Preface

Welcome to the realm where soil meets spreadsheet, where the fields of finance and agriculture
converge to cultivate prosperity and growth. In the dynamic landscape of agricultural finance and
cooperation, this practical manual serves as a compass, guiding students, practitioners, and
enthusiasts through the intricate terrain of financial management in agriculture.

As the global population burgeons and the demands on agricultural production intensify, the
nexus between finance and agriculture becomes increasingly vital. From smallholder farmers to
agribusiness conglomerates, sound financial management practices are imperative for sustainable
growth, resilience, and prosperity in the agricultural sector.

This practical manual is a testament to the holistic approach required to navigate the
complexities of agricultural finance and cooperation. It delves into the multifaceted dimensions
of financial management in agriculture, encompassing concepts, principles, and practical
applications tailored to the unique challenges and opportunities inherent in the field.

With gratitude for the collective efforts of educators, practitioners, and researchers in advancing
the frontiers of agricultural finance and cooperation, I invite you to embark on this enriching
journey and discover the myriad possibilities that await within the pages of this manual.

Warm regards,

Dr. Denny Franco

Assistant Professor
RARS, Ambalavayal

1
 Practical Manual

Econ 2102

Agricultural Finance and Co-Operation

Operation (1+1)

Dr. Denny Franco

Assistant Professor

2
 Index

Sl. No Topic Signature

1 Documentation of Basic Statistics on Agricultural Finance

2 Procedure for Getting Farm Loans from Cooperative Banks

3 Procedure for Getting Farm Loans from Regional Rural Banks

4 Estimation of Credit Needs – Farm Level Survey

5 Scale of Finance

6 Unit Cost-Understanding NABARD schemes.

7 Preparation and Analysis of loan proposals-3 R’s of Credit

8 Techno-Economic Feasibility: Preparation of Project Report

9 Preparation of Repayment Plans

10 Preparation and Analysis of Balance Sheet

11 Preparation of Income Statement

12 Visit to Primary Agricultural Credit Societies (PACs)

13 Visit to District Cooperative Banks (DCCBs)

14 Visit to State Cooperative Banks (SCBs)

15 Visit to Commercial Banks (CBs)

16 Visit to Regional Rural Banks (RRBs)

3
 Practical 1: Documentation of Basic Statistics on Agricultural Finance

Objective :

The primary objective of documenting basic statistics on agricultural finance is to provide a

comprehensive, accurate, and accessible source of data and analysis that can be utilized by
various stakeholders in the agricultural sector.

Purpose:

1. Informed Decision Making:

-Policy Makers: Aid in the formulation and implementation of policies aimed at improving
agricultural finance systems, ensuring that they are based on reliable data and trends.

-Financial Institutions: Enable banks, credit unions, and other financial bodies to assess risk,
allocate resources efficiently, and develop tailored financial products for the agricultural sector.

-Farmers and Agribusinesses: Provide insights into available financing options, interest rates,
and loan accessibility, helping them make informed financial decisions.

2. Market Analysis and Trends:

-Trend Identification: Identify and analyze trends in agricultural finance, such as changes in
credit availability, interest rates, and the uptake of different financial products.

-Sector Performance: Evaluate the performance of the agricultural sector concerning financing,
highlighting areas of growth and potential challenges.

3. Academic and Research Purposes:

-Research and Development: Serve as a foundational resource for researchers studying

agricultural economics, finance, and related fields.

-Educational Material: Provide data for academic institutions to use in teaching and for students
undertaking projects and theses on agricultural finance.

4
4.Transparency and Accountability:

-Public Accountability: Ensure transparency in the allocation and utilization of financial

resources in agriculture, promoting accountability among financial institutions and policy
makers.

-Monitoring and Evaluation: Facilitate the monitoring and evaluation of financial initiatives and
programs aimed at supporting agriculture, allowing for adjustments and improvements based on
statistical evidence.

5. Investment and Economic Growth:

-Investor Confidence: Increase confidence among potential investors by providing reliable data
on the agricultural finance landscape, encouraging investment in the sector.

-Economic Planning: Assist in broader economic planning by linking agricultural finance

statistics with overall economic performance and growth projections.

6. Global Comparisons and Benchmarking:

- International Standards: Enable comparisons with global standards and practices in agricultural
finance, helping to benchmark national performance and identify areas for improvement.

- Best Practices: Highlight best practices and successful models from different regions or
countries, providing a reference for improving local agricultural finance systems.

