A Presentation on EMERGING OPPORTUNITIES IN AGRICULTURAL FINANCE By Sri S S BHAT

1. A Presentation on EMERGING OPPORTUNITIES IN AGRICULTURAL FINANCE By Sri S S BHAT General Manager Priority Credit & Financial Inclusion Wing, H.O. Bangalore

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. Contd….. • 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

4. Agri credit-as enabler of increased farm productivity 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

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. STRATEGIES FOR INCREASING AGRICULTURE LENDING • 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.

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. STRATEGIES FOR CHOOSING PROJECTS 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.

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. FINANCING OPPORTUNITIES Contract Farming / Tie-up arrangements • Sugar cane • Cotton • Broiler Poultry • Seed Production • Grapes • Vegetables • Gherkins • Dairy • Aqua Ventures • Spices Processing • Rubber Farming • Winery Units

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.