What is Cottage Industry?

Industry

A business or manufacturing activity carried on at people homes is called cottage industry. Cottage Industry shops allocated at Connaught place, New Delhi are the example of it. It was originally referred to home workers who were engaged in a work such as sewing, lace-making, wall hangings, electronics, or household manufacturing. It includes many producers, working from their homes, typically part-time.

Features

  • They are organised by people with private resources and raw materials
  • They usually use locally available man powers to get the work done
  • They make use of simple types of equipment
  • The capital investment is minimal

Types

These are primary, secondary, and tertiary.

  • Primary industry
    • Primary industry involves getting raw materials e.g. mining, farming and fishing.
  • Secondary industry
    • Secondary industry involves manufacturing e.g. making cars and steel.
  • Tertiary industry
    • Tertiary industries provide a service e.g. teaching and nursing.

Advantage

A major benefit of cottage industries is that they allow people to work from their homes. Women have benefited the most because they can work from home while still tending to their families. Many cottage businesses include the entire family in their operations.

Disadvantage

  • Lack of Parking and Distribution
  • Lack of Health and Safety
  • Lack of Food Laws
  • Lack of Zoning Requirements

Gramin Bhandaran Yojana

Introduction

Gramin Bhandaran Yojana is a capital investment subsidy scheme that works towards the construction and renovation of the warehouse in rural areas. Gramin Bhandaran Yojana was announced in 2001.

Purpose

The Gramin Bhandaran Yojana foresees a robust network of non-urban warehouses to help build adequate storage for farm produce in rural areas. The purpose of the scheme is to cater to better storage facilities of farm produce and agricultural inputs to boost its demand in the market and pave way for a system of warehouse receipts on a national level.

Features

Size of the warehouse

The owner has to decide the capacity of his godown. Subsidy for the scheme is provided for a minimum potential of 100 loads and a maximum of 30,000 loads.

Loans

Farmers can avail of the loan facility. The interest rates, loan amount and pledge period are based on the NABARD/Bank guidelines and practices of various financial institutions

Conditions

A warehouse should be robust in terms of their structure for the storage of agricultural produce. Owners have to get a license under the State Warehousing Act. Warehousing which has the capacity to store around 1,000 tons must be accredited by the Central Warehousing Corporation (CWC)

Location

Warehouse must be constructed outside the limits of the municipal corporations.

Credit linked assistance

Subsidy linked to institutional credit is available for projects financed by the following:

  • Urban Cooperative Banks,
  • Regional Rural Banks,
  • Commercial Banks,
  • North Eastern Development Finance Corporation (NEDFI),
  • State Cooperative Agricultural and Rural Development Bank,
  • State cooperatives banks, and
  • Agricultural Development Finance Committee

The credit facility will be extended for construction costs of boundary wall, grading, platform, packaging, internal road, the internal drainage system in addition to quality certification and warehousing facilities

Capital Cost

It depends on the actual cost or cost of a project appraised by a bank or Rs.3500 per ton, whichever is lower for 1000 tons warehouse.

Depends on the actual cost or cost of a project appraised by a bank or Rs.1500, whichever is lower for bigger than 1000 tons warehouse

Subsidy

Projects which receive finance from cooperative and commercial banks will get subsidy via NABARD. The subsidy rate is as follows:

Category of Applicant Rate of Subsidy
SC/ST entrepreneurs and their cooperatives 33.33% of the capital cost of the project, subject to a maximum of INR 3 crores
Farmers, agricultural graduates, and cooperatives 25% of the capital cost of the project, subject to a maximum of Rs. 2.25 crores
Individuals, companies, and corporations 15% of the capital cost of the project, subject to a maximum of INR 1.35 crores
Renovation of warehouses of cooperatives with the aid of NCDC 25% of the capital cost of the project.
Provisions of the scheme
  1. For warehouse up to 1000 ton capacity, the project cost was appraised by financing Bank or the actual cost to Rs.2500/- per ton of storage capacity.
  2. Warehouse exceeding 1000 ton capacity can get the appraisal by Bank and the actual cost of Rs.1875/-per ton of storage capacity.
  3. For the warehouses exceeding 10,000-ton capacity, the subsidy would be restricted to 10,000 ton only, and are also subjected to the relaxations.
  4. No beneficiary will draw the subsidy for the warehouse project from more than one source.
  5. The capacity of the warehouse is calculated at 0.4 Million tons per cubic meter.
Security