Key Elements to be documented:

1. Credit Supply and Demand: Data on the supply and demand for agricultural credit, including
the volume and value of loans disbursed in India.

5
2.Interest Rates: Statistics on interest rates for various types of agricultural loans.

3.Repayment Rates: Data on repayment rates of different banks

4. Types of Financial Products: Information on the range of financial products available to

farmers, such as loans, insurance, and grants in different banks.

6
5. Sources of Finance: Cooperatives, microfinance institutions, and government schemes.

6. Accessibility: Different central government schemes of financial services for smallholder

farmers versus large agribusinesses.

7
7. Geographical Distribution: state wise distribution of agricultural finance in India

8
 Practical 2: Procedure for Getting Farm Loans from Cooperative Banks

Objective:

The objective of documenting the procedure for obtaining farm loans from cooperative banks is
to provide a detailed, clear, and accessible guide that helps farmers understand and navigate the
loan application process efficiently.

This documentation aims to:

1. Enhance Financial Literacy:

- Inform Farmers: Educate farmers about the availability of financial resources through
cooperative banks.

- Clarify Steps: Provide clear instructions on each step of the loan application process.

2. Increase Accessibility:

- Simplify the Process: Break down the application process into understandable steps, reducing
complexity and making it easier for farmers to access loans.

- Promote Inclusivity: Ensure that farmers of all sizes, including smallholders and marginalized
groups, can access financial resources.

3. Support Agricultural Growth:

- Facilitate Investment: Enable farmers to secure funds for purchasing inputs, equipment, and
technology, leading to improved agricultural productivity.

- Enhance Livelihoods: Improve the economic well-being of farmers by providing them with the
financial means to expand and modernize their operations.

4. Ensure Transparency and Accountability:

- Standardize Procedures: Establish clear and standardized procedures for loan applications,
fostering transparency and trust.

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- Promote Fair Practices: Ensure that all eligible farmers have equal access to loans, minimizing
biases and promoting fair lending practices.

5. Boost Confidence in Cooperative Banking:

- Build Trust: Foster a positive relationship between farmers and cooperative banks by providing
reliable information and guidance.

- Encourage Utilization: Increase the number of farmers utilizing cooperative bank loans by
making the process transparent and straightforward.

Key Elements to Document in the Bank visit:

1. Eligibility Criteria:

- Requirements for land ownership or lease agreements.

- Necessary identification documents and proof of residence.

- Financial background and creditworthiness criteria.

2. Application Process:

- Detailed steps for visiting a cooperative bank branch.

- Instructions for obtaining and completing the loan application form.

10
- List of required documents, including land ownership/lease papers, identity proof, photographs,
and income certificates.

3. Loan Appraisal:

- Explanation of the loan evaluation process conducted by bank officials.

- Information on field inspections and creditworthiness assessments.

4. Sanction and Disbursement:

- Details on how loans are sanctioned after approval.

- Information on disbursement methods, including lump sum and installment options based on
the loan type and purpose.

11
5. Repayment Terms:

- Overview of repayment schedules aligned with crop cycles or income generation periods.

- Information on interest rates and any applicable subsidies.

6. Support and Resources:

- Information on government schemes, subsidies, and interest rate reductions available to

farmers.

- Guidance on insurance options to protect against risks.

Outcome :

By achieving these objectives, the documentation will serve as a valuable resource that
empowers farmers to secure the necessary financial support from cooperative banks, ultimately
contributing to the growth and sustainability of the agricultural sector.

12
 Practical 3: Procedure for Getting Farm Loans from Regional Rural Banks (RRBs)

Objective

The objective of this practical is to provide a detailed, step-by-step guide for farmers on how to
obtain farm loans from Regional Rural Banks (RRBs). This guide aims to simplify the process,
ensuring that farmers understand the requirements, documentation, and steps involved in
applying for and securing a loan.

Steps for Getting Farm Loans from RRBs

1. Determine Eligibility Criteria:

- Farmers: Individual farmers, joint borrowers owning cultivable land, tenant farmers,
sharecroppers, and oral lessees.

- Agricultural Activities: Loans for crop production, purchase of agricultural equipment,

development of irrigation systems, and other allied agricultural activities.

- Documentation: Proof of land ownership or lease agreement, valid identification documents,

and proof of residence.

