Boosting farm credit in Assam

 The National Bank for Agriculture and Rural Development (NABARD) has projected 9 per cent higher credit potential for Assam for the financial year 2023-24. Agriculture and allied activities are projected to receive Rs 19,993 crore (31 per cent) of the total anticipated credit potential estimated at Rs 39,636 crore. Bridging the gap between operational land holdings and operative Kisan Credit Cards (KCC) will be crucial to ensure that more farmers are able to avail farm loans for agriculture and allied activities from the formal credit markets. Agriculture providing livelihood support to about 70 per cent of the state's population increased flow of easy crop loan from formal credit markets can help augment household income of over 27 lakh farm families through increasing production and productivity. Paddy is the principal crop and is grown on 24 lakh hectares but 85 per cent of farmers are small and marginal with operational holding of only 0.36 hectare. Small landholdings coupled with increasing risks of crops loss due to flood or erosion are critical factors on demand side of farm loans in the state. Better coverage of crop insurance can insulate the farm families from financial shocks due to crop loss and also boost confidence in availing farm credits to invest in purchase of quality seeds, farm mechanization support, fertilizers, and irrigation to boost production. Apart from meeting short-term requirement of cultivation, objectives of the KCC scheme also include providing the farmer adequate and timely credit through single window system for meeting post-harvest expenses and produce-marketing loan. The level of financial literacy of small and marginal farmers plays a crucial role in motivating farmers to approach banks and other financial institutions for loans. Reserve Bank of India (RBI) data shows that number of operative KCCs in Assam decreased to 6.58 lakh from 7.37 lakh. Apart from meeting the gap of over 18 lakh KCC coverage, increasing the number of operative cards is essential to increase investment in agriculture sector by channelizing more credit to this priority sector. Formation of Famers Producers Organization (FPO) can help aggregation of small and marginal landholdings and thereby reduce financial risk of individual famers. The Union Budget for 2022-23 announced the Formation and Promotion of 10,000 FPOs in the country by 2023-24 and one of the objectives of this Central sector scheme is to enhance productivity through efficient, cost-effective and sustainable resource use and realize higher returns through better liquidity and market linkages for their produce and become sustainable through collective action.The scheme also aims at providing handholding and support to new FPOs up to five years from the year of formation in all aspects of management of FPO, inputs, production, processing and value addition, market linkages, credit linkages and use of technology etc. The FPOs need to undertake, among others, supply of quality production inputs like seed, fertilizer, pesticides and such other inputs at reasonably lower wholesale rates, make available need based production and post-production machinery and equipment like cultivator, tiller, sprinkler set, combine harvester and such other machinery and equipment on custom hiring basis for members to reduce the per unit production cost. Besides, the FPOs are also expected to make available value addition like cleaning, assaying, sorting, grading, packing and also farm level processing facilities at user charge basis on reasonably cheaper rate, storage and transportation facilities, undertake aggregation of smaller lots of farmer-members' produce, add value to make them more marketable and facilitate market information about the for judicious decision in production and marketing. Lack of capacity for value addition and such crucial market information keep small and marginal farmers away from formal credit markets which explain under-utilization of credit potential in the state. In north-eastern and hilly regions FPOs need to have minimum 100 members which makes formation of FPOs easier compared to other regions in which minimum 300 members are required. Despite the flexibility in norms, Assam has so far registered about 100 FPOs and this shows huge potential of increasing farm credit as well as increasing production, productivity and market access of small and marginal farmers that can be unlocked in the state. Irrigation coverage is another factor that comes in the way of small and marginal farmers from increasing investment in rain-dependent farming that involves risks of crop failure. Climate extremes such as very large excess rainfall when the famers need less amount rainor huge deficit in rainfall when the farmers need sufficient and normal rainfall have increased the vulnerability of farmers in the state. Improving irrigation coverage is crucial to reducing such risks and motivating farmers to practice multi-cropping and experimenting high yielding varieties. Early completion of digitization of land records will increase credit eligibility of farmers for agriculture and allied activities. The Agriculture Department, banks and other financial institutions addressing these issues will be a critical for increasing the capacity of Assam farmers to absorb more credit.