On August 9, PM Modi launched the Rs 1 lakh crore Agriculture Infrastructure Fund (AIF) to be used over the next four years.
This article in Mint explain what it is about:
The scheme will provide better warehousing and cold storage facilities for farmers, Modi said, adding, new jobs will be created as food processing and post-harvest facilities are set up in rural areas. The scheme will enable startups to scale up their operations and India to build a global presence in organic and fortified food, he said. The fund was launched with ₹1,128 crore of new loans disbursed to more than 2,200 cooperative societies. During the event, the Prime Minister also transferred ₹17,100 crore to farmers under the PM-Kisan direct income assistance scheme.
Under the infrastructure scheme—part of the federal government’s Atmanirbhar Bharat package announced in May—banks and financial institutions will provide ₹1 trillion in loans to cooperative societies, farmer producer companies, self-help groups, entrepreneurs, startups and infrastructure providers. The objective is to provide medium to long-term debt financing for setting up of post-harvest infrastructure and community assets for marketing of farm produce. According to the guidelines, all loans up to ₹2 crore will be disbursed with a 3% interest subsidy. The loans will be disbursed over four years— ₹10,000 crore in 2020-21, and ₹30,000 crore in the next three years.
This article in The Indian Express explains how it will be implemented and the potential roadblocks.
The fund will also be used to provide loans, at concessional rates, to FPOs and other entrepreneurs through primary agriculture credit societies (PACs). NABARD will steer this initiative in association with the Ministry of Agriculture and Farmers Welfare.
“The fund is a major step towards getting agri-markets right,” writes Ashok Gulati, the Infosys Chair Professor for Agriculture at ICRIER. But he points out some missing parts of the puzzle. Firstly, unless NABARD ensures that FPOs get their working capital at interest rates of 4 to 7 per cent — like farmers get for crop loans — the mere creation of storage facilities will not be enough to benefit farmers. “Currently, most FPOs get a large chunk of their loans for working capital from microfinance institutions at rates ranging from 18-22 per cent per annum. At such rates, stocking is not economically viable unless the off-season prices are substantially higher than the prices at harvest time,” he writes. The second missing item is the future of the agri-futures markets. A vibrant futures market is a standard way of hedging risks in a market economy. Several countries — be it China or the US — have agri-futures markets that are multiple times the size of those in India.
