MEGA FOOD PARKS SCHEME (MFPS) GUIDELINES

(With effect from 17.11.2011)

1. Background and Objectives of the Scheme

a. Based on extensive feedback and consultations with various stakeholders the earlier
Scheme of Food Parks under the 10th Five Year Plan has been revised and reformulated
as Mega Food Parks Scheme (MFPS) for the 11th Five Year Plan period.

b. MFPS is expected to facilitate the achievement of the Vision 2015 of Ministry of Food
Processing Industries to raise the processing of perishables in the country from the
existing 6% to 20%, value addition from 20% to 35% and the share in global food trade
from 1.5% to 3% by the year 2015.

c. The primary objective of the MFPS is to provide adequate / excellent infrastructure

facilities for food processing along the value chain from the farm to market. It will
include creation of infrastructure near the farm, transportation, logistics and centralized
processing centers. The main feature of the scheme is a cluster based approach. The
scheme will be demand driven, pre marketed and would facilitate food processing units to
meet environmental, safety and social standards.

d. The expected outcome is increased realization for farmers, creation of high quality rural
processing infrastructure, reduction in wastage, capacity building of the producers and
processors and creation of an efficient supply chain along with significant direct and
indirect employment generation.

2. Salient Features of the Scheme

a. The scheme aims to facilitate the establishment of a strong food processing industry
backed by an efficient supply chain, which would include collection centres, primary
processing centers and cold chain infrastructure. The food processing units, under the
scheme, would be located at a Central Processing Centre (CPC) with need based common
infrastructure required for processing, packaging, environmental protection systems,
quality control labs, trade facilitation centres, etc.

b. The extent of land required for establishing the CPC is estimated to be between 50- 100
acres, though the actual requirement of land would depend upon the business plan, which
may vary from region to region. CPC would be supported by farm proximate Primary
Processing Centers (PPC) and Collection Centres (CCs) in identified locations based on a
 techno-feasibility study, adequate to meet the requirements of the CPC. The land required
for setting up of PPCs and CCs at various locations would be in addition to land required
for setting up CPC.

c. It is expected that on an average, each project will have around 30-35 food processing
units with a collective investment of Rs 250 crores that would eventually lead to annual
turnover of about Rs 450-500 crores and creation of direct and indirect employment to
the extent of about 30,000. However, the actual configuration of the project may vary
depending upon the business plan for each Mega Food Park. The aggregate investment in
CPC, PPCs and CCs should be proportionate and commensurate to the size of the total
project keeping in view the economies of scale.

The Scheme is co-terminus with the 11th Plan period. However, projects which have
received the final approval under the scheme shall continue to receive the grant support
and benefits of the scheme.

3. Pattern of Assistance

3.1 The Scheme shall provide a capital grant at the rate of 50 percent of eligible project cost*
in general areas and 75 percent of eligible project cost in difficult and hilly areas i.e
North East Region including Sikkim, J&K, Himachal Pradesh, Uttarakhand and ITDP
notified areas of the States subject to a maximum of Rs.50 crores per project.

* The eligible project cost is defined as total project cost minus cost of land, pre-operative
expenses and margin money for working capital.

3.2 Considering the complexities of the scheme, the Ministry would engage a Program
Management Agency (PMA) to provide management, capacity building, coordination
and monitoring support. For meeting the cost of the above and also other promotional
activities by the Ministry, a separate amount, to the extent of 5% of the overall grants
available, will be earmarked.

3.3 The project cost for the purpose of eligibility under this scheme would consist of the
following components:

3.3.1 Core Processing Facilities

3.3.1.1 Farm Proximate Collection Centers and Primary Processing Centers: Shall have
components like cleaning, grading, sorting and packing facilities (including
equipments) dry warehouses, specialized cold stores including pre-cooling chambers,
 ripening chambers (including equipments), reefer vans, mobile pre-coolers, mobile
collection vans etc.

3.3.1.2 Central Processing Centers: Buildings for common facilities like testing laboratory
(including equipments), cleaning, grading, sorting and packing facilities (including
equipments), dry warehouses, specialized storage facilities including Controlled
Atmosphere Chambers, Pressure Ven tilators, variable humidity stores, pre-cooling
chambers, ripening chambers etc. (including equipments), cold chain infrastructure
including reefer vans, packaging unit, irradiation facilities, steam sterilization units,
steam generating units, Food incubation cum development centers etc.

