Govt tweaking norms for mega food parks; anchor investors need to set up a food processing unit too

The Cabinet Committee on Economic Affairs has cleared a modification proposal which would make it mandatory for anchor investors in mega food parks to also own at least one food processing unit within the park.

Under the infrastructure development scheme for mega food parks, ownership and management of the park vests with a special purpose vehicle (SPV) in which organised retailers, processors, service providers, etc may be the equity holders or there may be an anchor investor along with its ancillaries, associated companies and other stakeholders.

As of now, the norms said the government or its agencies can also become shareholders in the SPV provided their holding is restricted to 26 per cent to ensure the private character of the SPV.

The modification changes the nature of the SPV by removing the 26 per cent ceiling for equity ownership by state government where the parks are located. It has also said that anchor investor in the SPV holding majority stake, with or without other promoters, will be required to set up at least one food processing unit in the park with an investment of not less than Rs 10 crore.

This means PE firms looking to come in as anchor investors with a majority stake would also need to set up a standalone unit for food processing centre. Alternatively, they can hold a minority stake or come in as a co-promoter, if they intend to bypass the requirement.

However, state government entities and co-operatives applying for projects under the scheme, will not be required to form a separate SPV and set up processing unit(s) in the park. The government says the moves will help boost investments in the sector which has not taken off in a big way as anticipated.

The government had cleared a proposal to set up 12 mega food parks in the ongoing 12th Plan period (2012-17) with an allocation of Rs 1,714 crore, to boost the food processing sector and create adequate infrastructure in the country with efficient supply chain management from farm gate to retail outlet.

Food parks are aimed at providing modern infrastructure facilities for food processing industries along the value chain from farm to market.

The government expects that each project will absorb investment of around Rs 100 crore in common facilities and besides additional investments estimated at around Rs 250 crore. It projected that each park will generate revenues of Rs 500 crore and nearly 30 food processing units are expected to be set up in each project.

(Edited by Joby Puthuparampil Johnson)

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