Banking Article, Banking Finance 2021, Banking Finance January 2021

Agriculture Marketing Infrastructure (AMI)

Agriculture is one of the most critical sectors of the Indian economy that not only drives the growth and development of agriculture and allied sectors directly but also affects the well-being of rural people at large, their prosperity and employment and also forms an important resource base for a number of agro-based industries and agro-services.

While the food security constantly augmented though various plan periods by strategic planning and mission mode schemes has largely been achieved, but the fulcrum of monetising the farmers and their economic well being is still a challenge.

An efficient, competitive and accessible market with adequate post-harvest and marketing infrastructure can potentially achieve its core objective of generating net positive returns to the producer.

In the light of the Government’s vision to double farmers’ income by 2022, it entails an urgent need for putting in place better farmer-market linkages through developing and upgrading Gramin Haats as Gramin Agricultural Markets (GrAMs) and declaring warehouses/cold storages as market sub-yards , promoting scales of economy in production & post-production activities through active participation of Farmer Producer Organizations, squeezing food supply chain through direct marketing in every forms of wholesale and retails (farmer-consumer market), symmetrising market information, promoting market driven production through a demand based market intelligence and price forecasting system and promoting quality management of farmers’ produce.

Agricultural Marketing Infrastructure

Agricultural Marketing Infrastructure includes storage infrastructure like warehouses, cold storage, godowns including stand-alone silos for storage of food grains with necessary ancillary facilities like loading, unloading, bagging facility etc.

The estimates of National Centre for Agricultural Economics and Policy Research (NCAP) projecting total demand for food grains of the country to touch 281 million MT by 2020-21 further necessitates requirement for total storage capacity of around 196 million MT of marketable surplus.

Assistance for storage infrastructure is available on capital cost of the project including cost of allied facilities like boundary wall, internal road, internal drainage system, weighing, grading, packing, quality testing & certification, fire fighting equipment etc. which are functionally required to operate the project.

 

Importance of Agriculture Marketing Infrastructure

 

Scientific Storage: The main objectives of scheme include creation of scientific storage capacity with allied facilities in rural areas to meet out various requirements of farmers for storing farm produce, processed farm produce, agricultural inputs etc.

Price Stabilization: Warehouses help in price stabilization of agricultural commodities by checking the tendency to making post-harvest sales among the farmers.

Market Intelligence: AMI offer the facility of market information to persons who hold their produce in them. They inform them about the prices prevailing in the period, and advise them on when to market their products.

Developing and upgrading infrastructure: It will incentivize developing and upgrading of Gramin Haats as GrAMs to make better farmer-consumer market linkages.

Value chain: It helps to promote Integrated Value Chains through minimal processing /value addition to make the produce more marketable, which includes washing, sorting, cleaning, grading, waxing, ripening, packaging, labelling etc., wherein the product form is not changed.

Reduction of post harvest losses: Since it promotes creation of scientific storage capacity for storing farm produce, processed farm produce and agricultural inputs etc. it reduces post-harvest & handling losses, promote pledge financing and market access.

Financing: In order to avoid distress sales by the small and marginal farmers in the peak season, warehouse (registered under Warehousing Development and Regulation Act) issues ‘negotiable warehouse receipt’ to farmers. The farmers may enjoy credit facilities from banks on the security of the warehouse receipt issued for the stored products to the extent of 75 to 80 per cent of their value.

 

Food Grain Storage Management in India

 Food Corporation of India is the only government agency entrusted with movement of food grains from the procuring states to consuming states through a network of storage infrastructure owned or hired by FCI in the whole of India.

Challenges in Agriculture Marketing Infrastructure

The Indian commodities are facing tough competition in the international market when it comes to quality, pesticide residues, varieties with more shelf life, packaging etc. This implies that Indian produce need to be more competitive to face the international competition which again demands the maintenance of quality standards throughout the value chain including good agricultural practices

. Whereas it has been found that 30 – 40 percent of fruits and vegetables are wasted due to post harvest losses. There is lack of basic as well as specialized infrastructure such as cold storages, refer vans, cool chains, ripening chambers etc.

