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Subsidy for Organic Farming in India

India is a major agricultural economy. Currently, agriculture contributes about 15% to India’s GDP and employs about 57 % of the total workforce of about 470 million. It provides employment to 27% of the country’s population. Over years, the Indian agricultural sector has made significant changes from food grain productivity to multi-product enterprises. In recent years organic farming has emerged as a new concept in Indian agriculture, in which the farmer produces products that are far healthier and safer for human consumption.

An increasing number of people are becoming aware of the advantages of producing food organically. Ideally, they would do this at home and be completely free of pesticides and artificial fertilizers. However, if they have the option to buy local produce that has been produced organically, this is certainly another step in the right direction. In order to make this happen though, it requires more funding and subsidies for organic farmers in India. The Government of India offers subsidies for organic farming in India through its organic farming subsidy program and crop insurance scheme in addition to several other efforts aimed at promoting the cultivation of organic produce in India. The Indian government has taken up the task of organic farming in a big way. This is mainly due to an increase in environmental awareness and under the directions of the apex court as well. The government of India provides subsidies for commercial production units manufacturing bio-fertilizers/bio-pesticides/fruit & vegetable compost under National Project on Organic Farming (NPOF). One of such subsidies is the Subsidy for Organic Farming in India.

What is the Objective of this Subsidy

The objective of this subsidy scheme is to promote sustainable farming through the use of natural components like cattle dung, bio-fertilizers, and vermicompost in the field. The Department of Agriculture & Cooperation through the National Centre of Organic Farming (NCOF) provides these subsidies to protect and improve soil health. An added advantage of using organic/ biological inputs in crop production is a reduction in overall cost when compared to using conventional methods. The scheme offers a capital investment subsidy to farmers who wish to establish commercial enterprises for the production of organic and/ or biological types of inputs (fertilizers and seeds).

Eligibility for the Scheme

The scheme is available in cases such as:

  • The scheme is open to new and existing fruit, vegetable, and other organic fertilizer producers.
  • The subsidy can be availed by individuals, groups of farmers/growers, proprietary firms, partnership firms, co-operatives, and corporations, if bio-fertilizers or bio-pesticides are manufactured in addition to organic fertilizers
  • The subsidy can be availed by APMCs (Agricultural Produce Market Committees), Municipalities, NGOs (Non-governmental organizations), and private entrepreneurs If a fruit & vegetable waste compost unit is envisaged.
  • All farmers including women who take up crop insurance can receive subsidies worth Rs 1,22,000 crores (US$ 21 billion), corresponding to about two percent of India’s GDP.

Note: The total input subsidy per hectare (2.47 acres) forms 18.17% of the farm income per hectare; the price support subsidy per hectare forms 2.46% of the farm income per hectare, and total subsidies farmers amount to 21% of their farm income. This will continue as long as agriculture remains unproductive.

Project Cost

  • The Bio-fertilizer and bio-pesticides units will be provided with a capital subsidy of 25% of the entire project cost, which will be subject to a maximum of Rs.40 lakhs per unit.
  • Fruit & vegetable compost units will be provided with a capital subsidy of 33% of the entire project cost which will be subject to a maximum of Rs.60 lakhs per unit.
  • The cost of land purchased, civil works, plant & machinery, scientific instruments, and equipment, etc will be included in the Project Cost.
  • Calculate the value of the land in the project cost and it must not exceed 10% of the project cost.
  • Cost of the land and civil structures (buildings) should not exceed 50% of the total financial outlay.

Repayment Tenure

The time limit for the completion of the project is 15 months, but with a grace period of three months. If the project is not completed within that time, then the subsidy is withdrawn and you have to pay back the loan in addition to interest. The bio-fertilizer units, bio-pesticide units, and fruit & vegetable compost units are generally allowed up to 10 years with a grace period of two years. The financing institution determines the rate of interest as per their norms.

Subsidy Release

NABARD will release a subsidy for farmers who buy seeds from banks that have been approved for refinancing by the bank. The subsidy will be split into two parts. The first 50% of the subsidy will be released to the bank as soon as it approves the loan. When the farmer buys seeds, they can use this first part of the subsidy to offset some of the cost. The remaining 50% will be released after NABARD confirms that it has inspected the crop and found that it meets certain quality standards. The subsidy amount will be kept by the financing institution in a subsidy reserve fund account, to be finally adjusted against the loan amount at the completion of the repayment period. The research and development activities needed to produce such productive seeds are also undertaken by the government, which pays for these expenses out of tax money.

Required Document to Apply

As per Bank Requirements, the applicants should have the following documents with them while applying:

  • Copy of Aadhaar card
  • Copy of the first page of the bank passbook
  • Competent officer issued Caste certificate (valid only for SC and ST farmers)
  • Proof of electricity connection (if irrigation equipment is required)

Condition for tractor purchase

Tractors are available for purchase by farmers of all types ( Only farmers who haven’t availed a subsidy from the government for the purchase of a tractor or power tiller in the past seven years will be eligible)

Note: Subsidy on fertilizers is provided by the Central government whereas subsidy on the water is provided by the State governments. The government gives different types of subsidies to farmers like fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy, etc.

**The benefit of the grant is available on any tractor or power tiller.

Steps to Apply for the Subsidy

Where to Apply:

The application procedure for the Subsidy Scheme is explained in detail below:

Step 1: Interested applicant will have to submit the project proposal for term loan and subsidy to the Bank on the application form as prescribed by the concerned bank along with the project report and other supporting documents for appraisal and sanction of loan

Step 2: After the appraisal, sanction, and disbursement of the first installment of the loan the bank provides a brief project profile-cum-claim form for advance subsidy in the described format along with the bank’s sanction letter to the Regional Office (RO) of NABARD.

Step 3: NABARD on receipt of the project profile cum claim form will sanction and release 50% of the advance subsidy and order the participating bank to keep the subsidy in the Subsidy Reserve Fund Account (Borrower-wise).

Step 4: By the end of the completion of the project, the applicant will have to inform the bank in advance, who will initiate the inspection by the Committee consisting of officials from the bank, NABARD, and the implementing agency to ensure that the unit validates to technical & financial parameters of the project.

Step 5: Later to the successful completion of the inspection, the claim form will be submitted to NABARD in the described format for the clearance of the final subsidy.

Step 6: The claim form should be attached with the inspection report of the Committee and the completion certificate for the final subsidy claim.

Step 7: NABARD will release the final subsidy to the participating banks which will be replenished by the implementing agency.

Subsidy for Organic Farming in India Details

Collateral Security: As per Norms

Processing Fees: As per Norms

Scheme Validation: Not Active

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