3.3.1.3 The above mentioned facilities are only illustrative and exact nature of the facilities
may vary from project to project based on specific requirements as appraised by the
bank. However, it is desirable to allocate at least 35 percent of the eligible project
cost towards creation of above mentioned core processing facilities.

3.3.2 Factory buildings

It will consist of standard factory sheds for Micro and Small Enterprises (MSEs)
which are built on a maximum of 10 per cent of the area of CPC as part of plug and
play facilities for MSEs.

3.3.3 Enabling Basic Infrastructure

It will include roads, drainage, water supply, electricity supply including captive
power plant, effluent treatment plant, telecommunications lines, parking bay
including traffic management system, weighbridges etc at the PPC &CPC level.
However, of the total proposed cost of captive power plant, cost not exceeding Rs.10
Crore shall be considered as eligible project cost for grant assessment. Any additional
cost towards setting up of captive power plant would be required to be met
exclusively from SPV?s contribution. SPV has to demonstrate a firm plan to ensure
good quality assured power supply to prospective units in the Park.

3.3.4 Non-Core Infrastructure

It will consist of support infrastructure such as administrative buildings, training

center (including equipments), trade center/display center, crche, canteen, workers?
hostel, offices of service providers, labour rest and recreation facilities, marketing
support system, etc. However, the cost of non-core infrastructure facilities not
exceeding 10% of the project cost, would be eligible for grant purpose
3.3.5 Project Implementation Expenses

This would include cost of hiring the services of domain consultants by the SPVs for
preparation of DPRs, supply chain management, engineering/designing and
construction supervision etc.

3.3.6 Land

Land for the project shall be purchased / arranged by the SPV. The registered value of
such land would be taken as part of the project cost and contribution/share of the
SPV. The GOI grant shall not be used for procurement of land and will be 50% of
non-land component of the project.

Although the projects are expected to be formulated by the SPVs based on the felt
needs, the projects with greater emphasis on establishment of core processing
facilities and thereby directly enabling the establishment of food processing units
would be given preference.

4. Implementation Process

4.1 Special Purpose Vehicle (SPV)

4.1.1 The responsibility of execution, ownership and management of the Mega Food Park
would vest with a Special Purpose Vehicle (SPV) in which Financial
Institutions/Banks, organized retailers, processors, service providers, producers,
farmer organizations and other related stakeholders would be the equity holders. The
preference for sanctioning assistance under the Scheme would be given to those SPVs
in which industry units with the plans of processing wide range of perishable products
will have major stake.

4.1.2 The key features of the SPVs, which shall act as Implementing Agencies (IAs) of the
projects under the Scheme are indicated below:

i. SPV shall be a Body Corporate registered under the Companies Act.

ii. Each SPV would have at least three entrepreneurs / business units which would be
independent of each other with no common director
iii. At least 26% of equity of the SPV should be held by food processor(s) within the
SPV.
iv. The combined net worth of shareholders of the SPV should not be less than Rs.50
crore with food processor having at least 10 crore of net worth. Each member in
 SPV must have a net worth at least 1.5 times of their proposed equity contribution
in order to ensure requisite contribution for the project.
v. The proposed equity shareholding of the members should be backed by adequate
net worth.
vi. The SPV needs to bring in at least 20% of the eligible project cost as equit.
(Including cost of land).
vii. Government agencies can also become shareholders in SPV, if they so desire,
holding up to a maximum of 26% of share capital so as to ensure private sector
character of the SPV.

4.1.3 As Implementing Agencies, the SPVs would be responsible for the following:

i. To formulate the Detailed Project Report and execute the project in a transparent,
efficient and timely manner.
ii. To procure land and ensure external infrastructure linkages for the projects.
iii. To obtain key statutory approvals/clearances including environmental clearances,
which are prerequisite for commencement and operation of the Project.
iv. To achieve financial closure and ensure completion of project.
v. To own and maintain the common infrastructure.
vi. To receive the financial assistance under the Scheme, and its utilization in a
transparent and judicious manner and maintain proper account.

4.2 Program Management Agency (PMA)

4.2.1 The Ministry will appoint a Program Management Agency (PMA) to assist it in
implementation of the Scheme. The PMA will be a reputed pan India institution with
extensive experience in project development, management, financing and
implementation of cluster infrastructure projects.