2. Visit the Nearest RRB Branch

Location of the Branch:

Date of the Visit:

3. Obtain and Complete the Loan Application Form

- Ask for the specific loan application form for agricultural loans.

13
4. Enlist the essential documents required:

5. Submit the Application and Documents

6. Loan Appraisal and Field Inspection:

7. Procedure for loan Sanction and Disbursement of money

8. Repayment Terms for different loans and its interest rates :

14
9. Utilize the Loan for Intended Purpose

Outcome :

By following these steps, farmers can effectively navigate the process of obtaining farm loans
from Regional Rural Banks, enabling them to access the necessary financial resources to
improve their agricultural productivity and livelihoods.

15
 Practical 4: Estimation of Credit Needs – Farm Level Survey

Objective:

The objective of conducting a farm-level survey for the estimation of credit needs is to
accurately determine the financial requirements of farmers for their agricultural activities. This
involves collecting detailed information about the farm operations, inputs, outputs, and other
relevant factors to assess the necessary credit for sustaining and enhancing farm productivity.

Steps for Conducting a Farm-Level Survey

1. Define Survey Objectives and Scope

Objectives:

- To identify the specific credit needs of farmers.

- To understand the types of credit required (short-term, medium-term, long-term).

- To gather data on farm size, cropping patterns, input costs, and income.

Scope:

- Target a representative sample of farms in the survey area.

- Include various types of farming operations (crop cultivation, livestock, horticulture, etc.).

2. Develop Survey Questionnaire

Sections of the Questionnaire:

- Farmer Information: Name, age, gender, education level, contact details.

- Farm Details: Location, size of the farm, type of farming (irrigated/non-irrigated).

- Crop Information: Types of crops grown, area under each crop, cropping pattern, yield per
hectare.

- Input Costs: Cost of seeds, fertilizers, pesticides, labor, machinery, irrigation, and other inputs.

16
- Farm Income: Average income from each crop, income from allied activities (livestock, dairy,
etc.).

- Credit History: Existing loans, repayment history, sources of credit, interest rates, and loan
terms.

- Credit Requirements: Purpose of the loan (input purchase, machinery, infrastructure), amount
needed, preferred loan duration.

3. Select Survey Sample

Sampling Method:

- Use stratified random sampling to ensure representation across different farm sizes, types, and
geographical locations.

Sample Size:

- Determine an adequate sample size to ensure the data collected is statistically significant and
represents the target population.

4. Conduct Field Survey

Training Survey Enumerators:

- Train enumerators on the objectives of the survey, questionnaire administration, and data
collection techniques.

Data Collection:

- Visit selected farms and conduct face-to-face interviews with farmers using the structured
questionnaire.

- Ensure accuracy and completeness of data by cross-checking responses during the interview.

5. Data Entry and Analysis

Data Entry:

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- Enter collected data into a database or spreadsheet for analysis.

- Ensure data accuracy by double-checking entries.

Data Analysis:

- Analyze data to estimate the average credit needs per farm for various purposes (e.g., input
purchase, equipment, infrastructure).

- Segment data based on farm size, type of farming, and geographical location to identify
specific credit requirements for different farmer groups.

6. Prepare Report on Credit Needs

Report Sections:

- Introduction: Objectives, methodology, and scope of the survey.

- Farmer Demographics: Profile of surveyed farmers.

- Farm Characteristics: Details about farm sizes, types, and cropping patterns.

- Credit Needs: Analysis of credit requirements, purposes of credit, and preferred loan durations.

- Recommendations: Suggestions for financial institutions on designing suitable credit products,

potential subsidies, and interest rates.

7. Disseminate Findings

Stakeholders:

- Share the findings with relevant stakeholders, including financial institutions, agricultural
departments, farmer associations, and policymakers.

Presentation:

- Use presentations, reports, and workshops to disseminate findings and discuss potential
strategies to address the identified credit needs.

