On 15th May 2020, the finance minister of India announced the post harvest infrastructure financing facility of the Agriculture Infrastructure fund. The scheme document lays down all the issues persisting in the Indian agricultural sector due to poor post harvest infrastructure including low CAGR, high post-harvest losses, low plowback ratio etc and then elaborates on the objectives of the scheme- “To mobilize a medium – long term debt finances facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through incentives”
This article aims to elucidate the central sector scheme, evaluate its performance in the two years since its introduction, explain the issues emerging in the achievement of the aims of the scheme, and the suggestions to overcome these challenges.
Agriculture has been a primary occupation in India for a long time and currently employs 50 per cent of the Indian population. However, the agricultural sector in India is still developing and is characterized by low productivity and backwardness.
In 2017, the government introduced the goal of doubling farmers income by 2022. It was under this goal that the issue of post harvest losses was focused on. In India the issue of post harvest losses, both quantitative and qualitative is quite serious. A research conducted by Indian Council of Agricultural Research in 2016 revealed that post harvest losses amount about 3.9% to 6% in cereals, 4.3% to 6.1% in pulses, 2.8% to 10.1% in oilseeds, 5.8% to 18.1% in fruits, and 6.9% to 13% in vegetables.
Additionally, the committee set on Doubling Farmers Income estimated that about 40% of the fruits and vegetables produced in India go unsold in the market and hence amount up to around 63,000 crores of losses each year. This proves to be a major barrier in increasing farmer’s income. These losses are attributable to the absence of adequate post-harvest agricultural infrastructure in India.
To induce the development of post-harvest infrastructure in India, the government introduced the Central Sector Scheme of financing facility under ‘Agriculture Infrastructure Fund’ in 2020.
According to the scheme document, “It is only through the development of infrastructure, especially at the post harvest stage that the produce can be optimally utilized with opportunity for value addition and fair deal for the farmers. Development of such infrastructure shall also address the vagaries of nature, the regional disparities, development of human resource and realization of the full potential of our limited land resource.”
About the Scheme
The scheme is a medium and long term financing scheme for the development of post-harvest management and community farming assets under which an amount of 1 lakh crores rupees will be lended in the form of low-interest loans by
Lending Entities that may include
- Scheduled commercial banks,
- Scheduled cooperative banks,
- Regional Rural Banks (RRBs),
- Small Finance Banks,
- Non-Banking Financial Companies (NBFCs) and
- National Cooperative Development Corporation (NCDC)
in the span of 10 years.
The eligible beneficiaries of the scheme as per the scheme document are:-
- Primary Agricultural Credit Societies (PACS); PACS which have adopted Digitization will be given preference,
- Marketing Cooperative Societies,
- Farmer Producers Organizations(FPOs),
- Self Help Group (SHG),
- Joint Liability Groups (JLG),
- Multipurpose Cooperative Societies,
- Startups and
- Central/State agency or Local Body sponsored Public Private Partnership Projects.
Eligibility extended to
- State Agencies/APMCs,
- National & State Federations of Cooperatives,
- Federations of Farmers Producers Organizations (FPOs)
- Federations of Self Help Groups (SHGs).
The low-interest loans will be provided through interest subvention of (3% up to an amount of 2 crores and a maximum period of 7 years) along with credit guarantee coverage (under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)) by the government for the investment in farm-gate & aggregation point post-harvest infrastructure projects including
- Post Harvest Management Projects including:
- Supply chain services including e-marketing platforms
- Pack houses
- Assaying units
- Sorting & grading units
- Cold chains
- Logistics facilities
- Primary processing centers
- Ripening Chambers
B. Viable projects for building community farming assets including –
- Organic inputs production
- Bio stimulant production units
- Infrastructure for smart and precision agriculture.
- Projects identified for providing supply chain infrastructure for clusters of crops including export clusters.
- Projects promoted by Central/State/Local Governments or their agencies under PPP for building community farming assets or post harvest management projects.
The scheme according to the document was supposed to be operational from the year 2020-21 to 2029-30.
The total amount of 1 lakh crore will be disbursed in four years starting with sanction of Rs. 10,000 crore in the first year and Rs. 30,000 crore each in next three financial years.
The period of financial facility is now extended from 4 to 6 years upto 2025-26 and the overall period of the scheme has been extended from 10 to 13 upto 2032-33.
Furthermore, the moratorium for repayment under this scheme can vary from 6 months to 2 years.
The eligible beneficiaries may register themselves on the portal of National Agriculture Infra Financing Facility under the beneficiary registration facility. After the successful registration, a beneficiary registration id is allotted. Following this, the beneficiary has to download and fill the DPR template. The beneficiary can then login through the portal and apply for a loan by mentioning all the required details and uploading the pdf of the filled DPR template.
After the submission, the application will be reviewed by the ministry and eligible applications will be approved following which application will be digitally transferred to the selected bank for credit appraisal. The bank will then review the project for viability and accordingly sanction the project and will transfer the amount in the aadhaar-linked bank account of the beneficiary.
Throughout the entire processing stage of the application, the status update messages will be sent to the registered mobile number of the applicant.
