TRACTOR /POWER TILLER/FARM MACHINERY

Particulars Tractor/Power tiller/other farm Machinery Combine Harvester

Purpose Farm mechanisation is not tractorisation
alone but includes financing for other
machinery/implements like seed drill, seedcumfertiliser drill, planters, power sprayers,
seed cleaners, weed removers, power
threshers, chaff cutters, cane crushers,
harvester combines etc.
Combine harvester may be financed
with or without a vehicle (Tractor /
truck) for transportation from place
to place.
Eligibility Farmers or group of farmers who are
owner cultivators of at least 4 acres of land
having perennial irrigation facilities to raise
successive crops are eligible for tractor loans
for purchase of tractor with 35 H.P. and
less.
Farmers or group of farmers who are
owner cultivators of at least 6 acres of land
having perennial irrigation facilities to raise
successive crops are eligible for tractor loans
for purchase of tractor with more than 35
H.P.
Progressive farmers with good track
record, having scope for utilisation
of machinery in own farm as well
as in other farms are eligible.
The farmer who applies for the
loan should convince that he has
adequate scope/potential for the
gainful utilisation of the machinery.
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Points to be considered during appraisal: Visit the farm and verify whether there is genuine
need for a tractor, power tiller etc.,
Type of soil, source of irrigation, extent and
situation of land and cropping pattern etc.,
Eligibility of the borrower (individual or group)
on the basis of land holding vis--vis horsepower
of tractor to be purchased as shown in the chart
above
Whether there is genuine need for a combine
harvester
Combine harvesters which have been tested
and satisfactory test reports issued by the
Farm Machinery Testing and Training Institute
of Government of India, Budhini (Madhya
Pradesh) and Hissar (Haryana) alone should be

financed.
Scope for custom service, if any
a) 1000 hours of productive work in agriculture
per year on own farm or both on own farm
and on custom service for Tractor
b) 600 hours of productive work in agriculture
per year on own farm or both on own farm
and on custom service for Power Tiller
At least 3 implements (disc plough, mould
board plough, cultivator, cage wheel etc., or
rotavator including trailer) should be purchased
as otherwise the tractor may not be put to
maximum and economical use.
A farmer can be financed for purchasing a
second tractor atleast three years after the first
tractor finance, provided the first loan is repaid
in full.
Land revenue records, details of collateral
security, village officers certificate and valuation
certificate.
Proforma Invoices, Estimate (for second hand
tractors/equipments) and other relevant papers
as applicable for other term loans should be
obtained.
Appraisal should also taken into account
following factors.
a) How many tractors are already in the
applicants village (in case of tractor is to be
used as custom service).
b) Availability of service and fuel stations in the
neighborhood
c) Farmers driving license or his willingness to
engage a licensed driver
d) In case driver has to be engaged, his salary
has to be factored into cash flow.
Loan Applications: Agri 15 and Agri 10
Documentation
The following documents must be obtained:
a) F.110(i) Letter of Hypothecation (Tractor/
Power Tiller/Crops) when the loan amount is
above Rs. 1.00 lac
b) F 110 (k) Letter of Hypothecation (machinery,
equipments, crop and Livestock) up to Rs.1.00
lac loan amount
c) F.378 Undertaking to repay in installments
d) F.512 Mortgage deed - Agricultural Advances
in case of Registered Mortgage (wherever
necessary)
e) F.379/F.379 A Confirmation letter of Deposit
of Title Deeds/ Supplementary Narration in case

of Equitable Mortgage (wherever necessary)

f) F.111/F.111 A Letter of Guarantee (wherever
necessary)
g) F.417 / F.417 A Registered memorandum
of deposit of title deeds/supplementary
memorandum of deposit of title deeds, wherever
necessary.
h) Letter of authorisation from the borrower to remit
the loan amount (along with margin money
wherever applicable) direct to the dealer.
i) An undated sale letter from the borrower (both
for the Tractor and Trailer). Form- 29 and 30 in
duplicate.
j) An undated transfer of ownership letter as
prescribed in the M V Act of the State (both for
the Tractor and Trailer).
LOANS FOR RENOVATION/REPAIRS OF
TRACTORS
Loans can also be extended for repair of existing
tractors irrespective of whether it was financed by
any bank or not.
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Following 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 more
years post repair (in the opinion of authorized
service center or mechanic).
d) Repayment period should not exceed 5 years
or estimated remaining utility life of the tractor
whichever is less.
e) Amount: Estimated repair / renovation cost
minus applicable margin.
Sometimes branches have to either conduct
or participate in Credit Camps organised on
occasions like special campaigns, Kissan Month,
VVIPs Visits, Outreach programmes, Womens
Day etc. Some public functions are also tagged to
mass disbursement of loans. Assets like tractors,
livestock, and machineries are brought to the venue
to be handed over by dignitaries .
Loans are best disbursed in branches. However
if it becomes necessary to organise or join such
camps either to generate publicity or in compliance
of directions from various authorities, following
precautions must be taken:
1. Mass sanction of loans should not cause any
dilution of eligibility and appraisal norms.
2. Urgency and pressure for disbursement should

not cause imperfect documentation.

