Compendium of financing options for the food processing sector

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1 Investment Environment & Opportunities in Food Processing SIKKIM Compendium of financing options for the food processing sector

2 Table of contents State Introduction 2 Why Sikkim 2 Raw Material Base 3 Production Clusters 6 Agricultural Marketing 8 Processing Clusters 10 Infrastructure 12 State Government Initiatives 14 Snapshot of Investable Projects 18 Contact Us 20

3 State Introduction The beautiful Himalayan state of Sikkim is blessed with some of the most spectacular landscapes, flora and fauna. Modern Sikkim is a multiethnic and multilingual Indian state and is also among India's most environmentally conscious states. State capital Gangtok Geographical area 1 7,096 km 2 Sikkim - key highlights Population 2 (Census 2011) Gross state domestic product (GSDP) 3 (at current price, base year ) FDI Inflows (FY00-FY17) 610,577 INR 16,637 crore (USD 2.5 billion) in INR 21,179 Crore (USD 3.1 billion) Per capita income 4 USD 2,584 (Measured as Per Capita NSDP at current prices for ) Airport 5 1 Sikkim Gangtok Total road length (kms) 6 (National + Highway) 1,010 Why Sikkim 1 India s first fully organic state 2 Five agro-climatic zones, one of the few regular snowfall receiving states 3 Blessed with bountiful natural resources, Sikkim is a biodiversity hotspot Largest producer and exporter of Large Cardamom 4

4 3 Raw material base (1/3) Sikkim has become India's first fully organic state by converting around 75,000 hectares of agricultural land into sustainable cultivation. Sikkim is blessed by a fertile land that largely supports agriculture. Agriculture is the most important part of the socio-economic pattern in Sikkim, and it s also the primary occupation of the inhabitants of the state. Organic farming in the state has been a traditional way of farming adopted by farmers since ages. Due to unavailability of assured irrigation, farmers practice rain-fed farming system with an integrated approach and therefore, integrated farming system is predominant in the state with agriculture, horticulture and animal husbandry in impeccable coordination. Sikkim has rich green cover with abundant plant species as a result the soil is rich in organic matter content and makes the organic conversion easier. Snapshot of Land Under Cultivation ( ) Gross Cropped 147 Area ( 000 Ha) Net Sown Area 77 ( 000 Ha) The topography and the climatic conditions of Sikkim are highly favourable for agriculture and this is the reason why Sikkim witnesses a high yield every year. There are five agro-climatic zones 7 in the state as shown below: Tropical Zone Sub-tropical Zone Temperate Zone Sub-Alpine Zone Alpine Zone The major crops of the state are maize, rice, buckwheat among cereals, Black gram (Urad) and rice bean among pulses, soybean and mustard among oilseeds. The main horticultural crops are orange & pears among fruits, ginger, cardamom, turmeric and cherry pepper among spice crops, cole crops, peas & bean, tomato, potato among vegetable crops. Besides, production of potato & pea seeds and off-season vegetables cultivation at high altitude is done extensively. Of late, cultivation of flowers such as cymbidium, rose, gerbera, anthurium, lilium etc. is generating good income for farmers and a large number of farmers have adopted floriculture as a commercial venture.

5 4 Raw material base (2/3) Major strength of Sikkim s food processing industry lies in the following: Spices- Turmeric, Cardamom, Ginger, Cherry Pepper Pulses- Black gram (Urad), Rice Bean Cereals- Rice, Maize, Buckwheat, Barley, Finger Millet Oilseeds- Soybean, Rapeseed, Mustard Commercial crops- Large Cardamom, Orange, Ginger, Turmeric, Cherry Pepper Food Grains: Key production highlights 8 ( ) Total production of thousand tonnes of food grains o o o Rice thousand tonnes Maize thousand tonnes Buckwheat 3.47 thousand tonnes Horticulture products: Key production highlights ( ) Total production of thousand tonnes of horticulture products o o o o Fruits thousand tonnes Vegetables thousand tonnes Flowers thousand tonnes Spices thousand tonnes

6 5 Raw material base 9 (3/3) SPICES (MT) Spices (000 MT) Ginger 54,990 Turmeric 5,680 Cardamom 4,110 FRUITS (MT) Banana 3,561 Pear 1,492 Kiwi 790 VEGETABLES (MT) Potato 53,550 Peas 8,850 Okra(Ladies Finger) 6,870 LIVESTOCK & FISHERIES (MT) Eggs Fish 440 Meat million

