$67.6 million ADB Loan to Boost Investment for Agribusiness Infrastructure in Bihar

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Asian Development Bank (ADB) and the Government of India have signed a $67.6 million loan that will help improve physical and institutional links to support agriculture in the state of Bihar. The loan will help expand agricultural value chains and facilitate better linkages for small scale farmers with processors, agribusiness entrepreneurs, and service providers in Muzaffarpur and Patna-Nalanda regions of Bihar.

The loan is the first tranche of a $170 million multitranche financing facility under the Agribusiness Infrastructure Development Investment Program, which was approved by the ADB Board in September, 2010 to boost private sector investment in agribusiness infrastructure in selected regions of Bihar and Maharashtra.

The programme will build physical and institutional links along horticulture integrated value chains (IVCs), which include farmers, processors, agribusiness entrepreneurs, and service providers, a central goal of the Indian government. This will help farmers, traders and other value chain stakeholders to improve their products and processes, become competitive and adapt to changes in end markets.

Public-private partnerships (PPP) to design, build, finance and operate the integrated value chains are a key component of the project. Private investors will provide collection services, grading, packaging, storing, processing and cold-storage facilities to a range of high value chains. This will raise the value addition being done from agricultural activities, by reducing post-harvest wastes and integrating small landholders into the agribusiness value chains.

The programme would also enhance livelihoods by benefitting farmers, the landless poor and women through creation of additional employment opportunities along the integrated value chains and ancillary industries thereby raising their income, and improving off-farm income opportunities for the rural poor.

The signatories to the loan were Mr. Venu Rajamony, Joint Secretary (Multilateral Institutions), Department of Economic Affairs, Ministry of Finance, on behalf of the Government of India; and Mr. Hun Kim, Country Director for India, on behalf of ADB. The project agreement was signed by Dr. N. Vijaya Lakshmi, Secretary (Agriculture) on behalf of the State Government of Bihar.

Speaking on the occasion Shri Rajamony said that the Agribusiness Infrastructure Development Investment Program fills gaps in agribusiness infrastructure value chains from farm gate to market. This innovative and integrated approach will promote a more inclusive agribusiness value chain and promote efficient and market-oriented farming among smallholder farmers. He said that the Program aims to leverage private sector investment and management into agri-business infrastructure through public-private partnership mode.

Mr. Kim said that the pioneering nature of the investment program is the introduction of integrated value chains and application of public-private partnerships in the agribusiness sector. He said that this will help scale-up future models for agribusiness operations in India.

The Department of Agriculture, Government of Bihar, is the executing agency of the project, which is expected to be implemented over a period of six years, completing in 2017.

This first tranche loan from the ordinary capital resources of ADB has a 25-year term, including a grace period of 5 years, commitment charges of 0.15% and interest rate in accordance with ADB’s LIBOR-based lending facility.

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