AGRICULTURE INFRASTRUCTURE FUND (AIF)

CONTEXT: Agriculture and allied activities are the primary income source for ~58% of total population of India. ~85% of the farmers are Small Holding Farmers (SHFs) with less than 2 hectares of land under cultivation and manage ~45% of agricultural land. Annual income of majority of the farmers is very low.

Further, India has limited infrastructure connecting farmers to markets and hence, 15-20% of yield is wasted which is relatively high in comparison to other countries where it ranges between 5-15%. Investment in agriculture in India has further been stagnant with less than 2% CAGR over last 5 years. Also, lack of investor confidence is leading to lower plowback ratio.

OBJECTIVES: To mobilize a medium-long term debt-financing 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 fulfil numerous objectives for all the stakeholders in the agriculture eco-system.

FEATURES:

1. It is a Central Sector Scheme launched in 2020 to deal with the COVID-19 pandemic crisis with a corpus of Rs. 1 lakh crore. The period of the scheme has been extended upto 2032- 33 (initially it was for 2020 to 2029).

2. Financial assistance is provided in the form of Interest Subvention of 3% and Credit Guarantee for setting up post-harvest management Infrastructure. The fund will be managed and monitored through online Management Information System (MIS).

3. Beneficiaries of the scheme include Farmers, Primary Agricultural Credit Societies (PACS), Farmer Producers Organisations (FPOs), Self Help Groups (SHG), State Agencies/APMCs.

4. Participating institutions: All scheduled commercial banks scheduled cooperative banks, Regional Rural Banks (RRBs), Small Finance Banks, Non-Banking Financial Companies (NBFCs) and National Cooperative Development Corporation (NCDC) may participate to provide this financing facility, after signing of Memorandum of Understanding (MoU) with National Bank for Agriculture & Rural Development (NABARD)/DA&FW.

5. Refinance: If required, need based refinance support will be made available by NABARD to all eligible lending entities including cooperative banks and RRBs as per its policy.

SIGNIFICANCE:

• • It provides support facilities to farmers and value chain actors for risk sharing and market access.
  • Improved marketing infrastructure will help farmers sell their produce directly.
  • With investments in logistics infrastructure, post-harvest losses can be reduced.
  • It also provides targeting State-specific APMCs and maintenance of sanitary and phytosanitary standards for organic produce marketing and exports.
  • District, state or national level monitoring committees will reduce the turnaround time for file processing to less than 60 days.
  • The scheme tries to mitigate spatial and temporal risks in the agribusiness ecosystem through adequate post-harvest infrastructure facilities.

NEGATIVES:

• • The financing facility allocation to the States/UTs based on the value of the output of agriculture and allied activities is skewed.
  • Over 65% of the total funds were allocated to only eight States: Uttar Pradesh, Rajasthan, Maharashtra, Madhya Pradesh, Gujarat, West Bengal, Andhra Pradesh, and Tamil Nadu.
  • Bankers look at the projects from their credit assessment lens, where feasibility depends on the project and the promoter.

WORKING

Within two-and-a-half years of the implementation of the Agriculture Infrastructure Fund (AIF), the scheme has mobilized more than Rs.30,000 crore for projects in the agriculture infrastructure sector with a sanctioned amount of Rs.15,000 crore under AIF.