Explained | Agriculture Infrastructure Fund

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved a significant expansion of the Agricultural Infrastructure Fund (AIF) scheme.

This decision introduces a series of measures designed to make the AIF more attractive, impactful, and inclusive to enhance agricultural productivity and infrastructure.

Agriculture Infrastructure Fund

• Agriculture plays a vital role in India’s economy. About 54.6 per cent of the total workforce is engaged in agricultural and allied sector activities (Census 2011) and accounts for 17.8 per cent of the country’s Gross Value Added (GVA) for the year 2019-20 (at current prices).

• Given the importance of the agriculture sector, the government of India has taken several steps for its development in a sustainable manner. Steps have been taken to improve the income of farmers.

• Agriculture Infrastructure Fund (AIF) is a Central Sector Scheme of financing facility.

• The key objective of the scheme is to mobilise a medium to long term debt financing facility for investment in viable projects for post-harvest management infrastructure and community farming assets through incentives and financial support in order to improve agriculture infrastructure in the country.

• It was approved by the Union Cabinet on July 8, 2020.  

• The scheme will be operational from 2020-21 to 2032-33.

• The aim is creation of infrastructure at the farm gate. 

• Under the scheme, Rs 1 lakh crore will be provided by banks and financial institutions as loans to Primary Agricultural Credit Societies (PACS), Marketing Cooperative Societies, Farmer Producers Organizations (FPOs), Self Help Groups (SHG), farmers, Joint Liability Groups (JLG), multipurpose cooperative societies, agri-entrepreneurs, startups and central/state agency or local body sponsored Public Private Partnership Project.

• All loans under this financing facility will have interest subvention of 3 per cent per annum up to a limit of Rs 2 crore. 

Impact of AIF scheme

• Since its launch in July 2020, AIF has been instrumental in supporting creation of 6,623 warehouses, 688 cold stores and 21 silos projects, resulting in additional storage capacity of about 500 LMT in the country. 

• This includes 465 LMT of dry storage and 35 LMT of cold storage capacity. With this additional storage capacity 18.6 LMT of food grains and 3.44 LMT of horticulture produce can be saved annually. 

• About Rs 47,575 crore has been sanctioned for 74,508 projects under AIF till date. 

• These sanctioned projects have mobilised an investment of Rs 78,596 crore in the agriculture sector, out of which Rs 78,433 crore has been mobilised from private entities. 

• In addition, infrastructure projects sanctioned under AIF have helped in generating more than 8.19 lakh rural employment opportunities in the agriculture sector.

Expanding Agricultural Infrastructure Fund scheme

• The expansion in the scope of the AIF scheme is poised to further drive the growth, improve productivity, enhance farm incomes and contribute to the overall sustainability of agriculture in the country. 

• These measures also underscore the government’s commitment to strengthening the agricultural sector through holistic development of farm infrastructure in the country.

• These initiatives aim at expanding the scope of eligible projects and integrate additional supportive measures to foster a robust agricultural infrastructure ecosystem.

1) Viable Farming Assets: The scheme now includes the creation of infrastructure for ‘viable projects for building community farming assets’. This expansion allows all eligible beneficiaries to develop projects that enhance community farming capabilities, potentially improving productivity and sustainability in the agricultural sector.

2) Integrated Processing Projects: The list of eligible activities under AIF now includes integrated primary and secondary processing projects. However, standalone secondary projects remain ineligible and will continue to be covered under Ministry of Food Processing Industries (MoFPI) schemes.

3) PM KUSUM Component-A Integration: The government has allowed convergence between Component-A of the PM-KUSUM scheme and AIF. This integration is available for farmers, farmer groups, Farmer Producer Organisations (FPOs), cooperatives, and Panchayats. The aim is to promote sustainable clean energy solutions alongside agricultural infrastructure development.

4) Enhanced Credit Guarantee Coverage: In addition to the existing Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the government proposes to extend AIF credit guarantee coverage for FPOs through the NABSanrakshan Trustee Company Pvt. Ltd.

• This expansion of credit guarantee options is designed to improve the financial security and credit-worthiness of FPOs, encouraging increased investments in agricultural infrastructure projects.