AIF Scheme: Agriculture Investment Funds

PWOnlyIAS February 06, 2024 04:45 2792 0

AIF scheme is a Central Sector Scheme offering a medium-long term debt financing facility of Rs.1 lakh crore for funding agriculture infrastructure to support and promote agricultural development, improve productivity, and address challenges faced by farmers, agribusinesses, and the overall agricultural industry.

Introduction To AIF Scheme

AIF scheme (Agriculture Investment Funds) is a Central Sector Scheme offering a medium-long term debt financing facility of Rs.1 lakh crore for funding agriculture infrastructure to support and promote agricultural development, improve productivity, and address challenges faced by farmers, agribusinesses, and the overall agricultural industry.

Importance of AIF in UPSC Syllabus- GS Paper 1, Agricultural Resources, GS Paper 2, Government Policies & Interventions, GS Paper 3, E-Technology in the Aid of Farmers

AIF Scheme: Key Facts

AIF Full Form	Agriculture Investment Funds (AIF)
AIF Scheme Launch Year	July ,2020
AIF Scheme Focus Area	Financial Assistance to Agricultural Infrastructure
Nodal Ministry	Ministry of Agriculture and Farmers Welfare, Govt. of India
AIF Scheme Time Duration	Financial Year 2020-21 to 2032-33

Aim of AIF Scheme

To mobilize a medium long term debt financing facility for investment in viable projects relating to post-harvest management Infrastructure and community farming assets through incentives and financial support in order to improve agriculture infrastructure in the country.

Post Harvest Management- It is a collective term of the activities and techniques used to preserve and protect crops after they have been harvested. It includes activities such as cleaning, sorting, grading, packaging, storage, and transportation.

Objective of post-harvest management is to maintain the quality and safety of the crops, as well as to extend their shelf life, so that they can be sold and consumed at a later time.

Need For AIF Scheme

Dominance of Agriculture in National Income- Highlighting the fact that approximately 58% of the country’s population relies on agriculture as their primary source of income.
Challenges of Small and Fragmented Landholdings- Discussing the economic challenges faced by small and fragmented landholders, leading to low annual incomes in the agricultural sector.
Impact of Poor Connectivity on Agricultural Output- Addressing the issue of poor connectivity and limited infrastructure, contributing to the wastage of 15-20% of the country’s agricultural output.
Stagnation in Agricultural Investment- Examining the consequence of these challenges, emphasizing the stagnation in agricultural investment within the country.
The Role of AIF Scheme in Economic Transformation- Introducing the Agriculture Investment Fund (AIF) scheme as a solution to boost farmers’ income, stimulate agricultural production, and enhance exports.

Objectives of AIF Scheme

AIF have multi folded objectives for every participants in agriculture

For Farmers	Enhancing Market Access for Farmers- Improved marketing infrastructure to allow farmers to sell directly to a larger base of consumers and hence, increase value realization for the farmers. This will improve the overall income of farmers. Logistics Investment for Market Efficiency-With investments in logistics infrastructure, farmers will be able to sell in the market with reduced post-harvest losses and a smaller number of intermediaries. This further will make farmers independent and improve access to the market. Modernizing Storage and Packaging Systems -With modern packaging and cold storage system access, farmers will be able to further decide when to sell in the market and improve realization. Community Farming for Productivity Gains-Community farming assets for improved productivity and optimization of inputs will result in substantial savings to farmers.
For Government	Government Support for Priority Sector- Government will be able to direct priority sector lending in the currently unviable projects by supporting through interest subvention, incentive and credit guarantee. This will initiate the cycle of innovation and private sector investment in agriculture. Reducing National Food Wastage- Due to improvements in post-harvest infrastructure, the government will further be able to reduce national food wastage percentage thereby enabling the agriculture sector to become competitive with current global levels. Public-Private Partnerships for Infrastructure- Central/State Government Agencies or local bodies will be able to structure viable PPP projects for attracting investment in agriculture infrastructure.
For Agri entrepreneurs and startups	Innovation Drive with Dedicated Funding- With a dedicated source of funding, entrepreneurs will push for innovation in the agriculture sector by leveraging new age technologies including IoT, AI. Connecting Ecosystem Players- It will also connect the players in the ecosystem and hence, improve avenues for collaboration between entrepreneurs and farmers.
Banking Ecosystem	Risk Mitigation through Credit Guarantee- With Credit Guarantee, incentive and interest subvention lending institutions will be able to lend with a lower risk. This scheme will help to enlarge their customer base and diversify their portfolio. Empowering Cooperative Banks and RRBs- Refinance facility will enable a larger role for cooperative banks and RRBs.
Consumers	Consumer Benefits from Reduced Inefficiencies- With reduced inefficiencies in post-harvest ecosystem, key benefit for consumers will be a larger share of produce reaching the market and hence, better quality and prices.

