Speaking at the seminar, `Agro-advantage : Maharashtra,' on the financing options for agriculture, PS Bhatnagar, union secretary in the ministry of food processing and industries, said that financial institutions should suitably re-orient their policies for making credit available to this sector at affordable terms.

"The commercial banks and financial institutions do not appreciate the special circumstances in which food processing industries operate and these are treated in the same way as any other manufacturing sector," Bhatnagar said adding that the dependence of agriculture on vagaries of weather, the incidence of various types of pests and diseases in agricultural produce make the foodprocessing industry "highly vulnerable".

The Union secretary pointed out that the flow of investment into food processing has not been commensurate with the requirement, taking into account the immense opportunities that the sector offers. The industry, said Bhatnagar, faces uphill problems relating to easy availability of finance, high cost of raw materials due to low agricultural activity, non-availability of processable varieties of raw materials, and preference of the Indian consumers for fresh food. Even as agriculture is treated as a priority sector by banks and financial institutions, Bhatnagar pointed out that similar consideration is not extended to the agro-processing sector, although development of agriculture is largely dependent on it.

"The agro processing industry needs special considerations while determining the bankability of projects," Bhatnagar said.

The food processing industry is passing through a developing phase, and financial institutions should extend venture capital fundsbecause of the high risk involvement. "The absorption of funds will depend upon the absorption of technology and know-how in the new market economy. Financial institutions, therefore, while extending credit to this sector, must also extend help of technologists and business managers to their clients so that they can utilise the funds in a proper and productive manner," Bhatnagar said "which will improve the overall efficiency of the system.

"Some of the companies which are well established and expanding their market share need additional working capital support. The rate of interest must be affordable for companies because seasonality increases the cost of inventory and high interest cost reduces the profitability of the companies and keeps potential investors away from venturing into food processing industry," Bhatnagar advocated.

The rates of interest depends on the pay-back capacity of the industry, which is low for the food processing industry. Financial institutions, Bhatnagar said, must come outwith innovative packages to fund this sector while at the same time putting less interest burden on the industry.

Speaking at the seminar, PVA Rama Rao, ex-chairman and managing director of Nabard, spoke at length about the bank's pro-active role in strengthening and expanding the activities of the co-operative banks and regional rural banks. "Strong and vibrant rural credit institutions are a pre-requisite for ensuring adequate credit flow for rural activities," Rama Rao stressed adding that major opportunities will encompass agro-based, high volume products such as processed milk, poultry, meat, packed atta and piggery products.