Guidelines on agri infra fund may be tweaked to make it need-based as credit disbursal is slow

The Centre is considering tweaking the guidelines of the ₹1-lakh crore Agriculture Infrastructure Fund (AIF) in order to make it need-based and not target-based, so that whatever amount approved materialises into actual projects.

Even as projects worth about ₹1,500 crore have been sanctioned by the Centre in the last two months under AIF, the credit disbursal is just 41 per cent of the approved amount of ₹7,603 crore so far. The disbursal rate was 35 per cent (of ₹6,157 crore) in second week of December 2021.

“It seems as the current guidelines provided for automatic approval route once the commercial banks/cooperative banks put the proposal online after their own verification, there is a push to meet the target by States. Unless serious projects are identified and pushed through the disbursal rate will not go up,” said a source closely involved in monitoring the AIF. The details are being worked out by the Union Agriculture Ministry in consultation with stakeholders, sources said.

Both the States and lending agencies have to ensure that disbursal of AIF funds also increases and there has to be some handholdings if the beneficiaries are laggards in implementation, the official said. Too much pressure on banks and State governments will make them target-oriented by sanctioning the projects whereas some study should also be done by them whether the projects for which credit has been applied are ‘needed’ for that location, he said.

Funding

The AIF will fund projects post-harvest infrastructure and community farming assets at farm gates, in which primary agricultural co-operative societies (PACS), farmers producer organisations (FPOs), Agriculture Produce Market Committees (APMCs), agriculture entrepreneurs and start-ups are allowed to avail the credit at cheaper interest rates.

National Bank for Agriculture and Rural Development (Nabard) is providing re-finance facility under AIF to co-operative banks at 4 per cent interest, while the Centre is granting a further 3 per cent interest subvention to all beneficiaries of AIF, making the effective rate for PACS at just 1 per cent, whereas private sector is getting the credit at 5-6 per cent interest from commercial banks after the 3 per cent Central subsidy.

Only 6.1 per cent of the sactioned amount of ₹3,044 crore for the co-operative banks having been disbursed to PACS, according to official data. There was no improvement in sanctioned amount by the co-operative banks in last two months. On December 10, 2021 the dirsbursal was only 4 per cent of approved amount.

On the other hand, lending by commercial banks is fairly good as they have disbursed 65 per cent of the ₹4,559 crore worth projects sanctioned.

Launched in August 2020, the AIF is a medium to long-term debt financing facility for investment in viable projects for agri infrastructure during the priod 2020-29 . Besides interest subsidy, credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for loans up to ₹2 crore is also provided.