Some interesting facts

  • India is short by 10 million tonnes of cold storage capacity due to Which over 30 percent of agricultural produce goes waste every year
  • More than 20% of produce from fields is lost to poor post-harvesting

Facilities and lack of cold chain infrastructure.

  • Also 10% of food grain that India produces annually is eaten by rodents.
  • Only 7% of food in India is processed. The United Kingdom process 65% of its food. Even a developing country like the Philippines processes as much as 45% of its food.
  • India, the world’s second largest fruit and vegetable producer encounters a waste of close to 25% worth of produce.

Harvest and post-harvest losses of various agricultural commodities: Post-harvest losses for major groups of agricultural and allied produce in percentage at national level given in graph-1

 

 

 Government initiatives for augmenting of Agriculture Marketing Infrastructure

  • National Policy on Handling and Storage of Food Grains, 2000
  • Gramin Bhandaran Yojna
  • Private Entrepreneurs Guarantee (PEG), 2008 Scheme
  • Agricultural Marketing Infrastructure (AMI)-In order to incentivize creation of agricultural marketing infrastructure including storage infrastructure, the Ministry of Agriculture & Farmers Welfare implementing a capital investment subsidy/sub-schemes Agricultural Marketing infrastructure (AMI) under Integrated Scheme for Agricultural Marketing (ISAM).

The storage capacity created under agricultural marketing infrastructure under sub scheme of integrated scheme for Agricultural marketing (ISAM) state wise as on 31.03.2019 is as follows.

 

 

 

Sanctioned by  NABARD Sanctioned by NCDC (New) Sanctioned by NCDC (Renovation) Total sanctioned
No. of projects Capacity in tonnes No. of projects Capacity in tonnes No. of projects Capacity in tonnes No. of projects Capacity in tonnes
33069

 

606 lakh

 

3251 25.95 lakh 2614 23.22 lakh 38964 655.00 lakh

 

 

  • RBI master direction on priority sector lending related to AMI

The reserve bank of India master directions (priority sector lending chapter III- Targets and classification), 2016 prescribe that loan against pledge/ hypothecation of agricultural produce can be granted against warehouse receipts as detailed under:

Loans to individual farmers including SHGs/ JLGs, & Loans to corporate farmer FPOs/ companies of individual farmers, partnership firms and cooperative of farmers up to Rs. 50.00 lakhs against pledge/ hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months

  • Orienting banks towards electronics negotiable warehouse receipts system

Apart from Indian banks association, an number of interaction have also taken place between WRDA and representative of the banks on the relevance and need to resort to pledge finance only against NWRs/ e NWRs.

Emerging scope of Agriculture Marketing Infrastructure

India is driven by three high value sub-sectors – horticulture, livestock and fisheries. In addition, the quantum of agricultural production – food grains, cotton, oilseeds – have also grown abundantly. The infrastructure required handling the quantity and quality of agricultural produce is neither sufficient nor suitable to address the changes.

To begin with the storage space is inadequate.. Earlier, the warehouses were largely in the public sector and cooperative sector, but now the private sector has also made rapid strides in providing these services. Yet there is a necessity to ramp up scientific storage space, including silos and facilitate financing of stored goods to farmers.

Cold storage and cold chain management is another important area that requires immediate attention and investment. Most of the horticultural produce is wasted due to lack of cold stores and refrigerated transport vehicles. Investors and private entrepreneurs who have set up cold storages and controlled atmosphere storages have reported issues of poor returns due to absence of material for storage.

On the other hand, farmers face the problem of distress sale since there are no cold storages near the selling centres. Unlike a regular warehouse, climate controlled warehouses seems to need more intricate business planning. The government can play a role in this by enabling cluster-based approach of growing vegetables, fruits and flowers. This provides a ready market for the producers, supply of horticultural produce for consumers, processors while the excess production can be stored, thus creating a win-win situation for all stakeholders.

