A hearty Welcome fromMaheshchandra Pathak

AGRIBUSINESS

AGRIBUSINESS - Bankers’ point of view

A hearty Welcome fromMaheshchnadra Pathak

AGRIBUSINESS

PREAMBLE

In view of technological break-through in agriculture, a transformation from traditional to a commercial oriented developed agriculture is eminent. This situation creates need for capital investment in agriculture, besides creating working capital requirement in production, marketing, processing etc of the farm produce .

So, there is, and will be, everlasting- DEMAND for this production credit That is Agribusiness for the Banks

FACTORS INFLUENCING PRODUCTIVITY

Preparing land for cultivation Use of improved planting

materials like seeds etc. Provision of irrigation facilities Prevention of Soil Erosion/ Soil

treatment/Soil reclamation Use of Manures & Fertilizers Plant Protection/Harvesting/Post

harvest activities/Storage/Marketing

Purchase of machinery/implements like Tractors/Threshers/Planters/ Harvesters

Implements to facilitate post-harvesting processing like

grading/packing/Transport of farm produce Creation of MINOR Irrigation (source for

water/ water lifting device) Prevention of Soil Erosion/ Soil

treatment/Soil reclamation PLANTATION/HORTICULTURE Storage/Processing/Marketing

FOLLOW-UP

First follow up inspection should be conducted at the time of sowing of the Crops. The visiting official may also suggest the modern farming techniques of raising the particular crop if needed.Second follow up inspection should be conducted one and half months after the sowing and in the middle of the cropping stage in case of Sugarcane and other long duration crops.

Third follow up inspection should be conducted at the time of harvesting and marketing of the Crops for recovery of loan

In case of failure of crops due to adverse seasonal conditions, it should be examined whether the Crop Loans can be converted into Term Loan and suitable decision should be taken immediately.

Main Crops and their Seasons

Season Period Sowing period

Harvesting period

Principal Crops

Kharif May to October

Generally at the beginning of Southwest Monsoon

At the end of South west monsoon (Sept. to Oct. May continue till January)

Paddy, Jowar, Bajra, Ragi, Groundnut, Maize, Sugarcane (duration period 10-18 months Eksali/Adsali crops), Cotton, Tobacco

Rabi Mid Oct. to Mid April

At the beginning of Cold weather

Feb. to April (May continue till May in some cases)

Wheat, Barley, Gram, Mustard, Peas, Potato, Pulses and oilseeds

Zaid Beginning of Feb. to Beginning of May

At the beginning of Hot weather

Mid April to May (May continue up to June in some cases)

Cucurbits, Jowar, Maize

FACTORS INFLUENCING Viability

On-farm activities

There should be reasonable certainty that the farmer will be able to derive the optimum returns with existing/proposed infrastructure. The Branch should have the basic information about the crops generally grown seasonally in the area, inputs required and their supply, cost of cultivation under irrigated/dryland condition and their yields.

Suitability of soil and climatic conditions.

Irrigation facilities Availability of required inputs. Yield of the Crop Whether the proposed package of

practices of particular crop conform to the recommendations of Department of Agriculture.

Availability of processing and marketing facilities for the crops.

The managerial ability of the farmer/borrower

Whether the proposed cost of cultivation of crops is realistic and in conformity with scale of finance fixed by the District Level Technical Committee

Cost of inputs and realizable income should be worked out on the basis of the ruling prices for the past 2-3 years and keeping in view the Government policy (Minimum Support Price) in this regard

The estimates of production should be realistically worked out for an average season and not under ideal conditions.

While working out the economics of a farm holding generally, 50% of the gross income may be expected to be available for repayment out of which 2/3rd could be treated as available for crop loan and 1/3rd for Term Loan installment.

KISSAN CREDIT CARDS(Short-term working capital)

What is it? A single window credit facility for

providing adequate and TIMELY credit to farmers for meeting their cultivation and other requirements as:▫ Cost of cultivation▫ Post harvest expenses▫ Consumption requirements for farmers’

household▫ Maintenance of farm assets, and activities

allied to agriculture

To whom?▫ All eligible, willing, non-defaulter farmers

residing within the command area.▫ Individual/ Joint borrowers who are owner

cultivators ▫Tenant farmers/ Oral lessees & share

Croppers.▫ SHG or JLG farmers including Tenant farmers/

Oral lessees & share Croppers

Eligible amount In respect to farmers growing Single Crop

▫ Cost of cultivation as approved by District Level Technical Committee (a)

▫ Add 10% of (a) above for post-harvest/ household consumption requirement of the farmer (b).