6 Production Clusters Sikkim leads in production of: Large Cardamom 10, with 86% of India s produce from the state The major production clusters of Sikkim are given below:

Sikkim Rice North, East, West and South Sikkim Milk North, East, West and South Sikkim Maize North, East, West and South Sikkim Ginger North, East, West and South Sikkim Okra/

7 6 Production Clusters Sikkim leads in production of: Large Cardamom 10, with 86% of India s produce from the state The major production clusters of Sikkim are given below: Mandarin Orange North, East, West and South Sikkim Large Cardamom North, East, West and South Sikkim Cherry Pepper East, West & South Sikkim Potato North, East, West and South Sikkim Rice North, East, West and South Sikkim Milk North, East, West and South Sikkim Maize North, East, West and South Sikkim Ginger North, East, West and South Sikkim Okra/ Lady sfinger West Sikkim Turmeric North, East, West and South Sikkim Beans East Sikkim Green Peas North, East, West and South Sikkim Geographical Indication: Sikkim Large Cardamom, Sikkim Tea

8 7 Production Clusters

9 8 Agriculture marketing and warehousing Sikkim has the following marketing facilities in the state 11 : Food Processing Units: Few large processing units are present in the state that are involved in the processing of flour, tea, fruits, bakery and other food products Agri-Export Zones: Two Crop Agri Export Zones Flowers (orchids), Cherry Pepper East Sikkim Ginger North, East and West and South Sikkim One multipurpose cold storage unit having a capacity of 2000 tonnes Total effective storage capacity of 11,000 tonnes in the state Sikkim has made reforms in the Agricultural Produce Market Committee (APMC) Act to remove restrictions and provide a conducive environment to flourish the agriculture markets. Some of the major modifications are mentioned below: Withdrawn the restrictions posed on private /cooperative sector or local bodies to establish the market yards and direct purchase from farmer. Establishment of consumer/ farmer markets. Contract farming agreement and its model specifications. Contract farming sponsor to get the contract farming agreement recorded with the prescribed officer. No title, rights, ownerships or possession to be transferred or alienated or vest in the contract farming sponsor or his successor or his agent as a consequence arising out of the contract farming agreement. Market fee not to be levied for the second time in any market area of the state by market committee. Market fee not to be levied more than once in commercial transactions between traders or to consumers

10 9 Processing Clusters (1/2) Spices & Condiments South Sikkim Milk West & East Sikkim Tea South Sikkim Prepared Foods East Sikkim Fruits & Vegetables South & East Sikkim Beverages East Sikkim Bakery products East Sikkim

11 10 Processing Clusters (2/2) Dairy products and Analogues Alpine Cheese Factory West Sikkim Spices High Altitude Spice South Sikkim Fruits & Vegetables Fruit Preservation Factory East Sikkim Miscellaneous Sikkim Flour Mill CG Foods India Pvt. Ltd. Tripti s Enterprises Sikkim Snacks Pvt. Ltd. East Sikkim East Sikkim East Sikkim East Sikkim Famous Traditional Food of Sikkim Dal bhat - is a boiled rice and lentil soup, served with vegetable curry and spicy homemade sauce. Gya thuk or Thukpa - is a noodle based soup with vegetables or meat. Momo is a stuffing of minced meat, vegetables or cheese in flour dough, made in the form of dumplings and steamed to perfection.

12 11 Processing Clusters

13 12 Infrastructure The status of key physical and agricultural infrastructure in Sikkim is as follows: Parameter Status Agri-Export Zones Two Agri-Export Zones Installed power 12 (including allocated shares in Joint & Central Sector Utilities as on 31 Mar 2017) Thermal: MW Hydro(Renewable): 619 MW RES(MNRE): MW Utilities Electricity cost 13 INR 4.3 per unit First 20KL- INR 10/KL 20-40KL- INR 13/KL Water rates KL INR 17/KL Every KL above of 60 KL-INR 20/KL

