The Government Approves Rs 1 Lakh Crore Package For Agriculture Infrastructure Fund

By Angel Broking | Published on 18th August 2020 | 127

The Government Approves Rs 1 Lakh Crore Package For Agriculture Infrastructure Fund

When the finance ministry announced the stimulus package in May, the focus was to revive the economy that suffered a set back from COVID-19 outbreak.  It was a massive 20 lakh crore package to offer financial assistance to various sectors in phases. Reviving agriculture was one of the prime focuses of the policy. Advancing on its plans, the government announced Rs 1 lakh crore package under Agriculture Infrastructure Fund (AIF).

The Prime Minister Inaugurated AIF on Sunday. The fund will offer financial sustenance to agri-entrepreneurs, start-ups, agri-tech players and farmer groups for post-harvest management and nurturing of farm assets.  It is an additional fund announced along with the existing PM-Kishan scheme to revive the agricultural sector.

The new agriculture infrastructure fund will be available for the next ten years until 2029.  It aims at providing debt financing facility under the subvention scheme to viable agricultural projects on post-harvest infrastructure development, especially for building storage and processing facilities. Under the announced package, Farmer Producer Organisations (FPOs) and individual farmers will receive loans at reduced rates through Primary Agriculture Societies (PACs).

The policy is a significant step towards correcting the current bottlenecks in the agricultural market. The Narendra Modi government has already taken some critical steps towards relaxing policy control over the agriculture sector and allowing farmers more facilities in discovering the right price for their produce. It included amending the Essential Commodity Act, allowing farmers to sell their products outside the APMC markets, and encouraging participation in farming contracts. But to reap the benefits of these changes, post-harvest infrastructure development is essential.  The newly created agri-infra fund will help in filling up the gap. It assumes that there is already existing demand for agri-infrastructure which it plans to fund through 1 lakh crore grant. The budget deficit will widen by Rs 5000 crore due to interest subvention subsidy, but the benefits it’s going to bring will be long-lasting.

There is a huge scope of improvement in post-harvest infrastructure. Due to lack of it, farmers are forced to sell their produce right after harvesting, often incurring a significant loss.  Improvement in infrastructure will prevent distress selling and encourage framers to explore better prices in the market.

Highlights of the agriculture infrastructure fund 

  • The new agri market infrastructure fund is a medium to long term debt financing facility for viable post-harvest management projects and infrastructure development
  • An estimated 2,280 farmer societies will receive benefits of the Rs 1 lakh package
  • The sanctioned amount will be available through multiple lending institutions. Already 11 to 12 private-sector lenders have signed a memorandum with the Ministry of Agriculture.
  • The loan is going to be available to primary agri-credit societies, FPOs, farmer groups, agriculture start-ups, individual farmers, agri-entrepreneurs, and agri-tech firms.
  • The loan, starting from current fiscal, will be available in phases for the next four years. Recommendation for the current year is Rs 10,000, and Rs 30,000 for the next three years.
  • Beneficiaries will receive 3 percent interest discount on the loan and a credit guarantee of up to 2 crores
  • Flexible moratorium of six months to up to two years is offered under the new scheme.
  • Credit guarantee coverage up to Rs 2 crores will be available to the eligible borrowers under the Credit Guarantee Fund Trust For Micro And Small Enterprises (CGTMSE). The government will pay the fees for it.
  • Fund processing, management, and monitoring will be done online using a Management Information System (MIS), which will allow all qualified entities to apply for a loan under the fund.

Conclusion

In recent time the government has announced a slew of policy changes to modernise the agricultural sector and empowering farmers with better price discovery management, giving more control over their income. The agriculture infrastructure fund is a major step forward.  It aims at assisting the one nation, one market policy of the government. Under the new scheme, the government plans to facilitate construction of a series of cold stores and chains, along with offering stimulus to ancillary industries like e-trading platforms, grading and packaging, and more.