3. No document should be left fully or partly blank.
4. Acknowledgement of borrower for having received
the asset must be held. Photograph of a guest
handing over asset is not enough evidence.
5. When vehicles or ignition keys are handed over
in a public function, the RC Book formalities
should not be ignored.

Disbursement of Loans in Public Functions

63

Objective:
Grameen Bhandaran Yojana, a capital Investment
Subsidy Scheme for construction/ Renovation of
Rural Godowns, has following objective:
To reduce wastage and avoid deterioration of
farm produce.
Creation of scientific storage capacity with allied
facilities in rural areas to meet the requirements
of farmers for storing farm produce, processed
farm produce and agricultural inputs
Promotion of grading, standardization and
quality control of agricultural produce to improve
their marketability
Prevention of distress sale immediately after
harvest by providing the facility of pledge
financing and marketing credit
Strengthen agricultural marketing infrastructure
in the country by paving the way for the
introduction of a national system of warehouse
receipts in respect of agricultural commodities
stored in such godowns and to reverse the
declining trend of investment in agriculture
sector by encouraging private and cooperative
sectors to invest in the creation of storage
infrastructure in the country.
Eligibility:
Individuals, farmers, Group of farmers/growers,
Partnership/ Proprietary firms, Non-Government
Organizations (NGOs), Self Help Groups (SHGs),
Companies, Corporations, Co-operatives, Local
Bodies other than Municipal Corporations,
Federations, Agricultural Produce Marketing
Committees, Marketing Boards and Agro Processing
Corporations in the entire country. Assistance for
renovation of rural godowns will, however, be
restricted to godowns constructed by cooperatives
only.
Location:
The entrepreneur will be free to construct godown
at any place, as per his/her commercial judgment

except for the restriction that it would be outside

the limits of Municipal Corporation area. Rural
godowns constructed in the Food Parks promoted
by the Ministry of Food Processing Industries shall
also be eligible under the scheme for assistance.
Size:
Capacity of a godown shall be decided by an
entrepreneur.
Subsidy shall be restricted to a minimum
capacity of 100 tonnes and maximum capacity
of 10,000 tonnes.
No maximum ceiling on subsidy in the case
of projects of Rural godowns of Cooperatives
assisted by NCDC.
Godowns of smaller size upto 50 tonnes capacity
will also be eligible for subsidy as a special case
based on viability analysis depending on the
topography/special requirement of the State/
Region. In hilly areas*, rural godowns of smaller
size upto 25 tonnes capacity will also be eligible
for subsidy.

RURAL GODOWNS (GRAMEEN BHANDARAN

YOJANA)
64

*where the project site is located at a height of

more than 1000 meters above mean sea level.
Rate of subsidy
(a) 33.33% of the capital cost of the project in
case of projects located in North Eastern
States, hilly areas and those belonging to
Women Farmers/ their self help groups / cooperatives
and SC/ST entrepreneurs & their
self-help groups/ Co-operatives subject to a
maximum ceiling on subsidy of Rs.62.50 lakh.
No maximum ceiling on subsidy in the case of
cooperatives assisted by NCDC;
(b) 25% of the capital cost of the project to
all categories of farmers (Other than Women
Farmers), agriculture graduates, cooperatives
and State/ Central Warehousing Corporations
subject to a maximum ceiling on subsidy of Rs.
46.87 lakh. No maximum ceiling on subsidy
in the case of cooperatives assisted by NCDC;
(c) 15% of the capital cost of the project to all
other categories of individuals, companies &
corporations etc., subject to a maximum ceiling
on subsidy of Rs. 28.12 lakh; and
(d) 25% of the capital cost of the project for
renovation of godowns of cooperatives with

assistance from NCDC.

