ADB $170 Million Facility to Help Two Indian States Modernize Horticulture Systems

News Release | 16 September 2010

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending a $170 million multitranche financing facility to help the Indian states of Bihar and Maharashtra modernize their horticulture industries, boosting the incomes of farmers and other vulnerable rural groups.

ADB's Board of Directors today approved the facility for the Agribusiness Infrastructure Development Investment Program, which will fund physical and institutional links along horticulture 'integrated value chains' that include farmers, processors, agribusiness entrepreneurs, and service providers.

Modernizing agriculture is a central goal of the Government of India, with 58% of the population relying on the sector for both income and livelihood. However, output has not grown in line with past state targets, leaving persistently high levels of rural poverty. Under its current five-year development plan for 2007-2012, the Government estimates it will need infrastructure investments of $457 billion to meet its growth targets, with the private sector earmarked to provide about 30% through public-private-partnerships.

The program will finance improvements to facilities such as cooling, packaging and storage sheds, and drainage and waste management systems, as well as linking up essential infrastructure, such as power, water and farm-to-market access roads. Small producers will be organized into farmer companies and given training to increase their skills for marketing and adding value to crops, resulting in increased profits.

The central component will be the involvement of the private sector through public-private partnerships in line with government strategy. Around eight, or more, public-private partnership contracts will be made available to private sector concessionaires to design, build, finance and operate the integrated value chains. To attract private firms, public sector capital grants will be provided.

"This investment program will pioneer the mainstreaming of public-private partnerships in agriculture, with the private sector bringing in world-class technology and modern agribusiness management techniques, resulting in higher value for horticulture products in selected regions of Bihar and Maharashtra," said Marzia Mongiorgi-Lorenzo, who was responsible for the project in ADB's South Asia Department.

It will deliver broad benefits by increasing farm gate prices and incomes for small and medium-sized farmers and traders, while reducing post harvest losses. It will also provide direct jobs within value chains and other indirect employment opportunities for the landless poor and other vulnerable groups.

Funds from the facility will be released in at least four tranches, with the first carrying a term of 25-years, including a 5-year grace period, with an annual interest rate determined in accordance with ADB's LIBOR-based lending facility. The final amount for the initial tranche is $67.6 million. The total investment cost for the program is 212.2 million, with the Government of India providing counterpart finance of $42.2 million.

The executing agencies are the Bihar Department of Agriculture and the Maharashtra Department of Cooperation, Marketing and Textile, with the program expected to be completed by December 2017.