Sample Survey Questionnaire

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Section 1: Farmer Information

1. Name:

2. Age:

3. Gender:

4. Education Level:

5. Contact Details:

Section 2: Farm Details

6. Location of Farm:

7. Total Farm Size (hectares):

8. Type of Farming: ☐ Irrigated ☐ Non-Irrigated

9. Types of Crops Grown:

- Crop 1: ________ Area: ________ Yield/ha: ________

- Crop 2: ________ Area: ________ Yield/ha: ________

- Crop 3: ________ Area: ________ Yield/ha: ________

- Crop 4: ________ Area: ________ Yield/ha: ________

- Crop 5: ________ Area: ________ Yield/ha: ________

- Crop 6: ________ Area: ________ Yield/ha: ________

Section 3: Input Costs (per season)

10. Seeds: ________

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11. Fertilizers: ________

12. Pesticides: ________

13. Labor: ________

14. Machinery: ________

15. Irrigation: ________

16. Other Inputs: ________

Section 4: Farm Income (per season)

17. Crop 1 Income: ________

Crop 2 Income: ________

Crop 3 Income: ________

Crop 4 Income: ________

18. Income form by-products :

19. Income from Allied Activities (e.g., livestock): ________

Section 5: Credit History

20. Existing Loans: ☐ Yes ☐ No

21. If yes, provide details:

- Source: ________

- Amount: ________

- Interest Rate: ________

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 - Repayment Period: ________

22. Previous Loan Repayment History: ☐ Good ☐ Fair ☐ Poor

Section 6: Credit Requirements

23. Purpose of Loan: ☐ Input Purchase ☐ Machinery ☐ Infrastructure ☐ Other

24. Amount Needed: ________

25. Preferred Loan Duration: ☐ Short-Term ☐ Medium-Term ☐ Long-Term

Outcome:

By following these steps and utilizing the structured questionnaire, the farm-level survey will
effectively estimate the credit needs of farmers, providing valuable insights to financial
institutions and policymakers for developing appropriate credit products and support
mechanisms

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 Practical 5: Scale of Finance

Objective

The objective of this analysis is to compare the scale of finance for various crops in different
districts with the actual cost of cultivation and the resulting credit needs of farmers. This will
help in understanding whether the existing scale of finance is adequate to meet the cost of
cultivation and support the credit needs of farmers.

Key Definitions

- Scale of Finance: The maximum amount of loan that can be sanctioned to farmers for a specific
crop in a particular area, usually determined by local agricultural authorities and financial
institutions.

- Cost of Cultivation: The total expenses incurred by farmers in the process of growing a crop,
including costs for seeds, fertilizers, pesticides, labor, irrigation, and other inputs.

- Credit Needs: The financial requirement of farmers to cover the cost of cultivation and related
agricultural activities.

Steps for Analysis

1. Collect Data on Scale of Finance

Sources:

- Local agricultural offices and banks / NABARD website

2. Collect Data on Cost of Cultivation

Sources:

- Agricultural research studies and surveys, Farmer interviews and field surveys, Agricultural
extension services and local agribusinesses.

Data Points:

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- Detailed cost of cultivation for various crops, including input costs (seeds, fertilizers,
pesticides), labor, irrigation, machinery, and other relevant expenses.

- Average costs based on different farm sizes and types.

3. Compare Scale of Finance with Cost of Cultivation

Steps:

- List the scale of finance and the cost of cultivation side by side for each crop in different
districts.

- Calculate the difference between the scale of finance and the actual cost of cultivation.

Example Table:

Crop Panchayath Scale of Cost of Difference Adequacy

Finance (per Cultivation Assessment
hectare) (per hectare)

4. Assess Credit Needs

Steps:

- Identify gaps where the scale of finance is lower than the cost of cultivation.

- Estimate the additional credit required to cover these gaps.

Calculation Example:

- If the scale of finance for paddy in District A is Rs. 500 per hectare, but the actual cost of
cultivation is Rs. 600 per hectare, the additional credit needed is Rs.100 per hectare.

23
5. Make Recommendations

For Financial Institutions:

- Adjust Scale of Finance: Recommend adjusting the scale of finance to more accurately reflect
the cost of cultivation in each district.

- Introduce Flexible Loan Products: Suggest creating loan products that can adapt to varying cost
structures and include provisions for unexpected expenses.

For Policy Makers:

- Subsidies and Support Programs: Advocate for increased subsidies or support programs to help
farmers cover the gap between available finance and actual cultivation costs.

- Cost Monitoring: Encourage regular monitoring and updating of cost of cultivation data to
ensure financial support remains relevant and adequate.

For Farmers:

- Awareness and Advocacy: Educate farmers about the importance of advocating for adequate
financial support and participating in surveys and data collection efforts.

Example

1. Data Collection:

- Conduct surveys and interviews with farmers in different panchayth.

- Gather data from local agricultural offices, banks, and research institutions.

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2. Data Analysis:

- Use statistical tools to compare the scale of finance with the cost of cultivation.