Initially, interest subvention for a loan upto Rs. 2 crore was possible for one location only.
Now, in case an eligible entity puts up projects in different locations then all such projects are eligible for interest subvention for loan upto Rs. 2 crore. (Here, Location refers to physical boundary of a village or town having a distinct LGD (Local Government Directory) code.2) Each of such projects should be in a location having a separate LGD code. However, for private entities, the limit of the number of projects to be covered under this scheme is 25.
For APMCs, interest subvention for a loan upto Rs. 2 crore will be provided for each project of different infrastructure types e.g. cold storage, sorting, grading and assaying units, silos, et within the same market yard.
Participating Institutions/ Lending Entities
All the aforementioned entities under the participating institutions are eligible to participate in this scheme. In order to participate, the organization has to sign the Memorandum of Understanding (MoU) with (NABARD)/DAC&FW NABARD that’ll entitle NABARD with the power to negotiate cap on lending rates in a fair manner.
Furthermore, the lending rates of the lending institutions is decided with due consultation with all the lending institutions and is conveyed to all the concerned stakeholders.
Also, the criteria for selection of an eligible borrower is to be decided by the lending institutions in due consultation with NABARD and monitoring committees, PMUs whilst keeping in mind the viability of the projects to avoid NPAs.
- Interest Subvention Cost- The loans disbursed under the scheme will have interest subvention of 3% per annum up to a limit of Rs. 2 crore for a maximum period of 7 years. In case of loans beyond Rs.2 crore, then interest subvention will be limited up to 2 crore.
- Credit Guarantee Cost- Credit guarantee coverage will be available for all eligible borrowers from this financing facility under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crore.
- Administration Cost of PMU- The Farmers Welfare Programme Implementation Society under DACFW is entitled with the responsibility to provide PMU support to the scheme at the central level and state PMUs of PM KISAN at state level.
The government will release Interest subvention and credit guarantee support to Banks and lending institutions through PFMS, i.e. public financial management system.
The scheme lays down that 24% of total grants – in – aid of the scheme should be utilized for SC/ST entrepreneurs (16% for SC and 8% for ST). Furthermore, lending institutions are required to ensure adequate coverage of entrepreneurs belonging to women and other weaker segments of society.
The scheme has put forward tentative allocation of funds for all states on the basis of total value of output of Agriculture and Allied sectors.
Three-tier Monitoring Framework
The scheme provides for a three-tier monitoring framework to ensure the effective implementation of the scheme at all levels (district, state, and national). The main responsibilities of the monitoring committees at all levels are elucidated in Fig 1.
Online MIS Platform
The scheme document laid down the provision of an online MIS platform to manage and monitor the fund. As mentioned above, the portal will allow the beneficiaries to apply for loan apart from providing several other benefits including minimum documentation, faster approval process, scheme details including interest subvention and credit guarantee offered, and transparency of interest rates offered by multiple banks.
The platform will also aid the government in monitoring the implementation of the scheme by
- Providing multiple views of dashboards across various districts
- Allowing the state and national level PMUs to monitor the total sanctioned amount and number of borrowers, total interest subvention benefit availed, loan statement summary, demographic and geographic mix of borrowers and type of projects.
Output Outcome Monitoring Framework (OOMF)
To ensure the effective implementation of the scheme, the framework of Output-outcome monitoring is laid down. There are a variety of outputs that the scheme aims to achieve, which can be measured by certain indicators. The framework seeks to estimate the outcomes of the outputs aimed to be achieved by the scheme through the indicators.
|No. of Applications
|Loan Amt. of Received Appls.
|₹ 21,280 Cr
|Total Appl. Sanctioned
|Total Amount Sanctioned
|₹ 12,519 Cr
|Total Appl. Disbursed
|Total Amt. Disbursed
|₹ 7,114 Cr
Sanction rate of applications = 46.96%
Disbursal percent of sanctioned applications as of the date = 68.23%
State-wise Sanctioned applications and amount
|No. of projects sanctioned
|Amount (In Rs. Crore)
|Jammu and Kashmir
|Andaman and Nicobar Islands
Source: Pib Press Release dated 22 MAR 2022 – ‘Agriculture Infrastructure Fund’
OOMF Report 2022-23
The scheme has been widely lauded by many experts as a developed post-harvest infrastructure is vital for agricultural development in India and there felt an urgent need for formal credit into farm and farm-processing based activities for the same in order to attract investment in the agriculture sector.
Although it has been only two years since the launch of this financing scheme, considerable progress is being witnessed in the direction of achievement of its objectives.
As visible from Fig 1, a total amount of ₹7,114 Cr has been disbursed under this scheme, which is an impressive figure.
It is with the support of this scheme that various agriculture infrastructure projects were created while some of them are at the final stage of completion. This infrastructure includes 3898 warehouses, 155 assaying units, 136 primary processing units, 135 sorting & grading units, 20 smart & precision agriculture projects, and around 3000 other kinds of post-harvest management projects and community farming assets3.
The initial deficiencies of the scheme as observed by the government through many rounds of consultations with numerous stakeholders were sorted by the modifications introduced in July 2021.