▫ Add 20 % of (a – as discussed above) towards expenses related to repairs and maintenance of farm assets, Insurance of Crops/ assets/PAIS (c)

SUM TOTAL OF (a)+(b)+(c)= LIMIT of KCC for 1st YEAR (d)

Eligible amountIn respect to farmers growing Single Crop

Limit as arrived at (d) { – discussed earlier } shall be taken as the basis for arriving at limits for 2nd year onwards.

▫10% addition of (d) may be taken as limit for 2nd year and similar process can be replicated up to 5th year.

Eligible amountIn respect to farmers growing Single Crop

Limit as arrived at (d) { – discussed earlier } shall be taken as the basis for arriving at limits for 2nd year onwards.

▫10% addition of (d) may be taken as limit for 2nd year and similar process can be replicated up to 5th year (e).

Eligible amountIn respect to farmers growing Multiple Crops

Same procedure to arrive at Limit for rest of the period as arrived at (d) { – discussed earlier } depending upon the crops proposed to be cultivated

Rest as discussed at (e)

IT IS ASSUMED THAT FARMER (BORROWER) ADOPT THE SAME CROPPING PATTERN FOR THE REMAINING PERIOD OF 4 YEARS. IF CHANGED –

THE LIMIT IS TO BE RE-DONE

ILLUSTRATION (I)FOR ARRIVING AT KCC LIMIT

(Mono-crop)Assumptions: Land holding 1 acre Crop Kharif Paddy DLTC has decided Cost of cultivation ` 11,000.00

per acre

Assumptions: Land holding 1 acre Crop Kharif Rabi DLTC has decided Cost of cultivation ` 11,000.00

per acre

Particulars Amount

Cost of Cultivation Component 11,000.00

Add 10% towards post harvest/ HH exp 1,100.00

Add 20% towards farm maintenance 2,200.00

Sub-Limit for 1st year (Y-1) 14,300.00

Sub-Limit for 2nd Year

Add 10% in Y-1 (` 14,300.00 + ` 1,430.00) (Y-2)

15,730.00

Similar procedure for Y -3, Y -4; and Y -5

Final Limit ( ` 20,930.00), Say 21,000.00

ILLUSTRATION (II)FOR ARRIVING AT KCC LIMIT

(Multiple-crops)Assumptions: Land holding 10 acre Crop Kharif Paddy (5 acre) Sugar cane (5 acre)

Rabi Groundnut (5 acre) DLTC has decided Cost of cultivation ` 11,000.00,

` 22,000.00 & ` 10,000.00 per acre respectively

Assumptions: Land holding 1 acre Crop Kharif Rabi DLTC has decided Cost of cultivation ` 11,000.00

per acre

Particulars Amount

Cost of Cultivation Component 2,15,000.00

Add 10% towards post harvest/ HH exp 21,500.00

Add 20% towards farm maintenance 43,000.00

Sub-Limit for 1st year (Y-1) 2,79,500.00

Sub-Limit for 2nd Year

Add 10% in Y-1 (` 2,79,500.00 + ` 27,950.00) (Y-2)

3,07,450.00

Similar procedure for Y -3, Y -4; and Y -5

Final Limit ( ` 4,09,200.00), Say 4,09,000.00

FACTORS INFLUENCING Crop Insurance

(Issues are state specific)

• Compulsory for all loanee farmers availing Seasonal Agricultural Operations loans for Notified crops in notified area up to the availed loans amount during specific period as notified by the state.

• Optional coverage beyond loan amount may be considered. They will be treated at par with Non-loanee farmer w.r.t the cut off dates.

• Proof of land holding, Crops shown must for all cases.

•Premium subsidy – 10% for farmers having Land Holding of 2 Ha or less.

•For Seasonality Discipline is related to Cut off date for submitting the proposal and Loaning period eligible for coverage of all notified Crops.

•For loanee farmers minimum sum insured will be the crop loan component of KCC availed and normal rate of premium

• For Non-loanee farmers normal rate of premium will be applicable up to the value of threshold yield and if farmer wants to extend the insurance up to 150% of value of average yield, then for balance amount, actuarial rate will be charged.

• Premium charged is normally 2.50% to 3.50% (For Vegetable like Onion may go up to 5.05%)

• Maximum coverage is 150% of Average yield • Other factors are – Level of Indemnity

(normally 60-80%), Threshold yield etc.

