Why in the News?

The Union Cabinet has expanded the scope of the Agricultural Infrastructure Fund (AIF).  The scheme, worth ₹1 lakh crore, would be redesigned to include financial support for Farmers’ Producers Organisations (FPOs) to enhance their financial security and creditworthiness.

What’s in Today’s Article?

• About AIF (Objective, Key Features, Benefits of AIF, etc.)
• About FPO (Meaning, Objective)
• News Summary

About Agricultural Infrastructure Fund(AIF):

• It is an initiative launched by the Government of India in July 2020 as part of the Atmanirbhar Bharat Abhiyan.
• The primary objective of this fund is to provide financial support to create and modernize agricultural infrastructure, thereby enhancing the overall efficiency of the agricultural sector in the country.

Key Features of the Agricultural Infrastructure Fund:

• Financial Support:
  • The AIF provides medium to long-term debt financing to develop post-harvest management infrastructure and community farming assets.
  • The scheme aims to attract investments for agricultural infrastructure development, with a total allocation of Rs 1 lakh crore to be distributed through banks and financial institutions until 2025-26.
• Interest Subvention:
  • The scheme offers an interest subvention of 3% per annum on loans up to ₹2 crore. This subvention is available for a maximum of seven years.
• Credit Guarantee:
  • Credit guarantee coverage is provided through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for eligible borrowers.
  • This ensures that the risk is mitigated for lending institutions, encouraging them to extend loans to farmers and agribusinesses.
• Eligible Entities:
  • The fund is accessible to a wide range of entities including farmers, Primary Agricultural Credit Societies (PACS), Farmer Producer Organizations (FPOs), Self Help Groups (SHGs), and entrepreneurs engaged in agriculture.
• Infrastructure Development:
  • The fund supports the development of critical infrastructure such as cold storage facilities, warehouses, grading and sorting units, processing units, and other post-harvest management facilities.
  • It also encourages the development of community farming assets like organic input production units, custom hiring centres, and renewable energy assets.
• Digital Integration:
  • The AIF is integrated with digital platforms such as the e-NAM (National Agriculture Market), ensuring better market access for farmers and reducing inefficiencies in the supply chain.

Benefits of the Agricultural Infrastructure Fund:

• Reduction of Post-Harvest Losses:
  • By improving storage and processing facilities, the AIF aims to reduce post-harvest losses, which are a significant concern in Indian agriculture.
• Increased Farmers’ Income:
  • Enhanced infrastructure and better market access through e-NAM are expected to increase farmers’ income by reducing waste and improving the value realization of their produce.
• Rural Employment:
  • The creation and modernization of agricultural infrastructure will generate rural employment, contributing to the economic development of rural areas.
• Sustainable Agriculture:
  • The focus on modern infrastructure also promotes sustainable agricultural practices, ensuring long-term benefits for the sector.

What is a Farmer Producer Organization (FPO)?

• A Producer Organisation (PO) is a legal entity formed by primary producers, viz. farmers, milk producers, fishermen, weavers, rural artisans, craftsmen.
• The main aim of PO is to ensure better income for the producers through an organization of their own.
• The ownership of the PO is with its members. It is an organization of the producers, by the producers and for the producers.
• FPO is one type of PO where the members are farmers.
• FPO operatives provide education and training for their farmer-members, elected representatives, managers, and employees so that they can contribute effectively to the development of their FPOs. 

Centre Redesigns Agricultural Infrastructure Fund to Cover FPOs:

• The Union Cabinet has announced an expansion of the Agricultural Infrastructure Fund (AIF).
• The redesigned scheme will now include financial support for Farmers’ Producers Organisations (FPOs) to enhance their financial stability and creditworthiness.
• The government highlighted that the expanded AIF will make the scheme more attractive and inclusive, thereby strengthening agricultural infrastructure across the country.
• So far, ₹47,575 crore has been sanctioned for 74,508 projects under the AIF, leading to a total investment of ₹78,596 crore in the agriculture sector, with ₹78,433 crore coming from private entities.
• These projects have also generated over 8.19 lakh rural jobs.
• The expansion of the AIF is expected to further boost agricultural growth, improve productivity, increase farm incomes, and contribute to the sustainability of agriculture in India.