TRACTOR /POWER TILLER/FARM MACHINERYParticulars Tractor/Power tiller/other farm Machinery Combine HarvesterPurpose Farm mechanisation is not tractorisationalone but includes financing for othermachinery/implements like seed drill, seedcum-fertiliser drill, planters, power sprayers,seed cleaners, weed removers, powerthreshers, chaff cutters, cane crushers,harvester combines etc.Combine harvester may be financedwith or without a vehicle (Tractor /truck) for transportation from placeto place.Eligibility Farmers or group of farmers who areowner cultivators of at least 4 acres of landhaving perennial irrigation facilities to raisesuccessive crops are eligible for tractor loansfor purchase of tractor with 35 H.P. andless.Farmers or group of farmers who areowner cultivators of at least 6 acres of landhaving perennial irrigation facilities to raisesuccessive crops are eligible for tractor loansfor purchase of tractor with more than 35H.P.Progressive farmers with good trackrecord, having scope for utilisationof machinery in own farm as wellas in other farms are eligible.The farmer who applies for theloan should convince that he hasadequate scope/potential for thegainful utilisation of the machinery.61Points to be considered during appraisal:- Visit the farm and verify whether there is genuineneed for a tractor, power tiller etc., Type of soil, source of irrigation, extent andsituation of land and cropping pattern etc., Eligibility of the borrower (individual or group)on the basis of land holding vis--vis horsepowerof tractor to be purchased as shown in the chartabove Whether there is genuine need for a combineharvester Combine harvesters which have been testedand satisfactory test reports issued by theFarm Machinery Testing and Training Instituteof Government of India, Budhini (MadhyaPradesh) and Hissar (Haryana) alone should befinanced. Scope for custom service, if anya) 1000 hours of productive work in agricultureper year on own farm or both on own farmand on custom service for Tractorb) 600 hours of productive work in agricultureper year on own farm or both on own farmand on custom service for Power Tiller At least 3 implements (disc plough, mouldboard plough, cultivator, cage wheel etc., orrotavator including trailer) should be purchasedas otherwise the tractor may not be put tomaximum and economical use. A farmer can be financed for purchasing asecond tractor atleast three years after the firsttractor finance, provided the first loan is repaidin full. Land revenue records, details of collateralsecurity, village officers certificate and valuationcertificate. Proforma Invoices, Estimate (for second handtractors/equipments) and other relevant papersas applicable for other term loans should beobtained. Appraisal should also taken into accountfollowing factors.a) How many tractors are already in theapplicants village (in case of tractor is to beused as custom service).b) Availability of service and fuel stations in theneighborhoodc) Farmers driving license or his willingness toengage a licensed driverd) In case driver has to be engaged, his salaryhas to be factored into cash flow. Loan Applications: Agri 15 and Agri 10 DocumentationThe following documents must be obtained:a) F.110(i) Letter of Hypothecation (Tractor/Power Tiller/Crops) when the loan amount isabove Rs. 1.00 lacb) F 110 (k) Letter of Hypothecation (machinery,equipments, crop and Livestock) up to Rs.1.00lac loan amountc) F.378 Undertaking to repay in installmentsd) F.512 Mortgage deed - Agricultural Advances in case of Registered Mortgage (wherevernecessary)e) F.379/F.379 A Confirmation letter of Depositof Title Deeds/ Supplementary Narration in caseof Equitable Mortgage (wherever necessary)f) F.111/F.111 A Letter of Guarantee (wherevernecessary)g) F.417 / F.417 A Registered memorandumof deposit of title deeds/supplementarymemorandum of deposit of title deeds, wherevernecessary.h) Letter of authorisation from the borrower to remitthe loan amount (along with margin moneywherever applicable) direct to the dealer.i) An undated sale letter from the borrower (bothfor the Tractor and Trailer). Form- 29 and 30 induplicate.j) An undated transfer of ownership letter asprescribed in the M V Act of the State (both forthe Tractor and Trailer).LOANS FOR RENOVATION/REPAIRS OFTRACTORSLoans can also be extended for repair of existingtractors irrespective of whether it was financed byany bank or not.62Following conditions should be followed:-a) Loan availed for the tractor from any bank(including our bank) should have been repaid.b) Tractor should not be older than 12 years.c) It should remain roadworhty atleast for 3 moreyears post repair (in the opinion of authorizedservice center or mechanic).d) Repayment period should not exceed 5 yearsor estimated remaining utility life of the tractorwhichever is less.e) Amount: Estimated repair / renovation costminus applicable margin.Sometimes branches have to either conductor participate in Credit Camps organised onoccasions like special campaigns, Kissan Month,VVIPs Visits, Outreach programmes, WomensDay