FARM MECHANIZATION

FACTORS CREATING A NEED•Availability of Farm Labor (After effect of

MNREGS)•Deep ploughing/

Harrowing/Puddling/Thrashing Transport/ Hiring

•15 to 60 HP•Nature of soil, Particulars of farm

operations, Cropping patern, Crop type

FACTORS INFLUENCING Viability of the Project

• Income from own farm and transportation

• Income from hire• Income from transportation of agricultural

produce• Saving from Labor cost• Fuel/ Salary/ Maintenance & depreciation• Must be used at least 1800 hours in a year.

DAIRYING

Dairying plays an important role in the development of agricultural economy of our country. Arrangements for cross-breeding through A.I of exotic breeds with establishment of organized milk collection, processing and distribution have encouraging effects.

BREEDSBUFFALOES: Murrah, Jaffarabadi, Nilli Ravi, Mehsana etc.COWS: Holstein Friesian, Jersey, Red Dane, Sindhi,

Tharparkar, Hariana, Sahiwal, Ongole, Gir, Kankrej etc.

Murrah is the most efficient milk with butterfat producer in the country. A massive, medium, sized, deep framed, black animal with tightly curved horns. Average lactation is 1360 – 2250 Litres, (Normally 6-8 litres per day) with around 7% fat. Individual yielding up to 3,200 litres is not UNCOMMON.

CHARACTERISTICS

Holstein Friesian normally yields 25 litres a day, while Jersey yields around 8-10 litres a day.

While selecting any milch cattle, we need

prefer the animal who have wedge shaped appearance – Black sparkling eyes, lean neck, udder should have a good network of blood vessels. All four quarters of the udder should be well demarcated and well placed teats

FACTORS INFLUENCING Viability of the Project

LOCATIONo Whether the environmental and climatic factors

suitable for Dairying?o Proximity to marketing center and availability of

affordable transport facilities.o Availability of Veterinary assistance/fodder/feed.o Water supply

EXPERIENCE Past experience If existing, strength of dairy animals, their breed,

age, value, health, dry or milching.

Consumption pattern - potential Milk-route/Chilling Plant/ Processing

Plant Fodder/Feed/Vet Micro/Macro climate

PROPOSALo Whether the shed (if exiting – what type – face to

face or tale to tale) is adequate to accommodate the existing as well as proposed animals?

o Capital expenditure on building/equipment/animals

o Estimates for feed and maintenanceo Who is going to manage (self or expert?)o Marketing (strategies/target group/innovation)o Economics – net surpluso What are the stakes of the promoter?

Assumptions to arrive at Economic Viability

Income from sale of milk 380+180 days (2 instalments to maintain the continuity)

Income by sale of FYMIncome by sale of CalfTotal receipts – Total requirements – Interest –

Principal – Cattle Risk Fund (Suggestive only 25 paise per litre) = Net surplus

During Dry period – may be reduced

POULTRY

For Egg production (Layers) For Meat production (Broilers) For DoC (Hatcheries)

Layers Housing and purchase of DoC sexed with female

chicks, brooding them for nearly 4 weeks, rearing them as growers from 5 to 22 weeks, feeding and maintaining them as Layers, collecting, packing and marketing of eggs upto 52-53 weeks, then culling of birds for meat purpose.

Broilers

Housing and purchase of DoC for meat purpose, feeding and rearing them up to 8 weeks, before their meat becomes fibrous.

Hatchery Highly sophisticated, requires considerable

amount of expertise and technical know-how. Aim is to produce fertilized eggs and hatch them under controlled climate for getting only desired type of chicks true to the type. Involves rearing of male and female, parents for production of fertilized eggs, grading them for their suitability for hatching, testing during hatching and finally producing only healthy desirable and true to the type Chicks.

Hatchery Take off point of poultry farming is DoC which is end product of the

Hatchery unit. Hatchery precedes poultry farming. Parent stock should have a combining ability that the efficiency of egg/meat production of their progeny is as desired by the farmer/consumer. The success of hatchery depends on care taken in selecting the parent male/female stock. Any error made in making the choice of parent birds cannot be compensated by any other measures taken at a subsequent stage. The parent stocks are to be reared properly so that their level of egg production is always the Best. All the eggs that are produced however are not suitable for hatching, as the embryo might not be of appropriate size to develop into a chick of high productivity. The eggs are required to be in settlers for 18 days and hatchers for 3 more days for getting chicks culling of week lings and sexing where necessary inoculation is done in the DoC before marketing.

