CB, Govt. look to develop local dairy industry

With the sharp increase in prices of milk powder and food crops in the global market, a favourable environment is being developed for the local dairy and food crop sector.

Looking to enhance local milk production and milk based products while promoting agricultural crop processing industries in the country, the Central Bank (CB), in association with the Government, has launched a special credit programme effective from this month, a statement from the bank said.

A total of Rs.5000 million at a concessionary rate of interest is expected to be distributed to small scale dairy farmers, liquid milk processing industries and agricultural crop processors. The credit scheme has been introduced as stated in the Budget 2008. Non-availability of a credit scheme for dairy products at present was identified as one of the constraints for development of liquid milk production in the country, the satement said adding that further, strengthening of agro-processing industry by providing financial facilities for agro-based industries, storage and processing of crops would help to develop the cultivation of food crops on a sustainable basis. Accordingly, this credit programme will increase the investments in the local liquid milk and food crop sectors in the country.

The project is expected to assist the farmers to deviate from traditional farm practices and to adopt modern scientific animal husbandry practices by providing financial assistance under the credit programme. In addition, a part of the loan funds could be utilised to feed the cows with concentrated feed, grass and fodder with adequate water and required veterinary care too.

Farmers are allowed to keep local breeds, or cross breed and if available they could purchase hibreed animals too with the loan funds.
However, the loan limit will be determined on the basis of the veterinary surgeon’s recommendation of the capacity of each farmer. The vets will consider the experience of the farmer, availability of water and fodder and other factors when making such recommendations.

Further, the CB in association with lending banks will make arrangements for Forward Sales Contracts (FSCs) between the dairy farmers and milk collecting companies to ensure a stable market with a remunerative price for liquid milk. Loans could be obtained for the construction of cattle sheds, purchasing of cows, purchase of concentrated feed, veterinary services and drugs, construction of bio-gas tanks and any other requirements recommended by the vets.

The loan limits extend from Rs.50,000 to Rs.400,000 per borrower at an interest rate of 12 percent per annum. The maximum repayment period is five years. In addition to the above, liquid milk processing industries are also eligible to receive bank loans under the programme up to a maximum of Rs.300 million per industry. Interest for such loans will be 14 percent per annum and a maximum of 5 years is available for repayment. Such an industry is required to make an arrangement with 2,000 to 10,000 dairy farmers to purchase liquid milk under FSCs.

Further, agro-based industries are also eligible to receive loans at 14 percent per annum under the credit programme up to a maximum limit of Rs.300 million per borrower. Such industries are required to enter into FSCs with 1,000 to 10,000 farmers to purchase their produce. The CBSL and lending banks will assist the industries to enter into FSCs with farmers.

The loans are available for the construction of industrial buildings/modernization, purchase of modern machinery and equipment, storage, cold rooms and transportation services and other required services and equipment for maintenance of standards.