Dairy firm Kwality Ltd on Friday said it has signed an agreement with Bank of Baroda for providing Rs 4,000 crore loans to the former's one lakh farmers from whom the company procures milk. In a filing to BSE, Kwality said it "has signed an MoU with Bank of Baroda...to disburse Rs 4,000 crore of loans to its one lakh farmers in initial phase out of its established network".
The company has a network of about 3.25 lakh across about 4,500 villages in Uttar Pradesh, Haryana and Rajasthan which are amongst the largest milk producing states of India. Kwality Ltd would cover the remaining farmers in subsequent phases over a period of time.
"The funds would be available at preferential rate and shall be utilised primarily towards purchasing of milching animals, smartphone and two wheelers," it said.
The scheme is aimed at providing financial assistance to improve socio-economic lives of farmers and steer them towards digitisation.
When contacted, the company's President and Head Business Transformation Nawal Sharma said: "This is a win-win situation for all the three stakeholders which are farmers, bank and company. This will help in increasing our direct sourcing of milk from farmers and faster rolling out of high-margin value added products thereby improving the profitability."
The Bank of Baroda would get a readily available customer base for the priority sector lending, he said, adding that bank would also get operational support from the company in identification of farmers and payment management system.
"Farmers will get financial assistance at attractive terms with which they can create additional infrastructure leading to higher income. This will also promote digitisation among farmers," Sharma said.
He said farmers would get loans up to Rs 4 lakh at less than 9 per cent interest rates.
"It would allow us to develop a robust engine to increase our procurement directly from farmers which currently contributes 22 per cent of our total milk handling capacity of 3.4 mn litres/day," Sharma said, adding that the company is targeting to increase direct procurement to over 50 per cent over the next 3-4 years.
Kwality plans to roll out 10-12 variants of high margin value-added products such as flavoured milk, paneer, cheese, UHT, cream in tetra packs, table-butter, yoghurts, amongst others over next 12-18 months.
It has six milk processing plants in north India.