etc. Some public functions are also tagged tomass disbursement of loans. Assets like tractors,livestock, and machineries are brought to the venueto be handed over by dignitaries .Loans are best disbursed in branches. Howeverif it becomes necessary to organise or join suchcamps either to generate publicity or in complianceof directions from various authorities, followingprecautions must be taken:1. Mass sanction of loans should not cause anydilution of eligibility and appraisal norms.2. Urgency and pressure for disbursement shouldnot cause imperfect documentation.3. No document should be left fully or partly blank.4. Acknowledgement of borrower for having receivedthe asset must be held. Photograph of a guesthanding over asset is not enough evidence.5. When vehicles or ignition keys are handed overin a public function, the RC Book formalitiesshould not be ignored.Disbursement of Loans in Public Functions63Objective:Grameen Bhandaran Yojana, a capital InvestmentSubsidy Scheme for construction/ Renovation ofRural Godowns, has following objective: To reduce wastage and avoid deterioration offarm produce. Creation of scientific storage capacity with alliedfacilities in rural areas to meet the requirementsof farmers for storing farm produce, processedfarm produce and agricultural inputs Promotion of grading, standardization andquality control of agricultural produce to improvetheir marketability Prevention of distress sale immediately afterharvest by providing the facility of pledgefinancing and marketing credit Strengthen agricultural marketing infrastructurein the country by paving the way for theintroduction of a national system of warehousereceipts in respect of agricultural commoditiesstored in such godowns and to reverse thedeclining trend of investment in agriculturesector by encouraging private and cooperativesectors to invest in the creation of storageinfrastructure in the country.Eligibility:Individuals, farmers, Group of farmers/growers,Partnership/ Proprietary firms, Non-GovernmentOrganizations (NGOs), Self Help Groups (SHGs),Companies, Corporations, Co-operatives, LocalBodies other than Municipal Corporations,Federations, Agricultural Produce MarketingCommittees, Marketing Boards and Agro ProcessingCorporations in the entire country. Assistance forrenovation of rural godowns will, however, berestricted to godowns constructed by cooperativesonly.Location:The entrepreneur will be free to construct godownat any place, as per his/her commercial judgmentexcept for the restriction that it would be outsidethe limits of Municipal Corporation area. Ruralgodowns constructed in the Food Parks promotedby the Ministry of Food Processing Industries shallalso be eligible under the scheme for assistance.Size: Capacity of a godown shall be decided by anentrepreneur. Subsidy shall be restricted to a minimumcapacity of 100 tonnes and maximum capacityof 10,000 tonnes. No maximum ceiling on subsidy in the caseof projects of Rural godowns of Cooperativesassisted by NCDC. Godowns of smaller size upto 50 tonnes capacitywill also be eligible for subsidy as a special casebased on viability analysis depending on thetopography/special requirement of the State/Region. In hilly areas*, rural godowns of smallersize upto 25 tonnes capacity will also be eligiblefor subsidy.RURAL GODOWNS (GRAMEEN BHANDARAN YOJANA)64*where the project site is located at a height ofmore than 1000 meters above mean sea level.Rate of subsidy(a) 33.33% of the capital cost of the project incase of projects located in North EasternStates, hilly areas and those belonging toWomen Farmers/ their self help groups / cooperativesand SC/ST entrepreneurs & theirself-help groups/ Co-operatives subject to amaximum ceiling on subsidy of Rs.62.50 lakh.No maximum ceiling on subsidy in the case ofcooperatives assisted by NCDC;(b) 25% of the capital cost of the project toall categories of farmers (Other than WomenFarmers), agriculture graduates, cooperativesand State/ Central Warehousing Corporationssubject to a maximum ceiling on subsidy of Rs.46.87 lakh. No maximum ceiling on subsidyin the case of cooperatives assisted by NCDC;(c) 15% of the capital cost of the project to allother categories of individuals, companies &corporations etc., subject to a maximum ceilingon subsidy of Rs. 28.12 lakh; and(d) 25% of the capital cost of the project forrenovation of godowns of cooperatives withassistance from NCDC.Projects located in States/ areas otherthan \NE States/ hilly areas, and projectsnot belonging to women farmers/ SC/ STentrepreneurs & their self-help groups/cooperativesProjects located in NEStates/ hilly areas**/ &projects belonging toWomen Farmers***/ SC/ST entrepreneurs & theirself help groups/ Cooperatives****Source of finance Farmers@,AgricultureGraduates,Cooperatives andState / CentralWarehousingCorporations.Individuals,Companies andCorporations etc.Owners minimumcontribution*25% 25% 20%Subsidy from the Govt. 25% 15% 33.33%Term loan from eligibleFinancing institutions(Minimum)50% 50% 46.67%For projects for which subsidy routed through NABARDPattern of funding@ Farmer is a person whose main source of income is from Agriculture.