Ambitious plans to boost rural entrepreneurship in Karnataka have encountered a significant bureaucratic hurdle. Thousands of government-assisted food processing startups, launched under a central scheme, are now in limbo as banks refuse to release crucial loans. The blockage stems from the units' inability to obtain mandatory pollution control certificates, threatening to derail job creation and investment goals in the state's hinterlands.
Loan Sanctions Frozen Amid Certification Deadlock
The crisis came to light during a high-level review meeting of the State Level Bankers' Committee (SLBC) in the second week of December 2024. Agriculture Minister N Cheluvarayaswamy revealed that 52 participating bankers flagged a major issue: thousands of loan applications from micro food processing units were stuck. The sole reason for the hold-up was the absence of a Consent for Establishment (CFE) certificate from the Karnataka State Pollution Control Board (KSPCB).
With the financial year 2025-26 drawing to a close, this impasse puts the state's annual targets at severe risk. The government had earmarked Rs 206 crore to facilitate 5,000 new micro food processing units across Karnataka. Officials warn that without bank financing, these units cannot move forward, as they cannot survive on state and central subsidies alone.
Minister Appeals for Exemption to Save Rural Jobs
In a urgent intervention, Minister Cheluvarayaswamy wrote to KSPCB Chairperson PM Narendraswamy last week, pleading for an exemption. He argued that these units, largely set up by farmers and rural entrepreneurs, have minimal environmental impact and should be spared the lengthy certification process.
Justifying the demand, the minister detailed that the average investment under the PM Formalisation of Micro Food Processing Enterprises (PMFME) scheme is between Rs 10 lakh and Rs 15 lakh per unit. These are primarily millet processors, ready-to-eat food makers, cold-pressed oil mills, bakeries, and spice powder, pappad, and pickle manufacturing units.
"These activities help curb rural migration, support marginalised communities, and ensure better prices for agricultural produce," the minister stated in his letter. He further requested that such units be classified under the 'White Category', exempting them from needing both CFE and Consent for Operation (CFO) certificates.
A Race Against Time for Scheme's Final Year
The timing of this bottleneck is critical. The 2025-26 period marks the final year of the PMFME scheme. Over the past five years, Karnataka has successfully registered nearly 8,000 startups under the scheme, attracting total investments of nearly Rs 1,000 crore, including subsidies. The nodal agency, the Karnataka State Agricultural Produce Processing and Export Corporation (KAPPEC), now faces the challenge of adding another 5,000 units before the scheme concludes.
Agriculture department officials highlighted the human cost of the delay. Each stalled unit has the potential to generate 10 to 15 jobs. Collectively, the pending applications represent a loss of 40,000 to 50,000 employment opportunities in rural Karnataka. The KSPCB's process, which can take from a few weeks to several months, is now the central obstacle to unlocking this rural economic potential.
The state government's appeal places the ball firmly in the KSPCB's court. A decision on the exemption will determine whether thousands of aspiring rural entrepreneurs can access the capital needed to build their businesses or see their plans crippled before they even begin.
