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HomePosts Tagged "impact of contract farming on the livestock sector."
AgroPolicy, Animal Health, Finance, India, Live Stock, Schemes - Govt

Scheme to act as a key enabler and risk mitigation measure for lending institutions and enabling collateral free funding to livestock sector.

Department of Animal Husbandry & Dairying, Ministry of Fisheries, Animal Husbandry and Dairying is implementing the Credit Guarantee Scheme under Animal Husbandry Infrastructure Development Fund (AHIDF) to strengthen credit delivery system and facilitate smooth flow of credit to the Micro, Small & Medium Enterprise (MSMEs) engaged in Livestock sector without hassles of collateral security. For operationalizing the scheme, DAHD has established a Credit Guarantee fund Trust of Rs 750.00 crores, which will provide credit guarantee coverage up to 25 per cent of the credit facilities extended to the MSMEs by the eligible lending institutions.

The credit guarantee scheme facilitates access to finance for un-served and under-served livestock sector, making availability of financial assistance from lenders to mainly first-generation entrepreneurs and under privileged section of society, who lack collateral security for supporting their ventures.

The main objective of the Credit Guarantee Scheme is that the lender should give importance to project viability and secure the credit facility purely on the basis primary security of the assets financed.

The establishment of credit guarantee fund trust was approved under the Prime Minister’s AtmaNirbhar Bharat Abhiyan stimulus package of Rs.15000 crores“ Animal Husbandry Infrastructure Development Fund” (AHIDF) for incentivizing investments by individual entrepreneurs, private companies, MSMEs, Farmers Producers Organizations (FPOs) and Section 8 companies to establish (i) the dairy processing and value addition infrastructure, (ii) meat processing and value addition infrastructure, (iii) Animal Feed Plant, (iv) Breed Improvement technology and Breed Multiplication Farm (v) Animal Waste to Wealth Management (Agri Waste Management) and (vi) Setting up of Veterinary Vaccine and Drugs Manufacturing facilities.

One of the key features of the AHIDF scheme is the establishment of a Credit Guarantee Fund Trust of Rs. 750.00 Crores. DAHD has formed a trust with NABSanrakshan Trustee Company Private Limited, a wholly owned subsidiary of NABARD for the establishment of a Credit Guarantee Fund Trust for extending the credit guarantee to Micro, Small & Medium Enterprises under AHIDF scheme. This fund trust established in March 2021 is the Nation’s first ever fund trust under Credit guarantee scheme of AHIDF in the agriculture and Animal Husbandry sector and is a path-breaking initiative taken by DAHD which would exponentially increase the number of MSME units getting benefits of AHIDF scheme and strengthen the ecosystem for the collateral-free credit from the banks.

The credit guarantee portal has been developed as a rule based B2B portal and implemented the enrolment of eligible lending institutions under Credit Guarantee Scheme, issuance/renewal of credit guarantee Cover and settlement of claims.

Notably, the initiative of credit guarantee scheme taken by DAHD is expected to greatly increase the participation of MSMEs engaged in livestock sector leading to increased flow of credit to the sector and strengthen the MSMEs to boost the overall rural economy through strengthening the Livestock sector which is of one of the most potential sectors seeking development.

Scheme to act as a key enabler

India, Industry Reports / Analysis, Live Stock

Improved production efficiency, commercial culture development, increased revenue and employment are all possible through contract farming as it provides credit, technology, inputs, information, extension services, and risk mitigation to farmers. In addition, the provision of an assured market through contract farming is seen as an extremely useful benefit. Let us now examine the impact of contract farming on the livestock sector.

In the 1960s, contract farming emerged in India’s seed production sector throughout states; by the 1990s, it had spread to other farm goods in places like Punjab and Haryana, where companies like Pepsi Foods were cultivating tomatoes, chilies, and potatoes under contract. Currently, private domestic and international enterprises for internal processing or export mostly dominate contract farming in India. The practice is ubiquitous across crops and livestock, states, and agencies (public, private, and multinational). The government of Arunachal Pradesh has recently extended an invitation to large corporations like Reliance, Adani, and Patanjali to begin contract farming and a buy-back policy in the state.

The farmers in our country have to contend with a number of issues, including the use of antiquated equipment and management techniques, weak negotiating positions with input suppliers and produce markets, a lack of infrastructure and market information, a dearth of management expertise, a subpar packaging of goods, and a shortage of funds to raise high-quality livestock.

Contract farming can be viewed as a way to entice the private sector to deploy some of its considerable resources to solve these issues. Improved production efficiency, commercial culture development, increased revenue and employment are all possible through contract farming  as it provides credit, technology, inputs, information, extension services, and risk mitigation to farmers. In addition, the provision of an assured market through contract farming is seen as an extremely useful benefit.

Uplifts small farmers

Small farmers who are highly vulnerable to risk can especially gain from contract farming since it allows them to buy milking animals, boost output, and ride the wave of market-driven expansion. Farmers’ revenues will increase to their full potential, and their exposure to production-related risks, transfer price risks, and output hazards will be minimised with the use of contracts.

Elaborating further on this concept of contract farming, Narendra Pasuparthy, Chief Farmer, CEO & Founder, Nandu’s said, “Although contract farming in India has been prevalent for several decades, a legal framework on farming agreements came into force only in 2020. In the livestock sector, this has paved the way for greater investments, creation of new markets, and better financial security for the farmers. At Nandu’s, we envisage a promising future for this collaborative approach. Since our inception in 2016, Nandu’s has been making conscious efforts to build a steady source of livelihood for the farmer community. Currently, we have 300 farmers who work exclusively with Nandu’s. Integration farming contracts ensure that our farmers are exposed to zero risk – despite the unpredictable market conditions and other factors affecting production efficiency.”

To read more click on: https://agrospectrumindia.com/e-magazine

Improved production efficiency, commercial culture development, increased