Blog, By Central Government, Financing facility under Agriculture Infrastructure Fund

Financing facility under Agriculture Infrastructure Fund

“Investment in infrastructure is a long-term requirement for growth and a long-term factor that will make growth sustainable.”

~Chanda Kochhar.

As per the top subsidy consultancy of INDIA, the above-mentioned statement was quoted way back in time, but it still stands relevant for most of the sectors of an economy operating in India.

The role of infrastructure becomes more important whenever the conversation shifts towards agricultural development. In the field of agriculture, it is only through the development of infrastructure, especially at the post-harvest stage that the production can be optimally utilized with an opportunity for value addition and can act as a fair deal for the farmers at the same time.

In the light of the above-mentioned assertion, our Honourable Finance Minister announced ₹ 1 lakh crore Agri Infrastructure Fund for farm-gate infrastructure for the farmers on 15th May 2020. Consequently, the Department of Agriculture and Farmers Welfare formulated the Central Sector Scheme to mobilize a medium for supervising the funds under various sections.

The scheme shall provide medium to long-term debt financing facilities for investment in viable projects for post-harvest management infrastructure and community farming assets through interest subvention and financial support.

Ministry of Cause- Ministry of Agriculture & Farmers’ Welfare headed by Mr. Narendra Singh Tomar

Overview of the Policy

The policy was launched in the year 2020

Implementation Period- 2020 – 21 to 2032 – 33

Period of Financing Facility- 6 years

Size of Financing Facility- 1 Lakh Crore Rupees

Eligibility Criteria

Eligible post-harvest management and viable projects:

  1. Supply chain services 
  2. E-marketing platforms
  3. Warehouses
  4. Silos
  5. Pack houses
  6. Assaying units
  7. Sorting and grading units
  8. Cold chains
  9. Logistics facilities
  10. Primary processing centers
  11. Ripening Chambers
  12. Organic inputs production 
  13. Bio stimulant production units
  14. Infrastructure for smart and precision agriculture
  15. Projects identified for providing supply chain infrastructure for clusters of crops including export clusters
  16. Projects promoted by Central/State/Local Governments or their agencies under PPP for building community farming assets or post-harvest management projects

Further, an indicative list of crop wise eligible and ineligible post-harvest/ primary processing activities under the scheme is given.

For example:

Name of the Crops- Cereals (Wheat, Rice, Jowar, Ragi & Bajra, and Sorghum)

Eligible PHM & Primary Processing Activities- Cleaning, De-stoning, Sorting & grading, Hulling, Milling, Pounding, Grinding, Tempering, Parboiling, Soaking, Drying, Sieving, and Irradiation.

Not eligible under AIF– Fermentation, Baking, Puffing, Flaking, Frying, Extrusion, Blending, and Roasting.

Name of the Crops- Spices (Cardamom, Nutmeg & Mace, Garlic, Turmeric, Ginger, Dry Chillies & Peppers, Coriander, and Anise)

Eligible PHM & Primary Processing Activities- Cleaning, Drying, Sorting, Boiling, Polishing, Grinding, Packaging, Storage, and Irradiation.

Not eligible under AIF- Roasting, Sterilizing, and Thermal treatment.

Likewise, indicative list of crop wise eligible and ineligible post-harvest/ primary processing activities under the scheme is given.

24% of the total grants under the scheme must be utilized for SC/ST entrepreneurs combined. (16% for SC and 8% for ST entrepreneurs)



The benefits of the scheme by the best subsidy consultancy of India :

S. No. Benefit Details
          1           Interest Subvention Cost   Under this financing facility, individuals and associations will be provided loans with an interest subvention of 3% per annum, up to an upper limit of 2 crore rupees.   The interest subvention of 3% will only be provided for 7 years, and after that, the usual ROI will come into practice.   In the case of loans beyond 2 crore rupees, the interest subvention will only be limited to the amount of 2 crores, beyond that one must return the loan with the usual ROI.  
      2       Credit Guarantee Cost   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 ₹ 5 crores. The fee for this coverage will be paid by the Government  
    3     Administration cost of PMU   Farmers Welfare Programme Implementation Society under DACFW will provide PMU support to the scheme at the central level and state PMUs of PM KISAN at the state level.  

Loans will be disbursed in four years starting with a sanction of Rs. 10,000 crore in the first year and Rs. 30,000 crore each in the next three successive financial years.

Sector-specific Advantages:

S. No. Sector Benefit
          1       Farmers (FPOs, PACS, Marketing Cooperative Societies, Multipurpose  cooperative societies, Mandis, Self Help Groups, etc.)   Improved marketing infrastructure to allow farmers to sell directly to a larger base of consumers.   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.   With modern packaging and cold storage system access, farmers will be able to further decide when to sell in the market and improve realization.  
            2             Government   Government will be able to direct priority sector lending in the currently viable projects by supporting through interest subvention, incentive, and credit guarantee.    Due to improvements in post-harvest infrastructure, the government will further be able to reduce the national food wastage percentage.   Central/State Government Agencies or local bodies will be able to structure viable their own for attracting investment.  
      3       Agri entrepreneurs and startups   Entrepreneurs will push for innovation in the agriculture sector by leveraging new-age technologies including IoT, AI, etc.   It will also connect the players in the ecosystem and hence, improve avenues for collaboration between entrepreneurs and farmers.  
      4       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 diversify their portfolio.  
    5     Consumers   With reduced inefficiencies in the post-harvest ecosystem, a key benefit for consumers will be a larger share of products reaching the market and hence, better quality and prices.   

Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform. It will enable all the qualified entities to apply for loans under the fund. The online platform will also provide benefits such as transparency of interest rates offered by multiple banks, scheme details including interest subvention and credit guarantee offered, minimum documentation, faster approval process as also integration with other scheme benefits.