Projects located in States/ areas other
than \NE States/ hilly areas, and projects
not belonging to women farmers/ SC/ ST
entrepreneurs & their self-help groups/
cooperatives
Projects located in NE
States/ hilly areas**/ &
projects belonging to
Women Farmers***/ SC/
ST entrepreneurs & their
self help groups/ Cooperatives****
Source of finance Farmers@,
Agriculture
Graduates,
Cooperatives and
State / Central
Warehousing
Corporations.
Individuals,
Companies and
Corporations etc.
Owners minimum
contribution*
25% 25% 20%
Subsidy from the Govt. 25% 15% 33.33%
Term loan from eligible
Financing institutions
(Minimum)
50% 50% 46.67%
For projects for which subsidy routed through NABARD
Pattern 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 the
extent 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.
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Mode of release
a) Advance subsidy: 50% of the subsidy
amount will be released to NABARD by Deptt
of Agriculture and Cooperation in advance.
Accordingly NABARD would release subsidy to
bank in advance for keeping the same in the

Subsidy Reserve Fund Account of the concerned

borrower. This amount of 50% advance subsidy
would be released by NABARD to the banks on
submission of a project profile-cum-claim form
(Annexure-I).
b) Final subsidy: The remaining 50% of the subsidy
amount would be disbursed to the bank(s) by
NABARD after conduct of an inspection by
a Joint Inspection Committee comprising of
officers from NABARD, participating bank and
Directorate of Marketing & Inspection (DMI) in
the concerned State.
Pledge Loan
The farmers keeping their produce in the godowns
shall be eligible to avail on hypothecation of produce
upto 75% of the value of produce pledged subject
to a ceiling of Rs.5 lakh per borrower. Such loan
shall be for a period of upto 12 months. The rate of
interest on such loans shall be as per RBI guidelines.
The banking institutions shall accept the godown
receipts on its being duly endorsed and delivered
to bank for pledge loan against hypothecation of
produce as per RBI guidelines. The pledge loan
advance under Grameen Bhandaran Yojana will
qualify under Direct Agriculture - priority sector
lending.
Time Limit For Completion
A time limit of 15 months is prescribed for
completion of the project from the date of disbursal
of first instalment of loan. However, if reasons
for delay are justified, a further grace period upto
6 months may be allowed by the bank. If the
project is not completed within stipulated period,
the benefit of subsidy shall not be available and
advance subsidy has to be refunded forthwith.
Interest Rate: As applicable to agricultural Term
loans.
Other Conditions
Rural godowns may be treated as infrastructure
for financing.
The participating banks / NCDC / NABARD, etc.,
will adhere to their own norms for appraisal of
projects.
A signboard at the site Assisted under Gramin
Bhandaran Yojana of Ministry of Agriculture,
Government of India will be exhibited.
Govt.s interpretation of various terms will be
final.
Besides Joint Inspection Committee (JIC)
inspection, pre & post completion inspections of

the project may be undertaken to verify physical,

financial and operational progress, as and when
required.
Govt. reserves the right to modify, add and
delete any term and condition without assigning
any reason.
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The Need
In spite of being the largest producer of fruits and
second largest producer of vegetables in the world,
Indias per capita availability of fruits and vegetables
is quite low because of post harvest losses. The
perishable nature of these produce necessitates a
cold chain arrangement to maintain quality, extend
shelf-life and to prevent glut situations which
proves disastrous to the growers. A cold storage
facility accessible to them helps in averting the risk
of distress sale.
Food Storage Conditions
Foods and many other commodities can be
preserved by storage at low temperature, which
retards the activities of micro organisms. Micro
organisms are the spoilage agents and consist of
bacteria, yeasts and moulds. Low temperature
does not destroy those spoilage agents as does high
temperature, but greatly reduces their activities,
providing a practical way of preserving perishable
foods in their natural state which otherwise is not
possible through heating. The low temperature
necessary for preservation depends on the storage
time required often referred to as short or long term
shortage 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 been
processed in some form e.g. meat and fish
products, and
3. Commodities that benefit from storage at
controlled temperature e.g. beer, tobacco,
khandsari, etc.
Economic size of unit and land requirements:
Cold storage units can be used to store either a single
commodity or multiple commodities. Depending
upon the entrepreneurs financial health; it can
be planned to store the produce entirely owned by
him or on rental basis or in combination of the two.
NABARD usually encourages cold storages where
70% of the capacity is available to farmers for storage
on rentals. Financial viability of a unit depends

upon the intended pattern of use and rental rate

prevalent in an area. However, units entirely to be
used by the owners are also considered for sanction.
Considering 70:30 utilization of the capacity for
rentals and own use, a 5000 MT capacity unit
is considered as viable with the assumptions as
indicated at Annexure I. To set up a 5000 MT
capacity cold storage unit although one acre of land
may be adequate, it is always better to have two
acres of land to take care of future expansions and
waste management. While selecting the site care
should be taken to select a site at an elevation free
from inundation and well connected by road and
other communication facilities to both production
and consumption centres. The land should be of
non agricultural type and the soil at the site should
be firm enough to carry the weight of the building
and storage racks.