“The most important decision taken by this cabinet is the approval to build multiple projects for different infrastructure needs in the same APMC market yard, as APMCs handle an astonishing amount of perishable items but lack in basic infrastructure amenities like cold storage units, grading units and drying units.”4Gajendra Singh Shekhawat , (Union minister for Jal Shakti)
Furthermore, the scheme managed to attract investment proposals worth ₹23,000 crores, accelerating change in this direction5.
- Status of FPOs and PACS across India-
A major focus is laid on farm producer organizations (FPOs) and primary agricultural credit societies (PACS) as the beneficiary of this scheme. Even though the nature of this decision is great so as to promote the organization of farmers in FPOs to collectively reap the benefits, the viability of these FPOs and PACS is questionable.
The FPOs and PACS across India are ailed by many deficiencies including inefficient functioning or organizational weakness, improper leadership, and less mobilization of farmers in FPOs6. Therefore, it is necessary that the government simultaneously takes the required measures to strengthen these two categories of institutions to ensure the speedy and efficient utilization of the fund.
- Slow Disbursal Rate
As mentioned above, the disbursal rate is 68 per cent which is not ideal. The slow disbursal can again be attributed to PACS’s inefficiencies. The conditions stipulated by the PACSfor credit-disbursal are based on the physical progress of the projects. This is the reason for the poor progress with only 4 percent of the sanctioned amount disbursed.
Adding to the dismay, the PACS have been laggards in setting up the required infrastructure7.
- Mere creation of Storage Facilities not enough to benefit small and Marginal Farmers
According to expert Prof Ashok Gulati, unless NABARD ensures that FPOs get their working capital at 4% or 7% interest rate, just the creation of storage facilities will not go far enough to benefit farmers. At present, a majority of the FPOs get a big chunk of their loans for working capital from microfinance institutions at very high rates ranging from 18-22% per annum. At such rates, stocking is not economically viable unless the off-season prices are substantially higher than the prices at harvest time8.
- Low Actuals in comparison to the Budget Estimates
The actual expenditure made by the government on Agriculture is miserably low as compared to the budget estimates as visible in Fig 3. The Budget estimates are generally very high for each year while the revised estimates and the actuals fall really short. In order for FPOs to present their projects as viable, for their demanded amount to be sanctioned, it is necessary that support must be provided from the government to provide them their much-needed resources and to promote them through the existing schemes9.
To wrap up, the financing facility under the Agriculture Infrastructure fund for post harvest agricultural infrastructure is a great move by the government to channelise private investment in the agricultural sector of India. The scheme has been achieving considerable progress in terms of the amount sanctioned and the investment proposals received are evident of this.
However, there are a few factors which are responsible for impeding the achievement of the aims of this policy. There is a need to monitor the post-sanction process of the scheme to ensure that the sanctioned amount is disbursed to meet the expenditure of the required infrastructure. In addition, a special focus must also be laid on APMCs as the major beneficiary to resolve its basic deficiency of poor agricultural infrastructure to ensure better price realization for farmers.
The FPOs and PACS must be strengthened so as to ensure their efficient working along with the easing of the credit disbursal conditions of the PACS.
Furthermore, the funds must be optimally allocated and utilized in such a manner that the actuals can be brought closer to the budget estimates to give a big push to the agricultural sector.
Lastly, the government at the State and Union must collaborate with each other to ensure the optimum utilization of this scheme. As evident from Table 2, many of the states are performing at a below-average level in terms of utilization of the scheme (Number of sanctioned projects) which must be taken into due attention.
- PIB Update (July 8th, 2021), Cabinet approves modifications in Central Sector Scheme of financing facility under ‘Agriculture Infrastructure Fund’
- PIB Update (July 8th, 2021), Cabinet approves modifications in Central Sector Scheme of financing facility under ‘Agriculture Infrastructure Fund’
- PIB Update (Feb 11, 2022) Making Agriculture Profitable
- Shekhawat G. S. (Jul 2021) Agriculture infrastructure funds set to make mandis more efficient, modern
- Shettigar J., Misra P. (Jul 2022) This new infra fund is just what agri sector needs, Livemint
- Bishnoi R. K., S. Kumari (2020) CHALLENGES FACED BY FPOs & STRATEGIES TO OVERCOME: A REVIEW, International Journal of Advances in Agricultural Science and Technology, Vol.7 Issue.6, June-2020, pg. 25-33 ISSN: 2348-1358
- Editorial, Dhyeja IAS (2020) An Assessment of Agriculture Infrastructure Fund Scheme : Daily Current Affairs, Dhyeja IAS
- Gulati A. (Aug 2020) Agriculture Infrastructure Fund: Another major step in the right direction to get agri-markets right, Financial Express
- Dey (Sep 2021) Agri finance Will the Agri Infra Fund deliver? , The Hindu BL
Read another article by Zubiya Moin Higher Education in India: The Status Quo and the Roadmap Ahead in IMPRI insights
Zubiya Moin, Student Researcher at IMPRI, Student of Economics honors at Jamia Millia Islamia, Delhi