Agriculture Infrastructure Fund

April 29, 2021 Simplified

Context:

Agriculture Infrastructure Fund has crossed the Rs. 8000 crore mark after receiving 8,665 applications worth Rs. 8,216 crores.

The largest share of the pie is contributed by Primary Agricultural Credit Societies (PACS) (58%), agri-entrepreneurs (24%) and individual farmers (13%).

About:

Agriculture Infrastructure Fund is a central sector scheme that will enable a financing facility of Rs.1 lakh crore for funding agriculture infrastructure projects at farm-gate and aggregation points such as farmers producers organisations, primary agricultural cooperatives, startups and entrepreneurs in the agriculture sector.

The scheme provides medium to long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and financial support/credit guarantee.
It is meant for building processing and storage facilities, and for helping farmers, FPOs, etc. build post-harvest agriculture infrastructure and community farming assets.
These facilities should help farmers get a higher price for their produce as they will be able to reduce wastage, store, process and give value addition to their products.
The scheme will run for ten years from 2020 to 2029.
Under this, banks and financial institutions provide loans with an interest subvention of 3% per annum.
The scheme also entails providing credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for loans up to Rs. 2 Crore.
NABARD will steer this initiative in association with the Ministry of Agriculture and Farmers’ Welfare. Read more on NABARD.

Objectives of Scheme

Tomobilize a medium – long term debt finances facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through incentives and financial support in order to improve agriculture infrastructure in the country. This financing facility will have numerous objective for all the stakeholders in the agriculture eco-system.

Farmers (including FPOs, PACS, Marketing Cooperative Societies, Multipurpose cooperative societies)
Improved marketing infrastructure to allow farmers to sell directly to a larger base of consumers and hence, increase value realization for the farmers. This will improve the overall income of farmers.
With investments in logistics infrastructure, farmers will be able to sell in the market with reduced post-harvest losses and a smaller number of intermediaries. This further will make farmers independent and improve access to market.
With modern packaging and cold storage system access, farmers will be able to further decide when to sell in the market and improve realization.
Community farming assets for improved productivity and optimization of inputs will result in substantial savings to farmers.

Government
Government will be able to direct priority sector lending in the currently unviable projects by supporting through interest subvention, incentive and credit guarantee. This will initiate the cycle of innovation and private sector investment in agriculture.
Due to improvements in post-harvest infrastructure, government will further be able to reduce national food wastage percentage thereby enable agriculture sector to become competitive with current global levels.
Central/State Government Agencies or local bodies will be able to structure viable PPP projects for attracting investment in agriculture infrastructure.

Agri entrepreneurs and startups
With a dedicated source of funding, entrepreneurs will push for innovation in agriculture sector by leveraging new age technologies including IoT, AI, etc.
It will also connect the players in ecosystem and hence, improve avenues for collaboration between entrepreneurs and farmers.

Banking ecosystem
With Credit Guarantee, incentive and interest subvention lending institutions will be able to lend with a lower risk. This scheme will help to enlarge their customer base and diversification of portfolio.
Refinance facility will enable larger role for cooperative banks and RRBs.

Consumers
With reduced inefficiencies in post-harvest ecosystem, key benefit for consumers will be a larger share of produce reaching the market and hence, better quality and prices. Overall, the investment via the financing facility in agriculture infrastructure will benefit all the eco-system players.

Eligible Projects

The scheme will facilitate setting up and modernization of key elements of the value chain including

Post Harvest Management Projects like:	Viable projects for building community farming assets including
Supply chain services including e-marketing platforms Warehouses Silos Pack houses Assaying units Sorting &grading units Cold chains Logistics facilities Primary processing centers Ripening Chambers	Organic inputs production 7 Bio stimulant production units Infrastructure for smart and precision agriculture. Projects identified for providing supply chain infrastructure for clusters of crops including export clusters. Projects promoted by Central/State/Local Governments or their agencies under PPP for building community farming assets or post harvest management projects.

Scheme beneficiaries

Primary Agricultural Credit Society (PACS), FPOs, Marketing Cooperative Societies, Joint Liability Groups (JLG), Self-Help Groups, Multipurpose Cooperative Societies, Startups, agri entrepreneurs, Central/State agency or Local Body sponsored Public-Private Partnership Projects.

Need for Agriculture Infrastructure Fund

For approximately 58% of the people of the country, agriculture and allied activities are the chief sources of income. About 85% of farmers manage 45% of the agricultural land, being smallholder farmers (less than 2 hectares of land under cultivation). As such, the annual incomes of most of the farmers in the country are low.

Low connectivity and limited infrastructure connecting farmers and markets mean that 15 – 20% of the output is wasted, which is much higher than in other countries. Investment in agriculture has also been stagnant.

All the above factors mean that a scheme dedicated to improving post-harvest management infrastructure and farming infrastructure is the need of the hour.