FPO NABARD and AIF

Subject: Agriculture

Context:

Centre has launched the Rs 1 lakh crore Agriculture Infrastructure Fund (AIF) to be used over the next four years. This fund will be used to build post-harvest storage and processing facilities, largely anchored at the Farmer Producer Organisations (FPOs), but can also be availed by individual entrepreneurs.

Concept:

FPO

• A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen.
• A PO can be a producer company, a cooperative society or any other legal form which provides for sharing of profits/benefits among the members.
• The main aim of PO is to ensure better income for the producers through an organization of their own.
• Small producers do not have the volume individually (both inputs and produce) to get the benefit of economies of scale.
• Besides, in agricultural marketing, there is a long chain of intermediaries who very often work non-transparently leading to the situation where the producer receives only a small part of the value that the ultimate consumer pays.
• Through aggregation, the primary producers can avail the benefit of economies of scale. They will also have better bargaining power vis-à-vis the bulk buyers of produce and bulk suppliers of inputs.
• FPO is one type of PO where the members are farmers. Small Farmers’ Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a generic name for an organization of producers of any produce, e.g., agricultural, non-farm products, artisan products, etc.

NABARD

• NABARD came into existence on 12 July 1982 by transferring the agricultural credit functions of RBI and refinance functions of the then Agricultural Refinance and Development Corporation (ARDC).
• It is set up with an initial capital of Rs.100 crore, its’ paid up capital stood at Rs.14,080 crore as on 31 March 2020.
• Consequent to the revision in the composition of share capital between Government of India and RBI, NABARD today is fully owned by Government of India.
• It is a statutory body established under Parliamentary act-National Bank for Agriculture and Rural Development Act, 1981.
• Functions of NABARD:
  • Building an empowered and financially inclusive rural India through specific goal oriented departments which can be categorized broadly into three heads: Financial, Developmental and Supervision.
  • It provides refinance support for building rural infrastructure.
  • It prepares district level credit plans to guiding and motivating the banking industry in achieving these targets.
  • It supervises Regional Rural Banks (RRBs) and helping them develop sound banking practices and integrate them to the CBS (Core Banking Solution) platform.
  • It provides training to handicraft artisans and helps them in developing a marketing platform for selling these articles.
  • NABARD has various international partnerships including leading global organizations and World Bank-affiliated institutions that are breaking new ground in the fields of rural development as well as agriculture.

AIF

• The scheme shall provide a medium – long term debt financing facility for investment in viable projects for post-harvest management Infrastructure and community farming assets through interest subvention and financial support.
• This new agri-infra fund has duration of 10 years till 2029.
• Under the scheme, Rs. One Lakh Crore will be provided by banks and financial institutions as loans to Primary Agricultural Credit Societies, Marketing Cooperative Societies, Farmer Producers Organizations, Self Help Group, Farmers, Joint Liability Groups, Multipurpose Cooperative Societies, Agri-entrepreneurs, Startups, Aggregation Infrastructure Providers 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 annum up to a limit of Rs. 2 crore. This subvention will be available for a maximum period of seven years.
• Further, credit guarantee coverage will be available for eligible borrowers from this financing facility under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for a loan up to Rs. 2 crore.
• Agri Infra fund will be managed and monitored through an online Management Information System (MIS) platform. It will enable all the qualified entities to apply for loan under the fund.
• The National, State and District level Monitoring Committees will be set up to ensure real-time monitoring and effective feed-back.