The Indian government is preparing a major financial push for the country's agricultural backbone. According to sources familiar with the matter, the upcoming Union Budget may propose a substantial scale-up of the Agriculture Infrastructure Fund (AIF), with a fresh allocation exceeding ₹1 trillion planned over the next five years.
A Five-Year Plan to Transform Farm Logistics
This ambitious proposal, currently under consideration, aims to accelerate the creation of critical post-harvest infrastructure. The primary goal is to significantly reduce farm-level losses, which are particularly severe for perishable crops like fruits and vegetables. The move underscores the government's strategy to make robust agricultural infrastructure a central pillar of farm sector reforms.
The significance of this sector cannot be overstated. Agriculture and allied activities contribute approximately 18% to India's GDP and provide employment to nearly 46% of the nation's workforce. The AIF was originally launched in July 2020 as part of the ₹20 trillion pandemic stimulus package. It currently has a loan support corpus of ₹1 trillion.
Under the existing scheme, banks provide loans for eligible projects, with the Centre offering a 3% interest subvention on loans up to ₹2 crore for seven years, along with a credit guarantee cover. Beneficiaries are required to contribute a minimum of 10% of the project cost.
Bridging the Gap: From Sanctions to Ground Impact
The scheme has already seen considerable traction. As of December 24, 2025, over ₹1.18 trillion has been sanctioned for 146,106 projects nationwide. However, the actual disbursement of loans stands at about ₹57,608 crore, with total sanctions at ₹78,743 crore. This gap is attributed to the phased disbursement model, especially for construction projects like warehouses and cold storage, where funds are released in stages as the project progresses.
The new proposal, as explained by an anonymous official, involves combining the fresh ₹1 trillion allocation with the scheme's current unutilized allocation of around ₹20,000 crore (₹21,257 crore as of December 24). If approved, this would be introduced as a new tranche with annual allocations.
The need for this massive investment is driven by alarming data on post-harvest losses. Government estimates indicate about 6% of crops are lost after harvest. A study by the Indian Council of Research on International Economic Relations (ICRIER) revealed that India suffered annual post-harvest losses worth ₹1.53 trillion ($18.5 billion) between 2020 and 2022.
Focus on Farm-Gate Solutions and State-Wide Implementation
The additional funding is earmarked primarily for developing farm-gate storage, modern warehousing, and efficient logistics networks. This infrastructure will empower farmers to store their produce for longer durations and sell at more remunerative prices, reducing their dependence on intermediaries.
States like Maharashtra, Madhya Pradesh, Uttar Pradesh, Punjab, and Gujarat have been the largest beneficiaries of the AIF so far. The financing has been utilized to establish custom hiring centres for farm machinery, primary processing units, cold chains, and collection centres to strengthen agricultural value chains.
Data from the agriculture ministry highlights the diversity of projects approved: 41,625 custom hiring centres, 23,155 farm automation projects, 17,585 warehouses, 4,095 sorting and grading units, and 2,775 cold storage assets.
Expert Views on Execution and Long-Term Impact
Experts acknowledge the scheme's momentum but stress that execution is paramount. Sushma Vasudevan of Boston Consulting Group noted that while the AIF has expanded in scale in its first five years, sustaining momentum requires ensuring disbursements keep pace with sanctions. Addressing challenges for smaller borrowers—such as awareness, credit access, and execution capacity—is also crucial.
Shubhra Suman, an assistant professor of economics at Delhi University, explained that the fund benefits farmers by reducing post-harvest losses, enabling better price realization, and stabilizing incomes. By financing scientific storage and processing facilities, it helps farmers avoid distress sales immediately after harvest.
On the ground, beneficiaries attest to the scheme's value. Puneet Singh Thind, founder of Northern Farmers Mega FPO, stated that a renewed push with a larger outlay would accelerate decentralized storage and value addition near farms. Amrit Singh, a farmer from Punjab's Ropar district, confirmed that such storage facilities are already helping farmers cut wastage and sell when market prices are favourable.
The proposal, which awaits final approval in the Budget, represents a long-term vision to fortify India's farm supply chains, minimize waste, and ultimately enhance the economic resilience of millions of farmers across the nation.
