TN releases first instalment of 66.67 crore for financial support to farmer producer companies

CHENNAI:
The state government has provided administrative sanction of Rs 266.70 crore and financial sanction of Rs 66.67 crore as first instalment for the financial year 2019-2020 for financing Farmer Producer Companies in the state through Tamil Nadu Small Farmer Agri Business Consortium (TNSFAC).
The funds will be provided to the Farmer Producer Companies under three components – Mezzanine Capital Assistance (Rs 50 crore), Credit Guarantee (Rs 50 crore and Revolving fund (Rs 166.70 crore).
This comes after Tamil Nadu Farmer Producer Organisation Policy is being formulated to address the issues and challenges faced by Farmer Producer companies.
According to a GO released on Friday, the fund was formulated after holding consultations with stakeholders, including farmers, farmer producer companies, officials, bankers, with NABKISAN, a subsidiary of National Bank of Agriculture and Rural Development to design solutions faced by the companies and their financial requirements.
Currently, there are 500 Farm Producer Companies registered with Tamil Nadu of which 130 farmer producer companies have been promoted by Department of Agricultural Marketing and Agri Business. It is learnt that most of the companies are start-ups of not more than five years and face challenges relating to mobilization of members, organizational cohension, statutory compliance, entrepreneurial capability, business and marketing acumen and strategy, financial resources etc.
According to a Government Order released on Friday, Credit Guarantee Fund will provide easy access to bank credit. It will provide 50 per cent guarantee against defaults by farmer producer companies which would eventually be written off by lending agency. Ther companies may be supported for two to three cycles of funding or maximum of three to five years.
Similarly, Mezzanine Capital Assistance, will be a margin fund corpus constituted with a lending agency which will invest in the capital of Farmer Producer companies.
“Since there is no provision for subscribing to capital by non farmers, the investment will be made in the form of cumulative redeemable long term preferential capital or debenture at nominal rates. The preference capital or debenture will be redeemable after five years and repayment will be at the end of fifth year,” the GO said. The invested fund would have the features of capital and form part of the own funds without any voting right, the GO added.
Under Revolving fund, the state will create a corpus in the lending agency where in the corpus fund will be blended by the lending agencyand lent to farmer producer companies at concessional rates. On recovery, the part principal amount will be re-credited to the corpus fund and again used for lending. The revolving fund will be provided for a maximum period of three years.
The state will form a committee on Farmer Producer Organisational Financing which will oversee formation, financing and market integration of collectives on a quarterly basis.
The implementing agency will be Department of Agricultural Marketing and Agri business through TNSFAC. NABKISAN which has invested 10pc stake will be the implementing partner.
Pending approval of the legislature, the expenditure may be initially met by drawal of advance from the contingency fund, the GO added.