June 2, 2011

India farmers to obtain crop loan for post-harvest

Indian government is intending to give crop loan facilities at a cheaper rate for post-harvest management which will encourage farmers to keep their harvest in registered warehouses at the lowest available rate of interest, according to Prof K V Thomas, Minister of State for Consumer Affairs, food and public distribution.

"I understand that availability of finance to farmers, particularly the small and marginal ones, at around 11% rate of interest is creating hardship for them," he said.

"I have taken up this issue with finance ministry. At the same time, the Warehousing Development and Regulatory Authority (WDRA) should provide linkage of registered warehouses with the Agricultural Produce Market Committee and spot exchanges to enable farmers fetch better prices of their agriculture produce," said Thomas.

A structured warehousing system backed by negotiable receipt financing mechanism will certainly go a long way to solve such basic issues faced by Indian farmers, he said. "It will increase liquidity in rural areas, encourage scientific warehousing of goods, improve supply chain and enhance rewards for grading and quality, and better price risk management."

Responding to the issues raised by ASSOCHAM's secretary general D.S. Rawat, the minister said these activities will also result in higher returns to farmers and better services to consumers. He admitted that Indian agriculture is currently faced with major challenges of ever-growing population to feed, shrinking natural resources, increasing global competitiveness, lack of scientific storage facilities, changing food habits of people and uncertainties of changing climate.

The situation becomes more difficult for a country like India where over 65%of people still rely on agriculture for employment and livelihood. Ironically, nearly 40% of agriculture produce is wasted for want of storage facilities.

"Therefore, there is a need for creating world-class warehouses equipped with the latest equipment in handling, grading, storage and transportation of different commodities," said Thomas.

India has an estimated storage capacity of 107 million tonnes of which 20 million tonnes is held by the private sector. The WDRA has got 336 applications from 19 states with a warehousing capacity of 12 lakh tonnes for registration. These will be first accredited by approved agencies.

Rawat said this is a healthy sign for potential public private partnership. He said warehousing is a capital intensive function which needs support from financial institutions.