Fund set up to plug gaps in food supply a hit among investors


Entrepreneurs are borrowing briskly from the Rs 1 lakh-crore Agriculture Infrastructure Fund, part of the first Covid-induced economic stimulus package, to build assets aimed at plugging gaps in India’s food supply chain, the main reason behind annual spells of food inflation, especially in perishables, such as onion, official data showed on Sunday.

Investors have so far borrowed Rs 1,566 crore, showing a preference to invest in long-neglected post-harvest facilities, such as warehouses, cold chains, food grading-cum-sorting units and processing units. The fund was launched by Prime Minister Narendra Modi on August 9.

A deficit of post-harvest infrastructure, crucial for a resilient food-supply chain, causes physical wastage and loss of food items worth Rs 2.15 lakh crore every year, according to data from the ministry of food processing.

For instance, the gap between demand and availability of cold-storage facilities in India, the world’s second-largest producer of food grains, fruits and vegetables, is 36.83 million tonnes, according to a PHD Chamber of Commerce study. Punjab is the only state with surplus storage, while Tamil Nadu, Maharashtra and West Bengal have some of the largest gaps.

The fund is designed to address this investment gap because of its concessional rates. Besides the Rs 1566 crore already disbursed, applications for nearly 10,000 new assets worth another Rs 993 crore are currently under evaluation or due to be taken up soon, data till November 5 reviewed by HT showed. All of the country’s 12 public-sector banks and nine private lenders are part of the fund.

“The Rs 1,566 crore tranche has gone to over 3000 primary agricultural credit societies or PACS,” an official said, requesting anonymity. PACS are village-level credit cooperatives and therefore the most accessible financial institution for a farmer.

Additionally, PACS have submitted fresh applications for 9,435 infrastructure projects worth Rs 690.56 crore. Banks have also picked another 352 applications from other agri-investors for projects worth Rs 302.71 crore. Top five leading states from where investment proposals have been received are Madhya Pradesh (119 applications), UP (46), Bihar (30), Rajasthan (28) and Odisha (22).

The fund, which figured in the Rs 20-lakh crore first stimulus package to deal with the Covid crisis, aims to offer medium-to-long term debt financing for investment in farm projects.

It will provide loans on easy terms totalling Rs 1 lakh crore over four years, starting with a sanction of Rs 10,000 crore for 2020-21 and Rs 30,000 crore each for the next three financial years.

Borrowers get an interest subvention, where part of the interest is paid by the government, of 3% per annum up to a loan limit of Rs 2 crore for a period of seven years.

“India is roughly able to store only 2% of its farm produce in temperature-controlled environment to meet shortfalls during lean seasons, whereas that statistic is 8% for the Asia-Pacific sector,” says Raj Kathpalia, an advisor to Consultative Group on International Agricultural Research.

India’s status, therefore, as the world’s largest producer of items such as pulses, spices, milk, bananas and second-largest producer of wheat, rice and vegetables don’t help to stave off food-price spirals.

Retail inflation jumped to a six-year high of 7.61% in October on account of high food prices after excess rains damaged stored and freshly harvested vegetables, such as onion. Most farmers store harvests in leaky traditional structures that don’t protect against pests, rain or decay.

Data from the Indian Institute of Horticultural Research show India loses, annually, 12.7% of its mango output, 6.6% of banana produce, 4.18% of onions, 12.9% of tomatoes and 10.2% of green peas during harvesting, storage and transportation stages. India also ranks fairly low in the global food processing value chain.



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