Reducing farm wastage

New fund should help boost agricultural infrastructure

Viewed against the annual agricultural credit target of Rs 15 trillion set in the 2020-21 Union Budget, the newly created agri-infrastructure fund of Rs 1 trillion, to be disbursed over the next four years, appears rather trivial. But its significance lies in its need-driven objective of augmenting the agricultural infrastructure for handling farm produce to cut down post-harvest losses, generate additional employment, and bolster farmers’ income. This, in turn, can be expected to boost rural demand for industrial goods and services to aid, even if tacitly, the other sectors of economy.

Launched by Prime Minister Narendra Modi on Sunday, the new fund is part of the Rs 20-trillion economic package announced by Finance Minister Nirmala Sitharaman in May 15 amid the Covid-19 crisis. It is mandated to provide 3 per cent interest subvention for seven years and up to a Rs 2-crore credit guarantee for the infrastructure projects to be taken up by cooperatives, self-help groups, farmer producer organisations (FPOs), start-ups, and agri-technology players. The amount is targeted to be spent over four years — Rs 10,000 crore during the current fiscal year and Rs 30,000 crore each in the next three years. The moratorium on repayment under this programme would vary from six months to two years. Preference would be given to setting up cold chains, silos, ripening chambers, assaying, grading and packaging units, and electronic marketing facilities linked to e-trading platforms of mandis or the electronic National Agricultural Market (e-NAM). Already, 11 of the 12 public sector banks are said to have signed agreements with the agriculture ministry for participating in the operation of this fund.

While India’s farm output has surged remarkably over the past few decades, the infrastructure to handle the produce has not expanded in tandem. The paucity of warehouses and cold stores, as also of refrigerated transportation for perishable items, results in huge wastage of farm products. A study quoted in the report of the Dalwai committee on doubling farmers’ income, presented to the government last year, estimated the average annual post-harvest losses due to poor storage and logistics at over Rs 92,651 crore. Interestingly, this panel reckoned that a sizable part of these losses could be averted by spending just Rs 89,375 crore on developing the needed infrastructure. This investment would, additionally, generate 3 million new jobs in rural and semi-urban areas.

However, the creation of this fund has evoked only cautious welcome from the FPOs and start-ups, which are likely to be key players in its implementation. They feel that the interest subvention of 3 per cent may not suffice to address their financial woes. The banks, at present, charge 13-14 per cent interest because these organisations generally do not own any assets to offer as collateral. The mooted 3 per cent subsidy would still keep the interest rates in double digits. They argue being essentially farmers’ bodies dealing in agriculture-related activities, they should be treated on par with farmers in extending loans at the rate of around 4 per cent. They also need relatively strong handholding by the government for the same reasons. Anyway, the ultimate outcome of this initiative would depend on how well these by and large inexperienced farm bodies can capitalise on this financial facility.