Centre eyes ₹1 trillion boost for farm infrastructure in Budget to cut crop loss

The move aims to accelerate the creation of post-harvest infrastructure and reduce farm-level losses, particularly in perishable crops.

The proposal also underscores the government’s efforts to make agricultural infrastructure a cornerstone of farm sector reforms, at a time when agriculture and allied activities account for about 18% of India’s GDP and employ nearly 46% of the workforce.

The AIF, announced as part of the ₹20 trillion pandemic stimulus package, currently has a loan support ceiling corpus of ₹1 trillion. Under the scheme, banks and financial institutions provide loans for eligible projects, with the Centre offering a 3% interest subvention on loans of up to ₹2 crore for a period of seven years, along with credit guarantee cover for loans of the same amount. Beneficiaries must contribute at least 10% to the project cost.

While the AIF is operational from 2020-21 to 2032-33, loan disbursements under the scheme was made only for six years, until FY 2025-26.

Since its launch in July 2020, more than ₹1.18 trillion has been sanctioned across 146,106 projects nationwide as of 24 December.

The ₹1.18 trillion figure refers to the total project cost incurred by entrepreneurs, and not just the portion eligible for interest subvention. Since the government support applies only to the loan component—and not the entire project cost—the cumulative value of projects sanctioned under the AIF can exceed the fund’s loan ceiling.

Banks have sanctioned loans of ₹78,743 crore, while actual disbursements stand at about ₹57,608 crore as of 24 December.

The gap between sanctions and disbursements reflects the progressive nature of lending under the scheme. While loans for asset purchases such as tractors are disbursed upfront, funding for construction-related projects—such as warehouses or cold storage facilities—is released in phases, in line with project progress.

"Agriculture and farmers welfare ministry has proposed that the unutilised allocation of around ₹20,000 crore ( ₹21,257 crore on 24 December), along with the fresh ₹1 trillion, should be provided through budgetary allocation," said one of the two people cited above, requesting anonymity.

If approved, the fresh allocation would be introduced as a new tranche with annual allocations released each year.

Tackling post-harvest losses

The proposal comes amid rising concerns over post-harvest losses. Government estimates suggest that around 6% of crops in India are lost after harvest, including fruits and vegetables.

According to the Indian Council of Research on International Economic Relations (ICRIER), India incurred annual post-harvest losses of ₹1.53 trillion ($18.5 billion) from 2020 to 2022, primarily due to crops and agri-allied produce.

The additional funding would be directed primarily into farm-gate storage, warehousing, and modern logistics, enabling farmers to store produce for longer periods and sell at remunerative prices. "By strengthening post-harvest infrastructure, the government expects to minimise losses, improve price realisation and reduce farmers’ dependence on intermediaries," said the first person.

Maharashtra, Madhya Pradesh, Uttar Pradesh, Punjab and Gujarat are the largest beneficiaries of the scheme. In these states, AIF financing has been used to set up custom hiring centres for farm machinery, as well as primary processing units, warehouses, cold chains and collection centres to strengthen value chains.

Queries emailed to the spokespersons of the ministries of agriculture and finance on Wednesday remained unanswered till press time.

Execution and impact

Experts said the scheme has gained momentum, but noted that execution is key.

"In its first five years, AIF has expanded in scale. Going forward, it will be important to sustain this momentum by ensuring that disbursements keep pace with sanctions, and that challenges faced by smaller borrowers, around awareness, access to credit and execution capacity, are effectively addressed," said Sushma Vasudevan, APAC lead, managing director and partner, agriculture practice at Boston Consulting Group.

“The scheme has created momentum, and its long-term impact will depend on deeper and more consistent on-ground implementation."

The fund benefits farmers primarily by reducing post-harvest losses, enabling better price realization, and stabilizing farm incomes, said Shubhra Suman, assistant professor, department of economics, Maitreyi College, Delhi University. "By financing scientific storage, cold chains, grading, and processing facilities, the scheme helps farmers avoid distress sales immediately after harvest and facilitates value addition closer to the farm gate," Suman added.

Data from the agriculture ministry shows that projects approved under the scheme include 41,625 custom hiring centres, 23,155 farm and harvest automation projects and 17,585 warehouses. The fund has also sanctioned 4,095 sorting and grading units for horticulture produce and 2,775 cold storage assets as of 24 December.

The scheme’s beneficiaries say such investments are critical for improving supply chain efficiency, stabilising prices during harvest gluts and enhancing farmers’ incomes in the long term.

"The renewed push through a larger outlay is expected to further accelerate the development of decentralised storage, primary processing units, cold chains and value addition facilities closer to farms," said Puneet Singh Thind, founder & director, Northern Farmers Mega FPO, a federation of farmer producer organizations from northern states.

“These storage facilities are helping farmers cut wastage and sell produce when markets are favourable," said Amrit Singh, a farmer in Rauli village of Punjab’s Ropar district.