4.2.2 The envisaged role of PMA is as follows:

i. To assist the Ministry in organizing a series of workshops/media campaigns

aimed at sensitizing the potential stakeholders about the MFPS.
ii. To assist the Ministry in inviting Expression of Interest for projects under the
Scheme.
iii. To assist the Ministry in selection of Projects through evaluation/appraisal of
techno-feasibility reports and DPRs submitted for mega food park projects.
Appraisal of the DPRs will include examination of financial viability and
sustainability of O&M structure of the projects.
iv. To assist in the evaluation of any amendments to the projects/DPRs.
v. To assist the SPVs in financial closure.
 vi. To assist the Ministry in release of the grant under the scheme.
vii. To monitor and report the progress of the Mega Food Park projects to the
Ministry.

4.3 Project Management Consultant (PMC)

In addition to the PMA, for ensuring smooth implementation of projects at ground level,
Ministry has drawn up a panel of Project Management Consultants (PMC) with the
required experience in preparation of DPRs for large projects and in project
implementation. These agencies or any other (meeting the criteria of PMC fixed by the
Ministry as communicated on its website) may be engaged by the SPVs for preparation of
DPRs and for assistance in implementation and the cost of which would be considered as
one of the eligible components of the project. However, such cost should not exceed 2%
(inclusive of taxes) of the eligible grant amount of the project.

4.4 Expression of Interest

In response to the notice inviting Expression of Interest (EoI) by Ministry for selection of
Projects, a proposal for the proposed Mega Food Park will be submitted by the
promoters/SPV. An illustrative list of points to be covered in the proposal along with EoI
is provided at Annexure A? . The proposal will be evaluated by the Ministry through the
PMA, as per illustrative criteria finalized by the Ministry (given at Annexure B?),so as
to ensure the selection of the most potential and viable projects.

The proposal would have tentatively identified the locations of the CPC and PPCs,
availability of land, availability of group of minimum 3 stakeholders who would be the
potential shareholders of the proposed SPV, the proposed level of investment including
the estimated project cost and the proposed means of finance, the number and type of
food processing units and requisite backward and forward linkages. The proposals having
ownership and possession of suitable land for the project will be given preference.

4.5 In-Principle Approval

The proposal submitted in response to the EoI will be evaluated by the Program
Management Agency (PMA). The applicants will also make a presentation of their
proposals before the Technical Committee (TC).

The PMA will undertake evaluation on a scale of 100 points on the basis of EoI proposals
while the TC will undertake independent evaluation on a scale of 50 points on the basis
of the presentation made by the applicants. The final evaluation report along with the
recommendations of the TC based on the composite evaluation will be placed before the
 Inter-Ministerial Approval Committee (IMAC) for consideration of In -Principle
Approval to the projects. The evaluation criteria for PMA & TC are placed at Annexure
B.1 and B.2.

If the SPVs fail to submit the requisite DPRs along with other requirements needed for
Final Approval within 6 months from the date of according-Principle
In Approval, the
In -Principle Approval stands automatically cancelled, unless extension of time is
granted by the Approval Committee (AC).

4.6 Final Approval

4.6.1 A project will be accorded Final Approval by the AC, if the following conditions are
fulfilled.

4.6.1.1 Submission of Detailed Project Report (DPR) consisting of technical, commercial,

financial and management aspect of the project and its appraisal/recommendations of
the PMA and Technical Committee. The DPR should include cluster analysis
depicting availability of raw materials, legible contour survey report and contour
plan/maps of the proposed land, site analysis for element like soil analysis, flood
history, onsite features etc. for realistic cost estimate of land development and
construction, detailed master plan along with sectional drawings and building plan
with legends giving clear picture of little of drawings and other relevant details,
construction cost certified by Chartered Engineer, cost of plant and equipment backed
with quotations from equipment and machinery suppliers etc. and its
appraisal/recommendations of PMA and Technical Committee.

4.6.1.2 Submission of proof for possession of land by SPV as per DPR requirements for CPC
(at least 50 acres of contiguous land). The land should have conversion for industrial
/infrastructure use. In case of land acquired by SPV on lease basis, the leased period
will be for a minimum of 25 years.

4.6.1.3 Submission of proof for incorporation of SPV and execution of Share Subscription
Agreement amongst the members of SPV.

4.6.1.4 Plan to fund the project, other than the grant portion plan need to be supported by
proposed equity contribution (clearly suggesting respective cash contribution from
shareholders in proportion to their holding and the timeframe) and sanction letter of
term loan from the bank through which term loan is being proposed, along with bank
appraisal report.
4.6.1.5 Proof of appointment of Project Management Consultant. The PMC for the project
should be selected only from the Ministry?s empanelled agencies.

