Mega Food Parks Scheme

Mega Food Parks Scheme (MFPS) was launched in 2008 whereby, the Government provides Financial Assistance up to Rs. 50 Crore to set up modern infrastructure facilities for food processing called Mega Food Parks. The key objectives of the scheme are to reduce wastage of perishables; raise processing of food items from 6% to 20% and raise India’s share in Food Processing Industry from 1.5% to 3%.

What is a Mega Food Park?

A mega food park is basically a hub and spoke architecture comprising Collection Centres (CCs) and Primary Processing Centres (PPCs) as spokes linked to a Central Processing Centre as hub.

Collection Centres CCs

The CCs work as points of aggregation of the produce from individual farmers, farmer’s groups and Self Help Groups. They feed the raw material to the PPCs. The collection centres are managed by local entrepreneurs. They server as farm level aggregation points for adjoining areas within a radius of around 10 kilometres. It was expected that these CCs will emerge as centres of rural commerce and will spur economic activities in the area.

Primary Processing Centres (PPCs)

The PPCs work has primary handling centres which use the raw materials to be processed further in CPC. A PPC serves a number of CCs in proximity. Some PPCs have inhouse facilities such as pulping, juicing etc. They have facilities such as refrigerated vans, trucks etc. to transport material to CPC in shortest possible time.

Central Processing Centre

The Central Processing Centre is an industrial park in an area of around 50 acres and houses a number of processing units owned by different business houses. Here, the developed plots of land will be provided to the large and midsized units while Common Design Factory Sheds are provided to small scale units. The park will provide common facilities such as water, electricity and effluent treatment apart from specialized facilities like cold storage, ware housing, logistics and backward integration through the network of primary processing centres and collection centres.

The above architecture is based on a “hub and spoke” model as shown below:

Thus, Mega Food Park is an inclusive concept that aims at establishing the direct linkages from the farm to processing to consumer markets. The cornerstone of a Mega Food Park’s success is efficient logistics that connects the CCs and PPCs to CPC. Further, the main feature of this scheme is cluster based approach.

Government Assistance

The MFPS scheme envisages a onetime capital grant of 50% of the project cost (excluding land cost) subject to a maximum of Rs. 50 Crores in general areas and 75% of the project cost (excluding land cost) subject to a ceiling of Rs. 50 Crores in difficult and hilly areas i.e. North East Region including Sikkim, J&K, Himachal Pradesh, Uttarakhand and ITDP notified areas of the States.

Most important Features of Mega Food Parks

• Cluster Based Approach
• Demand driven with focus on strong backward and forward integration
• Enabling Infrastructure Creation along the supply chain and technology
• Creation of Central Processing Centre (CPC) and Primary Processing Centres (PPC)
• Common Facilities and amenities to be assisted
• Leverage investments in food processing units
• Stakeholder participation with private led initiative through Special Purpose Vehicle (SPV)
• Assistance to creation of common enabling facilities
• Typical Project Cost envisaged – Rs 120-150 crore
• Land – not eligible for funding out of GOI grant
• Assistance from Ministry
• Limited to non-land component of the project and project is done on 50-50-50 scheme {Rs. 50 Crore grant by Government; 50 acre land is needed; 50 crore minimum investment to be done by park developer}
• 50% of project cost limited to Rs. 50 Crore in general areas
• 75% of project cost limited to Rs. 50 Crore in difficult & hilly areas and ITDP notified areas.

How the scheme is implemented?

Implementation of the Mega Food Park is done through the Special Purpose Vehicle (SPV) mechanism in which Financial Institutions/Banks, organized retailers, processors, service providers, producers, farmer organizations and other related stakeholders are the equity Holders.

Each SPV is a Company registered under the Companies Act; and is required to have at least three entrepreneurs / business units which would be independent of each other with no common directors. The land for the project is arranged by SPV.

• A minimum of 26% of equity of the SPV should be held by food processor(s) within the SPV.
• The combined net worth of the shareholders of the SPV should be minimum  50 Crore with food processor(s) having at least of Rs. 10 Crore of net worth .
• The earlier guidelines said that the government agencies can become shareholders and they can have maximum 26% share capital, so that SPV’s private sector character is maintained. The NDA government had recently modified the guidelines to allow central government agencies to become shareholders in the Special Purpose Vehicles (SPVs) to run food parks without any restriction on their equity.
• The SPVs need to bring in at least 20% of the project cost, including the cost of land, as their contribution.

Role of state government

• Providing assistance to SPVs in procurement of suitable land.
• Providing all the requisite clearances, wherever needed, for setting up the MFP and its components thereof and providing the necessary assistance for Power, Water, Approach roads and other external infrastructure to the project
• Providing flexible and conducive labour environment and consider special facilities like exemption of stamp duty, VAT/Sales Tax exemption etc. for the MFP and the units located in the MFP
• Providing a fast track single window agency to facilitate clearances and permissions required for the project.

Current Status

When this scheme was launched; 42 Mega Food Parks were to be established by 2015; as of now not all of them have been launched. The government is now planning to launch a revamped version of the scheme under SAMPADA.

Issues with the Scheme Mega Food Park Scheme

The objective of the scheme is to link farm produce to the market by bringing together farmers, processors and retailers. However, there are some major issues which need to be addressed to get the desired results.

• Firstly, land acquisition is major issue. It is very difficult to get 50 acre of land anywhere, particularly in small and hilly states. The government needs to provide flexibility to this requirement.
• Secondly, since most agri-business in our country happens through cooperatives, their integration into food parks is critical.
• Thirdly, through the scheme gives a grant to the SPV, the SPV finds itself unable to attract the PPCs and CCs. Here, the National Mission on Food Processing could play a major role by providing the Rs. 50 Lakh grant under that mission to units within the MFPs. But that scheme is now delinked from central support and states may have to decide if they want to continue or not. State governments may look into these issues case-by-case basis and provide attractions to these units as well.
• Fourthly, the MFP scheme provides maximum grant of Rs.50 crores for setting up a MFP in minimum 50 acres of contiguous land with 50 percent contribution to the total project cost from the SPV. This “one size fits all” approach has not been able to attract the investors having more or less requirements.

Lastly, the scheme has not attracted global companies because some of them would not work on basis of “grant” from a developing country. They would like to work on Joint Ventures.