By Sandeep Sabharwal
Agriculture inarguably is the mainstay of the Indian economy and the part of the agriculture sector in India’s economy can not be understated. The sector has a enormous indirect effect on allied sectors of the rural economy and the manufacturing & services segments of the national economy. Like Agriculture, the Agri Warehousing & Agri Financing sectors are also the essential enabler of development for India’s Agri-economy and the improvement and development of these two sectors will in the end advantage the farmers.
There are two pillars of post-harvest agriculture in India, the initial is storage and the other one particular is the preservation and Agri Financing. India has two crop cycles Rabi and Kharif and the crops harvested in these cycles are consumed in the subsequent months of the whole year. This has a direct correlation to inflation, farmer revenue, and the Indian population’s nutrition cycle. During the storage period, each the above pillars are basic for the survival and upkeep of the crops.
In storage and preservation, the main challenges are with regards to the perception of inadequate infrastructure and the Non-scientific storage options major to Quality and Quantity loss of crops, therefore financial loss each to the exchequer as nicely as the producer.
Here it is worth mentioning that as per GOI information, 10% of the crop valued at a staggering 1 lakh crore is supposedly acquiring wasted in India due to non-availability of storage. Had it been the case, the grain which India imports in big quantities from a host of nations like Australia, Canada, Baltic area, and so on. and which gets dumped at ports for months prior to reaching the customer would have been the initial to rot but surprisingly it does not loose on Quality or Quantity more than the period of time, but at the identical time information in the public domain suggests that Indian crops that are stored in static ground climate in CAP or Godown (Warehouses) loses 10% of the quantity. This assumption in itself is an anomaly as these losses are due to Non-scientific management and not due to inadequate storage facilities.
In an era of Artificial intelligence and technological advancement, it is disheartening to see that due to a incorrect perception the trouble is becoming wrongly identified and therefore not becoming addressed. When processes like remote sensing and GPS locking is becoming widespread we are nevertheless ranting that we do not have the suggests of guarding our crops in warehouses (in what ever state and the stage they are) and therefore we demand new infrastructure whilst the option lies in placing up scientific management firms and encouraging newer technologies which could handle the present infrastructure effectively and enable in addressing the problem of post-harvest losses. In India, if we could avoid this 10% of post-harvest losses that itself would be akin to a green revolution. In reality, a handful of years back FICCI had accomplished a study on how making use of scientific methods on current infrastructure can curtail the post-harvest losses of 10% to only .5%.
Just like Warehousing, Agri financing is a different integral aspect of the Agri worth chain and from time immemorial this part has been played by many stakeholders like traders, millers, Arhtiyas, Banks, and more not too long ago the NBFCs. The GOI had classified this as a priority sector lending location but right here also there exists an anomaly. The government provides lending targets to the banks with a provision that in case the banks do not meet these targets they had to subscribe to GOI securities to the tune of a deficit of target at extremely low yield. Despite this deterrent, there are occasions banks do not meet their targets. So at one particular hand, we have the plight of Agri farmers, traders, and so on. who are unable to acquire finance and at the other, we had banks that could not meet lending targets.
To fill this gap arising out of the inability of banks to serve the niche regions, a lot of skilled Agri services firms has diversified into NBFC but regardless of the availability of market place and appetite these NBFC’s could not boost their small business due to low RoE that was not in commensuration with the expectations of the shareholders. This was mainly because these NBFCs do not have leverage offered at a reduce price, in contrast to banks that have CASA which provides them access to less costly credit. These NBFCs are dependent on banks to provide them credit, which leads to a greater price of capital which acts as a deterrent to additional lending. So less costly credit produced offered to such NBFCs just like credit is produced offered to NABARD, will go a extended way in augmenting the Agri sector. The very best-case situation right here would be the formation of an Agri Bank which lends to such firms with all due checks and balances, will go a extended way in aiding the development of the Agri financing NBFCs.
(Sandeep Sabharwal is CEO, SLCM Group. Views expressed are the author’s personal.)