Mortgage of land and godown

Eligibility for Gramin Bhandaran Yojana

The following are eligible to avail of the Gramin Bhandaran Yojana

  • Farmers
  • Farmers’ groups
  • Proprietary firms
  • Co-operatives
  • Non-Governmental Organizations
  • Marketing Boards
  • Agro-processing co-operative societies
  • Agro-processing corporations
  • Agro-industrial corporations
  • Agricultural Produce Marketing Committees
  • Other corporations
  • Quality testing laboratories
  • Partnership firms
  • Companies, and
  • Self-help groups

Objectives for the Gramin Bhandaran Yojana

  1. To create the storage capacity in rural areas to help farmers.
  2. Promoting to improve its marketability.
  3. Preventing the wastage and deterioration.
  4. Providing infrastructure for farmers for the storage of agricultural commodities.

 

Important References

  1. Govt Rural Godown Scheme PDF
  2. Directorate of Marketing & Inspection
  3. Important contacts – DMI Contacts
  4. National Bank for Agriculture & Rural Development (NABARD)
  5. National Cooperative Development Corporation (NCDC)

What is NABARD?

Introduction

NABARD can be expanded as National Bank for Agriculture and Rural Development.  This was set up on 12 July 1982 on the recommendations of the B. Sivaraman committee with regards to the implementation of the National Bank for Agriculture and Rural Development Act 1981 and it has been the top Development Financial Institution in India.

The main functions of NABARD pertain to policy development, coordination, research, training, etc., relating to rural credit. It provides refinance lo cooperatives, regional rural banks, etc. Moreover, it makes loans and advances to state governments for a period not exceeding more than 20 years to enable (them to subscribe directly or indirectly to share the capital of cooperative credit societies.

The authorized paid-up capital is more than Rs.30, 000 cr. Government of India holds 100% of the share capital. NABARD has it’s headquartered in Mumbai. It has been the key to providing rural services, innovative social services, and the provision of credit services in the rural parts of India.

Roles

  • NABARD supports the cottage industries –Most of the cottage and SMEs in India are situated in the rural part and it has played a crucial role in reorganizing the cottage industry such that rural areas of India have become a key contributor to the growth of India.
  • It brought collaboration between the rural and national economy by reaching out to various industries and sectors like fertilizer manufacturers, pesticide developers, and farm equipment producers and linking each other for collaborative growth. This led to a mutual benefit cycle that helped both the economy.
  • It serves as the apex body for providing a range of services that involves financing and provision of credit to the rural regions for carrying out a range of development activities.
  •  It is also a key body to support new agencies and institution come up specifically targeting Indian villages and their inhabitants. These agencies are specifically targeted to end scrutiny, rehabilitation unit creation, credit institution restructuring, training new hires, etc.
  • It also plays the role of an intermediary to various rural financing agencies that operate at the bottom-most level. It also acts as a bridge between RBI, Indian Government, state-level bodies.
  • It also takes part in developing other organizations that take part in the development of the rural economy.
  • It plays a crucial role in the development and support of the functioning of Co-operative banks in the process of regulation and also training their staff.

Function

  • It acts as the apex financing body for the provision of credits to agencies or firms which are focused upon promoting various development activities in rural areas.
  • It pays special attention to projects built under the Integrated Rural Development Program (IRDP).
  • It arranges to refinance for IRDP accounts in order to give the highest share of contribution towards the abolition of poverty.
  • It provides instructions for the promotion of group activities under its programs and provides 100% refinance support for them.
  • It helps to connect the Self-help Group (SHG) and the needy population of the rural areas.
  • It also monitors and controls the cooperative banks and RRBs to support rural financing and needy farmers

Conclusion

NABARD has been instrumental in shaping modern India through the development of rural areas. It has been shaping the problems faced by the rural population and also helped them in earning a livelihood and betterment of the rural economy. It has connected both the rural and national economy and collaborated both. It currently works with close to 4500 partner companies who are the leading innovators and major players in various rural projects.

