Agriculture Infrastructure Fund

Context:

Cabinet approves modifications in Central Sector Scheme of financing facility under ‘Agriculture Infrastructure Fund’

Key Highlights:

The Union Cabinet chaired by Hon’ble Prime Minister Shri Narendra Modi today gave its approval to the following modifications in Central Sector Scheme of Financing Facility under ‘Agriculture Infrastructure Fund’:

• Eligibility has now been extended to State Agencies/APMCs, National & State Federations of Cooperatives, Federations of Farmers Producers Organizations (FPOs) and Federations of Self Help Groups (SHGs).
  • At present Interest subvention for a loan upto Rs. 2 crore in one location is eligible under the scheme. In case, one eligible entity puts up projects in different locations then all such projects will be now be eligible for interest subvention for loan upto Rs. 2 crore. However, for a private sector entity there will be a limit of a maximum of 25  such projects. This limitation of 25 projects will not be applicable to state agencies, national and state federations of cooperatives, federations of FPOs and federation of SHGs. Location will mean physical boundary of a village or town having a distinct LGD (Local Government Directory) code. Each of such projects should be in a location having a separate LGD code.
  • For APMCs, interest subvention for a loan upto Rs. 2 crore will be provided for each project of different infrastructure types e.g. cold storage, sorting, grading and assaying units, silos, et within the same market yard.
  • The power has been delegated to Hon’ble Minister of Agriculture & Farmers Welfare to make necessary changes with regard to addition or deletion of beneficiary in such a manner so that basic spirit of the scheme is not altere
  • The period of financial facility has been extended from 4 to 6 years upto 2025-26 and overall period of the scheme has been extended from 10 to 13 upto 2032-33.

The modifications in the Scheme will help to achieve a multiplier effect in generating investments while ensuring that the benefits reach small and marginal farmers.  APMC markets are setup to provide market linkages and create an ecosystem of post-harvest public infrastructure open to all farmers.

About Agriculture Infrastructure Fund

• The Agriculture Infrastructure Fund (AIF) was announced in May 2020 by the Government of India for farm-gate infrastructure for farmers.
• 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 organizations, 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

To mobilize 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.

Implementation Period of Scheme

The Scheme will be operational from 2020-21 to 2029-30. Disbursement in four years starting with sanction of Rs. 10,000 crore in the first year and Rs. 30,000 crore each in next three financial years. Moratorium for repayment under this financing facility may vary subject to minimum of 6 months and maximum of 2 years

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.

Benefits

• All loans under this financing facility will have interest subvention of 3% per annum up to a limit of Rs. 2 crore. This subvention will be available for a maximum period of seven years.
• Further, credit guarantee coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crore. The fee for this coverage will be paid by the Government.
• In case of FPOs the credit guarantee may be availed from the facility created under FPO promotion scheme of Department of Agriculture, Cooperation & Farmers Welfare (DACFW).
• Moratorium for repayment under this financing facility may vary subject to minimum of 6 months and maximum of 2 years.

Source: PIB

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