14 13 Infrastructure

15 14 State government initiatives Highlights of State Industrial Policy 15 : The state government has enacted a number of policy measures to assist the investors for setting up industries in Sikkim. These measures include investment subsidy on total investment; subsidy on captive power generating sets, special incentive to the pioneer unit, special incentives for women entrepreneurs etc. The Sikkim Industrial Promotion and Incentive Act 2000, which has been amended twice in 2003 and 2007 and finally known as The Sikkim Industrial Promotion and Incentive (Amendment) Act, 2007 which has been effective from 1st May The key features of the Act are: Artisan and Tiny Scale Unit a) 15% of total capital investment in plant and machinery subject to a maximum of INR 30,000/- b) 30% of total capital investment in plant and machinery subject to a maximum of INR 60,000/-, for units set up by local entrepreneurs. c) For units set up in the thrust areas 20% of total capital investment in plant and machinery subject to a maximum of INR 40,000/- d) For units set up in the trust areas by local entrepreneurs 20% of total capital investment in plant and machinery subject to a maximum of INR 80,000/- Small Scale Industrial Unit a) 10% of total capital investment in plant and machinery subject to a maximum of INR 5 Lacs 1. b) For units set up by local entrepreneurs 10% of total capital investment in plant and machinery subject to a maximum of INR 10 Lacs 1 c) For units set up in the trust areas 15% of total capital investment in plant and machinery subject to a maximum of INR 7 Lacs 1 d) For units set up in the thrust areas by local entrepreneurs 15% of total capital investment in plant and machinery subject to a maximum of INR 14 Lacs 1. Medium/Large Scale Unit a) 5% of total capital investment in plant and machinery subject to a maximum of INR 10 Lacs 1. b) For units set up by local entrepreneurs 10% of total capital investment in plant and machinery subject to a maximum of INR 15 Lacs 1 c) For units set up in the thrust area 10% of total capital investment in plant and machinery,subject to a maximum of INR 15 Lacs 1 d) For units set up in the thrust areas by local entrepreneurs 20% of total capital investment in plant and machinery, subject to a maximum of INR 30 Lacs Lacs = 1 Million

16 15 SIKKIM INDUSTRIAL POLICY 2007: Below is a comprehensive list of incentives provided by the State Government under the Industrial Policy of Food processing is considered a Thrust Sector under the policy. Type of Incentive Salient Features Thrust Sector 1. Agro-based industries 2. Floriculture 3. Animal Husbandry and Dairy Products 4. Minor Forest Based Produce Power 100% reimbursement of power bill for consuming up to INR 50,000 per annum. For above INR 50,000 the reimbursement will be to the extent of INR 50,000 plus 25% of the balance of actual payment subject to a maximum of INR 2 lakhs 2. The State Government shall grant a subsidy of 30% to power tariff to industrial units coming up Growth Centre or Thrust Areas. 50% of the cost incurred on linking of power from the main line to the factory shed subject to a maximum ceiling of INR 50, % subsidy will be admissible for purchase of Diesel generating sets subject to maximum ceiling of INR 30,000 Fiscal incentives Fiscal Incentives to new Industrial Units and substantial expansion of existing units: i) New industrial units and existing industrial units on their substantial expansion as defined, set up in Growth Center, Industrial Infrastructure Development Centers (IIDCs) and other locations like Industrial Estates, Export Processing Zones, Food Parks, IT Parks, etc., as notified by the Central Government are entitled to 100% income tax and excise duty exemption for a period of 10 years from the date of commencement of commercial production. Thrust Sector Industries are entitled to similar concessions in the entire State of Sikkim without area restrictions. ii) All New industries in the notified location would be eligible for capital investment 15% of their investment in plant & machinery, subject to a ceiling of Rs.30 lakh. The existing units will be entitled to this subsidy on substantial expansion, as defined. iii) An interest subsidy of 3% on the working capital loan would be provided to all new industrial units in notified locations for a period of 10 years after the commencement of commercial production. This benefit would also be extended 2 10 Lakhs= 1 Million