Important Features
  1. NABARD contact details-
  2. Address – Plot C-24, G Block, Bandra Kurla complex, BKC Road, Bandra East, Mumbai, Maharashtra 400051
  3. Web links- https://www.nabard.org/content.aspx?id=571

Loans and subsidies for warehouse in India

Subsidies are provided by NABARD under Gramin Bhandaran Yojana Scheme to the farmers on submission of the project file which requires the construction of these agricultural warehouses are taken up by the individuals as below:

  • Farmers
  • Farmers’ groups
  • Proprietary firms
  • Co-operatives
  • Non-Governmental Organizations
  • Marketing Boards
  • Agro-processing co-operative societies
  • Agro-processing corporations
  • Agro-industrial corporations
  • Agricultural Produce Marketing Committees
  • Other corporations
  • Quality testing laboratories
  • Partnership firms
  • Companies, and
  • Self-help groups

As per the scheme, the entrepreneur can construct a warehouse at any place freely, as per their convenience, except in the restriction if it is outside the limits of the Municipal Corporation area. Rural warehouse constructed in and around the Food Parks promoted by the Ministry of Food Processing Industries is eligible for this scheme.

The capacity of a warehouse can be decided as per the need by the farmer or the entrepreneur. But subsidy of the scheme will be restricted to a minimum of 100-ton capacity and maximum value of 10,000 ton.

Scheme Details

Below are the subsidies:

  1. For SC/ST entrepreneurs and their cooperatives, the rate of subsidy available is 30-35% of the capital cost of the project and it is maximized to Rs.3 cr.
  2. For Farmers, agricultural graduates, and cooperative, the rate of subsidy available is 20-25% of the total cost of the project and is limited to Rs.2.25 cr.
  3. Individuals, companies, and corporations, the rate of subsidy available is 10-15% of the capital/total cost of the project and it is maximized to Rs.1.35 cr.
  4. For the Renovation of the warehouse of cooperatives with the aid of NCDC, the rate of subsidy available is 20-25% of the capital/total cost of the project.
  5. For warehouse up to 1000 ton capacity the project cost was appraised by financing Bank or actual cost to Rs.2500/- per ton of storage capacity.
  6. Warehouse exceeding 1000 ton capacity can get the appraisal by Bank and the actual cost of Rs.1875/-per ton of storage capacity.
  7. For the warehouses exceeding 10,000-ton capacity, the subsidy would be restricted to 10,000 ton only, and are also subjected to the relaxations.
  8. No beneficiary will draw the subsidy for the warehouse project from more than one source.
  9. The capacity of the warehouse is calculated at 0.4 Million tons per cubic meter.

Banks that cover subsidies released through NABARD

Subsidies which are linked to the institutional credit and will be available to the project under the schemes which are financed by the banks listed-

  • Urban Cooperative Banks,
  • Regional Rural Banks,
  • Commercial Banks,
  • North Eastern Development Finance Corporation (NEDFI),
  • State Cooperative Agricultural and Rural Development Bank,
  • State cooperatives banks, and
  • Agricultural Development Finance Committee

Mode of the release of subsidies

  1. The first 50% of subsidy amount is released on approval and acquisition of land and balance of the other 50% of subsidy amount will be released after godown construction reached roof level.
  2. 100% of subsidy amount would be released for the renovation of warehouses but that too after the completion of work of repair and renovation.
  3. The subsidy is provided as an interest-free loan, but it can be adjusted only after the completion of the construction of godown just for the satisfaction of NCDC.

Loan facilities

The farmers can avail the pledge loan for warehouse constructions by hypothecation of their products to keep their produce. The terms and conditions for pledge loans include margin, rate of interest, amount, pledge period, etc. which are issued by the National Bank for Agriculture and Rural Development – NABARD/RBI according to the normal banking practices which are followed by financial institutions.

Credit facility cover

As per the NABARD rules, the credit facility covers construction costs such as boundary wall, grading, platform, packaging, internal road system, as well as the internal drainage system. Besides these, the benefit would be extended to the quality of certification and godown construction facilities

 

Still, confused of how to start a warehouse business? Please check this article How to start a warehouse business

How to start a warehouse business

Introduction

Starting a business is not possible without hard work and investment. There is a lot of responsibility, work, long hours, investment, and stress involved. But the rewards are amazing. If you are trying to enter the warehouse business, two things you must care about are –

This industry is highly competitive, but that’s exactly what makes it so profitable.
Let’s first know exactly what a warehouse is? After this, we will talk about the below points:

  • Checklist
  • Profit Calculations
  • Subsidy from Government
  • Loan from Banks
  • Other important topics about the business.

So, a warehouse is basically a building for storing goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. Stored goods can include any raw materials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing, and production. Example of warehouse:

Seems similar to godown? Is it?