- Identify patterns and areas where the scale of finance is inadequate.

3. Report Preparation:

- Prepare a detailed report summarizing findings and recommendations.

- Include visual aids like charts and graphs to illustrate the data.

4. Stakeholder Engagement:

- Share the report with financial institutions, policy makers, and farmer associations.

- Organize workshops or meetings to discuss findings and recommendations.

Outcome:

By comparing the scale of finance with the cost of cultivation and identifying the credit needs of
farmers, this analysis aims to ensure that financial support systems are adequately meeting the
requirements of the agricultural sector, thereby promoting sustainable farming practices and
improving the livelihoods of farmers.

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 Practical 6 : Unit Cost-Understanding NABARD schemes.

Objective

The objective is to provide a clear understanding of the concept of Unit Cost as it pertains to
various schemes offered by the National Bank for Agriculture and Rural Development
(NABARD). This includes explaining how Unit Cost is determined, its importance in
agricultural finance, and examples of its application in NABARD schemes.

Key Definitions

- Unit Cost: The average cost of financing a specific agricultural activity or investment,
calculated per unit of measurement (e.g., per hectare, per animal, per machine). It serves as a
benchmark for determining the amount of loan or subsidy that can be provided for a particular
activity.

Importance of Unit Cost in NABARD Schemes

1. Standardization:

- Provides a standardized approach to determine the financing needs for various agricultural
activities across different regions.

2. Budgeting:

- Helps in the accurate budgeting and allocation of funds for agricultural projects and schemes.

3. Transparency:

- Ensures transparency and uniformity in the provision of loans and subsidies, preventing over-
or under-financing.

4. Planning:

- Assists farmers and financial institutions in planning and managing agricultural investments
effectively.

26
Determining Unit Cost

The Unit Cost is determined through comprehensive studies and field surveys conducted by
NABARD, which take into account various factors such as:

- Cost of Inputs: Seeds, fertilizers, pesticides, labor, machinery, etc.

- Regional Variations: Differences in climate, soil quality, and local agricultural practices.

- Market Prices: Prevailing market rates for inputs and outputs.

- Historical Data: Past data on production costs and yields.

NABARD Schemes:

1. Dairy Entrepreneurship Development Scheme (DEDS):

Unit Cost Determination:

- For Crossbred Cow: The Unit Cost includes the cost of purchasing the cow, feed, veterinary
care, and housing.

- Example Unit Cost: INR 60,000 per cow.

Subsidy and Loan Structure:

- NABARD provides a subsidy of 25% of the Unit Cost (33.33% for SC/ST beneficiaries).

- The remaining amount is covered through a loan from a financial institution.

2. Schemes for Farm Mechanization:

Unit Cost Determination:

- For Tractors:

Subsidy and Loan Structure:

27
3. Schemes for Micro Irrigation:

Unit Cost Determination:

Subsidy and Loan Structure:

4.

5.

28
6.

Data Sources:

- NABARD website

- Local agricultural extension offices

- Banks and financial institutions

Outcome

By understanding the concept of Unit Cost and its application in NABARD schemes, farmers
can better plan their investments, access necessary financial resources, and effectively implement
agricultural projects, thereby enhancing productivity and income.

29
 Practical 7 : Preparation and Analysis of loan proposals-3 R’s of Credit

Objective

The objective is to provide a comprehensive guide on preparing and analyzing loan proposals for
agricultural finance, focusing on the 3 Rs of Credit—Return, Repayment Capacity, and Risk.

The 3 Rs of Credit

1. Return

2. Repayment Capacity

3. Risk

Steps for Preparing and Analyzing Loan Proposals

1. Preparation of Loan Proposal

Analysis of Loan Proposal

Return Analysis

- Projected Income: Estimate the potential income from the proposed agricultural activity.

- Profitability: Calculate the net profit by subtracting the total costs from the total income.

- Return on Investment (ROI): Assess the ROI to determine the project's profitability and
viability.

Example Calculation:

- Total Income: Rs.10,000

- Total Costs: Rs.7,000

- Net Profit: Rs.3,000

- ROI: (Net Profit / Total Costs) * 100 = (3,000 / 7,000) * 100 = 42.86%

30
Repayment Capacity

- Cash Flow Analysis: Evaluate the cash flow from the farm operations to ensure there is
sufficient income to cover loan repayments.

