Credit-linked subsidy scheme for agri-horticulture sectors

[ Nongthombam Devachandra ]

The ‘land of dawn-lit mountains’, Arunachal Pradesh, is also known for its varied climatic zones – alpine in the north (border areas with China-Tibet), temperate in the west (bordering with Bhutan), tropical-subtropical in the east and the south (bordering with Myanmar, Assam and Nagaland). The state is having agrarian economy. While forestry and its related aspects would and ought to remain predominant for the state, the agri-horticulture sectors cannot be ignored, considering their practicality in terms of adoption by the farming community and also the preference of the produces from the state by consumers both domestic and other states.

It is highly commendable that the state cabinet of Arunachal Pradesh led by Pema Khandu on 19 August, 2021 announced the credit-linked subsidy schemes under agriculture (Atmanirbhar Krishi Yojana: Rs 60 cr) and horticulture (Atmanirbhar Bagwani Yojna: Rs 60 cr) sector during 2021-22. The proportion of subsidy assistance is 45:45:10, with government subsidy: bank credit: beneficiary contribution. The eligible entities who can avail the facilities include individual farmers (no collateral or guarantor within Rs 1.60 lakh); SHGs and FPOs (no collateral or guarantor within Rs 10 lakhs). Nodal implementing authority is envisaged as DC in their respective districts.

The produces/products of agri-allied sectors that are ‘technically feasible and economically viable’ would be indigenous rice having unique aroma, millets that is traditionally special, Arunachal orange (GI-tagged produce), lime and lemons, pineapple, kiwi (largest producer in the country), apple, blueberry, walnut, large cardamom, ginger, black ginger, turmeric, chillies, tea, rubber, oilpalm (an emerging thrust plantation crop), arecanut, mushroom, bamboo shoot based nurseries, typical leafy vegetables, etc. Feasibility aspects cover the possibility to take up the activity in a particular location taking the backward (inputs and advisories) and forward (marketing) linkages are critically studied without any favour or fear. Economic viability aspects cover the expected expenditure to be incurred, management of the activity, payment for the mandays, cost of marketing and total revenue from all the components (primary or secondary).

Commercial scale demands longer implementation period, usually 3-5 years. Non-recurring (capital investment) and the recurring (working capital) costs are comparatively higher in hilly states like Arunachal Pradesh as compared to plain/valley-based agronomic practices.

Attempt is being made to sensitize the prospect farmers-growers regarding the nitty-gritty of such schemes (which are often not so successful in any states in the NER, mostly because of the unawareness of modalities involved in such schemes). Possible modalities of effective implementation, which need to be known (by all stakeholders, especially farmers) may be simplified as below:

a) Margin 10 percent:

It is expected that the guidelines clarifies whether 10 percent margin component is to be deposited to the bank forefront or it can be understandably adjusted so that farmers need not pay 10 percent and get 55 percent (to make the project cost component of 100 percent). Because, after depositing 10 percent, if a borrower gets bank loan of 45 percent, then will it not result in the unwanted situation of ‘under-finance’?

b) Nature of the government subsidy of 45 percent of the project cost (expected to get clarity in subsequent guidelines):

i). Forefront: The subsidy amount is earmarked, released and parked at designated branches of bank(s) in the district as identified by the implementing authority (DC), in this case). This is more effective and less complicated for the financing banks. Beneficiaries need not pay interest on the subsidy component. Time bound implementation as well as the number of beneficiaries is limited or can be estimated. For instance, only 45 percent would be loan component, 45 percent subsidy would be simultaneously released and 10 percent margin.

ii). Back-ended: This is the most common credit-linked subsidy schemes (either central or state specific). Here, the risks and responsibilities of feasibility and viability studies are bestowed upon the financing banks/branches (which are ill-equipped with manpower, especially for such analysis and have little knowledge on the proposed feasible activities. Fulfilling the queries raised by general bankers takes such a longer time period that seasons get over, compelling the activity to fail proving them to be ‘right’.

In back-ended subsidy scheme, generally (unless there is MoU between the state government and the financing banks):

  1. Borrower needs to avail the subsidy component as bank loan on which interest would be levied till the day the subsidy amount is received by the bank and parked against the beneficiary’s special account. For instance, 45 percent + 45 percent, ie, 90 percent would be loan component and 10 percent margin.
  2. In some cases (unless clearly specified), bank officials ask the borrowers to arrange themselves the government’s subsidy component in the beginning and the financing bank would automatically transfer or deposit the entire subsidy amount once it is released by the authority and received by the bank. Here, 55 percent becomes margin (promoter’s component), which is quite a huge amount for typical farmers. Many discrepancies arise from such an arrangement/understanding.

c) Frequency of disbursement (release of loan amount):

Generally, the farmers have the impression that the entire 45 percent + 45 percent at one go. But this is not the case. Since the investment (or the requirement of expenditure) is in phases, so the loan component as well as the subsidy would be disbursed (released) in matching manner as per the implementing period with an interval of say 3-6 months for 3-5 years. Almost all the farmers would want the entire bank loan (as well as the subsidy) in the forefront, so that they manage as per their requirement. This cannot be accepted and creates lots of conflict at implementation stages.

d) Interest (simple or compound):

Interest levied on disbursed loan component is simple during the ‘moratorium’ period (the initial duration of project implementation during which no revenue is generated). All the agricultural term loans (ATL) are levied with compound interest after the moratorium period. However, interest is reducing in nature. Some states come up with interest subsidy or subvention also. If there is any such interest subsidy/subvention, it is expected that instruction is clearly given whether this new scheme would be covered with such interest subsidy or not.

e) Insurance component of crops and farmers:

Since the PM Fasal Bima Yojana (PMFBY) is yet to get implemented in the state of Arunachal Pradesh, instructions may be laid out whether interested general insurance companies (both government and private) can be approached borrowers or/and banks. This would be a win-win situation for all the stakeholders. However, it may be incorporated that the borrowers are compulsorily insured suitably as per discretion of the financing banks, if not already insured.

f) Land possession certificates (LPC):

It is the most critical part of implementing any land based agri-allied ventures.

g) Model scheme or area-specific scheme:

It is expected that bankable model schemes or/and area-specific schemes for all the potential crops and activities are prepared keeping realistic cost of inputs and manpower as well as revenue. Services of line departments, KVKs, ICAR, agricultural universities in the state can be effectively utilized. Overestimation of revenue or/and underestimation of cost would often result in hindrance to successful implementation of schemes from the farmers’ viewpoint.

h) Prospect buyers/FPIs:

Special concession or incentives in any possible manners may be given to prospect buyers of any kind – individuals, food processing industries (FPI), exporters, etc, that would directly or indirectly act as effective enablers. Provision may be given to create special permits or licences for such entities. Registered FPOs from other states may be invited to become buyers of the produces resulted from the scheme, giving possible relaxation.

i) Implementing period:

The period may be considered to consider as August 2021 to July 2022 (taking 12 months for hassle-free implementation as February-March are critical for banks).


It is the collective responsibility of all the stakeholders such as agri-horticulture professionals, functionaries of line departments, bankers, gaon burahs, farmers, traders, exporters, and district administrations who need to understand the significance of the ambitious scheme of the state government and make it successful in all possible ways and set as commendable example. The contents may serve as food of thought for whomsoever concerned. (The contributor is Assistant Professor, Fruit Science, College of                 Horticulture & Forestry, Imphal, Pasighat. He can be reached at The contents and ideas expressed are of the contributor and not of the institution where he serves/served.)