Agri infra projects. Slow disbursal of credit drags agri infra projects

Disbursal of funds to strengthen agricultural infrastructure through setting up of warehouses and other projects under the ₹1-lakh crore Agriculture Infrastructure Fund (AIF) has been slow as primary agri co-operative societies (PACS) have been laggards in setting up the much-required infrastructure.

A key condition stipulated by the PACS to disburse credit based on the physical progress of the projects is the reason for the slack progress with only 4 per cent of the sactioned amount of ₹3,044 crore for the co-operative banks having been disbursed to PACS, according to a Government source.

The PACs have been slack despite the fact that they are being offered credit at 1 per cent interest by co-operative banks. As a result, the total credit disbursal has been only 35 per cent so far of the 8,604 projects worth ₹6,157 crore sanctioned by the Government. This is 64 per cent in value terms out of the 14,550 applications with credit demand of ₹9,642 crore received till date.

On the other hand, lending by commercial banks is good as they have disbursed 66 per cent of the ₹3,113 crore worth projects sanctioned.

Re-finance facility

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.

Launched in August 2020, the AIF is a medium to long-term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets during 2020-29 (10 years). Besides interest subsidy, credit guarantee coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for loans up to ₹2 crore has been provided.

The AIF will fund projects at farm gates and where primary agricultural co-operative societies, farmers producer organisations, agriculture entrepreneurs and start-ups aggregate harvested farm produce.

Three-tier system

While the Agriculture Ministry has taken responsibility for interest subsidy, the States provide government guarantee to commercial banks for projects under AIF, which are not available to co-operative banks, sources said. Since the co-operative structure is a 3-tier one, to avail of the AIF credit, PACS have to first approach the district co-operative bank which will forward the proposal to Nabard via respective state co-operative bank.

“It is partially true that the time taken in the co-operative structure is more than in commercial banks. However, if 1,360 projects receive credit out of 5,062 projects, for which the amount has already been sanctioned, there is something wrong at the PACS level,” a Nabard official said. Since it is the lender’s responsibility to recover the amount, co-operative banks are also circumspect on this front, the official said. If the progress on AIF does not improve, even Nabard may throw open the credit facilities to private sector through the co-operative banks, the official added.

While the Agriculture Ministry has been constantly monitoring the progress of credit under AIF, resulting in the sanctioned amount registering a six-fold increase in the last 10 months, experts are asking the government to tweak the policy for better progress.

Though it looks good that AIF allows the beneficiaries to avail of benefits of other schemes in setting up the infrastructure, along with its own credit, the reality is quite different, said an expert.

For instance, the seed money under AIF is 10 per cent to avail of the credit, but it is 20 per cent under Agriculture Marketing Infrastructure Scheme (formerly Grameen Bhandaran Yojana). There has to be some synchronisation between schemes as an AIF beneficiary setting up a warehouse would not get 25-33 per cent subsidy on capex under AMI scheme unless he deposits 20 per cent seed money.