Covid-19 Effect: Demand For Agri Loans & Storage Facilities Set to Rise

Agricultural loans and storage facilities are anticipated to be in high demand during the current Kharif season, according to Agri finance and warehousing corporations, since the pandemic situation appears to be under control and the impact of irregular rainfall is minor.

They predict a substantial increase in rice, maize, bajra, soybean, groundnut, and cotton farmers in Uttar Pradesh, Madhya Pradesh, Rajasthan, Gujarat, Karnataka, and Maharashtra.

2 Fold Increase in Loan Disbursement

“As the number of Covid-19 cases declines and vaccination progresses, we estimate a two-fold rise in loan disbursement this season,” Sandeep Sabharwal, Group CEO of Sohan Lal Commodity Management Pvt Ltd (SLCM), a prominent farm logistics and financing business, said. “In the current fiscal year, we plan to provide finance for a diverse basket of agricultural commodities and goods, such as loans to farmer producer organizations and non-banking financial companies (NDFCs),”

He expects high demand for paddy, rice, maize, bajra, soybean, peanut, and cotton, among other crops.

“Strong production figures and higher procurement prices, as well as an overall resurgence in economic activity, will continue to sustain the resilient rural demand for the 2021-22 season,” Sabharwal added. “Agricultural loans will be most sought after in states like Haryana, Punjab, Uttar Pradesh, Madhya Pradesh, Maharashtra, Gujarat, and Karnataka.”

The majority of SLCM's agri-lending is handled through its wholly-owned subsidiary Kissandhan Agri Financial Services. 

Origo Commodities, a Gurgaon-based agriculture fintech firm that provides structured trade finance on agro commodities, predicted that loans in this year's Kharif season will increase by 150 % year on year to Rs 450 crore, up from Rs 180 crore in the previous Kharif.

Sunoor Kaul, the co-founder of Origo Commodities, stated, "The elements driving the growth are opening up farmer procurement centers in UP and Rajasthan this season and onboarding of new clients."

Procurement is a significant asset, he added, since it allows clients and producers to find lower prices.

Increased Warehousing Facilities - Need of The Hour

Meanwhile, warehousing firms are expanding their capacity to meet increased demand.

According to Unupom Kausik, president of National Commodities Management Services (formerly, National Collateral Management Services), the country's largest private post-harvest agriculture management company, “new schemes of Agri infra fund for building Agri infrastructure in proximity to APMCs will bring some additional storage capacities to the extent of around 0.8-1.0 million metric tonnes.”

Most crops would be unaffected by the unpredictable rains this Kharif season, he added, with the exception of cotton and groundnut in Gujarat and, to a lesser extent, guar and moong in western Rajasthan. “Most Kharif farmland has benefited greatly from recent rains,” Kausik added.

Quotes Source: The Economic Times