Items of finance

Capital Investment: Construction of shed Poultry equipments/Transport arrangement Egg grading/storing room Internal roads Staff quarters Fencing

Working Capital requirements DoC Feed Vaccines/Medicines Salaries & Wages Electricity/other office exigencies

FACTORS INFLUENCING Viability of the Project

Proper layout – avoid heat wave/strong wind and proper ventilation

DoC during brooding require additional heat.

Layers generally need 17 hours light Feeds – one of the most important

ingredient – Chick-mesh (0-4 weeks), Grower-mesh (5-22 weeks) Layer-mesh after it starts laying. On an average for the first 22 weeks feed requirement is 10 Kg per bird, 40-42 Kg during Laying period.

Location of the project Availability of clean water Uninterrupted power supply Availability of all inputs

(Doc/Feed/Power/ Labor/Veterinary aid/transport) at a reasonable price.

Laying begins by 18th week and reaches its peak in the 28th week. Average production may be safely taken around 80 % during the laying period of 12 months.

ASSUMPTIONS

Economic Viability Construction of shed and building:

Grower/Brooder house 1000 sft for 1000 birds Layer house 2000 sft for 1000 birds Store 20’X10’ Electrical installations Water connection/arrangements

Equipments Brooders/Waterers/Feeders/Laying pan etc.

Assumptions

Income from Sale of eggsIncome from Sale of droppingsIncome by sale of culled BirdsIncome by sale of gunny bags

FISHERIES

We have considerable potential for development of both marine and inland fisheries. More than 5000 KM of coastline for marine fishing. Small water areas comprising ponds and tanks cover around 15 Lakh ha. Reservoirs and lakes provide another 20 Lakh ha of cultivable water. This is in addition to long stretch of rivers, irrigation canals and brackish water lakes and esturies which also support fish life of different varieties.

Fish and fish products are cheapest source of animal protein in Indian economy. It provides employment to fishermen, traders, mechanics, transport operators and others. Valuable FX is earned from export of Prawns/Lobsters/Tuna/ Pomfrets/Frog legs/Canned/dried fish etc. Deep-sea Lobsters/Shrimps are in high demand in international markets

MARINE FISHERIES

Inshore Fishing Offshore Fishing Deep sea Fishing

Inshore Fishing Up to 10 fathoms from the sea coast – usually not

mechanized, Small sonnies, sea boats, catamarans are used for inshore fishing

MARINE FISHERIES

Offshore Fishing Fishing in areas between 10-40 fathoms depth.

Wooden boats (25-50 ft in overall length with 30-70 BHP engines) are used.

Deep-sea Fishing Fishing beyond 40 fathoms. Larger sized boats more

than 50 ft engines of 200 BHP (Normally 7-10 days voyage) equipped with adequate storage of catch/ fuel/ fresh water and insulated for storage of ice frozen fish etc.

OBJECTIVE

• Improvement of socio-economic standard of traditional fishermen

• Entrepreneur must have requisite expertise, sufficient experience, technical know-how.

• Items for finance are acquisition of boat/trawler/ accessories etc.

• Reclamation/ Repair of derelict Tanks/ marshy lands / Fallow areas

• Raising of nurseries for fingerlings of commercially suitable species of fish

OBJECTIVE

• Transport/ Storage/ Ice plants/ Packaging arrangements/ Refrigerated vans/ Marketing outlets

• In case of inland Fish Farming factors like seasonal or perennial. Source of water supply, Vegetation in the pond, area of pond, source of fish seed supply (stocking – intensity), Technical supervision.

• Being highly perishable – must be marketed without any loss of time.

HORTICLTURAL ACTIVITIES

Horticulture includes cultivation of garden crops which include fruits, flowers and vegetables

Fruits cultivation (fruits - like Mango, Apple, Jackfruit, Banana, Grapes, Pineapple, Guava, Papaya, Ber (Zyzyphus), Citrus crops Lemon, Oranges,

Kinnow, Pomegranate, Litchi, Pear, Plum, Loquat, Strawberry, Avacado, Gooseberry(Aaonla) has

become a highly remunerative enterprise for farmers.

Plantation Crops like Cashew, Coffee, Rubber, Tea, Palmoil etc. fall in separate category.

The natural resources of the country like agro-climatic and soil factors provide a good base for cultivation of variety of fruits. We classify them as under:

TROPICAL – Mango, Citrus, Banana, Guava, Papaya, Pineapple, Sapota, Jackfruit, Custard apple, Ber, Jamun, Avacado, Aaonla etc.