- Repayment Schedule: Align the loan repayment schedule with the farm's income cycle,
considering harvest periods and sale of produce.

- Debt Service Coverage Ratio (DSCR): Calculate DSCR to measure the farm's ability to service
debt.

Example Calculation:

- Net Operating Income: Rs.10,000

- Annual Debt Obligations: Rs.5,000

- DSCR: Net Operating Income / Annual Debt Obligations = 10,000 / 5,000 = 2.0

- A DSCR of 2.0 indicates good repayment capacity.

Risk Analysis

- Market Risks: Assess risks related to market prices, demand fluctuations, and competition.

- Production Risks: Evaluate risks related to crop failure, pests, diseases, and adverse weather
conditions.

- Financial Risks: Consider risks related to interest rate changes, loan terms, and potential
default.

- Mitigation Strategies: Develop strategies to mitigate identified risks, such as crop insurance,
diversification, and adopting resilient farming practices.

Example Loan Proposal:

1. Farmer Information

- Name:

31
- Age:

- Gender: Male / Female / others

- Education Level:

- Contact Details:

2. Farm Details

- Location:

- Size:

- Type of Farming: Irrigated / Rainfed

- Cropping Pattern:

3. Project Details

- Proposed Activity by taking loan:

- Total Financial Requirements:

4. Financial Plan

- Loan Amount Required: ………………. ( …% of total cost)

- Farmer’s Contribution: Rs…………… (…% of total cost)

- Interest Rate :…………………% per annum

- Repayment Period :…………………. years

5. Projected Returns

- Additional Income from Increased Efficiency: Rs………… per year

- Annual Costs (Maintenance, Fuel): Rs…………….

- Net Annual Return: Rs…………………..

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- ROI: (Net Annual Return / Total Cost) * 100 = (………… / ………….) * 100 = …….%

6. Repayment Capacity

- Estimated Annual Farm Income: Rs……………..

- Existing Debt Obligations : Rs…………………… per year

- Total Annual Obligations (Including New Loan): Rs…………per year

- DSCR: …………. / …………. = ………..

7. Risk Analysis

- Market Risks: Low / Moderate / High / Extremely high (Remark : )

- Production Risks: Low / Moderate / High / Extremely high (Remark : )

- Financial Risks: Low / Moderate / High / Extremely high (Remark : )

- Adopted any Mitigation Strategies: Crop insurance, diversification into high-value crops

Outcome:

By preparing a detailed loan proposal and thoroughly analyzing it based on the 3 Rs of Credit—
Return, Repayment Capacity, and Risk—farmers can enhance their chances of securing loans
from financial institutions. This structured approach ensures that the loan proposal is
comprehensive, demonstrates viability, and aligns with the financial institution's requirements.

33
 Practical 8: Techno-Economic Feasibility: Preparation of Project Report

Objective

The objective of preparing a techno-economic feasibility project report is to evaluate the

technical and economic viability of an agricultural project. This report helps in assessing whether
the proposed project is feasible and sustainable, thereby assisting in securing financing from
banks or other financial institutions.

Steps for Preparing a Techno-Economic Feasibility Project Report

1. Executive Summary

- Overview: Provide a brief summary of the project, including the objective, scope, and key
findings.

- Project Description: Outline the main components of the project, target beneficiaries, and
expected outcomes.

2. Project Background and Rationale

- Introduction: Contextualize the project, explaining why it is being proposed and its importance.

- Need Assessment: Describe the need for the project, supported by data and evidence.

- Objectives: Clearly state the specific objectives the project aims to achieve.

3. Technical Feasibility

- Project Design and Technology:

- Describe the project design, including the technology and processes to be used.

- Explain the selection of technology and its appropriateness for the project.

- Location and Site Analysis:

-Detail the location of the project, including geographical, environmental, and logistical
considerations.

34
 - Conduct a site analysis to ensure suitability.

- Infrastructure and Facilities:

- Outline the infrastructure required, such as buildings, roads, and utilities.

- Detail the availability and adequacy of these facilities.

- Raw Materials and Inputs:

- List the raw materials and inputs needed, their sources, and availability.

- Assess the reliability of supply chains.

Technical Specifications:

- Provide technical specifications and standards that will be adhered to.

- Include diagrams, flowcharts, and technical drawings if necessary.

4. Economic Feasibility

- Market Analysis:- Conduct a thorough market analysis, including demand and supply
assessment, market trends, and competitive landscape. Identify target markets and potential
customers.