Infrastructure Funded by NABARD

Infrastructure Fund/ Scheme Year of Inception Corpus (Rs. in crores) Outstanding as on 31 March 2019 (Rs. in crores) Activities Covered
Warehouse Infrastructure Fund (WIF) 2013-14 5000 4984.00 Warehouses, Silos, Cold Storages & Cold Chain
Food Processing Fund (FPF) 2014-15 2000 276.00 Setting up notified food parks and food /Cold chains and supply logistic/food processing unit

 

Agri-Market Infrastructure Fund

The Union Budget 2018-19 announced the setting up of Agri-Market Infrastructure Fund with a corpus of Rs.2000/- crore in NABARD for developing and upgrading agriculture marketing infrastructure in 22000 Grameen Agriculture Markets (GrAMs) and 585 APMCs. This fund will help in creating further scope for financing market infrastructure projects to small and marginal farmers.

Key highlights of Union budget 2020-2021 of Govt.of India towards to AMI

  • Viability gap funding for creation of efficient warehouse on PPP mode.
  • SHGs run village storage scheme to be launched.
  • Financing on Negotiable Warehousing Receipts to be integrated with e-National Agricultural Market
  • Kisan Rail and Krishi udaan to be launched by Indian railway and ministry of civil aviation respectively for a seamless national cold supply chain for perishables.
  • NABARD refinancing scheme will be further expanded. Agricultural credit target has been set-up at 15 lakh crores.

 

Suggestion for Improvement of AMI finance

 

  • Publicity programmes by distributing leaflets booklets and posters by organizing film and video shows, and conduct meeting at village, chaupal level with participation of Farm women, SHG, farmer club on benefits of scientific storage of food grains.
  • The farmers may be encouraged to store their agricultural produce in registered warehouses to get better return. They are eligible to get credit facilities by pledging the negotiable warehouse receipts.
  • Financing at reduced interest rate is desirable for minimizing intermediation, providing for pan-India market and to free the farmers from the clutches of money lenders and also empower them to quote their own price for sale of their goods.
  • The negotiable warehouse receipt system will encourage scientific storage of agricultural commodities and minimize storage losses in food grains and other agricultural commodities.
  • Short duration training programme should be organized by govt of India on all aspects of scientific storage of food grains with the help of State and Central Government Agriculture Departments, Banks, Agriculture Universities, at village/Panchayat/Block level. and financial help available from different financial institution for AMI.
  • Encourage value chain financing there by Incentives to aggregators at village level because sometimes Small and marginal farmers are not able to bring their produce to the nearby warehouses due to lack of transportation facilities. In such cases, the services of aggregators (cooperative farmers group, self help group, farmers/producers companies) may be used.
  • Encourage Viability gap funding for creation of efficient warehouse on Public Private Partnerships (PPPs) mode. The Central and State Agencies like FCI, CWC, and SWCs etc. may take the lead in inviting private entrepreneurs for the construction of warehouses.

 

Conclusion

The country has largely gained self-sufficiency in food productions.  However,  the  marketing systems  and  post-harvest  marketing  infrastructure  have  not been  able  to  keep  pace  with  the  growing  production  and  marketable  surplus.

There by Losses in agricultural produce after harvest occur at different stages of supply chain right from point of harvesting to the point of consumption  so Creation  of agricultural  marketing  infrastructure  in  the  country  is  the  need  of  hour

Hence provision of adequate infrastructure,  including warehouse, Rural godown  cold chain logistics at village level  are  needed,  to  enable the farmers to realize better prices  for  their  farm  produce  and  also  to  provide  nutritious  food  to  consumers  at  affordable  prices.

And appropriate grading, quality assessment and certification will also encourage formal financial institutions to lend against stored goods as they would understand the shelf-life of the commodity. Grading can help in developing customized financing products.

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