World Bank signs USD 210m loan to support smallholder farmers in Maharashtra

The USD 210million loan from the International Bank for Reconstruction and Development (IBRD) has a 6-year grace period and a maturity period of 13.5 years.

The Government of India, the Government of Maharashtra and the World Bank today signed a loan agreement of USD 210 million to support smallholder farmers participate in competitive agriculture value chains, facilitate agri-business investments, increase market access and productivity in focus commodities, and build resilience of crops to recurrent floods or droughts in the Indian state of Maharashtra.

The USD210 million Maharashtra Agribusiness and Rural Transformation Project will help build capacity of the nodal departments and institutions; increase private sector investments in agricultural value chains; remove constraints for producers and entrepreneurs in accessing emerging domestic and export markets; build the capacity of the state to respond to commodity-price fluctuations by providing access to timely information on markets and production trends, and enhance adoption of climate-resilient production techniques in the state.

“Foreseeing the future risks of climate change, the Government of India is implementing several programs under its National Action Plan on Climate Change. In agriculture it promotes the use of less water and adoption of climate-smart practices and technologies,” said Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance. “This project in Maharashtra is a significant step towards transforming the state's rural economy through sustainable agriculture practices and the empowerment of farmers by connecting them directly to the markets,” he added.

The loan agreement was signed by Shri Sameer Kumar Khare, Additional Secretary, Department of Economic Affairs, Ministry of Finance on behalf of the Government of India and Mr. JunaidKamal Ahmad, Country Director (India), World Bank on behalf of the World Bank.

Whereas, the project agreement was signed by Shri Eknath Dawale, Secretary, Department of Agriculture, Government of Maharashtra and Mr. JunaidKamal Ahmad, Country Director (India), World Bank on behalf of the World Bank.

The project will be implemented in all 36 districts of Maharashtra. Over one million farming households will directly benefit from the project. At least 43 percent of farmers and farm-workers participating in project activities are expected to be women. Specific focus will be given to women-led enterprises and the participation of women in the decision-making processes of farmer producer organizations.

“The Government of Maharashtra aims to double agriculture exports from the state and transform the sector into a stable source of sustainable growth and economic development,” said Mr. Junaid Kamal Ahmad, Country Director (India), World Bank. “This project will serve as the nucleus to fulfill the state’s much larger vision of an agriculture-based rural transformation.”

Such an agricultural transformation is already underway in Maharashtra with an upsurge in the production of high-value crops such as fruits and vegetables, pulses, and maize and soybean for animal feed. The state has emerged as one of the country’s largest producer and exporter of fruits, vegetables, pulses, cotton, and soybean. Whereas the area under cultivation for cereals such as rice and wheat has been declining since 2000.

Many of these changes have led to several positive developments for Maharashtra where production is labor-intensive (example, in horticulture and floriculture), is climate-resilient (pulse-based cropping systems increases resilience, e.g. pigeon pea intercropping leads to higher soil carbon sequestration than mono-crop system) and responds to domestic and global market needs.

However, a combination of increased production and a downturn in commodity prices is affecting farmers’ profitability. Commodities like cotton, soybean, sugar, (covering 44 percent of the cropped area in Maharashtra), are strongly influenced by global price movements. Broad shifts in the global prices of such commodities affect farmers who then find it difficult to cover the cost of production in many cases.

The focus of the project on enhancing the capacity of the state to effectively manage and deliver agricultural technical support and services, increasing credit linkages to formal financing institutions, improving Sanitary and Phytosanitary (SPS) standards and investing in business development services will help smallholder farmers become more competitive and increase their links to organized domestic and export markets.

“With a substantial urban population, relatively high per capita incomes, and highest industrialization levels, Maharashtra is well-placed for an agriculture-sector transformation. This project will strengthen the capacity of smallholder farmers to cope with fluctuations in the commodity market and enhance their incomes. The International Finance Corporation, the World Bank’s private sector arm will also be actively engaged in project design and implementation,” said Shri Manivannan Pathy, Senior Agricultural Specialist and Shri Adarsh Kumar, Senior Agribusiness Specialist and World Bank’s Team Leaders for the project.

The USD 210million loan from the International Bank for Reconstruction and Development (IBRD) has a 6-year grace period and a maturity period of 13.5 years.

(With Inputs from PIB)