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PM’s announcement about 1000 crore investment to help the dwindling infrastructure sector

On 9th August 2020, Prime Minister Narendra Modi announced INR 1,00,000 crores worth package termed as the Agriculture Infrastructure Fund or AIF. COVID-19 has been harsh for many industries – the agriculture sector reports most farmers and agro-entrepreneurs are facing post-harvest losses.

The objective of the new scheme

This AIF finance scheme has majorly been targeted towards two main constituents of the agriculture sector – one, storage and warehousing including cold storage; and, second, community farming infrastructures like silos, grading, assaying, and post-harvest processing units like packaging units and e-marketing purpose. The scheme is also going to benefit the entities involved in state, centre, or local government-sponsored PPP projects formed for crop aggregation.

The objective is to help different players involved in the agriculture sector reduce post-harvest losses. The government is aiming at helping farmers not only recover from their losses but also sell their crops at higher prices. The infrastructure is proposed to enable the farming community in storing their products safely, reduce wastage in the entire logistic chain, add value to the chain, and sell the produce at higher prices.

Mr. Narendra Modi pointed out that India has no issue with the production aspects in the agriculture sector. After all, we are the second-largest foodgrain producer in the world after China. It was only the post-harvest chain that has serious issues that leads to wastage of produce often. It is a big loss not only to the farming community but also to the country, as a whole.

Who is going to benefit from the new scheme?

Different players from the field like agriculture start-ups, agro-tech players, farmers, agro groups, Primary Agricultural Credit societies or PACS, Farmer Produce Organizations or FPOs, and entrepreneurs in the agriculture sector are going to benefit from this new financing scheme.

The new scheme was launched through video-conferencing by the PM. During the event, Mr. Modi also got the chance to interact with farmer groups and representatives from all over the country – about 3 Primary Agricultural Credit societies from Madhya Pradesh, Gujarat, and Karnataka had their representatives speak to the PM. During the occasion, PM Modi also announced the release of INR 17,000 crore that would be distributed to 8.5 farmers across the country under the PM KISAN Scheme, the sixth instalment.

Main points of the scheme

  • On 9th August 2020, PM sanctioned the first INR 1,000 crore to about 2.280 farmers’ groups under AIB.
  • The scheme is aimed at boosting the agriculture sector in India and also aligned with the self-reliance call of Mr. Modi that he had announced during the lockdown. He envisages that the scheme will enhance the country’s competitiveness in the global market.
  • The new finance scheme will bring about fresh additions and changes in the existing infrastructure available for post-harvest management solutions in the country.
  • The scheme has been introduced because the need was felt that India has immense opportunity in this area of post-harvest management solutions that encompass warehouses, cold storage, and food processing units. Thus, it offers a good opportunity for global and domestic players to bring in newer and technically advanced solutions in this domain.
  • The amendments in the Essential Commodities Act was bought about to motivate domestic and international traders and investors to invest in the agriculture warehousing sector.
  • The PM also pointed out that India has a good viable opportunity in the area of organic food – again, an area where the global presence can be welcome to fortify the zone.
  • The AIF is a scheme that has a tenure of 10 years with a one-lakh crore value. The scheme starts officially from the 2020-21 financial year.
  • It has been termed as a ‘medium-long term debt financing facility’. The viable area is post-harvest management solutions of infrastructure and also look for strengthening the community farming assets of the country with the backing of credit guarantee and interest subvention.

From the financial perspective:

  • The agriculture sector will get credit at subsidized interest in agricultural infrastructure development.
  • The Central Government will bear 3% of the interest subsidy.
  • The centre will also bear about INR 2 crore credit guarantees.
  • Of the 12 Public Sector banks, eleven have already signed the MoU with the Central Agriculture Ministry.
  • The entire amount of INR 1 lakh crore will be disbursed in the coming four financial years.
  • INR 10,000 crore has been earmarked for the current financial year (2020-21).
  • In the next three consecutive fiscal years, 2021-22, 2022-23, and 2023-24, the amount sanctioned has been INR 30,000 crores each.
  • The repayment Moratorium for this scheme has been kept at a variable of 6 months to two years.
  • The FPOs will directly get a credit guarantee from the Agriculture Ministry as per the FPO Promotion Scheme.
  • The other borrowers will be able to avail of the credit under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme. The Central government will pay the applicable fees for the loan.

The new scheme is going to create storage, warehousing, and post-harvest processing facilities in the rural parts of the country, that will serve a dual purpose. One, it will help is by fortifying the agricultural storage chain, while on the other, it will create a lot of jobs for the rural youth.

The Modi government plan to create 10,000 FPOs. The government has been creating the right policies to encourage agriculture start-ups which have seen about 350 commercial entities that are working in the area of food processing, artificial intelligence, renewable energy, and mechanization. The government has also recently launched the Kisan Rail that helps connect farmers with the market rather than indulging in distress selling. One noteworthy aspect of the Agriculture Infrastructure Fund is that the INR 1,000 crore credit was disbursed on the first day of the announcement itself, that is, 9th August 2020.

This announcement comes amid various farmers’ organizations demanding that the central government roll back three ordinances on contract farming, barrier-free inter-state trading, and also the amendment to the EC Act.

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About the Author: Praveen Unnikrishnan