17 16 Type of Incentive Salient Features to existing units in notified locations on expansion, as defined, as well as to Thrust Industries. Subsidy on Consultancy Service Local Employment Promotion Grant Subsidy on cost incurred on Quality Control Measures Exemption on Security Deposit and/or earnest money Subsidy on Study Tours & Inplant training Link of policy document iv) The insurance premium to the extent of 100% on capital investment for a period of 10 years would be extended by the Central Government to all new units and to existing units on their substantial expansion, as defined. An industrial unit shall receive a one-time subsidy on consultancy charge paid to an approved consultant as per the scale noted below: For project up to INR 10 lakhs, 3% subsidy subject to maximum of INR 20,000 For project above INR 10 lakhs, 3% subsidy subject to maximum of INR 100,000 Government will reimburse annually up to 30% of the realistic wage bill for local tribal employees. This would be for three years from the date of entertainment. The maximum limit of such subsidy is INR 1 lakh. Cost of laboratory Equipment for the purpose of quality control and ISI certification subject to a maximum of Rs.10, 000 (Rupees ten thousand) per unit will be reimbursed in cases where it does not form part of the project cost. Export oriented units committing to export at least 50% of the value of the turn-over will be eligible for an additional reimbursement of INR 1,00,000/- against such quality control measures. Industrial units shall be exempted from the payment of security deposits and/ or earnest money in respect of tenders or quotations for purchase of stores by Government Department. Entrepreneurs sent outside Sikkim with the approval of the Directors Of Industries for study tours and / or in-plant training shall be eligible for reimbursement of the return journey expenses of second class train and an allowance of INR 1000 per menses per entrepreneur: "

18 17 Snapshot of Potential Investable Projects Project Name Process able Products/ infrastructure Value Proposition 1. Orange juice manufacturing Unit 2. Spices processing unit 3. Pickles & Condiments Mandarin Orange Ginger, Turmeric Fruits & vegetables Large yield of mandarin orange in the state leaves huge scope for investments in this area Ginger & Turmeric powdering units can flourish in the state due to availability of raw material Increasing demand for pickles & condiments such as sauces by the growing Indian population can be served by the abundant supply of raw material in the state. 4. Tea Packaging Tea Tea plantations in South Sikkim provide opportunity for tea packaging and exporting of Sikkim tea. 5. Establishment of Popcorn units Maize Maize is abundant in the state and processed popcorn unit is highly viable in the state. 6. Poultry unit Eggs & Chicken Poultry farms are viable in the state of Sikkim. 7. Packaging unit of food products Packaged foods Ample scope for setting up a packaging unit of food products in the state. 8. Sugar candy Fruits Availability of fruits State is abundant in raw material and has huge potential for profitability 9. Modern Abattoir small scale Livestock Demand for red meat exceeds supply in India, State has a substantial supply of raw material required and provides a good opportunity

19 18 References Statistical Year Book India 2017, MOSPI (includes state highway, national highway, other PWD roads, rural roads, urban roads) html

20 Disclaimer: Without limiting the rights under the copyright reserved, this publication or any part of it may not be translated, reproduced, stored, transmitted in any form (electronic, mechanical, photocopying, audio recording or otherwise) or circulated in any binding or cover other than the cover in which it is currently published, without the prior written permission of MoFPI. KPMG and CII. All information, ideas, views, opinions, estimates, advice, suggestions, recommendations (hereinafter content ) in this publication should not be understood as professional advice in any manner or interpreted as policies, objectives, opinions or suggestions of KPMG and CII. Readers are advised to use their discretion and seek professional advice before taking any action or decision, based on the contents of this publication. The content in this publication has been obtained or derived from sources believed by KPMG and CII to be reliable but MoFPI, KPMG and CII do not represent this information to be accurate or complete. MoFPI, KPMG and CII do not assume any responsibility and disclaim any liability for any loss, damages, caused due to any reason whatsoever, towards any person (natural or legal) who uses this publication. This publication cannot be sold for consideration, within or outside India, without express written permission of MoFPI, KPMG and CII. Violation of this condition of sale will lead to criminal and civil prosecution. MoFPI, Confederation of Indian Industry (CII) and KPMG 2017

TRANSFORMING THE FOOD ECONOMY 3-5 November, 2017 Vigyan Bhawan, New Delhi, India About World Food India A global event to facilitate partnerships between Indian and international businesses and

21 TRANSFORMING THE FOOD ECONOMY 3-5 November, 2017 Vigyan Bhawan, New Delhi, India About World Food India A global event to facilitate partnerships between Indian and international businesses and investors, World Food India (WFI) is a gateway to the Indian food economy and an opportunity to showcase, connect, and collaborate. Write to us at: Ministry of Food Processing Industries, Government of India Panchsheel Bhawan, New Delhi, India. Telephone Number: / / / Find us at:

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