How India’s agri-infra fund creates a bold future for farmers and entrepreneurs
Despite agriculture being one of the most crucial pillars of the Indian economy, the country has suffered from a chronic lack of world-class agri-infrastructure. The $13.2 billion Agriculture Infrastructure Fund (AIF) announced by PM Modi aims to change that over the next four years, building post-harvest storage and processing facilities.
In 2017, the Doubling Farmers Income (DFI) Report in India highlighted the extensive funding opportunities for agri-entrepreneurs, farmers’ aggregations and support to agri startups that directly purchase from farmers in the country. The key objective, the report recommended, was to enable physical access of farmers’ produce to markets to monetise it in larger volumes and unlock a steady source of incomes for farmers.
Cut to 2020, and in the midst of a pandemic, the wishes of India’s most marginalised and under-appreciated farmers came true: on August 9, Indian Prime Minister Narendra Modi launched the $13.2 billion Agriculture Infrastructure Fund (AIF), an instrument to be used over the next four years to build post-harvest storage and processing facilities.
What is the Agriculture Infrastructure Fund?
It’s basically a debt financing facility under which Farmer Producer Organisation schemes (FPOs), self-help groups and agri-entrepreneurs can take loans to build infrastructure for post-harvest management and community farming assets, such as cold storage, collection centres and processing units. The scheme has already been cleared by the Indian cabinet and is being implemented from this month. A part of the fund has already been sanctioned to more than 2,280 farmer societies – and the assets are expected to help them get more value for their produce, as a proper post-harvest infrastructure will help them reduce wastage and sell crops at higher prices.
Why did the government launch the scheme now?
The creation of the AIF is an obvious indicator that the government has assessed a large demand for storage facilities and other post-harvest infrastructure in India, which has typically remained a much-neglected sector in the overall agri eco-system. While announcing the scheme, Prime Minister Modi said: “Farmers are now ready to be entrepreneurs, in line with the vision of doubling farmers’ income… India has a huge opportunity to invest in post-harvest management solutions like warehousing, cold chain, and food processing, and build a global presence in areas such as organic and fortified foods.” The scheme, he said, provides a great opportunity for agri start-ups to scale their operations, and will help create an ecosystem that reaches farmers in every corner of the country.
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The Indian government’s push for the agri-sector couldn’t have come at a better time: it follows the Modi cabinet’s overall stimulus plan to boost the Indian economy after the massive fallout of the coronavirus-induced lockdown on the Indian economy. As the contours of the economic crisis became clear, Prime Minister Modi sought investments in the MSMEs and the agri-sector from abroad and the Indian diaspora – including during his inaugural address at the India Global Week (IGW) summit organized by India Inc last month, where he urged investors to look at the full potential of the new India emerging from the shadows of the Covid-19 pandemic. IGW thus became one of the key global platforms where the Prime Minister articulated his vision for the sector.
What will the AIF do that other agriculture schemes haven’t done before?
As detailed by Indian Finance Minister Nirmala Sitharaman in March, the AIF is a major step towards getting agri-markets right. The government had earlier issued three ordinances related to the legal framework of agri-markets – on amendments in the Essential Commodities Act, allowing farmers to sell their produce outside the APMC mandis and encouraging farming contracts between farmers, processors, exporters and retailers – to bring about some degree of liberalisation in the sector.
Coupled with the creation of the AIF and the push for a new legal paradigm, the decisions reflect the government’s focus on creating post-harvest physical infrastructure. The AIF is the answer to glaring infrastructure gaps that need to be urgently filled in India’s pursuit of major agrarian reforms.
But what is the long-term policy behind creating the AIF? Will it really benefit agri-entrepreneurs?
While successive Indian governments have appealed to generations of farmers and exploited their ignorance and vulnerability for mere vote-bank politics, it’s the Modi government that has brought in a structured reforms approach that aims to ultimately empower one of India’s most critical economic segments. Despite India being an agriculture-dominated country and agriculture being one of the most crucial pillars of the Indian economy, India has for long suffered from a lack of adequate and well-maintained agricultural infrastructure.
Rapid technological advancements as well as the strategic nature of the agri-sector have coincided with the Modi government’s vision for an Atmanirbhar Bharat (self-reliant India), and have now found a timely convergence through the AIF. A sustained source of funding for agribusiness entrepreneurs will help leverage new-age technologies in agriculture such as Internet of Things (IoT), artificial intelligence, agritech and sophisticated cold chains, and make supply and value chain management more transparent. It will also provide necessary impetus to optimize agricultural infrastructure and systematically remove bottlenecks without being further dependent on the government’s policy mechanisms. Administered by NABARD and the Ministry of Agriculture & Farmers Welfare, the AIF will thus mobilise investments through incentives and financial support, in viable projects relating to post harvest management and community farming assets.