Agriculture Infrastructure Fund

agriculture

Policy Update
Akanksha Baronia

Marketing a crucial milestone in India’s mission to transform its agricultural sector, the Union Cabinet, chaired by Prime Minister launched Agriculture Infrastructure Fund, a scheme launched in 2020-21 to strengthen post harvest and farm gate infrastructure. Agriculture Infrastructure Fund aims to boost farmer income through value addition and efficient logistics.

The scheme focuses on the creation of farm gate storage and logistics facilities to help farmers store their produce effectively and sell it at better prices by minimising post harvest losses and reducing dependence on intermediaries.

Under AIF, a loan provision of ₹1 lakh crore has been made through lending institutions, with a capped interest rate of 9% on loans.

Functioning 

Financing Facility: ₹1,00,000 crore will be provided for financing Agriculture Infrastructure Projects at farm gate and aggregation points for following activities:

  1. Supply chain services including e-marketing platforms.
  2. Warehouses 
  3. Silos
  4. Pack houses
  5. Assaying units
  6. Sorting and grading units
  7. Cold chains
  8. Logistics facilities 
  9. Primary processing centres
  10. Ripening Chambers 

Pattern of Financing and Participating Institutions:

  1. All loans to have interest subvention of 3% per annum up to a limit of ₹2 crore for a maximum period of 7 years.
  2. Credit guarantee coverage for a loan up to ₹2 crores. The fee for this coverage will be paid by the Government.
  3. In case of FPOs, the credit guarantee may be availed from the facility created under FPO Promotion Scheme of DAC&FW.
  4. All Scheduled Commercial Banks, Scheduled Co operative Banks, Regional Rural Banks, Small Finance Banks, Non Banking Financial Companies and National Co Operative Development Corporation.

Expanding Agricultural Infrastructure Fund Scheme 

AIF scheme’s expansion aims to strengthen agricultural infrastructure nationwide and provide robust support to the farming community by broadening the scope of eligible projects, introducing additional supportive measures, and fostering a more comprehensive agrarian infrastructure ecosystem.

  1. Viable Farming Assets: The scheme now includes the creation of infrastructure for viable projects for building community farming assets.
  2. Integrated Processing Projects: The list of eligible activities under AIF now includes integrated primary and secondary processing projects.
  3. PM KUSUM Component A Integration: The government has allowed convergence between Component A of the PM-KUSUM scheme and AIF.
  4. Enhanced Credit Guarantee Coverage: In addition to the existing Credit Guarantee Fund Trust for Micro and Small Enterprises, the government proposes to extend AIF credit guarantee coverage for FPOs through the NABSanrakshan Trustee Company Pvt. Ltd.

Impact of AIF scheme 

Launched by Prime Minister Narendra Modi in 2020, the Agricultural Infrastructure Fund has played a pivotal role in transforming India’s agricultural landscape.

  1. Infrastructure Development 

            6,623 Warehouses

            688 Cold stores

            21 Silo projects 

  1. Storage Capacity 

            Total Additional Capacity Generated: 

             500 Lakh Metric Tonnes 

             Dry Storage: 465 LMT

             Cold Storage: 35 LMT

  1. Crop Preservation 

            Annual savings potential:

            Food Grains: 18.6 LMT

            Horticulture Produce: 3.44 LMT

As of  August 28, 2024, ₹47,575 Crore has been sanctioned for 74,508 projects under AIF scheme. These sanctioned projects have mobilised an investment of ₹78,596 Crore in agriculture sector, out of which ₹78,433 Crore has been mobilised from private entities. In addition, infrastructure projects sanctioned under AIF have helped in generating more than 8.19 Lakh rural employment opportunities in the agriculture sector.

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Impact 

As per the findings of the impact assessment study conducted for the Agriculture Infrastructure Fund, the scheme has significantly contributed to the creation of Post-Harvest Management Infrastructure and viable Farm Assets by improving access to affordable credit and incentivising investment in critical agri infrastructure. The study highlights that AIF-supported projects have led to increased availability of modern storage, cold chain facilities, and processing units, reducing post harvest losses and enhancing value addition for farmers.

Due to infrastructure created, there is reduction in post harvest loses, better price realisation for agri produce by farmer, increased farm mechanisation, employment generation at farm level etc.

Challenges 

  1. Implementation Gaps
  • The process constraints fund disbursements, resulting in delayed project execution.
  • Small stakeholders are discouraged from taking benefit of complex application processes.
  1. Awareness Issues
  • However small and marginal farmers are not very aware of the scheme. This situation is made worse by a lack of sufficient dissemination of information. Credit constraints are also a problem with the dependence of farmers on banks for financing; usually, they lack bank history and collaterals. Then there is the financial literacy of the beneficiaries, making accessing the funds that much more difficult.
  1. Inequitable Distribution 
  • Though projects are connected mostly in states with better infrastructure and institutional support, neglected regions are left behind. The scheme may be harder for marginalised groups, such as women farmers and tribal communities, to benefit from.

Recommendations 

To ensure the success of the AIF Policy, the following measures are recommended:

  1. Simplify Processes by reducing application and approval as they become more user-friendly. Digital platforms for application submission, and real-time tracking.
  2. Enhance awareness through outreach programs through local government bodies and NGOs are done accordingly. Making efforts to increase awareness of farmers using the mass media and digital campaigns.
  3. Promote private sector participation by creating space for public-private partnerships to bring investments and private sector expertise to bear. Provide financial rewards to private players who invest in rural infrastructure.
  4. Leverage technology by engaging in technology to monitor projects, and be transparent and accountable. Developing mobile applications that feed project impact and fund utilization information.
  5. Expand inclusivity by providing design special provisions for small-scale farmers, women, and tribal communities for equitable benefit. Assisting marginalized groups in building capacity and financial literacy.

Future Direction

The policy leading to the creation of the Agri-Infrastructure Fund (AIF) must change with the changing needs of the agriculture sector and rural economies in the long term for the continuation of the success of the AIF. Amongst future directions, prioritizing climate-resilient infrastructure for change for mitigation of the impacts of climate change on agriculture- is proposed. Investments in cold storage systems will keep the water, as per the aquifers that the ancient people found, rather than actually using conventional forms of energy sources.

Digital agriculture technologies integration, such as IoT-based monitoring systems and AI data analytics can improve the efficiency of infrastructure projects. For the implementation of activities gapped and innovative practices, periodic policy reviews should be taken. Additionally, the policy could be widened in scope and impact by forming partnerships with international organizations and using the best practices from around the world.

References 

  1. Ministry of Agriculture & Farmers Welfare. (2020). Agriculture Infrastructure Fund Policy, 2020 [Policy document]. JUS Scriptum. https://www.jusscriptumlaw.com/post/agri-infrastructure-fund-policy-2020
  2. Press Information Bureau. (2024, August 28). Agricultural Infrastructure Fund (AIF) Scheme: Enhancing & strengthening agri infrastructure [Press note]. Government of India. https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=152061&ModuleId=3
  3. Vikaspedia. (n.d.). Agriculture Infrastructure Fund [Scheme summary]. https://schemes.vikaspedia.in/viewcontent/schemesall/schemes-for-farmers/agriculture-infrastructure-fund?lgn=en
  4. Press Information Bureau. (2025, August 9). Agriculture Infrastructure Fund (AIF) [Press note]. Government of India. https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=154999

About the Author

        Akanksha Baronia is currently pursuing her postgraduate degree in Economics from Jawaharlal University, New Delhi. She is a research intern at IMPRI.

        Acknowledgement: The Author thanks Aasthaba Jadeja and their team for their valuable contribution.

        Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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