USAID has provided funds to Government of India (GOI) to finance activities that assist the development of a dynamic private agricultural business sector in India. The programme has been named as "Agricultural Commercialization and Enterprise (ACE) Programme". ICICI has been nominated as the implementing agency for ACE Programme. Post merger, ICICI Bank Limited is managing the fund.
The main purpose of ACE is to improve the investment environment for private agribusiness in post-farm horticulture. India is the world's second largest vegetable producer and third largest fruit producer. However, India's share of the world market for processed fruits and vegetables is less than 1% which can be increased if the quality and marketing efforts of Indian products are improved. Although India's horticulture output is high, the modern support services and infrastructure necessary for sustained growth in this high value sector are yet to be developed. ACE has been specifically formulated to provide finance as well as technical assistance for the aforesaid activities. ACE activities will focus primarily on promoting agribusiness innovations and diversity i.e. linking technology and labour requirements, reduction of post-harvest losses, development of Indo - US linkages and encouraging projects with a high demonstration effect. The activities cover fresh and processed fruits and vegetables, herbal products, spices, fruits and vegetables based processed foods, flowers and foliage. ACE will consider requests for assistance for innovative projects relating to post-farm subsectors of horticulture including post-harvest handling, packing, establishment of cold chain, mobile precooling, processing, marketing, integrated facilities for growing high value and low gestation period horticulture products and mushrooms.
Objectives
The main objectives of ACE are:
- To increase private investment in the agribusiness sector;
- To improve linkages between horticulture producers, processors and marketers;
- To increase flow of fresh and processed horticulture products to targeted domestic and export markets;
- To support GOI's programmes and policies for expanding and increasing productivity of private sector agro-industries;
- Strengthen capabilities of Trade Associations /Non-Governmental Organization’s (NGO) to assist the agribusiness sector; and
- To increase rural incomes.
Eligible Organizations
Private commercial ventures and cooperatives will be eligible to receive assistance under ACE.
Type of ACE activities
Three groups of activities have been identified - loans to private sector, technical assistance and trade & investment tours.
1. Loans to Private Sector
Eligibility Criteria
Mandatory
- Innovative, i.e., introduction of a new product, process or market including new technology / equipment (available indigenously or imported from USA).
- Aiming at improvement in linkages between horticultural producers, processors and traders.
- Resulting in development of an integrated agribusiness by backward as well as forward integration and high value addition.
- Flexible to process various fruits / vegetables throughout the year. Dependence on a single product should be avoided and economies of scale should be observed while determining capacities.
- Profit generating and self sustaining for the entrepreneur. It should also have positive impact on firm's operations in terms of productivity and income.
- Environmentally safe.
Non-Mandatory
- Creation of additional infrastructure such as collection centers, grading centers, storage facilities, refrigerated containers, packaging material and pallet manufacture, refrigerated transport, pre-cooling capability etc.
- Development of a new product from fruit and usage of by- products. The growing concern regarding chemical residue on fruits/vegetables should be considered, while conceptualizing the project.
- Increase in export of products by producing at competitive prices.
- Resulting in higher employment generation in the rural areas thereby leading to increased income.
- Improving skills of the existing workforce for technology absorption.
All types of agribusiness entrepreneurs in India will be eligible for ACE assistance. Those capable of providing demonstrative effect in a sector /area would be preferred.
ELIGIBLE EXPENDITURE
The expenditure eligible to be financed under ACE Programme would include plant and machinery, factory building and miscellaneous fixed assets. ACE funds can be utilized only for purchase of plant and machinery or fixed assets in whole or in part for the project of Indian /US origin and shall be clearly identified.
MAIN TERMS OF ASSISTANCE
1. LOANS TO PRIVATE SECTOR
- Promoter's Contribution - At least 25% of the project cost.
- ACE Assistance - Up to 50% of the project cost subject to a maximum of US
- $ 1 million or its rupee equivalent.
- Assistance from other - Balance 25% by way of loans/equity.
- Institutions /banks
- Debt to Equity Ratio - 1.5 : 1
- Interest Rate - Rupee Loans at market related rates.
- Loans would be utilized for import of technology, equipment and services only from the USA.
- Security - By way of Mortgage of assets.
- Repayment Period - Up to seven years including suitable moratorium.
Commodity Focus
ACE activities will focus on all types of fresh and processed fruits and vegetables, herbal products, mushrooms, flowers and foliage. While allocation of financial assistance will be based on demand, a significant portion would be targeted towards high potential export markets.
Evaluation of Project Proposals
It is recommended that the entrepreneurs should have a preliminary discussion with ICICI Bank prior to submitting a formal proposal. On receipt of a project profile (format on last page) and after a preliminary discussion, ICICI Bank will examine prima-facie eligibility of the project. If found eligible, a detailed proposal will be called for. ICICI Bank may involve, if necessary, experts for evaluation of the proposal. The proposal will be placed before a committee set up by ICICI Bank to sanction financial assistance.
Documentation
After the assistance is sanctioned, the industrial firm will enter into an agreement with ICICI Bank. The agreement will also indicate schedule of disbursements. Actual disbursement of funds will commence only after signing the agreement and promoters bringing in a part of their contribution. The expenditure incurred prior to the effective date of the agreement will not be included in the cost of the project.
Reporting Requirements
The firm receiving assistance under the ACE Programme will have to submit a quarterly report to ICICI Bank on the progress in implementation of the project. If the progress is not satisfactory, ICICI Bank reserves the right to take suitable action including suspension of further disbursements. After commissioning of the assisted project, ICICI will closely monitor the same. ICICI Bank, representatives of USAID and GOI would have a right to visit the assisted projects and request for information about its working.
ACE Implementation
The ACE Programme is being handled by Agri Business Group in ICICI Bank. Only a limited number of projects with high innovative content and demonstration effect would be funded from each of these sectors under this Programme.
AGRICULTURAL COMMERCIALISATION & ENTERPRISE (ACE) PROGRAMME
PROFORMA FOR PROJECT PROFILE
- Name and address of the Company
- Brief history and other particulars about the Company, promoters and their agribusiness experience together with latest audited annual accounts
- Management set up with brief bio-data of key persons.
- Brief description about the project
- Location of the Project indicating specific advantages
- The products to be handled and capacities proposed
- Raw material availability and procurement system and price pattern
- Details about technology to be used with innovative content, if any and likely suppliers
- Likely suppliers of equipment (indigenous/foreign)
- Target market for the product with demand and supply position and export potential of the products. Also indicate present distribution system
- Prevailing Government policies regarding horticultural produce and processed products. Also indicate present structure of levies and taxes
- Economic justifications for taking up the project such as value addition, employment, foreign exchange earnings etc
- Cost of the project/requirement of working capital
- Proposed means of financing including contribution from the promoters and their resources
- Schedule of implementation of the project
- Projected profitability, cash flow and balance sheets for the next 5-7 years along with assumptions such as capacity utilization, prices for finished products etc
For further information, please write to brahmanand.hegde@icicibank.com