Features of AIF Scheme

Key Features of AIF Scheme	Details
Fund Allocation Under AIF Scheme	Under AIF 1 lakh crore rupees is to be disbursed by the financial year 2025-26 and the interest subvention and credit guarantee assistance will be provided till the year 2032-33. Each beneficiary can receive up to 25 projects in different locations.
Targeted Beneficiaries of AIF	Farmers and Farmer Producer Organizations (FPOs). Additionally, it benefits Primary Agricultural Credit Societies (PACS), Entrepreneurs, Startups. Self Help Groups, Agricultural Produce Market Committees, Federations, also benefit from the scheme.
Interest Subvention under AIF	It provides 3% interest subvention, credit guarantee support for loans of up to Rs.2 crore and facility of convergence with other Central and State Govt. Scheme. NABARD loans for PACS are available at a reduced rate of 1% post subvention.
Credit GuaranteeS	The Agriculture Infrastructure Fund provides credit guarantee for loans up to Rs. 2 crore. It is done under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme.
Duration of AIF Scheme	The duration of the Agriculture Infrastructure Fund is 7 years which also included a moratorium period of up to 2 years.
Hassle free process	The Government of India supports the lending process. It does so by facilitating and speedy sanctions by a user-friendly online portal.
Lending Institutions	Agriculture Infrastructure Fund can be availed through several lending institutions which include 24 commercial banks, 40 cooperative banks, and NABARD, among others.
Management	AIF will be managed through an online Management Information System (MIS) platform. Constitution of National, State and District level monitoring committees to ensure real-time monitoring and effective feedback.

AIF Scheme

Benefits of AIF Scheme

Income Boost for Farmers- Financial support and investment in agriculture through AIF will lead to increased productivity of farms and boost the income for farmers.
Reduction in Post-Harvest Losses- AIFs if utilized appropriately can improve infrastructure, logistics, and storage, reducing post-harvest losses and it will ensure better returns for farmers.
Improve the market infrastructure- Improved marketing infrastructure enables farmers to sell directly to a larger consumer base, reducing dependency on intermediaries and enhancing market access.
Encourage Community Farming- AIFs supporting community farming assets lead to optimized input utilization and substantial savings for farmers, enhancing overall productivity.
Risk Mitigation- Credit guarantee, incentives, and interest subvention reduce the risk for lending institutions, enabling them to expand their customer base and diversify portfolios in agriculture financing.
Consumer Benefits- Streamlined post-harvest processes result in a larger share of produce reaching markets, benefiting consumers with improved quality and competitive prices.

Limitations of AIF Scheme

Viability Concerns for FPOs- Exploring the potential benefits of the scheme for Farmer Producer Organizations (FPOs) and questioning their viability.
Data Transparency on Institutional Funding- Highlighting the absence of reliable data on fund flow from institutions like NABARD, SFAC, and State agencies to FPOs, raising transparency concerns.
Unclear Market Intervention Role of AIF- Addressing the lack of clarity on how the Agriculture Investment Fund (AIF) will function as a market intervention scheme for market infrastructure institutions.
Lack of Convergence with Existing Schemes- Examining the absence of a mechanism for convergence with existing schemes, such as the PEG scheme, which has attracted private and corporate capital into agribusiness.
eNAM Integration Challenges for APMCs- Discussing the potential limitations of expanding the scope of Agricultural Produce Market Committees (APMCs) by integrating them into the electronic National Agricultural Market (eNAM) structure without a monitoring and evaluation cell in place.

AIF Scheme

AIF Scheme Progress So Far: Agricultural Investment Funds

August 2023- In a parliamentary discussion it is mentioned that Rs 15,448 crore has been sanctioned for 27,748 projects under the AIF so far. Out of the sanctioned amount 19,650 projects worth Rs 9,660 crore (9.66% of the total allocation) have been completed.
Madhya Pradesh (MP) is the leading state in fund utilisation and project completion under AIF, Maharashtra and Uttar Pradesh ranked second and third respectively.

Reason for Underutilized Funds

Awareness and Outreach Challenges- The scheme faces a lack of awareness among farmers, FPOs, and agri-entrepreneurs, leading to limited understanding of its benefits and application procedures.
Insufficiency in Bankable Projects- Many potential beneficiaries lack viable project proposals meeting the scheme’s eligibility criteria and technical standards.
Coordination and Convergence Issues- The scheme encounters challenges in terms of coordination and convergence among various stakeholders, including central and state governments, banks, financial institutions, implementing agencies, nodal departments, monitoring committees, and beneficiaries.
Infrastructure and Logistics Deficiencies- Rural areas face a lack of essential infrastructure and logistics facilities crucial for post-harvest infrastructure and community farming assets. The report emphasizes the necessity for increased investment and support to enhance rural infrastructure and logistics networks.