No, they are different. A Godown is an unorganized form of the warehouse, it is of Indian origin, and it’s personal in terms of the store like one retailer store has its own godown, and any place can be converted to godown for storing products. Example of a godown:

You would like to obtain some initial background information about the warehousing industry before starting your venture.

Estimating the need

To start a warehouse, the first thing is to estimate the need. So, these are required to be done:

  • Determine the demand – First of all, you need to determine the demand of warehouses in your area whether they could be Government, Private Companies, your own requirement, etc.
  • Determine the Location – For the warehouse you have to be careful about its location. Location is the primary factor of its demand by any institution. Normally it should be within 10 km from Railway station, airports, and seaports where goods can be loaded and unloaded easily.
  • Determine the size –Size of warehouse depends upon demand and space available. Although the ideal size of a single warehouse is 25000 sq.      ft. which could be made without any pillar in the center. This will avoid obstruction to plying loading vehicles.
  • Lookout the Competition – You must watch demand and supply in your area.
  • Estimate Start-Up Costs – Estimation of cost and availability of finance you must ensure based upon Land availability, Landfill cost, clear road for maneuvering loaded vehicles, Security of space, connectivity with the main road, and construction work.
  • Explore Financing Options – Many Govt. and Private sector banks are giving loans nowadays for warehouses.
  • Get Licenses – Must seek licenses applicable as per your state government rules of licensing for warehouse. Without proper licenses, companies will deny to take on lease.
  • Hire Contractors – Then you can hire specialist contractors who are mastered in building warehouses – This will ensure your quality of construction and life of the warehouse.
  • Hire Employees – Then hire employees like security guards for safety, Loader/un-loader, accountant, etc.
  • Build a Client Base – Actually, this is the first thing required and could be based on the demand of the warehouse.

Major things to be taken care of before starting the warehouse work

  • Maximum use of space
  • Ready access to all items
  • Efficient movement of goods
  • Effective utilization of labor & equipment’s
  • Maximum protection of items
  • Good-house-keeping

Cost of Construction

Warehouses construction is based on the type of building you prefer. It could be

  1. Steel structures (PEB)
  2. Reinforced concrete structures (RCC)

Mostly PEB structure is preferred for warehouse because it is fast in erection and it is durable. For future extension it is very easy to be extended. As per the requirement the PEB structure is designed and the casting is done in a factory and erection is made on the site. Generally PEB structure construction starts at INR 1000/sq. ft. to INR 1200/sq. ft. The foundation work, the major part with RCC other than that the erection can be done fast and handed over.
For RCC it will cost roughly from 1500/sq. ft. to 1600/sq. ft. Columns can be built till the required heights and the roofing can be of galvanized sheets industrial grade with all ventilation and ridges and all.

In addition to this cost also depends on-

  • Kind of structure are you willing to build
  • Built-up area planned
  • Locality i.e. rural or urban
  • Construction work by self or giving it to some company
  • Material costs are varying, so selecting the options also matters
  • Demand and supply of labour and material matters

Estimated Return from a warehouse

So, let’s say you have Rs.50 Lacs to spend for a warehouse. As per bank loan norms you can get 75% loan i.e. 1.5Cr assuming commercial financing with 25% down.
Let’s say that you can purchase a warehouse @3000/sf., so you end up with a 6667sf warehouse to rent.
If you can rent the warehouse at @35/sf./month, you’ll have a gross income of Rs.2, 33,333/month or Rs.28 Lacs/year.

The calculation for 1st year looks like
Particular INR
Own Capital 5,000,000
Total Capital 20,000,000
Loan 3 times of own cap 15,000,000
Rate of warehouse Per sq. ft. 3,000
Total warehouse purchased in sq. ft. area 6,667

 

Income in INR  
Rent @35 per sq. ft. 233,333
Rent Annual 2,800,000
Total Profit 2,800,000

 

Expenses in INR  
Interest on Loan @5% 750,000
Property [email protected] per sq. ft. 333,333
Building [email protected] sq. ft. 192,000
Liability [email protected] sq. ft. 66,667
Maintenance @2% 400,000
Total expenses 1,742,000
Net Profit 1,058,000
Return in % 21

Pretty good return. Your numbers may vary, so plug them in and see what you come up with. If you can’t gross at least 10% in your first year, you probably need to look for a better investment.

Loans and subsidies

Subsidies are provided by NABARD under the Gramin Bhandaran Yojana Scheme to the farmers on the submission of the project file from the different affiliate banks. The details of subsidies can be found here – Loans and subsidies for warehouse in India