The government has approved the Agriculture Infrastructure Fund, a pan-India central sector scheme to inject institutional financing into farm and farm-processing-related enterprises. It’s part of a larger stimulus plan of over Rs. 20 lakh crore issued in response to the Covid-19 problem. AIF is aimed at strengthening and expanding the scope of Agricultural Produce Marketing Committees (APMCs) — where agricultural produce is traded and a congregation of commission agents, merchants or artiyas, and large buyers influence auctioning and price discovery. This scheme can provide support facilities to farmers and value chain actors for risk-sharing and market access.
- The goal is to provide a medium- to long-term debt financing facility for sustainable projects in post-harvest infrastructure and community farming assets.
- The funding will be used to build cold stores and chains, warehousing, silos, assaying, grading, and packing units, e-marketing points linked to e-trading platforms, and ripening chambers, as well as PPP crop aggregation projects funded by national, state, and municipal governments.
- Banks and financial institutions will lend Rs. 1 lakh crore to Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Groups (SHG), Farmers, Joint Liability Groups (JLG), Multipurpose Cooperative Societies, Agri-entrepreneurs, and Central/State agencies or Local Bodies sponsored by Public Private Partnership Projects. Loans would be disbursed over four years, beginning with a sanction of Rs. 10,000 crore this fiscal year and Rs. 30,000 crore each of the next three fiscal years. A repayment moratorium of up to two years may be imposed, with a minimum of six months and a maximum of two years.
- Interest Subvention: Interest would be subtracted at a rate of 3% per annum on loans up to a limit of Rs. 2 crore. For a maximum of seven years, this subsidy will be accessible.
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Plan: Eligible borrowers would be eligible for credit guarantee coverage from the scheme under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crore.
- Farmer-Producer Associations (FPAs): In the case of FPOs, the credit guarantee can be obtained through the FPO promotion scheme’s facility.
How it enhances
- Agri-infrastructure utilising such post-harvest facilities as storage and transportation contributes to market linkage and appropriate additional gains to agri-value chain actors, including farmers. The Ashok Dalwai committee on secondary agriculture estimated that an investment of ₹89,375 crore is needed for storage and transportation facilities for primary agricultural produce.
- It is envisaged that the creation of storage and market infrastructure in a project mode through interest subvention of 3 per cent on collateral-free loan up to ₹2 crore for seven years may make (smaller) projects financially viable.
- Specific requirements like cluster identification or targeting State-specific APMCs and maintenance of sanitary and phytosanitary standards for organic produce marketing and exports are implicit in this scheme.
- The scheme further states that district, State or national level monitoring committees will be entrusted with keeping the turnaround time for file processing to less than 60 days. The approved projects for funding the beneficiaries are to be reflected in the Public Fund Management System and reasons for not funding the project needs to be communicated to maintain visibility and transparency.
- AIF scheme targets the creation of adequate post-harvest infrastructure facilities to mitigate spatial and temporal risks in the agribusiness ecosystem.
- Infrastructure creation or expanding the scope of APMCs by integrating them into eNAM structure may not avert farmers from distress sales or market failures until a monitoring and evaluation cell is put in place.
- How the AIF will act as a market intervention scheme for market infrastructure institutions is neither spelt out, nor is the mechanism of convergence with existing schemes framed.
As China has popularised a scheme called ‘futures plus’ that integrates the insurance and futures market for hedging crop failure or yield and price risks, agriculture policymaking think-tanks should consider it for modification of AIF funds linked to agricultural commodity derivative markets for improved market integration and reliable price discovery. Agriculture and related industries provide the primary source of income for around 58 percent of the country’s population. Smallholder farmers account for about 85 percent of all farmers, who manage 45 percent of all agricultural land (less than 2 hectares of land under cultivation). As a result, the majority of the country’s farmers have modest annual incomes.Because of the lack of connectivity and infrastructure connecting farmers and markets, 15 to 20% of the produce is squandered, which is significantly greater than in other countries. Investment in agriculture has also been stagnant.All of the foregoing criteria indicate that a programme aimed at enhancing post-harvest infrastructure and farming infrastructure is urgently needed.
How to structure:
- Give an introduction of what Agriculture Infrastructure Fund is
- Give the objectives/features
- Explain how it enhance farmer income and strengthen agricultural supply
- Mention few challenges