How the Agriculture Infrastructure Fund Can Support Small Farmers

In a country where agriculture sustains millions, the challenges faced by small farmers are immense—from limited resources to inadequate infrastructure. These obstacles not only hinder productivity but also limit their potential to earn a sustainable income. Recognizing this, the government introduced the Agriculture Infrastructure Fund, which emerged as a crucial lifeline, offering much-needed support to enhance agricultural practices. 

This fund not only helps reduce post-harvest losses but also boosts farmers’ incomes by enhancing the quality and marketability of their produce. With the support of this scheme, small farmers can finally bridge the gap between traditional practices and modern agricultural needs. Let’s explore how the Agriculture Infrastructure Fund is paving the way for a more prosperous future for small farmers.

What is the Agriculture Infrastructure Fund?

The Agriculture Infrastructure Fund, initiated by the Indian Government in 2020, is dedicated to providing long-term, low-interest credit for the development of post-harvest management infrastructure and community farming assets nationwide. With the ambitious goal of raising ₹1 lakh crore by 2025-26, the AIF is poised to be a crucial part of India’s agricultural growth. 

As of June 2024, the AIF has approved loans totaling over ₹43,000 crore, benefiting more than 67,871 projects across the country. The program has been especially effective in encouraging investments in cold storage, warehouses, and primary processing units. 

Who is Eligible?

The Agriculture Infrastructure Fund is not limited to large-scale farmers or agribusinesses. It is specifically designed to support small and marginal farmers, Farmer Producer Organisations (FPOs), Primary Agricultural Credit Societies (PACS), and even start-ups engaged in agriculture. The inclusivity of the government loan scheme ensures that even the most vulnerable sections of the farming community can benefit.

Eligible borrowers include:

  • Individual Farmers: Especially those with small landholdings.
  • FPOs and PACS: Organisations that represent a collective of farmers.
  • Agri-tech Start-ups: Innovative enterprises focused on bringing technological advancements to agriculture.
  • Cooperatives and Self-Help Groups (SHGs): Collectives that engage in farming or related activities.
  • Marketing Cooperative Societies: Entities involved in the distribution and sale of agricultural products.

Projects Supported by the Agriculture Infrastructure Fund

The scope of projects eligible under this government loan scheme is vast, covering everything from farmgate infrastructure to post-harvest management. This inclusiveness ensures that small farmers can develop comprehensive infrastructure to support their agricultural activities from start to finish.

Eligible projects include:

  • Cold Storage Facilities: Essential for preserving perishable produce.
  • Warehouses: To store agricultural products safely and reduce post-harvest losses.
  • Grading and Sorting Units: For improving the quality and marketability of produce.
  • Primary Processing Centres: To add value to raw agricultural goods.
  • Supply Chain Services: Such as logistics and transportation.
  • Community Farming Assets: Shared resources like tools and machinery that small farmers can use collectively.

Quantum of Loan and Repayment Period

The Agriculture Infrastructure Fund offers financial assistance through loans at concessional rates, making it a highly attractive option for small farmers. The quantum of the loan varies depending on the project and the borrower but generally aligns with the scale and impact of the proposed infrastructure.

  • Loan Amount: Borrowers can avail of loans up to Rs. 2 crore with an interest subvention of 3% per annum for a maximum period of seven years. This concession is provided for loans up to Rs. 2 crore, which is substantial support, particularly for small farmers and their collectives.
  • Repayment Period: The repayment tenure is typically long-term, spanning up to seven years, including a moratorium of up to two years. This flexible repayment structure allows borrowers to plan their cash flows effectively without the immediate pressure of repayment, ensuring that the infrastructure projects can be fully operational before repayments commence.

Objectives and Benefits of the AIF

The Agriculture Infrastructure Fund is more than just a financial assistance programme; it is a transformative initiative aimed at creating a robust agricultural ecosystem in India. The primary objectives of the AIF are:

  • Enhancing Infrastructure: The fund aims to fill the infrastructure gaps in the agriculture sector, particularly in rural areas, where small farmers often lack access to basic facilities like storage and processing units.
  • Increasing Farmers’ Income: By improving post-harvest management and market access, the AIF helps farmers get better prices for their produce, thereby increasing their income.
  • Reducing Wastage: A significant amount of agricultural produce in India is wasted due to inadequate storage and processing facilities. This government loan scheme aims to reduce this wastage by supporting the development of appropriate infrastructure.
  • Encouraging Investment: The AIF encourages private sector investment in the agriculture sector, creating opportunities for agri-tech start-ups and entrepreneurs to develop innovative solutions that can benefit small farmers.
  • Promoting Sustainable Practices: By supporting projects that focus on organic farming, bio-stimulant production, and other sustainable practices, the AIF promotes environmentally friendly agriculture.

A Promising Future for Indian Agriculture

The Agriculture Infrastructure Fund is a game-changer for Indian agriculture, offering a comprehensive solution to the sector’s infrastructure challenges. Small farmers, who have long been constrained by limited access to finance and modern facilities, now have a powerful tool to transform their operations. By leveraging the AIF, they can invest in infrastructure that enhances productivity, reduces losses, and increases profitability. The AIF is not just a loan scheme but a catalyst for a more resilient, sustainable, and prosperous agricultural sector in India.

To make the most of the Agriculture Infrastructure Fund and other supportive government loan schemes, farmers and agricultural entrepreneurs can explore tailored financial solutions offered by banks like HDFC Bank. With a commitment to nurturing growth at the grassroots level, HDFC Bank stands ready to assist you in leveraging these opportunities for a more secure and prosperous agricultural future.