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Opinion

Fund created to fill food supply gaps is a hit with investors

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

Investors have so far borrowed Rs 1,566 crore, showing a preference for investing in post-harvest facilities that had long been abandoned, such as warehouses, cold chains, food sorting and grading 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 waste and food loss worth Rs 2.15 lakh crore each year, according to data from the food processing ministry.

For example, 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 tons, according to a study by the Chamber of Commerce. by PHD. Punjab is the only state with storage surpluses, while Tamil Nadu, Maharashtra and West Bengal have some of the largest gaps.

The fund is designed to address this investment gap due to its preferential rates. In addition to the 1566 crore already disbursed, applications for nearly 10,000 new assets worth another 993 crore rupees are currently under evaluation or will be taken soon, data up to Nov. 5 reviewed by HT showed. The 12 public sector banks and the nine private lenders in the country are part of the fund.

“The 1,566 million rupee tranche has gone to more than 3,000 Primary Agricultural Credit Societies or PACS,” said an official, requesting anonymity. PACS are village-level credit cooperatives and therefore the most accessible financial institution for a farmer.

Furthermore, PACS has submitted new applications for 9,435 infrastructure projects worth Rs 690.56 crore. The banks have also chosen a further 352 applications from other agricultural investors for projects worth Rs 302.71 million. The top five states where investment proposals have been received are Madhya Pradesh (119 applications), UP (46), Bihar (30), Rajasthan (28) and Odisha (22).

The fund, which was featured in the first stimulus package of Rs 20-lakh crore to tackle the Covid crisis, aims to offer medium and long-term debt financing for investment in agricultural projects.

It will provide easy term loans totaling 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 subsidy, where the government pays part of the interest, of 3% per annum up to a loan limit of Rs 2 million over a period of seven years.

“India is roughly capable of storing just 2% of its agricultural products in a temperature-controlled environment to cover deficits during lean seasons, while that statistic is 8% for the Asia-Pacific sector,” he says. Raj Kathpalia, advisor to the Consultative Group on International Agricultural Research.

Therefore, India’s status as the world’s largest producer of items such as legumes, spices, milk, bananas, and the second-largest producer of wheat, rice and vegetables does not help avoid food price spirals.

Retail inflation jumped to a six-year high of 7.61% in October due to high food prices after excess rains damaged stored and freshly harvested vegetables such as onions. Most farmers store crops in traditional leaky structures that do not protect against pests, rain or decay.

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

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