Learn from non-farm infrastructure success

July 21, 2021 5:10 AM

To realise AIF potential, key PPP learnings from airports, highways, logistics, etc, need to be incorporated

There are also loopholes in the system of supplying paddy to the mills, requiring checks, a district controller of food on the condition of anonymity said.There are also loopholes in the system of supplying paddy to the mills, requiring checks, a district controller of food on the condition of anonymity said.

By PK Joshi & Arabinda K Padhee

In a recent cabinet decision, the government has committed to strengthening agri-infrastructure by pumping in more capital. The finance minister had also said in her Budget 2021 speech that the APMC mandis will be strengthened, leveraging funds from the Agriculture Infrastructure Fund (AIF). Last year, under Atmanirbhar Bharat Abhiyan, the government announced the AIF with an outlay of Rs 1 lakh crore, to be disbursed in next five years.

Under the scheme, the Centre funds a 3% interest subvention and provides a credit guarantee for loans up to Rs 2 crore to enhance the viability of any agri-infra projects. Initially, the fund was for agri-entrepreneurs, start-ups, agri-tech players, and farmer groups, who can access credit at subsidised interest for constructing and managing warehouses, silos, cold storages, etc. In July, the government made the APMC markets eligible for this fund. Contrary to perceptions of some farmers’ groups that the new farm Acts will weaken the APMC markets, the government expressed its commitment to develop and strengthen these markets.

The private sector can play a big role in agri-infra, but, in the absence of the appropriate institutional framework, its participation is lukewarm. One area needing exploration is PPP in agri-infra. India has a good record of PPP in non-farm infra, such as highways, ports, airports, etc. Here, engaging the private sector in developing and managing infrastructure brought fresh ideas and technologies, adoption of global best practices, and generation of significant employment.

Therefore, the government must explore adoption of best practices from non-farm PPP for agri-infra.
The first area could warehouse development/modernisation in APMC markets. Modern warehouses can be developed, like multi-layer, fully automated, RFID-enabled car-parking. These RFID-enabled, automated warehouses would improve efficiency of storage and retrieval of produce. These can enable storage for even smallholders, who have modest marketable surplus. The second area could be agro-processing in APMC areas.

The demand for processed and value-added commodities is rising fast. Agro-processing is a sunrise sector, growing at 10% annually. However, it is yet to actualise its potential to raise farmers’ income, accelerate growth, increase export, and generate employment. Developing and strengthening it is necessary for meeting future demands of processed food and reducing losses of perishables. The third area may be expansion of refrigerated and cold-chain enabled transport and logistics to reduce losses during transport.

Non-availability of land and low scale of business are reported to be the major obstacles for private sector response. There may be two approaches to develop PPP for using the AIF money in these areas. One, follow a similar pattern as has been practised for constructing and managing national highways using BOT (built, operate and transfer) approach. A model concession agreement using the VGF mechanism should be evolved under AIF, by engaging state governments and the functionaries of APMC markets.

Two, the warehousing and processing plants can be allocated suitable lands on a long-term lease with annual rent by inviting bids from private sector in OMDA (Operation, Management and Development Agreement) mode, as has been done for airport development and management. Same may be adapted for developing refrigerated and cold chain enabled transport.

Agriculture must learn from the examples of success in other sectors to become more attractive, competitive, and rewarding. The state governments must cultivate a conducive investment climate to whet appetite for AIF investment and attract private players in agri-infra.

Respectively, former director, South Asia Office, IFPRI, and country director (India), ICRISAT Views are personal

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Kerala has the right idea with vaccine mandate
2China: The state asserts
3Inflation outlook: Status quo from RBI on Omicron uncertainty