The Credit Guarantee Scheme for e-NWR based Pledge Financing (CGS-NPF) was launched by the Union Minister of Consumer Affairs, Food and Public Distribution, Shri Pralhad Joshi. This initiative aims to support farmers by providing a financial safety net against distress selling. The scheme allocates a corpus of Rs 1,000 crore for post-harvest finance through electronic negotiable warehouse receipts (e-NWRs). This move is part of the government’s broader commitment to enhance farmers’ welfare and promote agricultural sustainability.
Key Features of the CGS-NPF
The CGS-NPF offers a guarantee for loans taken against e-NWRs. Farmers can access funding by depositing their produce in accredited warehouses. The scheme primarily targets small and marginal farmers, women, Scheduled Castes, Scheduled Tribes, and persons with disabilities (PwD). It also extends benefits to micro, small, and medium enterprises (MSMEs) and farmer producer organisations (FPOs).
Financial Coverage and Risks
Loans up to Rs 75 lakhs for agricultural purposes are covered by the scheme. For non-agricultural loans, coverage extends to Rs 200 lakhs. The scheme addresses credit risk and warehouseman risk, ensuring a robust lending environment. Guarantee fees are set at 0.4% per annum for farmers and 1% for non-farmers. Coverage levels vary based on the loan amount and borrower category.
Implementation Challenges
The scheme’s success hinges on the registration of warehouses with the Warehousing Development and Regulatory Authority (WDRA). The Union Minister emphasised the need for more warehouses closer to farmland to facilitate easy access for farmers. E-registration of warehouses is crucial for the scheme’s operational efficiency.
Expected Outcomes
The CGS-NPF is anticipated to boost post-harvest lending , aiming for a total of Rs 5.5 lakh crore in the next decade. The initiative is expected to instil confidence in banks, encouraging them to lend more freely against e-NWRs. This financial support is crucial for improving farmers’ income and reducing distress selling.
Government Support and Future Directions
Government officials brought into light the importance of creating awareness about the scheme. They also stressed the need for reasonable charges for repository services and an increase in warehouse registrations. The aim is to register 40,000 warehouses in the next one to two years to enhance the scheme’s reach.
Impact on Stakeholders
The CGS-NPF is designed to benefit a wide range of stakeholders. It focuses on supporting vulnerable farmers while also aiding small traders and cooperatives. By providing a safety net, the scheme aims to ensure financial stability in the agricultural sector.
Conclusion
The CGS-NPF represents step towards improving the financial landscape for farmers in India. By addressing key challenges and promoting accessibility to credit, the scheme is set to play a vital role in enhancing agricultural productivity.
Questions for UPSC:
- Examine the impact of post-harvest finance on agricultural productivity in India.
- Critically discuss the role of the Warehousing Development and Regulatory Authority in enhancing farmers’ access to credit.
- Estimate the potential benefits of the Credit Guarantee Scheme for Small and Marginal Farmers in the long term.
- Point out the challenges faced by micro, small, and medium enterprises in accessing credit in rural India.
Answer Hints:
1. Examine the impact of post-harvest finance on agricultural productivity in India.
- Post-harvest finance reduces distress selling, allowing farmers to sell produce at better prices.
- Access to timely funds helps farmers invest in quality inputs and technology, improving yields.
- It encourages better storage practices, reducing post-harvest losses .
- Enhanced liquidity enables farmers to manage cash flows more effectively throughout the year.
- Increased confidence in credit access can lead to greater investments in agricultural sustainability.
2. Critically discuss the role of the Warehousing Development and Regulatory Authority in enhancing farmers’ access to credit.
- WDRA regulates and accredits warehouses, ensuring quality and reliability for farmers’ stored produce.
- It facilitates the issuance of electronic negotiable warehouse receipts (e-NWRs), enhancing collateral value.
- By promoting warehouse registration, WDRA helps expand the network of storage facilities accessible to farmers.
- WDRA’s oversight builds trust among financial institutions, encouraging them to lend against e-NWRs.
- Creating awareness and simplifying the registration process can further enhance farmers’ credit access.
3. Estimate the potential benefits of the Credit Guarantee Scheme for Small and Marginal Farmers in the long term.
- The scheme is expected to increase post-harvest lending , potentially reaching Rs 5.5 lakh crore in a decade.
- It provides a safety net, reducing financial risks and encouraging investment in agricultural practices.
- Enhanced access to credit can lead to improved income stability for small and marginal farmers.
- Long-term benefits include increased agricultural productivity and sustainability through better resource management.
- Empowerment of vulnerable groups like women and SC/ST farmers through targeted financial support.
4. Point out the challenges faced by micro, small, and medium enterprises in accessing credit in rural India.
- Lack of collateral and credit history makes it difficult for MSMEs to secure loans from banks.
- Limited financial literacy among rural entrepreneurs hampers their ability to approach financial institutions.
- High-interest rates and stringent lending criteria deter MSMEs from seeking formal credit.
- Inadequate infrastructure and access to reliable information restrict growth opportunities for MSMEs.
- Market volatility and economic uncertainties increase perceived risks for lenders, affecting credit availability.
