India’s dairy sector is a crucial contributor to the country’s economy, providing employment to millions of farmers and ensuring nutritional security. As the world’s largest milk producer, India has a well-structured policy framework to support dairy entrepreneurs, enhance milk production, and modernize dairy processing units. The government has introduced multiple initiatives to attract investment, encourage technological advancements, and improve the overall efficiency of dairy businesses.
This blog explores government policies and incentives, including Foreign Direct Investment (FDI) regulations, tax benefits, NABARD funding, and the Mega Food Park Scheme, that can help dairy entrepreneurs succeed.
FDI Policies in Dairy Sector
1. 100% FDI in Dairy Processing
The Indian government allows 100% Foreign Direct Investment (FDI) in the dairy processing sector under the automatic route. This policy enables foreign investors to set up dairy processing units without requiring government approval, fostering:
- Technological advancements in dairy processing.
- Increased investment in modern cold chain logistics.
- Expansion of dairy exports and global collaborations.
2. FDI Restrictions in Dairy Farming
While dairy processing allows full foreign investment, FDI in dairy farming and cattle rearing is restricted to ensure that local farmers remain competitive. This measure protects small-scale dairy farmers and encourages domestic investments in primary dairy production.
Tax Benefits for Dairy Entrepreneurs
1. Income Tax Exemptions
The government provides income tax benefits to dairy entrepreneurs to encourage investment in infrastructure and modern dairy processing units. Key exemptions include:
- 100% income tax exemption for new food processing units for the first 5 years.
- Tax deductions of 25%-30% for the following years.
2. Capital Expenditure Deduction
To promote investment in dairy infrastructure, the government allows 150% deductions on capital expenditure for businesses involved in:
- Cold chain storage for dairy products.
- Setting up warehouses for agricultural produce.
- Investments in dairy processing equipment and facilities.
3. Concessional Customs Duty on Dairy Equipment
Entrepreneurs importing modern dairy processing machinery and cold chain infrastructure benefit from a lower customs duty rate. This incentive helps in:
- Reducing initial capital expenditure for new dairy plants.
- Enhancing efficiency through advanced dairy technology.
NABARD Funding for Dairy Development
1. Dairy Entrepreneurship Development Scheme (DEDS)
The National Bank for Agriculture and Rural Development (NABARD) has launched the Dairy Entrepreneurship Development Scheme (DEDS) to support dairy farmers and entrepreneurs. Key features of DEDS include:
- Subsidized loans for setting up dairy farms with modern technology.
- Financial assistance for cattle procurement and breed improvement.
- Incentives for dairy product processing and packaging units.
2. Dairy Processing and Infrastructure Development Fund (DIDF)
The government has set up a ₹10,881 crore Dairy Processing and Infrastructure Development Fund (DIDF) under NABARD to:
- Provide low-interest loans to dairy cooperatives.
- Support modernization of existing dairy plants.
- Strengthen milk procurement, processing, and marketing networks.
3. Interest Subvention Scheme for Dairy Farmers
Dairy entrepreneurs can avail subsidized interest rates on loans under NABARD’s Priority Sector Lending (PSL) scheme. This incentive encourages small-scale dairy farmers to expand their businesses without financial burden.
Mega Food Park Scheme: Boosting Dairy Entrepreneurship
1. What is the Mega Food Park Scheme?
The Mega Food Park Scheme by the Ministry of Food Processing Industries (MoFPI) is designed to enhance food processing infrastructure, including dairy units. The scheme provides:
- State-of-the-art dairy processing infrastructure.
- Common cold storage and logistics facilities.
- Cluster-based milk procurement systems to improve efficiency.
2. Benefits of Mega Food Parks for Dairy Entrepreneurs
Dairy businesses operating within Mega Food Parks enjoy:
- Lower operational costs due to shared facilities.
- Increased market access for dairy exports.
- Financial support and infrastructure incentives from the government.
3. Number of Mega Food Parks in India
The Indian government has approved 42 Mega Food Parks, out of which 35 are already operational. These parks provide dairy entrepreneurs with access to modern processing units, ensuring quality production and global competitiveness.
State-Specific Dairy Incentives
1. Gujarat
- Special incentives for dairy cooperatives.
- Tax exemptions for dairy exports.
2. Rajasthan
- Subsidies for indigenous cattle breed improvement.
- Financial assistance for dairy farm automation.
3. Uttar Pradesh
- Interest-free loans for setting up dairy farms.
- Dairy promotion schemes for small-scale farmers.
4. Maharashtra
- Grants for dairy infrastructure development.
- Incentives for organic and A2 milk production.
Emerging Opportunities in the Dairy Sector
With government support, the dairy sector is experiencing rapid innovation and growth. Key opportunities include:
1. Expansion of Value-Added Dairy Products
The demand for flavored milk, yogurt, cheese, and probiotic dairy products is rising. Entrepreneurs can leverage tax incentives to establish new production units.
2. Investment in Cold Chain Infrastructure
With financial support from NABARD and Mega Food Parks, dairy entrepreneurs can invest in cold storage and refrigerated transport to reduce milk spoilage and enhance supply chain efficiency.
3. Digital Dairy Platforms and E-Commerce
Government policies encourage digitization in dairy trade. Dairy startups can benefit from:
- FDI in digital dairy platforms.
- Online dairy product sales with lower tax rates.
4. Organic and A2 Milk Production
The government is promoting organic and A2 milk farming through subsidies and low-interest loans. Entrepreneurs focusing on premium dairy products can tap into growing consumer demand.
Conclusion
The Indian government has created a robust policy framework to support dairy entrepreneurs through FDI policies, tax incentives, NABARD funding, and the Mega Food Park Scheme. These initiatives provide a strong foundation for innovation, investment, and global expansion in the dairy sector. For aspiring dairy entrepreneurs, now is the perfect time to leverage government schemes, modern technology, and financial incentives to build a successful and sustainable dairy business. With the right strategy and government support, the Indian dairy industry is poised for unprecedented growth and global competitiveness.
