There has been nearly a 54% jump in incorporation of new agribusinesses this year, the most since June when three agricultural laws came into force, even as thousands of farmers protest the changes in policies to liberalise the farm sector.
Agricultural firms are leading a revival in new businesses set up this year, buoyed by the farm laws and a national farm investment firm, as the economy starts emerging from a pandemic-induced slump. New agribusiness registered as companies and limited liability partnerships in 2020 so far, especially since the promulgation of three farm laws, has jumped 53.6%, from 5,104 to 7,840, the highest in five years, according to data from the corporate affairs ministry.
Firms set up in the farm sectors lead the growth of new incorporations following those in manufacturing, overtaking registrations in construction, finance and ‘others’ categories, the data show. Registration of firms under the broader ‘agriculture and allied activities’ category has increased 35%, the highest in any category.
Entrepreneurs are borrowing steadily from the Rs1 lakh-crore Agriculture Infrastructure Fund, part of the first Covid-induced economic stimulus package, to build assets in India’s food supply chain, according to separate data obtained from the agricultural ministry.
The brisk investments by the agri-led firms have been aided by laws aimed at liberalising the agriculture sector, incentivised funding and easing of restrictions on food trading farms, analysts say. Official data shows that 161,589 companies and limited liability partnerships were incorporated from January to November 2020 on the whole, the most after June when the new laws came into force and a nationwide lockdown was lifted. This represents an 8% rise over the corresponding period of 2019.
Investors have so far borrowed Rs1,566 crore from the agri infrastructure fund, showing a preference to invest in long-neglected post-harvest facilities, such as warehouses, cold chains, food grading-cum-sorting units and processing units. The fund was launched by Prime Minister Narendra Modi on August 9.
A deficit of post-harvest infrastructure, crucial for a resilient food-supply chain, causes physical wastage and annual loss of food items worth Rs2.15 lakh crore, according to data from the ministry of food processing.
The fund is designed to address this investment gap because of its concessional rates. Besides the Rs1566 crore disbursed, applications for nearly 10,000 new assets worth another Rs993 crore are currently under evaluation or due to be taken up soon, data till November 5 reviewed by HT showed. All of the country’s 12 public-sector banks and nine private lenders are part of the fund. “The Rs1,566 crore tranche has gone to over 3,000 primary agricultural credit societies or PACS,” an official said, requesting anonymity. PACS are village-level credit cooperatives and therefore the most accessible financial institution for a farmer.
Additionally, PACS have submitted fresh applications for 9,435 infrastructure projects worth Rs690.56 crore. Banks have also picked another 352 applications from other agri-investors for projects worth Rs302.71 crore. The top five states from where investment proposals have been received are Madhya Pradesh (119 applications), UP (46), Bihar (30), Rajasthan (28) and Odisha (22). The fund aims to offer medium-to-long term debt fina-ncing for investment in farm projects and provide loans on totalling Rs1 lakh crore over four years, starting with a sanction of Rs10,000 crore for 2020-21 and Rs30,000 crore each for three financial years. Borrowers get an interest subvention of 3% per annum up to a loan limit of Rs2 crore for a period of seven years.
“The new agricultural laws open up farm trade considerably. The assumption is that a liberalised farm sector will lead to higher private investments,” says Raj Kathpalia, an advisor to Consultative Group on International Agricultural Research.
The laws allow businesses to freely trade farm produce outside the so-called government-controlled “mandi system”, permit private traders to stockpile large quantities of essential commodities for future sales, which earlier only government-approved agents could, and lay down new rules for contract farming. Farmers, however, are protesting the reforms, saying they would make them vulnerable to exploitation by big corporations, erode their bargaining power and weaken the government’s procurement system, under which the government buys staples, such as wheat and rice, at guaranteed prices.