106
S
tate
of
I
ndia
’
s
L
ivelihoods
R
eport
2015
Guarantee Fund Scheme with an outlay of
`
1500 million for FPCs since 2013–14. This
scheme enables registered FPCs to access
equity grant to double member equity
upto a maximum limit of
`
1 million. The
scheme also provides a credit guarantee to
financial institutions which extend loans
to producer companies without collateral
upto
`
10 million. During the financial
year 2014–15, SFAC has sanctioned seven
projects amounting to
`
4.26 million under
Equity Grant Fund. The scheme has been
slow to pick up due to some procedural
issues and stringent eligibility criteria set
for equity support under which many PCs
do not qualify. Moreover, information on
the scheme has not reached many PCs. The
PCs require the support of POPIs to file the
applications. SFAC is reportedly simplify-
ing the processes to improve off take of the
equity fund grants.
Bankers are yet to fully appreciate the
credit guarantee being offered by SFAC and
have not shown much interest. POPIs find
the loan limit of
`
10 million for credit guar-
antee to be insufficient and want the limit to
be increased to
`
50million. The credit guar-
antee cover is not available to non-banking
institutions which are actually empathetic to
the PCs, have a deeper engagement and pro-
vide loans on a clear understanding of the
potential. SFAC should consider extending
credit guarantee to institutions like FWWB,
NABFINS, Ananya, Manaveeya etc., that are
keen to expand their portfolio with PCs and
can effectively use the guarantees.
The branch managers of banks have not
shownmuch interest in either the PCs ormar-
keting loans (Box 5.2). In fact, lot of bankers
haven’t heard about PCs. POPIs mention
that RBI’s policy support and NABARD’s
developmental role are needed for financing
PCs wherein branch managers need to be
trained in assessment and appraisal of PCs as
was done in spreading SHG bank linkage in
the first 10 years of SHG programme.
According to some of the POPIs, board
members of PCs being small producers also
hesitate to take responsibility for borrowing
large sums. Training to board of PCs on
developing a large future vision, business
planning and loan management needs to be
CCD mentions that due to lack of working
capital, PC is unable tomeet the large volumes of
produce demand by the corporates. Companies
are willing to advance
`
0.5 million for procure-
ment. However, procurement is done in a nar-
row window of opportunity when the produce
is harvested. For example, though the mango
season is of threemonths, procurement for pulp-
ing is done in 30 days since in the initial and last
month the cost is high. To procure 3,000 tonnes
the company requires
`
30million. Similarly, for
procurement of chillies, the first to third harvest
are the best; the fourth and fifth harvest are not
suitable for international trade. To procure
2,000 tonnes of chillies in 20 days, the company
requires
`
200 million. The company is able
to procure only 15 per cent of demand due to
scarcity of working capital. In spite of established
track record, books of accounts and evidence
of good working relationship with corporates,
banks especially branch staff are not keen and
insist on collateral and personal guarantees.
CCD then approached the companies to
finance the farmers for initial ploughing and
seeds costing
`
5,000 per acre. If these costs are
met farmers are willing to wait for upto 20 days
after harvest for their payment. But companies
that had bitter experience of financing farmers
earlier through traders were unwilling to
provide input loans to farmers.
CCD now is endeavouring for linking
NABARD financed godowns and warehouses
to be compliant with warehousing legislation so
that farmers can store produce closeby instead
of travelling 40 to 60 kilometers, which increases
transportation costs. Moreover, farmers have
faith only in local warehouses. If warehouse
receipt financing system is made available, then
PC can procure non-perishable commodities
over a longer period and manage with a lower
amount of working capital.
Source:
Discussions with CCD.
Box 5.2:
Working capital woes
