A Presentation

on

EMERGING OPPORTUNITIES IN EMERGING OPPORTUNITIES IN AGRICULTURAL FINANCEAGRICULTURAL FINANCE

By

Sri S S BHATGeneral Manager

Priority Credit & Financial Inclusion Wing,H.O. Bangalore

1

2

Overview of Indian Agriculture

.

Our Food Production has been stagnating since 2001-02

It is time we started the next round of green revolution

Agri Business and Agri Processing should drive the second round of “Green revolution” with diversification of crop production

Developed countries have converted their agriculture into Agri-Business

3

India is in the threshold of transforming its Agriculture into Agro-Processing due to;

- Huge emerging domestic market with change of lifestyle of people

- High potential for exports to developing/ developed countries

Agri-Business to create job opportunities in Rural Areas

Contd…..

4

Outline of Issues

Agriculture growth, an urgent priority-Flow of credit to agriculture is critical & closely monitored

Reducing size of land holdings- affecting viability of farming

Poor capital formation at farm level-little credit beyond production credit

Emerging opportunities – give the edge for building viable models

Much criticism-Bank’s predominant short term Production credit & a little term loan

Agri credit-as enabler of increased farm productivity

5

Canara Bank’s initiatives in agricultural finance

• Delivery initiatives- Hi-Tech Agri Finance branches, Agri focus branches

with AEO’s & Agri Finance Cells• Agri-Business Marketing Units Marketing & reaching Corporate managements• Agriculture Consultancy Services

– To provide Consultancy services for formulation/appraisal of projects

– To take up viability study-of existing projects /stimulus/rehabilitation packages

6

Identify borrowers through Extensive Credit Camps.

Cluster Approach to be adopted.

More thrust to Term Loans and investment loans under Agri Projects

Garner Agri-Corporate accounts by involving ABMOs.

Popularise Value Chain Finance, Contract Farming and Hire Purchase of Farm Machineries

Encourage post harvest finance.

STRATEGIES FOR INCREASING AGRICULTURE LENDING

7

Indian Agri- Business as an investment

Corporates – Both Indian and Multinational

–identifying agro processing as an

opportunity.

Scope for Joint ventures with global players.

Huge potential for infrastructure creation

like cold storages, chilling plants, market yards

and handling facilities.

Encouraging Contract Farming including

organic farming.

8

Investment by venture capitals. Channel financing and financing modern

retail outlets

Private Agri -extension initiatives

Organic farming Going for Hi-Tech Agriculture like

Floriculture, Tissue Culture, Aquaculture.

9

Individual would chose a project which…. - Gives more benefit than cost - Maximum rate of return among alternatives - Adequate return in quickest possible time

Banks would choose projects which would....

Give enough incremental income to repay principal & interest

Leave some surplus to improve standard of living of farmers

Give quicker return to borrowers Sufficient Cash Generation for repayment

obligation.

STRATEGIES FOR CHOOSING STRATEGIES FOR CHOOSING PROJECTS PROJECTS

10

Agro Based Industries

Project Financing

Appraisal of Projects & Syndication of Loans

Long term Loans in local currency and foreign currency for buildings, machinery, technology upgradation.

Working capital facilities

Export financing

Term Loans for Upgradation of existing units to adopt modern technology/ Standards

11

Financing opportunities for Commercial Banks

Post harvest management 1/3rd of fruits and vegetables produced in the

country are wasted due to poor cold storage and handling facilities.

Cold Chains – controlled atmosphere cold storages

for fruits and vegetables, Milk chilling plants,

Refrigerated vehicles

Creation of market yards and other infrastructure

Financing quality testing and certifying agencies

Labeling and Packaging industry

12

Food parks with common facilities for storage,

effluent treatment etc.

Finance against goods stored in warehouses – in

association with Collateral Management

Companies.

Bill discounting facilities to agriculturists against

acceptance of Bill of Exchange by the purchasing

company.

Opportunities in price risk mitigation using

commodity derivatives.

13

Contract Farming / Tie-up arrangements Sugar cane

Cotton

Broiler Poultry

Seed Production

Grapes

Vegetables

Gherkins

Dairy

Aqua Ventures

Spices Processing

Rubber Farming

Winery Units

FINANCING OPPORTUNITIES

14

Agro Based Industries

Some examples Seed production Fruits and vegetables processing & Vineries Food grain processing Meat and meat products, Egg powder Marine exports Extraction of oleoresins, Natural dyes Extraction of aromatic compounds Bio fertilizers, Bio pesticides Bio Technology

15

AGRO BASED INDUSTRIES–FOOD GRAIN PROCESSING- Flour Mills, Wheat atta/suji, Rice Mill, Corn flakes

– PROCESSING OF FRUITS & VEGETABLES

- Mango, Pineapple, Litchi, Guava etc. for pulp production with aseptic packaging for

exports

–FREEZE DRYING OF PRODUCTS (IQF) - Potato chips, French fries, Peas, Culinary Herbs

16

WINERY UNITS - French varieties of grapes

SEA FOOD PROCESSING - Tiger prawns, Shrimps & other fish products

PROCESSING OF MILK - Processed Milk, Cheese, Butter, Ice Cream etc.

PROCESSING OF MEAT & MEAT PRODUCTS - Poultry, Lamb, Pork etc

17

Aromatic & Medicinal Plants- Extraction of essential oils / compounds

viz. Ashwagandha, Rosemary, Coleus, Patchouli

Spices & Condiments- Extraction of Oleoresins

Bio Diesel Production - Jatropha, Pongamia

Natural Dyes- Annato

18

POST HARVEST MANAGEMENT- Rural Godowns, Warehouses promoted by Govt.

Cold Chains-Controlled Atmosphere Cold Storages- Milk Chilling Plants- Refrigerated Vehicles

Irradiation Plants – Use of gama rays to improve shelf life - Cereals, Pulses, Meat, Onion, Potato etc.

19

Capital Investment Assistance (Subsidy)

- National Horticulture Board (NHB)

- Agricultural and Processed Foods Export Development Authority (APEDA)

- Department of Agriculture & Co-operation

- National Horticulture Mission

20

To sum up-• Agriculture growth, a priority for an inclusive

growth.• The road ahead offers a promising opportunity as

well as challenge for Indian Agriculture.• The role of banks more specifically the Field level

Officers ( AEOs/ROs) is crucial in providing the much needed credit for capital investment and meeting the need of Rural Poor.

• Visualise the emerging business opportunities and be a proud partner in ushering in another era of excellence in agriculture production.

21