSY). The primary objective of the Mega Food Park Scheme is to provide modern infrastructure facilities for food processing along the value chain from the farm to the market. Know more about the revised guidelines of the Mega Food Park Scheme

Clarification on Land Requirement for setting-up Mega Food Parks

MoFPI clarified that the Minimum land required for setting up Mega Food Park is 50 acres of contiguous land free from any kind of encumbrance.

The selection of land should be justified in terms of connectivity and availability of basic infrastructure such as approach road, power, water and availability of raw materials.
Land can either be purchased or can be taken on a long term lease. In the case of a lease, the minimum period should be 75 years.
MoFPI also clarified that it is mandatory to have Changed of Land Use (CLU). The land use needs to be changed from Agricultural to Industrial to set-up Mega Food Parks.

Clarification on Formation of a Special Purpose Vehicle (SPV)

It is mandatory to form a Special Purpose Vehicle under the Companies Act to execute the project. This condition is not applicable in the case of the State Government, State Government Entities, and Cooperatives implementing the project. Land for the project has to be transferred in the name of SPV. MoFPI clearly clarified that the existing company has to form a separate SPV. The SPV will be responsible for the execution, maintenance and management of Mega Food Park. All the funds relating to the project will have to be in the accounts of the SPV.

Criteria on the formation of Special Purpose Vehicle

SPV should be a Body Corporate registered under the Companies Act.
State Government, State Government entities or Cooperatives intending to set up a Mega Food Park project will be exempted from the condition of forming SPV
The combined net worth of the shareholders of the SPV should not be less than Rs. 50 crore. Each member in SPV should have a minimum net worth of 1.5 times its proposed equity contribution in SPV.
The Anchor Investor in the SPV will be required to set up at least one food processing unit in the park with an investment of more than Rs. 10 crores, with a minimum 51% stake in the unit

Clarification on Possession of Land

Possession of land for the project at the stage of EOI is not mandatory and The EOI proposals having possession of land with Change in Land Use (CLU) will be given priority during the evaluation and selection process. SPV / Implementing Agency must meet the condition of possession of a minimum of 50 acres of continuous land with CLU for Final approval of the project.

Clarification on Eligible Project Cost

The eligible project cost is the total project cost but excludes the cost of land, preoperative expenses and margin money for working capital. However, interest during construction (IDC) as part of pre-operative expenses and fee to PMC up to 2% of the approved grant will be considered under eligible project cost

Types of Industries Permitted in Mega Food Park

Only food processing industries that make food products fit for human and animal consumption are 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.

Note: Setting up of alcoholic beverage unit as an anchor unit will not be allowed.

The Criterion for Valuation of Immovable Assets

The valuation of the immovable assets will be based on circle rates (as on date of application) declared by the concerned State Government, which should be duly certified by the competent State Revenue Authority. This valuation must be carried out within a period of 30 days preceding the EoI bid submission date.

Procedure for Proposal submission for Mega Food Park Project

The Ministry clearly mentioned that no proposal in physical form will be considered for evaluation. The only online proposal will be considered. The investors/promoters need to submit the proposals through an online portal as per the Mega Food Park Scheme. Click here to know more about the online procedure to submit a proposal for setting-up Mega Food Park Project

Set up an anchor unit with Mega Food Park

The lead promoter will be the Anchor Investor in the Special Purpose Vehicle who needs to set up at least one food processing unit in the park with an investment of not less than Rs. 10 crores.
The Anchor Investor shall have at least a 51% stake in such a processing unit. State Government/ State Government Entities/ Cooperatives would not be required to set up a processing unit in the park.
Anchor unit has to be implemented and commissioned with Mega Food Park.

Timeline for completion of Mega Food Park Project

The schedule for completion of the project will be 30 months from the date of issue of the final approval letter unless extended by IMAC for the reasons to be recorded. Click here to know more about the official notification pertaining to Clarification on Scheme for Mega Food Park