Recently, the Centre approved expansion of the Agriculture Infrastructure Fund (AIF) scheme to extend financial assistance for creation of viable community farming assets and integrated post-harvest management infrastructure. Though the scheme has been implemented since July 8, 2020, it is saddled with certain challenges at the ground level.
According to the World Bank, 15-20 per cent of crop yields in Indian agriculture are wasted which is relatively higher in comparison to other advanced economies wherein it ranges between 5-15 per cent. Besides, capital investments in the Indian agriculture sector have been stagnant with a CAGR of less than 2 per cent for the last five years. It is well-recognised that agri/rural infrastructure (irrigation, power, transport and research) has a multiplier effect in terms of availability of formal credit, higher yields, and (small and marginal) farmers’ access to remunerative markets.
Given long gestation periods, statutory hurdles, and low profitability, agri-infrastructure projects attract negligible amounts of private capital, nudging governments to opt for PPPs to boost post-harvest management infrastructure under AIF. A salient feature of the AIF scheme is that the sanctioned projects are being geo-tagged to avoid double funding from the banking system. Further, disbursement of funds by the banks is made to Aadhaar linked bank accounts of beneficiaries which will improve transparency and accountability of the scheme.
AIF in numbers
As on November 25, 2024, the total sanctioned amount under the scheme stood at ₹51,451 crore out of the earmarked amount of ₹1 lakh crore. Out of the ₹51,451 crore, scheduled commercial banks sanctioned a major portion of the loans (94.22 per cent) under the AIF. While the total cost of the sanctioned projects was estimated at ₹84,669 crore, various banks disbursed ₹33,724 crore. Out of the total sanctioned projects (84,333) under the AIF, majority belongs to custom hiring centres (20,537), followed by primary agri-processing centres (15,654), warehouses (12,266), sorting and grading units (2,940), cold storage chain facilities (1,753), infrastructure for smart and precision agriculture (1,575), logistics (1,147), etc. As per the dashboard of AIF, 47,397 (56.20 per cent) sanctioned projects have been geo-tagged till date. The average cost of the sanctioned projects works out to only ₹61 lakh (as against the maximum eligible amount of ₹2 crore per project).
Critical challenges
AIF has been facing certain operational hurdles at the grassroots level: inadequacy of loan amount (₹2 crore is not sufficient to establish medium/major projects like cold storage chains, 2 MW solar power plants, rural godowns, etc.); non-sanction of working capital funds under the AIF may result in low or no capacity utilisation of the project, leading to non-performing assets in the books of banks; non-availability of credit guarantee cover beyond ₹2 crore irrespective of the number of projects granted to the borrower under the AIF; inordinate delay in receipt of interest subvention as well as guarantee fee; and lack of awareness of bank officials/line department officials on the mechanics of the scheme.
In order to graduate from food security to energy security, renewable energy projects may be established by enhancing the maximum ticket size from ₹2 crore to, say, ₹5-10 crore (since cost of setting up of 1 MW power project is around ₹5 crore). Working capital may be provided to the borrowers at 25 per cent of the cost of the project to not only commission the project but also enhance its capacity utilisation. The AIF portal may be made user-friendly so as to download the detailed project report by the bank officials for sound credit appraisal. Customised training and capacity building should be undertaken, especially for bank officials.
In sum, a pragmatic mid-course correction may be done on the above lines in order to grant the remaining amount of ₹48,549 crore (48.55 per cent) by March 2026.
The writer is Director, Centre for Agri-Business Management, MANAGE, Hyderabad. Views are personal