Game on to boost agro food processing industry

To stimulate local and foreign investments and make the agro-processing industry vibrant, the government has offered a bunch of incentives including low cost fund, tax waiver, up scaling workers skill in the Agriculture and Food Processing Industry Development Policy 2022.    

Recently, the government has published the policy aiming at grabbing the global export market in food processing products through establishing cold chain infrastructure and research and innovation to develop products to make Bangladesh a hub for sourcing.   

Under new policy for the sector, the government is offering to provide capital assistance at low interest – up to half of the cost or a maximum of Tk 50 crore – for setting up new food processing industries.

Besides, interest assistance of 5 per cent or a maximum of Tk 20 crore will be given for loans taken under the condition of fixed capital investment for setting up such industry, according to the Agriculture and Food Processing Industry Development Policy-2022. The same facility is available for building cold chain infrastructure.

The new policy document was published by the industries ministry on October 31.

The document also states that entrepreneurs will get tax exemption for 3 to 5 years for setting up industries in the sector.

With the new policy, the industries ministry has set a target to ensure investment of $5 billion in the sector by 2028 and create one lakh new jobs. It also wants to raise the sector’s contribution to the GDP by 6 per cent within 2028 by increasing the consumption of agricultural products and raising the value-added tax (VAT) on the products.

With its basket of offers for the sector, the government aims to attract investors in processing the agro products and boost the industry. Under its latest strategy for the sector, the government is prioritising processing of fruits and vegetables, milk and milk products, fish, poultry, eggs, meat and meat products, flowers, grains, including grading and packing, etc.

Establishing tissue cell laboratories, modern greenhouses, nurseries, seed production units to meet industry standards is also being prioritised.

Capital assistance

According to the latest policy for the agro-food processing industry, the government will provide capital assistance in the form of low-interest loans of up to Tk 50 crore, for investments in new food processing industries.

The assistance, 50% of the total project cost, will be given for installation of plants, purchase of machinery and other works, the policy said.

However, the policy states that small and medium-sized enterprises (SMEs), taking the assistance, must go into production within 12 months after the loan is approved. The deadline is 24 months for large industrial units..

The same facilities will be available for setting up Primary Processing Center (PPC) and Primary Supply Center (PCC) in the sector.

For investment in technological development and modernisation of existing food processing industrial units, capital assistance will be provided in the form of loans of 25 per cent of the project cost or a maximum of Tk 50 crore.

The government will also provide 35 per cent or a maximum of Tk 50 crore to set up cold chain infrastructures for agriculture, horticulture, dairy products, meat products.

Interest assistance

An interest subsidy of 5 per cent per annum or a maximum of Tk 20 crore is being offered if entrepreneurs take loans in terms of fixed capital investment for industrial units and cold chain infrastructure.

The facility will be available for up to 7 years after the factory begins operation. However, in the case of PPC and PCC, the draft policy has proposed a 5 percent or a maximum of Tk 10 crore interest assistance.

Duty and tax exemption

The new policy also comes bearing duty exemption on the export of goods manufactured by the industry, purchase of transportation, and capital equipment.

In addition, cash assistance will be provided for research, and allocation of stalls for participation in fairs abroad.

The policy also proffers corporate income tax waiver for up to three years on dividends from existing projects’
income.

In the case of micro and small scale industries, VAT will be remitted at a rate of 100 per cent from the start of commercial production for up to 5 years. For middle and large industries, VAT will be remitted for 7 years at a rate of 75 per cent and 50 per cent respectively.

The government has also decided to exempt duty, VAT and tax to the industries to be set up in BASIC industrial parks and SEZs, outside Dhaka and Chattogram cities.

Duties and taxes on such industrial units will range from 0 to 5 per cent.

According to the policy, 100 per cent duty exemption is being offered in the first 5 years of setting up the industrial units and 25 per cent duty exemption on dividends thereafter. Furthermore, 30 per cent duty exemption will be given to those projects taken with loans on soft terms or have project cost of Tk 50 crore.

The government will increase support for market development of this sector. Government will help 10 MSMEs to participate in building stalls in national or international fairs and conferences for business growth. Up to 50% of the cost of participating in the trade fairs will be borne by the government. Exports of perishable products of this industry for 3 years from the date of commercial production will be given maximum cash incentives of up to Tk 50 lakh per industrial unit per year.

Agro-food tech park

The government will establish agro-food technology parks or agricultural export zones near seaports, markets and airports within the next five years, according to the policy. SEZs will also be established for rapid industrialisation.

Besides, the government wants to develop the agro-food processing sector through food packaging, improvement of test standards, and development of supply chain.

In order to meet the demand for quality products in the country, an increase in exports has been proposed.

Under the policy, BSTI, BCSIR, Bangladesh Accreditation Board (BAB), Islamic Foundation will work for product innovation and quality improvement. Besides, 50 per cent of the total expenditure for research in the processing industry will be supported by the government.

An Agro-Food Processing Industry Development Council will be constituted to monitor and evaluate the implementation of the policy at the national level. Under the chairmanship of the industries minister, this council will be constituted with 34 members through the representatives of various ministries and organisations concerned. Besides, there will be a 19-member committee led by the industries ministry for direct implementation of the policies.

Moreover, to increase the competitiveness of the food processing industry in the local and international markets, a capacity building project will be taken up in each department concerned. 

About two and a half lakh people are directly employed in the agro processing industry. In addition, a large number of people are working in various sections including backward linkages such as farmers involved in the production of agricultural products, employees of factories making packaging materials, suppliers. The market of agro-processing products in Bangladesh is estimated to be about Tk 50,000 crore.