* Cost of land not exceeding 10% of the project cost can form part of the owners contribution.** Where the project site is located at a height of more than 1000 meters above mean sea level.*** In case of partnership/ co-ownership, the ownership of women partners/ members shall be to theextent of 50% or more in the project to consider an application under the category of women farmer.**** SC/ST Cooperative to be certified by the concerned officer of the State Government.65Mode of releasea) Advance subsidy: 50% of the subsidyamount will be released to NABARD by Depttof Agriculture and Cooperation in advance.Accordingly NABARD would release subsidy tobank in advance for keeping the same in theSubsidy Reserve Fund Account of the concernedborrower. This amount of 50% advance subsidywould be released by NABARD to the banks onsubmission of a project profile-cum-claim form(Annexure-I).b) Final subsidy: The remaining 50% of the subsidyamount would be disbursed to the bank(s) byNABARD after conduct of an inspection bya Joint Inspection Committee comprising ofofficers from NABARD, participating bank andDirectorate of Marketing & Inspection (DMI) inthe concerned State.Pledge LoanThe farmers keeping their produce in the godownsshall be eligible to avail on hypothecation of produceupto 75% of the value of produce pledged subjectto a ceiling of Rs.5 lakh per borrower. Such loanshall be for a period of upto 12 months. The rate ofinterest on such loans shall be as per RBI guidelines.The banking institutions shall accept the godownreceipts on its being duly endorsed and deliveredto bank for pledge loan against hypothecation ofproduce as per RBI guidelines. The pledge loanadvance under Grameen Bhandaran Yojana willqualify under Direct Agriculture - priority sectorlending.Time Limit For CompletionA time limit of 15 months is prescribed forcompletion of the project from the date of disbursalof first instalment of loan. However, if reasonsfor delay are justified, a further grace period upto6 months may be allowed by the bank. If theproject is not completed within stipulated period,the benefit of subsidy shall not be available andadvance subsidy has to be refunded forthwith.Interest Rate: As applicable to agricultural Termloans.Other Conditions Rural godowns may be treated as infrastructurefor financing. The participating banks / NCDC / NABARD, etc.,will adhere to their own norms for appraisal ofprojects. A signboard at the site Assisted under GraminBhandaran Yojana of Ministry of Agriculture,Government of India will be exhibited. Govt.s interpretation of various terms will befinal. Besides Joint Inspection Committee (JIC)inspection, pre & post completion inspections ofthe project may be undertaken to verify physical,financial and operational progress, as and whenrequired. Govt. reserves the right to modify, add anddelete any term and condition without assigningany reason.66The NeedIn spite of being the largest producer of fruits andsecond largest producer of vegetables in the world,Indias per capita availability of fruits and vegetablesis quite low because of post harvest losses. Theperishable nature of these produce necessitates acold chain arrangement to maintain quality, extendshelf-life and to prevent glut situations whichproves disastrous to the growers. A cold storagefacility accessible to them helps in averting the riskof distress sale.Food Storage ConditionsFoods and many other commodities can bepreserved by storage at low temperature, whichretards the activities of micro organisms. Microorganisms are the spoilage agents and consist ofbacteria, yeasts and moulds. Low temperaturedoes not destroy those spoilage agents as does hightemperature, but greatly reduces their activities,providing a practical way of preserving perishablefoods in their natural state which otherwise is notpossible through heating. The low temperaturenecessary for preservation depends on the storagetime required often referred to as short or long termshortage and the type of product.In general, there are three groups of products:1. Foods that are alive at the time of storage,distribution and sale e.g. fruits and vegetables,2. Foods that are no longer alive and have beenprocessed in some form e.g. meat and fishproducts, and3. Commodities that benefit from storage atcontrolled temperature e.g. beer, tobacco,khandsari, etc.Economic size of unit and land requirements:Cold storage units can be used to store either a singlecommodity or multiple commodities. Dependingupon the entrepreneurs financial health; it canbe planned to store the produce entirely owned byhim or on rental basis or in combination of the two.NABARD usually encourages cold storages where70% of the capacity is available to farmers for storageon rentals. Financial viability of a unit dependsupon the intended pattern of use and rental rateprevalent in an area. However, units entirely to beused by the owners are also considered for sanction.Considering 70:30 