Emu farming: How to avail bank finance and government incentives?

Some of you readers have asked me about how some one can obtain a bank loan to start a business in emu farming and if there are any government incentives available for the same. So, I am posting my reply here for everyone’s benefit.

Government scheme

Government of India has recently launched a new venture capital funding scheme for poultry in which loan for 50% of the project cost will be interest free for emu breeding farms, subject to a maximum project cost of Rs.30 lakh.
If the loan account has not turned into a non performing asset account and the repayments are regular with no over due, then the farmer is eligible to claim for 50% interest subsidy on the portion of the bank loan till repayment period.

Objectives

This facility is available for the following purposes:

• emu breeding farms worth Rs. 30.00 lakhs,
  
• establishment of feed go-downs, feed mixing units, and feed analytical units worth of Rs.16.00 lakhs, and
  
• marketing of poultry products (specialized transport vehicle, cold room, retention shed for birds etc) worth of Rs. 25.00 lakhs.

 

Implementing agencies

NABARD is the nodal agency for the implementation of this scheme. Several commercial banks, cooperative banks and regional rural banks have implemented this scheme.

 

Sample cost estimate for breeding farm of 60 emu pairs

	Emu Breeding Farm (60 pairs)
S. No.	Items of investment	Cost in Rs. (appx.)
1	Emu shed, emu breeding pens, run of area with G.I. chain link and M.S. gate	400,000
2	Feed godown (storage)	100,000
3	Store and office	60,000
4	water supply, tank, well etc.	110,000
5	Labor housing	25,000
6	Equipments	25,000
7	Emu birds: 60 pairs – 3 months old	1,200,000
8	Emu transport and insurance	120,000
9	Feed cost	720,000
10	Overhead cost	240,000
	Grand Total (GTO)	3,000,000

Scheme funding/ Pattern of investment

• Entrepreneur’s contribution: 10% of total outlay or margin money
  
• Interest free loan: 50% of total outlay (through NABARD)
  
• Bank loan: 40% of total outlay (interest as applicable to agriculture loan)

NABARD would provide refinance to participating banks for 90% of the amount financed by the banks as term loan. Rate of interest on refinance will be decided by NABARD from time to time. 

 

Permission from the State Forest Department

It is clarified by the Chief Conservator of Forests, State Government of Maharashtra, Pune that emu is an exotic bird; and it has not been included in any of the schedules of wildlife (protection) Act, 1972. The provisions of Wild Life Protection Act, 1972 and rules made there under are, thus, not applicable to these birds.  As such no permission from the State Forest Department is necessary for rearing, farming and selling of these birds.

Procedure

To obtain a bank loan, farmers should apply to the nearest branch of a Commercial, Cooperative or Regional Rural Bank in their area using the prescribed forms which are available in the local branches of the financing banks. 


A detailed project report (DPR) along with necessary documents, such as, layout, site plan, cost estimates of civil work, quotations of equipments, training and/or experience certificate of the entrepreneur if any, should be attached/enclosed with the loan application.
The project will be sanctioned by the bank after proper scrutiny, if it

• follows bank’s laid down procedures
  
• is technically feasible & financially viable (bankable) and
  
• meets the conditions prescribed under the scheme.

If the bank sanctions the loan proposal, then it will have to submit its claim for venture capital fund (interest free portion) in the prescribed format to the regional office of NABARD. NABARD will carefully scrutinize the claim and if satisfied, it will release fifty percent of the total outlay, i.e., the interest free portion of the loan out of the revolving fund, to the bank .


The bank will release the entire loan amount in installments depending on the progress of the implementation of the project. The bank will affect recovery as per its prescription. Also, it will have to return pro rata of the recovery made to NABARD for crediting the revolving fund on an annual basis.


Repayment period of loan will depend upon the cash flow and will be up to maximum of nine years including grace period of two years. For assured repayment a tripartite agreement between the financing bank, emu hatchery owner and the borrower shall be executed. The emu farmer and the hatchery owner should execute a deed for buyback arrangement of emu eggs etc. 

 

Financial Analysis

From the cash flow analysis, it is observed that the Benefit Cost Ratio (BCR) and the Internal Rate of Return (IRR) has been worked out to approximately 1.35:1 and 35%, respectively for emu farming, based on the average techno financial assumptions. The net income at present varies from Rs. 35000 to Rs. 50000 per year/pair of emu.


I hope this articles helps you in understanding the mechanism of obtaining loan from banks and also utilizing the aid available from the government. If you still have any questions regarding the bank financing or government subsidies for emu farming and breeding, feel free to contact me.


[image credit: Enygmatic]