In a significant setback for rural entrepreneurship, thousands of micro food processing startups in Karnataka, established under a central government scheme, have hit a major financial roadblock. Banks are refusing to disburse crucial loans because these units lack a specific environmental certificate, stalling their operations and threatening job creation targets.
Loan Applications Pile Up as Banks Insist on Certificates
The issue came to light during a crucial review meeting of the State Level Bankers' Committee (SLBC) held in the second week of December. The meeting, attended by 52 bankers and officials from the Union Ministry of Food Processing Industries, revealed a massive backlog. Thousands of applications from entrepreneurs under the PM Formalisation of Micro Food Processing Enterprises (PMFME) scheme are stuck because they do not possess the Consent for Establishment (CFE) certificate from the Karnataka State Pollution Control Board (KSPCB).
With the current financial year nearing its close and the 2025–26 deadline for the scheme approaching, the impasse has prompted urgent government intervention. State Agriculture Minister N Cheluvarayaswamy has formally written to KSPCB Chairperson PM Narendraswamy, seeking an exemption for these PMFME units from the mandatory CFE requirement.
Exemption Sought to Protect Jobs and Rural Economy
Justifying the demand, Minister Cheluvarayaswamy highlighted the scheme's socio-economic impact and minimal environmental footprint. The average investment under PMFME ranges between Rs 10 lakh and Rs 15 lakh per unit. These are primarily small-scale ventures like:
- Millet processing units
- Ready-to-eat fruit and vegetable units
- Cold-pressed oil mills
- Bakeries and spice powder units
- Pappad and pickle manufacturing units
The minister argued that these activities have minimal environmental impact. Instead, they play a vital role in curbing rural migration, supporting marginalized communities, and ensuring better prices for farm produce. He has requested that such units be classified under the 'White Category' and exempted from needing both CFE and Consent for Operation (CFO) certificates.
A Race Against Time to Achieve State Targets
The stakes are high. Officials from the agriculture department explained that without bank loans, these units cannot survive on state and central subsidies alone. Each unit has the potential to create 10 to 15 jobs. Collectively, the pending applications represent 40,000 to 50,000 potential employment opportunities in rural Karnataka.
Karnataka has been a frontrunner in the PMFME scheme, registering nearly 8,000 startups over the past five years, with collective investments touching nearly Rs 1,000 crore. The Karnataka State Agricultural Produce Processing and Export Corporation (KAPPEC) is the nodal agency for implementation.
As the 2025–26 fiscal year marks the scheme's end, the state government has an ambitious target. Chief Minister Siddaramaiah has earmarked Rs 206 crore to facilitate an additional 5,000 micro food processing units. However, this goal is now in jeopardy. "If these units fail to obtain CFE, the state will not be able to achieve its target for 2025–26," the minister stated in his letter, underscoring the urgency of the situation.
The core of the problem lies in the processing time for the CFE. Officials note that the KSPCB can take anywhere from a few weeks to several months to issue the certificate, a delay that startup founders, often farmers and rural entrepreneurs, can ill afford. The state government's plea for exemption is now a critical test of bureaucratic flexibility versus regulatory compliance, with the future of rural livelihoods hanging in the balance.
