Dairy Processing and Infrastructure Development Fund

The Dairy Cooperatives of India commissioned a large number of dairy processing plants during the Operation Flood that lasted till 1996. Up until now, most of these plants have never been re-developed or expanded after that. With operations continuing with old and obsolete technologies in these plants, the scope to improve efficiencies and increase production is hard to achieve. Therefore, the Government of India announced the Dairy Processing and Infrastructure Development Fund (DIDF) under the NABARD with an estimated budget of INR 8,00 through the Union Budget 2017-18. This article talks about the important aspects and essentials of the DIDF.

Objectives

The following are the objectives of the Dairy Processing and Infrastructure Development Fund (DIDF).

To modernise the milk processing plants and their machinery.
To create additional infrastructures that specifically cater to the goal of processing more milk.
To increase the overall milk processing capacity, that in turn, will increase the value addition, and by increasing the production of dairy products.
To increase efficiency in dairy processing plants and producers that are owned and controlled by dairy institutions. Hence, enabling the optimum value of milk to milk producing farmers and increasing the supply of quality milk to consumers.
To help the producer-owned-and-controlled institutions increase their share of milk production, thereby offering more significant opportunities of ownership, management and access to markets, to rural milk producers in the organised milk market.
To assist the producer-owned-and-controlled institutions to have a stronghold in the organised milk market, strive as a dominant player, and to make increased Price Realisation to milk producers.

Components

The following are the objectives of the Dairy Processing and Infrastructure Development Fund (DIDF).

Modernisation and creation of new milk processing facilities.
Re-development and establishment of new manufacturing facilities for Value-Added Products.
Infrastructure to maintain milk and other products at various optimum temperatures.
Setting up of an electronic milk testing equipment.
Learning and Management of Projects
Any other activities, decided by the Government of India in consultation with the relevant stakeholders, concerning the dairy sector and aims to contribute to the current objectives of the DIDF.

Criteria

The following are the criteria in various aspects that are to be fulfilled to avail the Dairy Processing and Infrastructure Development Fund (DIDF).

Financial Criteria

The audit of accounts must be up-to-date. Moreover, the observations of the auditor must not comprise of any adverse opinions or disclaimers.
The end-borrower must not have defaulted any bank or financial institution on the date of the loan application procedure.
Every outstanding due to the producer members must not cross the threshold of 4 payment periods.
It is essential for the borrower to have a positive net worth.
The borrower must offer their consent for assignment concerning the steps taken by the National Dairy Development Board (NBBD) to secure its loan. In the case of reassignment, the costs involved shall be recovered from the eligible end-borrower.
As set up by the NBBD, the financial returns of the project must meet the requirements regularly.
The end-borrower must not have any receivables from the State Government for over a year.

Technical Criteria

Environmental or Statutory Clearances are to be obtained by the end-borrower to set up dairy plants/ producers.
To set up a new plant or to expand one, the end-borrower is required to have their own or a long-term leased land that is free from any encumbrances.
A No-Objection Certificate is essential from the concerned authority for the mortgage to NDDB in the case of leased land.

Institutional/ Governance Criteria

The plant must have a duly constituted governing body such as a board of Directors or a management committee as applicable to the legal form of the end-borrower.
The plant must have a full-time Chief Executive Officer or a Managing Director, and an adequate number of qualified managerial and technical personnel at critical positions.
The plant must not have a Director who has defaulted to any bank/ financial institution on the board.

Terms and Conditions for the Loan

The following are the various terms and conditions that have to be agreed upon to avail the loan.

Funding Pattern

The scheme follows a funding support pattern which will be in the form of an interest-bearing loan.

Loan Component: Maximum of 80%
End-borrower’s component: Minimum of 20%

Tenure and Moratorium Period

The tenure of the loan would be a maximum of 10 years from the date of the first release of funds. This would include the Moratorium Period of a maximum of 2 years on the repayment of the principal amount only. The Moratorium Period would be for the relevant project, and not for each release.

Interest Rate

The rate of interest would be 6.5% per annum for the end-borrower, which is currently set by the NDDB. The same would be effective throughout the repayment period. Therefore, interest will be calculated on a daily product basis, without compounding.

Commitment Charges

The end-borrower is required to pay a commitment charge of 2% per annum with applicable taxes on the cumulative difference if the cumulative disbursement at the end of a quarter is below 90% of the pre-approved cumulative draw-down schedule. The rates may differ and will be conveyed by the NDDB as required. This charge would be levied from the start of the next quarter up until the differential amount is withdrawn.

Security Arrangements

The end-borrower will be required to provide a State Government Guarantee for the repayment of the loan offered by the DIDF. However, this condition may be relaxed in situations where the end-borrower has enough collateral security. For cases such as these, the NDDB, in consultation with the NABARD, would examine the same and approval would be given as required.

Loan Swapping

Loans availed from any other financial institutions or banks for projects under execution will be considered as loan swapping under the DIDF scheme subject to certain pre-conditions that have to be fulfilled.

An eligible end-borrower must obtain a No-Objection Certificate (NOC) from the concerned financial institutions or funding agencies.
The end-borrower will have to qualify for all the eligibility criteria defined under the DIDF scheme.
No cases or disputes with respect to projects under consideration must be pending in the court of law.
As per the terms and conditions of the DIDF Scheme, the reassessment of the project cost must be estimated along with procurement procedures and viability.
Assessment of capability of the end-borrower to provide adequate security includes a guarantee from the State Government.

Repayment of Loan

The following are the terms and conditions for the repayment of loan availed under the Dairy Processing and Infrastructure Development Fund (DIDF) scheme.

Repayment of Interest

The interest is required to be paid by the end-borrower on a monthly basis. There would be no moratorium period on the payment of interest. The payment of interest would begin from the 1st day of the next month the loan was released.

Repayment of Principal

The Principal should be paid every month after the completion of the moratorium period.

Default in Repayment

When the end-borrower fails to repay the loan instalments on time or before the due date, the amount will attract an additional interest at the rate of 3% per annum, over and above the standard interest rate from the date of repayment till the actual date of repayment.