utilization of the capacity forrentals and own use, a 5000 MT capacity unitis considered as viable with the assumptions asindicated at Annexure I. To set up a 5000 MTcapacity cold storage unit although one acre of landmay be adequate, it is always better to have twoacres of land to take care of future expansions andwaste management. While selecting the site careshould be taken to select a site at an elevation freefrom inundation and well connected by road andother communication facilities to both productionand consumption centres. The land should be ofnon agricultural type and the soil at the site shouldbe firm enough to carry the weight of the buildingand storage racks.COLD STORAGE67TechnologyA cold storage unit incorporates a refrigerationsystem to maintain the desired room environmentfor the commodities to be stored. A refrigerationsystem works on two principles:1. Vapour absorption system (VAS), and2. Vapour compression system (VCS)VAS, although comparatively costlier, is quiteeconomical in operation and adequately compensatesthe higher initial investment. Wherever possiblesuch a system should be selected to conserve onenergy and operational cost. However, it has itsown limitations when temperature requirement isbelow 100C and many of the fruits and vegetablesexcept seeds, mango, etc. require lower than 100Cfor long storage.VCS is comparatively cheaper than VAS. There arethree types of VCS systems available dependingupon the cooling arrangements in the storagerooms i.e., diffuser type, bunker type and fin coiltype. Diffuser type is comparatively costlier and isselected only when the storage room heights arelow. The operational costs of such units are alsohigher. Bunker type is the cheapest and is preferredwhen storage room heights normally exceeds 11.5m. Its operational cost is also low. Fin coil type,although about 5% costlier than the bunker type, isvery energy efficient with low operational cost andhigher space availability for storage of produce.Such system is used for units with room heights of5.4m onwards. A comparison of electrical loads &energy savings, refrigerant requirement and spacesavings in all the three systemsFinancial ViabilityThe financial analysis of a cold storage of 5000 MTcapacity is placed as Annexure II. The project has amargin money component of 25% with the rate ofinterest on term loan and working capital as 15%and 18% respectively. The rental charges havebeen considered at Rs. 700 per MT and the profitmargin on self storage is Rs. 3000 per MT. For thisproject, the financial indicators of the investmentare as under:1. Net Present Value @ 15% DF = Rs. 67.09lakh2. Internal Rate of Return (IRR) = 25.75 %3. Average Debt Service coverage Ratio = 1.58a) EligibilityIndividuals, group of individuals, cooperativesocieties, proprietary/ partnership concerns andjoint sector companies by CBs and SCBs.b) MarginMargin of 15% to 25% should be taken dependingupon the status and financial health of a borrower.c) Rate of InterestAs applicable to Agricultural Term Loans from timeto timed) Repayment PeriodUpto 9 years depending on projected cash-flowwith moratorium not exceeding 1 year.e) SecurityLoan should be fully covered by security; eitherprime (cold storage land, building, machineries)or collateral or a combination of both apart frompersonal guarantee of promoters.Annexure IAssumptions for working out economics of a 5000MT capacity potato cold storage1. Capacity utilization: First year - nil, Second year- 80%, Third year onwards - 100%.2. 70% of the capacity is rented out and rest 30%capacity is used to store potato owned by thepromoter(s).3. Rental charges per season per MT of potato areRs. 700/-.4. Marketing margin on own potato considered atRs. 3000/- per MT.5. Pledge loan margin of 2% has been assumed on20% of total handling, considering per ton priceof potato at Rs.2500/ MT.6. Electricity and other utilities expenses consideredat Rs. 210/- per MT per annum.7. Lump sum establishment and office expensesconsidered as Rs. 2 lakhs per annum.8. Expenditure on maintenance and repairsconsidered as Rs. 20/- per MT per annum.9. Expenditure on gas, fuel and lubricantsconsidered as Rs. 10/- per MT per annum.6810. Labour charges for loading and unloading ofpotato in the cold store considered as Rs. 15/-per MT.11. Insurance charges for the potato considered asRs. 20/- per MT per season.12. Interest on working capital considered at 18%per annum for six months on an average in ayear.13. Margin money considered at 25% of thefinancial outlay.14. Interest on term loan considered at 15% perannum.15. Even though the life of the cold storage will bemuch more, the life has been considered as 15years for working out internal rate of return.16. Depreciation rate of 5% and 15% has beenconsidered for civil structures and plant &respectively.17. Repayment period of nine years with one yeargrace period has been considered. The interestduring first year has been capitalized andrepayment of principal has been consideredfrom third year.Annexure IIBROAD TECHNICAL PARAMETERS FOR A 5000MT COLD