- Cost Estimates:- Provide detailed cost estimates, including capital costs (land, buildings,
machinery) and operational costs (labor, raw materials, utilities).

- Revenue Projections:- Project the expected revenue streams from the project.

- Financial Analysis:- Conduct a detailed financial analysis, including cash flow projections,
profit and loss statements, and balance sheets. Calculate key financial indicators such as Net
Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and Break-even Analysis.

5. Risk Analysis and Mitigation

- Identify Risks:

- Identify potential risks, including technical, financial, market, and operational risks.

35
 - Assess the likelihood and impact of each risk.

- Mitigation Strategies:

- Develop strategies to mitigate identified risks.

- Include contingency plans and risk management protocols.

Example Outline of a Techno-Economic Feasibility Project Report

1. Executive Summary

- Brief overview of the project

- Key findings and recommendations

2. Project Background and Rationale

- Introduction to the project

- Need assessment and objectives

3. Technical Feasibility

36
- Project design and technology

- Location and site analysis

- Infrastructure and facilities

- Raw materials and inputs

- Technical specifications

4. Economic Feasibility

- Market analysis

- Cost estimates

- Revenue projections

- Financial analysis

37
 BC ratio:

IRR:

NPW:

5. Risk Analysis and Mitigation

- Identification of risks

- Mitigation strategies adopted

Outcome:

By following these steps and structuring the report accordingly, you can create a comprehensive
techno-economic feasibility project report that thoroughly evaluates the viability of an
agricultural project and provides a solid foundation for securing financing and successful
implementation.

38
 Practical 9 : Preparation of Repayment Plans

Objective

The objective of preparing repayment plans is to outline a structured schedule for repaying loans
obtained for agricultural projects. These plans ensure timely repayment, manage cash flow, and
maintain financial stability for both borrowers and lenders.

Steps for Preparation of Repayment Plans

1. Understand Loan Terms and Conditions

- Loan Amount: Determine the total amount borrowed.

- Interest Rate: Note the interest rate charged on the loan.

- Loan Duration: Identify the duration of the loan (e.g., 5 years).

- Repayment Frequency: Determine how often payments are due (e.g., monthly, quarterly).

2. Calculate Loan Repayment Amounts

- Fixed Installments: Determine whether the loan requires fixed or flexible installments.

- Amortization Schedule: Calculate the installment amount using an amortization schedule,

which breaks down each payment into principal and interest components.

3. Prepare a Repayment Schedule

- Monthly/Quarterly Schedule: Outline the repayment schedule, specifying the due date and
amount for each installment.

- Total Repayment Amount: Calculate the total amount to be repaid over the loan term, including
both principal and interest.

4. Consider Cash Flow and Budgetary Constraints

- Cash Flow Analysis: Assess the farm's cash flow to ensure that repayment installments are
manageable and align with income cycles.

39
- Budgetary Constraints: Take into account other financial obligations and expenses to avoid
overburdening the farm's finances.

5. Factor in Seasonal Variations

- Seasonal Income: If the farm's income is seasonal (e.g., crop harvest), structure repayment
plans to coincide with periods of higher cash inflow.

- Flexible Repayment: Consider flexible repayment options that allow for adjustments based on
seasonal variations in income.

6. Communicate with Lenders

- Discuss Options: Communicate with lenders to discuss repayment options and negotiate terms
that suit the farm's financial situation.

- Seek Assistance: In case of financial difficulties, proactively communicate with lenders to

explore restructuring or rescheduling options.

7. Monitor and Review

- Regular Monitoring: Monitor repayment progress regularly to ensure adherence to the

schedule.

- Review Financial Performance: Assess the farm's financial performance periodically to identify
any challenges or opportunities for improvement.

- Adjustments if Necessary: If needed, make adjustments to the repayment plan in consultation

with lenders to accommodate changing circumstances.

8. Maintain Documentation

- Record Keeping: Maintain detailed records of loan repayments, including dates, amounts, and
any correspondence with lenders.

- Financial Statements: Keep updated financial statements to track the farm's financial health and
repayment capacity.

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 Example

Loan Details:

- Loan Amount: Rs.100,000

- Interest Rate: 8% per annum

- Loan Duration: 5 years

- Repayment Frequency: Monthly

Calculate repayment Schedule using amortized even repayment plan:

Outcome

By following these steps and structuring repayment plans accordingly, farmers can effectively
manage loan repayments, maintain financial stability, and ensure the successful implementation
of agricultural projects. Regular communication with lenders and proactive monitoring of
financial performance are essential for achieving repayment goals and building strong
relationships with financial institutions.