4.7 Technical Committee and Project Approval Committee:

4.7.1 A Technical Committee headed by the Joint Secretary (MFPI) would scrutinize the
proposals/EoIs and Detailed Project Reports along with the appraisal notes of PMA,
and provide its recommendations/views to the Inter-Ministerial Approval Committee
to enable the sanction of In-Principle and Final Approvals. The other members of the
Technical Committee shall be as follows:

i. Representative from the Ministry of Agriculture

ii. Representative of APEDA
iii. Representative of ICAR
iv. Representative of the concerned State Government
v. Director (Finance), MFPI
vi. Director, MFPI- Convener

4.7.2 The Inter-Ministerial Approval Committee (AC), headed by Secretary (Food

Processing Industries) would accord -Principle
In and Final Approvals for the
projects based on the recommendation/views of the Technical Committee. The AC
shall regularly monitor the implementation of the projects sanctioned under the
Scheme. The other members of the Committee shall be as follows:

i. Additional Secretary & Financial Advisor, M/o FPI

ii. Advisor (Industry), Planning Commission
iii. Joint Secretary, Ministry of Agriculture
iv. Joint Secretary (PF-II), Department of Expenditure
v. Joint Secretary, MFPI
vi. Chairman, APEDA
vii. Chairman, MPEDA
viii. Director MFPI - Member Secretary
ix. Secretaries of the respective State Governments where the projects are
located would be invited for the Approval Committee meeting.

5. The ongoing projects sanctioned under the earlier Scheme of Food Parks of the previous
Five Year Plans will continue to be provided Government assistance, as per the
provisions of the respective scheme, out of the budget provision of Mega Food Parks
Scheme.
6. Role of State Government

6.1 The role of the State Government is envisaged in the following areas:

i. Providing assistance to SPVs in procurement of suitable land.

ii. 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
iii. Providing flexible and conducive labour environment and consider special
facilities like exemption of stamp duty, VAT/Sales Tax exempti on etc. for
the MFP and the units located in the MFP.

6.2 While approving the Mega Food Park projects, preference would be given to projects
located in states, which have or are in the process of providing encouraging / conducive
and enabling environment in terms of policy / regulatory framework (model APMC Act
etc.), infrastructure and fiscal incentives for food processing sector.

6.3 Providing a fast track single window agency to facilitate clearances and permissions
required for the project

6.4 The State Government agencies like Infrastructure/Industry Development Corporations

can also participate in the projects by way of subscribing to the equity of SPV, if they so
desire as per the norms stipulated in the Scheme.

6.5 The MFPs will be encouraged and assisted to seek approval of the projects under the
Industrial Infrastructure Parks Scheme, 2002 and to avail of the benefits therein, provided
the requisite conditions are met.

7. Dovetailing of Assistance

Considering the complexities and challenges associated with a supply chain linked
infrastructure projects of this nature, the SPV may dovetail assistance available under
various other schemes of Central and State Governments, which would improve the
viability of the projects, subject to the condition that the contribution of SPV, including
land, shall at least be 20% of the project cost. However, in case of difficult areas as
mentioned in paragraph 3.1, the minimum contribution of SPV shall at least be 10% of
the project cost. While dovetailing such assistance, it will be ensured that there is no
duplication of assistance for the same component/activity of the project.
8. Release of Funds

8.1 Once the project receives the Final Approval of the Approval Committee, the grant
support will be released by the Ministry to the SPV as per the following schedules subject
to fulfillment of the related conditions stated below, by the SPV:

8.1.1 First Installment of 30 percent of total grant under the Scheme will be released in two
tranches as 10 percent and 20 percent respectively. The 1 st tranche of 1st installment
will be released, subject to fulfillment of following criteria:

i. Establishment of Trust and Retention Account and signing of the TRA

Agreement with any Schedule - A Commercial Bank.
ii. Appointment of Ministry?s Nominee Director on the Board of the SPV. Tenure
of the Ministry nominee will be co-terminus to the operationalization of the
project.
iii. Proof of increase in authorized capital of SPV to allow stipulated equity
contribution as per approved means of finance for the project
iv. Expenditure certificate from Chartered Accountant confirming expenditure of
at least 10 percent of SPV?s equity contribution out of the eligible project cost.
v. Final approval of the project by AC.
vi. Recommendation of PMA confirming the fulfillment of above conditions.