COLD STORAGE
67

Technology
A cold storage unit incorporates a refrigeration
system to maintain the desired room environment
for the commodities to be stored. A refrigeration
system works on two principles:
1. Vapour absorption system (VAS), and
2. Vapour compression system (VCS)
VAS, although comparatively costlier, is quite
economical in operation and adequately compensates
the higher initial investment. Wherever possible
such a system should be selected to conserve on
energy and operational cost. However, it has its
own limitations when temperature requirement is
below 100C and many of the fruits and vegetables
except seeds, mango, etc. require lower than 100C
for long storage.
VCS is comparatively cheaper than VAS. There are
three types of VCS systems available depending
upon the cooling arrangements in the storage
rooms i.e., diffuser type, bunker type and fin coil
type. Diffuser type is comparatively costlier and is
selected only when the storage room heights are
low. The operational costs of such units are also
higher. Bunker type is the cheapest and is preferred
when storage room heights normally exceeds 11.5
m. Its operational cost is also low. Fin coil type,
although about 5% costlier than the bunker type, is
very energy efficient with low operational cost and
higher space availability for storage of produce.
Such system is used for units with room heights of

5.4m onwards. A comparison of electrical loads &

energy savings, refrigerant requirement and space
savings in all the three systems
Financial Viability
The financial analysis of a cold storage of 5000 MT
capacity is placed as Annexure II. The project has a
margin money component of 25% with the rate of
interest on term loan and working capital as 15%
and 18% respectively. The rental charges have
been considered at Rs. 700 per MT and the profit
margin on self storage is Rs. 3000 per MT. For this
project, the financial indicators of the investment
are as under:
1. Net Present Value @ 15% DF = Rs. 67.09
lakh
2. Internal Rate of Return (IRR) = 25.75 %
3. Average Debt Service coverage Ratio = 1.58
a) Eligibility
Individuals, group of individuals, cooperative
societies, proprietary/ partnership concerns and
joint sector companies by CBs and SCBs.
b) Margin
Margin of 15% to 25% should be taken depending
upon the status and financial health of a borrower.
c) Rate of Interest
As applicable to Agricultural Term Loans from time
to time
d) Repayment Period
Upto 9 years depending on projected cash-flow
with moratorium not exceeding 1 year.
e) Security
Loan should be fully covered by security; either
prime (cold storage land, building, machineries)
or collateral or a combination of both apart from
personal guarantee of promoters.
Annexure I
Assumptions for working out economics of a 5000
MT capacity potato cold storage
1. 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 the
promoter(s).
3. Rental charges per season per MT of potato are
Rs. 700/-.
4. Marketing margin on own potato considered at
Rs. 3000/- per MT.
5. Pledge loan margin of 2% has been assumed on
20% of total handling, considering per ton price
of potato at Rs.2500/ MT.

6. Electricity and other utilities expenses considered

at Rs. 210/- per MT per annum.
7. Lump sum establishment and office expenses
considered as Rs. 2 lakhs per annum.
8. Expenditure on maintenance and repairs
considered as Rs. 20/- per MT per annum.
9. Expenditure on gas, fuel and lubricants
considered as Rs. 10/- per MT per annum.
68

10. Labour charges for loading and unloading of

potato in the cold store considered as Rs. 15/per MT.
11. Insurance charges for the potato considered as
Rs. 20/- per MT per season.
12. Interest on working capital considered at 18%
per annum for six months on an average in a
year.
13. Margin money considered at 25% of the
financial outlay.
14. Interest on term loan considered at 15% per
annum.
15. Even though the life of the cold storage will be
much more, the life has been considered as 15
years for working out internal rate of return.
16. Depreciation rate of 5% and 15% has been
considered for civil structures and plant &
respectively.
17. Repayment period of nine years with one year
grace period has been considered. The interest
during first year has been capitalized and
repayment of principal has been considered
from third year.
Annexure II
BROAD TECHNICAL PARAMETERS FOR A 5000
MT COLD STORAGE
MEANS OF FINANCE
Annexure III
CHECK LIST FOR COLD STORAGE PROJECTS
Land requirement 2 acres
Storage space
requirement
17000 cubic metre
Technology preferred Gravity circulation/
Bunker type/ Fin-coil
Cold storage room
height
12.2 to 18.5 m
Avg. cost of investment Rs. per MT Total Cost
(Rs. lakhs)
Civil cost 1400 70
Insulation cost 350 17.5
Equipment cost 1100 55
Miscellaneous cost 150 7.5