Sub-Tropical – Litchi, Loquat, Pomegranate, Grape, Fig etc.

TEMPERATE – Apple, Pear, Peach, Plum, Apricot, Cherry, Strawberry etc.

CREDIT NEEDS (Items of Investment)

FOR HORTICLTURAL ACTIVITIES

The orchardist farmer would normally need funds both in the pre-bearing and bearing stages in the form of Long Term and Short Term credit. The borrower incurs expenditure in the form of recurring and non-recurring expenses during growing period, both at pre-bearing and bearing stages.

Pre-bearing stages (Non-recurring expenses)

Preparation of site/land Cost of layout including drip/sprinkler irrigation

fencing/grading/sorting/storage Digging and filling of pits Cost of manures/fertilizers Cost of planting materials Cost of equipments need for plant protection/

maintenance/grading/sorting/processing/packing/ transportation

Pre-bearing stages (Non-recurring expenses)

(The expenses will increase every year with the increase in size and age of the plant)

Cost of maintenance in pruning and training. Power/Fuel Labor charges on hoeing and other operations Cost of supervision Post-harvest expenses Marketing expenses

FACTORS INFLUENCING Viability of the Project

The site should be in a well established fruit region, so that local experience is available.

The site should be free from frost and hails. Chicku, Mango in early stage of growth, Papaya, Banana cannot withstand frost.

Sub-soil should be fertile and free from hardpans so as to ensure good growth of plants. Papaya, Peach, Citrus are susceptible to water logging. Fruits like Phalsa, Pomegranate, Guava can also be grown on Saline and Alkaline soils.

Whether the irrigation facilities available are adequate. If not, what arrangement could be made for developing the same?

Whether the choice of variety, layout and spacing is appropriate to the situation? Availability of adequate planting material of true to the type be ensured. Better alternative is units of State/Central Horticultural Department’s own nursery.

Appropriate choice of inter-crops from their compatibility with main crop as well as their profitability, and the period during which inter-cropping could be practiced profitably.

Estimate of a realistic production in relation to the existing level, Possible increase as a result of following certain recommended/accepted practice. Estimates of annual production from maiden crop onwards (on an increasing scale according to increase with growth of plants), up to the stabilization period.

Arrangements for packing/storage/transport/ marketing

Year wise estimates of costs on inputs and labor for raising and maintaining the plantation throughout the gestation period, based on the current prices and giving allowance for future escalation and estimate of costs for normal maintenance of the developed orchard.

ADEQUATE PROVISION OF PERSONNEL FOR GUIDANCE AND SUPERVISION DURING IMPLEMENTATION OF THE PROJECT IS A MUST

The site should have perennial source of irrigation, very particularly during initial growth of plants.

All fruits do not grow at all altitudes. Apple, Walnut, Cherries are best grown in between 4000-9000 ft above mean sea level. Citrus, Litchi, Mango cultivation above 2000 ft above msl may find difficult to acclimatize.

Only grafted or propagated through tissue culture plants/saplings should be preferred over those propagated through seeds.

Reliability with regard to the age of the plants and genuineness of variety is very important. Therefore, only reliable nurseries should be approached for the plants.

The borrower should ensure the availability of planting material well in advance of the planting season (Monsoon or Spring)

Monsoon season is suitable for Mango, Guava, Citrus etc, while Spring season is suitable for Apple, Peach, Plum, Apricot, Cherry etc.

An orchard near brick kiln often get affected due to fumes and should be avoided.

Plant protection measures should be assured. A very serious problem in fruit cultivation is protection against birds, squirrels and monkeys. Any devise to control the same will increase the cost of production – NO DOUBT- but is a must to maintain the quality and quantity.

The borrower should have good knowledge of pruning, particularly in case of deciduous fruit plants like Apple, Almond, Apricot, Peaches etc. Any wrong pruning by the farmer might delay or reduce the quantity and quality of fruits , and thereby his income.

Spacing and system of planting should be ascertained. Generally Square system of planting is preferred.

Marketing of fruits are the biggest challenge. It must be arranged as early as possible. Cold chain, good transport, vicinity to market, Post harvest processing can only help.

Fruits Row to Row Plant to plant No. of plants per acreDistance in feet

Mango/Litchi/Chicku

30 30 48

Citrus/Guava 20 20 108

Banana 05 058 1742

TONNES OF THANKS fromMaheshchandra Pathak

AGRIBUSINESS