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Agri financing, warehousing key necessities for Indian agri economic system; these two sectors could profit farmers

Like Agriculture, the Agri Warehousing & Agri Financing sectors are additionally the important thing enabler of development for India’s Agri-economy. Image: Reuters

By Sandeep Sabharwal

Agriculture inarguably is the mainstay of the Indian economic system and the function of the agriculture sector in India’s economic system can’t be understated. The sector has an enormous oblique influence on allied sectors of the agricultural economic system and the manufacturing & providers segments of the nationwide economic system. Like Agriculture, the Agri Warehousing & Agri Financing sectors are additionally the important thing enabler of development for India’s Agri-economy and the event and development of those two sectors will finally profit the farmers.

There are two pillars of post-harvest agriculture in India, the primary is storage and the opposite one is the preservation and Agri Financing. India has two crop cycles Rabi and Kharif and the crops harvested in these cycles are consumed within the subsequent months of your entire 12 months. This has a direct correlation to inflation, farmer revenue, and the Indian inhabitants’s diet cycle. During the storage interval, each the above pillars are basic for the survival and maintenance of the crops.

In storage and preservation, the key challenges are concerning the notion of insufficient infrastructure and the Non-scientific storage options resulting in Quality and Quantity lack of crops, therefore financial loss each to the exchequer in addition to the producer.

Here it’s price mentioning that as per GOI information, 10% of the crop valued at a staggering 1 lakh crore is supposedly getting wasted in India as a consequence of non-availability of storage. Had it been the case, the grain which India imports in large portions from a number of countries like Australia, Canada, Baltic area, and so forth. and which will get dumped at ports for months earlier than reaching the patron would have been the primary to rot however surprisingly it doesn’t free on Quality or Quantity over the time frame, however on the identical time information within the public area means that Indian crops which can be saved in static floor climate in CAP or Godown (Warehouses) loses 10% of the amount. This assumption in itself is an anomaly as these losses are as a consequence of Non-scientific administration and never as a consequence of insufficient storage services.

In an period of Artificial intelligence and technological development, it’s disheartening to see that as a consequence of a incorrect notion the issue is being wrongly recognized and therefore not being addressed. When processes like distant sensing and GPS locking is turning into widespread we’re nonetheless ranting that we would not have the technique of defending our crops in warehouses (in no matter state and the stage they’re) and therefore we require new infrastructure whereas the answer lies in placing up scientific administration firms and inspiring newer applied sciences which may handle the present infrastructure effectively and assist in addressing the difficulty of post-harvest losses. In India, if we may stop this 10% of post-harvest losses that itself can be akin to a inexperienced revolution. In truth, a couple of years again FICCI had carried out a research on how utilizing scientific methods on present infrastructure can curtail the post-harvest losses of 10% to solely 0.5%.

Just like Warehousing, Agri financing is one other integral a part of the Agri worth chain and from time immemorial this function has been performed by varied stakeholders like merchants, millers, Arhtiyas, Banks, and extra lately the NBFCs. The GOI had labeled this as a precedence sector lending space however right here too there exists an anomaly. The authorities offers lending targets to the banks with a provision that in case the banks don’t meet these targets they needed to subscribe to GOI securities to the tune of a deficit of goal at very low yield. Despite this deterrent, there are occasions banks don’t meet their targets. So at one hand, we’ve the plight of Agri farmers, merchants, and so forth. who’re unable to obtain finance and on the different, we had banks that might not meet lending targets.

To fill this hole arising out of the shortcoming of banks to serve the area of interest areas, loads of skilled Agri providers firms has diversified into NBFC however regardless of the supply of market and urge for food these NBFC’s couldn’t improve their enterprise as a consequence of low RoE that was not in commensuration with the expectations of the shareholders. This was as a result of these NBFCs would not have leverage accessible at a decrease value, in contrast to banks which have CASA which provides them entry to cheaper credit score. These NBFCs are depending on banks to offer them credit score, which ends up in a better value of capital which acts as a deterrent to additional lending. So cheaper credit score made accessible to such NBFCs similar to credit score is made accessible to NABARD, will go a great distance in augmenting the Agri sector. The best-case situation right here can be the formation of an Agri Bank which lends to such companies with all due checks and balances, will go a great distance in aiding the expansion of the Agri financing NBFCs.

(Sandeep Sabharwal is CEO, SLCM Group. Views expressed are the writer’s personal.)

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