Total 3000 150

Operational cost Rs./MT/year
Electricity & utilities 210
Establishment
expenses
35
Maintenance and
repair
20
Gas, Fuel and
Lubricants
10
Labour charges 15
Insurance 20
Total Electrical load 125 kW
Rs. (lakhs)
Total Project Cost 150.00
Margin Money 25% 37.50
Term loan 75% 112.50
Rate of Interest on term loan 15%
Rate of interest on working capital 18%

(i) Project Outlay

1 Item wise cost proposed under site
development and their quantity of work
analysis
2 Item wise cost proposed under Civil
structures and their quantity of work
analysis
3 Item wise details of the cost of
machinery with supporting quotations /
literature etc.
4 Cost of miscellaneous equipments
including office equipments,
communication system and firefighting
equipment etc.
5 Cost proposed under electrification and
item wise cost breakups
6 Cost proposed for stand-by power
arrangement
7 Cost proposed for water supply systems
such as construction of well / digging
of tubewell, installation of pumpset,
construction of overhead tank and
piping works
8 Any other arrangement / cost proposed
may be described with proper details
9 Cost of Erection and Commissioning
(ii) Means of Finance :
1 Total Outlay
2 Margin Money
3 Loan Requirement
69

Dos and DONTs

(iii) Lending terms: Rate of interest, grace

period, repayment period, down

payment, nature of security, availability
of government guarantee for bank
loan/ refinance, sources and extent of
availability of subsidy etc.
(iv) Proposed schedule of implementation
.Year wise physical and financial
programme, bank loan refinance
requirement.
(v) Estimates of unit wise aggregate income,
expenditure and surplus from the cold
storage, comments on the financial
viability of the project along with cash
flow, B/C ratio, net present worth,
financial rate of return , Internal rate of
return and Debt Service Coverage Ratio
(vi) Assumptions made for calculating income
and expenditure statement
(vii) Income and Expenditure Statement for
next nine years
(viii) Sensitivity Analysis
(ix) Socio-economic benefits including
employment generation and benefits to
farmers
(x) Comments on the financial position of the
borrowers/ implementing agency. In case
of companies, partnership firm or society
an analysis of their financial position and
audited financial statements for last three
years
(xi) Infrastructure available for project
implementation
(xii) SWOT Analysis
(xiii) Conclusions and recommendations
S.No. DOs Donts
1 Suitability of site with
proper elevation, drainage
and linkages by road and
other communications
must be ensured.
Site in a low lying area
with poor road and other
communication linkages
must be avoided.
2 Land should be converted
to non agricultural
category.
Agricultural land
should not be used
for construction of
cold storage without
converting it to non
agricultural category.
3 Soil should be tested for

its load bearing strength

and matching rack design
should be adopted.
Do not avoid soil load
bearing test and proper
rack design.
4 Necessary permission
from local authorities
for construction of
cold storage should be
obtained.
Dont avoid taking
permissions from
local authorities for
constructions.
5 Capacity of the plant and
its room temperature
should be matched to the
product to be stored and
market size.
Dont select the capacity
of the cold storage
arbitrarily.
6 Selection of technology
and machinery should
be for power efficiency,
low investment and
maintenance cost.
Costly and energy
intensive technology
should be avoided.
7 Plant operation may be
planned in a manner to
not exceed an average 12
hours operation a day.
Plant operation for more
than 12 hours a day
should be avoided.
8 Refrigeration system
should be properly
pressure tested and
vacuum tested for safety.
Proper pressure testing
and vacuum testing of
the refrigeration system
should not be over
looked.
9 Soft water should be used
for plant operation.
Dont use hard water
without softening it.
10 Trained personnel should
be employed for operating
the plant and maintaining
desired room conditions.
Untrained and
inexperienced personnel
should be avoided for
critical plant operations.
11 Proper standby
equipment like

compressor with motor

and water circulation
pump should be
provided.
Standby provisions
for critical equipment
should not be avoided to
save on cost.
12 Assured electricity supply
matching to the electrical
power requirement should
be provided. In case
of power failures, the
supply should be ensured
by DG set matching
to the essential power
requirement of the unit.
Dont compromise
on DG set to ensure
assured power supply.
13 Proper safety provisions
like fire extinguishers and
safety alarms should be
provided.
Dont compromise on
safety aspects for risk
free operation of the
unit.
14 Proper insurance cover
should be taken for
building, plant and
machinery and stored
stocks to take care of
unforeseen risk.
Dont avoid