CHENNAI: The state government has provided administrative sanction for Rs 266.70 crore and financial sanction for Rs 66.67 crore as first instalment for 2019-2020 for financing farmer producer companies through the Tamil Nadu Small Farmer Agri Business Consortium (TNSFAC).The funds will be provided to the 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 the 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 and bankers with NABKISAN, a subsidiary of the National Bank for 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 have been promoted by the Department of Agricultural Marketing and Agri Business. It is learnt that most of the companies are start-ups not more than five years old and face challenges in mobilisation of members, organisational cohesion, statutory compliance, entrepreneurial capability, business and marketing acumen and strategy, financial resources etc.
According to the GO, 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. The 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, adding that the invested fund would have the features of capital and form part of the own funds without any voting right.