8.1.2 Second Tranche of First Installment representing 20 percent of approved grant

assistance will be released to SPV subject to fulfillment of following criteria:
i. Utilization Certificate for the grant released as 1st tranche of 1st installment.
ii. Proof of proportionate expenditure by SPV (including term loan and equity)
out of eligible project cost equivalent to percentage of grant released as 1st
tranche of 1st installment.
iii. Proof of proportionate contribution by SPV (including term loan and equity)
out of eligible project cost equivalent to percentage of grant to be released as
2nd tranche of 1st installment.
iv. Award of contracts worth at least equivalent to 30 percent of total project cost
including at least 20 percent of approved components of basic enabling
infrastructure.
v. Recommendation of PMA confirming the fulfillment of above conditions.

8.1.3 Second Installment representing 30 percent of approved grant assistance will be

released to SPV subject to fulfillment of following criteria:

i. Utilization Certificate for the grant released as 2nd tranche of 1st installment.
 ii. Proof of proportionate expenditure by SPV (including term loan and equity)
out of eligible project cost equivalent to percentage of grant released as 2nd
tranche of 1st installment.
iii. Proof of proportionate contribution by SPV (including term loan and equity)
out of eligible project cost equivalent to percentage of grant to be released as
2nd installment.
iv. Submission of documents in lieu of proof of possession of land for all PPCs
along with construction schedule.
v. Proof of commencement of construction of Standard Design Factory sheds for
SMEs
vi. Proof of allotment of at least 25 percent of total allotable plots as per approved
DPR.
vii. Recommendation of PMA confirming the fulfillment of above conditions.

8.1.4 Third Installment representing 30 percent of approved grant assistance will be

released to SPV subject to fulfillment of following criteria:

i. Utilization Certificate for the grant released as 2nd installment.

ii. Proof of proportionate expenditure by SPV (including term loan and equity)
out of eligible project cost equivalent to grant released as 2nd installment.
iii. Proof of proportionate contribution by SPV (including term loan and equity)
out of eligible project cost equivalent to percentage of grant to be released as
3rd installment.
iv. Certificate from PMC confirming completion of at least 40 percent of
construction of PPCs and proof of expenditure of at least 40 percent of the total
proposed cost for PPCs as per approved DPR
v. Certificate from PMC confirming completion of at least 50 per cent
construction of Standard Design Factory sheds for SMEs
vi. Proof of allotment of at least 50 per cent of total allotable plots.
vii. Recommendation of PMA confirming the fulfillment of above conditions.

8.1.5 Fourth and final Installment representing 10 percent of approved grant assistance will
be released to SPV subject to successful completion of project and commencement of
operations. The criteria for completion of project are as follows:

i. Utilization Certificate for the grant released as 3rd installment.

ii. Proof of expenditure of 100% equity contribution of SPV including Term Loan
on the approved project components.
iii. Certificate from PMC confirming completion of the project as per approval.
 iv. Certificate from PMC confirming completion of Plug n? Play facility with 75%
of the MSEs units, as proposed in business plan, allotted space under Plug n?
Play facilities.
v. Proof of allotment of at least 75 percent of total allotable plots and
commencement of operations in at least 25 percent of the units.
vi. Recommendation of PMA confirming the fulfillment of above conditions.

8.2 Separate accounts shall be kept by SPV for the funds released by GOI.

8.3 In the event of an SPV withdrawing from executing a project before utilizing the
Government assistance, then the SPV should immediately return the Government
assistance together with the interest accrued thereon, in accordance with provision laid
under GFR 19 of Government of India.

8.4 A format of the Utilization Certificate is given as per Annexure C?

9. Time Schedule

9.1 The time schedule for completion and successful operationalization of project will be 24
months from the date of release of first installment of the grant by the Ministry or within
the extended timeframe as granted by the IMAC.

9.2 The SPV shall make all possible efforts to complete the projects as per the time lines
committed while seeking approval for the project. However, except in case of force de
majeure or reasons beyond the control of SPV, any willful delay, not attributable to valid
reasons beyond the control of the SPV, the Approval Committee may consider imposing
appropriate penalty in terms of reducing the grant amount, on case to case basis.

10. Project Monitoring and Evaluation

The Ministry will periodically review the progress of the projects under the scheme. The
PMA would devise a suitable project monitoring system and shall furnish monthly
reports/returns to the Ministry on the progress of the approved projects. In so far as
interpretation of any of the provisions of these guidelines is concerned, the decision of
the Approval Committee (AC) shall be final.

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