STORAGEMEANS OF FINANCEAnnexure IIICHECK LIST FOR COLD STORAGE PROJECTSLand requirement 2 acresStorage spacerequirement17000 cubic metreTechnology preferred Gravity circulation/Bunker type/ Fin-coilCold storage roomheight12.2 to 18.5 mAvg. cost of investment Rs. per MT Total Cost(Rs. lakhs)Civil cost 1400 70Insulation cost 350 17.5Equipment cost 1100 55Miscellaneous cost 150 7.5Total 3000 150Operational cost Rs./MT/yearElectricity & utilities 210Establishmentexpenses35Maintenance andrepair20Gas, Fuel andLubricants10Labour charges 15Insurance 20Total Electrical load 125 kWRs. (lakhs)Total Project Cost 150.00Margin Money 25% 37.50Term loan 75% 112.50Rate of Interest on term loan 15%Rate of interest on working capital 18%(i) Project Outlay1 Item wise cost proposed under sitedevelopment and their quantity of workanalysis2 Item wise cost proposed under Civilstructures and their quantity of workanalysis3 Item wise details of the cost ofmachinery with supporting quotations /literature etc.4 Cost of miscellaneous equipmentsincluding office equipments,communication system and firefightingequipment etc.5 Cost proposed under electrification anditem wise cost breakups6 Cost proposed for stand-by powerarrangement7 Cost proposed for water supply systemssuch as construction of well / diggingof tubewell, installation of pumpset,construction of overhead tank andpiping works8 Any other arrangement / cost proposedmay be described with proper details9 Cost of Erection and Commissioning(ii) Means of Finance :1 Total Outlay2 Margin Money3 Loan Requirement69Dos and DONTs(iii) Lending terms: Rate of interest, graceperiod, repayment period, downpayment, nature of security, availabilityof government guarantee for bankloan/ refinance, sources and extent ofavailability of subsidy etc.(iv) Proposed schedule of implementation.Year wise physical and financialprogramme, bank loan refinancerequirement.(v) Estimates of unit wise aggregate income,expenditure and surplus from the coldstorage, comments on the financialviability of the project along with cashflow, B/C ratio, net present worth,financial rate of return , Internal rate ofreturn and Debt Service Coverage Ratio(vi) Assumptions made for calculating incomeand expenditure statement(vii) Income and Expenditure Statement fornext nine years(viii) Sensitivity Analysis(ix) Socio-economic benefits includingemployment generation and benefits tofarmers(x) Comments on the financial position of theborrowers/ implementing agency. In caseof companies, partnership firm or societyan analysis of their financial position andaudited financial statements for last threeyears(xi) Infrastructure available for projectimplementation(xii) SWOT Analysis(xiii) Conclusions and recommendationsS.No. DOs Donts1 Suitability of site withproper elevation, drainageand linkages by road andother communicationsmust be ensured.Site in a low lying areawith poor road and othercommunication linkagesmust be avoided.2 Land should be convertedto non agriculturalcategory.Agricultural landshould not be usedfor construction ofcold storage withoutconverting it to nonagricultural category.3 Soil should be tested forits load bearing strengthand matching rack designshould be adopted.Do not avoid soil loadbearing test and properrack design.4 Necessary permissionfrom local authoritiesfor construction ofcold storage should beobtained.Dont avoid takingpermissions fromlocal authorities forconstructions.5 Capacity of the plant andits room temperatureshould be matched to theproduct to be stored andmarket size.Dont select the capacityof the cold storagearbitrarily.6 Selection of technologyand machinery shouldbe for power efficiency,low investment andmaintenance cost.Costly and energyintensive technologyshould be avoided.7 Plant operation may beplanned in a manner tonot exceed an average 12hours operation a day.Plant operation for morethan 12 hours a dayshould be avoided.8 Refrigeration systemshould be properlypressure tested andvacuum tested for safety.Proper pressure testingand vacuum testing ofthe refrigeration systemshould not be overlooked.9 Soft water should be usedfor plant operation.Dont use hard waterwithout softening it.10 Trained personnel shouldbe employed for operatingthe plant and maintainingdesired room conditions.Untrained andinexperienced personnelshould be avoided forcritical plant operations.11 Proper standbyequipment likecompressor with motorand water circulationpump should beprovided.Standby provisionsfor critical equipmentshould not be avoided tosave on cost.12 Assured electricity supplymatching to the electricalpower requirement shouldbe provided. In caseof power failures, thesupply should be ensuredby DG set matchingto the essential powerrequirement of the unit.Dont compromiseon DG set to ensureassured power supply.13 Proper safety provisionslike fire extinguishers andsafety alarms should beprovided.Dont compromise onsafety aspects for riskfree operation of theunit.14 Proper insurance covershould be taken forbuilding, plant andmachinery and storedstocks to take care ofunforeseen risk.Dont avoid