Suggestive Measures For AIF Scheme

Enhancing Awareness and Information Dissemination- The government should intensify efforts to raise awareness about the AIF scheme among its intended beneficiaries.
- Utilizing print and electronic media, social platforms, webinars, workshops, and roadshows can effectively communicate information.
- Leveraging existing networks like Krishi Vigyan Kendras, Common Service Centres, and Agricultural Technology Management Agencies can facilitate grassroots outreach.
Building Capacity and Readiness- Adequate support and guidance from the government are essential to enhance the capacity and readiness of farmers, FPOs, and agri-entrepreneurs for post-harvest infrastructure projects.
- This involves interventions such as training, mentoring, consultancy, incubation, and innovation.
- Facilitating access to credit, technology, and markets through schemes like PM-KISAN, PM-FME, PM-KMY, and e-NAM is crucial.
Improving Coordination and Convergence- The government should ensure better coordination and convergence among various stakeholders implementing the AIF scheme.
- Regular meetings, consultations, reviews, and feedback mechanisms are essential.
- Establishing a single-window system for project clearances and approvals, along with harmonizing norms and standards for post-harvest infrastructure across states and sectors, is crucial.
Strengthening Monitoring and Evaluation Mechanisms- To ensure the effectiveness of the AIF scheme, the government should establish a robust monitoring and evaluation mechanism.
- This involves defining clear output and outcome indicators, implementing a real-time tracking dashboard, conducting periodic surveys and studies to assess the scheme’s impact, and engaging third-party agencies for verification and validation.
Enhanced efforts through media channels, social platforms, webinars, and training programs are recommended for increased awareness.

Recent Development

Campaign BHARAT (Banks Heralding Accelerated Rural & Agriculture Transformation) has been launched by the Government under Agriculture Infrastructure Fund Scheme to provide maximum benefits to the people and to create a competitive spirit among the Banks and lending institutions to mobilize agriculture infrastructure projects at a faster pace.
- Top performing public and private banks, Regional Rural Banks, Small Finance Banks (SFBs), Non-Banking Financial Companies (NBFCs) and cooperative Banks will be selected and their special contribution will be recognized.

Strength	Financial Support to Agriculture- AIF provides essential financial support to the agricultural sector, addressing the funding needs of farmers, FPOs, and agri-entrepreneurs. Innovating in Agriculture- AIF can be utilised to fuse innovation in agriculture by encouraging the adoption of new technologies and modern practices. Like robots, temperature and moisture sensors, aerial images, and GPS technology. Increasing Credibility- Government support and backing enhance the credibility and sustainability of the AIF scheme. Boost to Rural Economy- AIF can led to rural development by improving infrastructure, increasing productivity, and creating employment opportunities.
Weakness	Lack of Awareness- Limited awareness about the AIF scheme among its target beneficiaries are becoming obstacles in its effective utilization. Insufficient Monitoring- Inadequate monitoring mechanisms may result in difficulties assessing the real-time impact and success of AIF projects.
Opportunities	Integrating Market to Farm- AIF can be used as an opportunity to integrate agricultural markets, fostering better price discovery to farmers and reduction of middlemen. Technical Advancement – Leveraging technology like AI and IoT advancements can supplement catalyze the efficiency and effectiveness of AIF initiatives. Encouraging Public-Private Partnerships- Opportunities exist for fostering public-private partnerships to attract additional investment and expertise.
Threat	Economic Volatility- Economic uncertainties and fluctuations can impact the availability of funds and the overall success of AIF projects. Impact on Climate- Agriculture is vulnerable to climate change, posing a threat to the productivity and success of AIF-supported initiatives. Political Transgression- Political conflict like recent Farmers protest, tussle between centre and may affect the continuity of support for the AIF scheme.

Way Forward to AIF Scheme

Modifying AIF for Market Integration- There is a need for modifying AIF funds linked to agricultural commodity derivative markets to enhance market integration and ensure reliable price discovery.
Converging AIF to other schemes- The Agriculture Infrastructure Fund can be assimilated with several schemes. For example various states have their own agricultural funds scheme so combining them with AIF will give a more fruitful outcome.
Creating Awareness among people- Utilisation of AIF can be fully utlized if people from ground level like farmers and SHGs are aware about the facilities provided by AIF. Organize state conclaves to increase awareness and popularity of the scheme among stakeholders.
Strengthening Governance- Ensuring transparency in flow of funds and establishing a body to keep an eye on the flow of funds will further help AIF to reach targeted sectors. Banks have been advised to nominate an AIF nodal officer in the head office. This nodal officer will act as coordination and communication channel with others regarding all aspects of the AIF scheme.

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AIF Scheme: Agriculture Investment Funds

Introduction To AIF Scheme

AIF Scheme: Key Facts

Aim of AIF Scheme

Need For AIF Scheme

Objectives of AIF Scheme

For Farmers

For Government

For Agri entrepreneurs and startups

Banking Ecosystem

Consumers

Features of AIF Scheme

Benefits of AIF Scheme

Limitations of AIF Scheme

AIF Scheme Progress So Far: Agricultural Investment Funds

Reason for Underutilized Funds

Suggestive Measures For AIF Scheme

Recent Development

Way Forward to AIF Scheme

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