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 Practical 10: Preparation and Analysis of Balance Sheet

Objective

The balance sheet provides a snapshot of a farm's financial position at a specific point in time,
presenting a summary of its assets, liabilities, and owner's equity. The objective is to guide
farmers in preparing and analyzing balance sheets to assess their financial health, solvency, and
liquidity.

Components of a Balance Sheet

1. Assets:

- Current Assets: Cash, accounts receivable, inventory.

- Fixed Assets: Land, buildings, machinery, equipment.

2. Liabilities:

- Current Liabilities: Accounts payable, short-term loans.

- Long-term Liabilities: Mortgages, long-term loans.

3. Owner's Equity:

- Capital Investment: Funds invested by the owner.

- Retained Earnings: Accumulated profits reinvested into the farm.

Preparation of Balance Sheet

1. Gather Financial Data

- Collect information on assets, liabilities, and owner's equity from financial records, including:
Bank statements, Loan documents, Purchase invoices, Depreciation schedules

2. Classify Assets

a) Current Assets: List cash, accounts receivable, and inventory, Include prepaid expenses, such
as prepaid insurance.

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- Fixed Assets:List land, buildings, machinery, and equipment, Calculate accumulated
depreciation for each fixed asset.

3. Determine Liabilities

- Current Liabilities: List accounts payable, short-term loans, and accrued expenses, Include
payments due within one year.

- Long-term Liabilities: List mortgages, long-term loans, and other obligations ,Include payments
due beyond one year.

4. Calculate Owner's Equity

- Capital Investment:

- Record the initial investment made by the owner.

- Include any additional investments made over time.

5. Prepare the Balance Sheet

- Organize assets, liabilities, and owner's equity into the balance sheet format.

- Total each section to ensure the balance sheet balances (Assets = Liabilities + Owner's Equity).

Analysis of Balance Sheet

1. Liquidity Analysis

- Current Ratio: Divide current assets by current liabilities to assess short-term liquidity. A ratio
above 1 indicates sufficient liquidity.

2. Solvency Analysis

- Debt-to-Equity Ratio: Divide total liabilities by owner's equity to assess leverage and solvency.
A lower ratio indicates less reliance on debt financing.

Debt-to-Equity Ratio = Total Liabilities / Owner's Equity

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Prepare a Balance Sheet

Outcome

By following the steps outlined for preparing and analyzing balance sheets, farmers can gain
valuable insights into their financial position, assess their ability to meet short-term obligations
and long-term debt, and make informed decisions to improve financial management and overall
farm profitability. Regular monitoring and analysis of balance sheet metrics are essential for
maintaining financial health and sustainability in agricultural enterprises.

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 Practical 11: Preparation of Income Statement

An income statement, also known as a profit and loss statement, provides a summary of a farm's
revenues, expenses, and profits over a specific period. It is a crucial financial statement that helps
assess the farm's financial performance and profitability.

Key points

- Revenue: Include all sources of revenue generated by the farm during the specified period, such
as sales of crops, livestock, and other agricultural products. Also, include any government
subsidies or other income.

- Expenses: List all expenses incurred by the farm during the period, including the cost of goods
sold (direct costs associated with production), operating expenses (e.g., labor, utilities,
maintenance), depreciation (for assets such as machinery and buildings), and interest expenses
(related to loans or other financial obligations).

- Total Revenue and Total Expenses: Calculate the total revenue and total expenses by summing
up the respective line items.

- Net Income Before Tax: Calculate the net income before tax by subtracting total expenses from
total revenue.

- Income Tax Expense: Include any income tax expense incurred by the farm during the period.

- Net Income After Tax: Calculate the net income after tax by subtracting income tax expense
from net income before tax.

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 Prepare an Income Statement of a farm

Outcome

The income statement provides a clear overview of the farm's financial performance during the
specified period, detailing its revenues, expenses, and net income. It is essential for assessing
profitability, making informed decisions, and planning for the future financial health of the farm.
Regularly preparing and analyzing income statements helps farmers monitor their financial
performance and identify areas for improvement.

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 Practical 12: Visit to Primary Agricultural Credit Societies (PACs)

Objective

Visiting Primary Agricultural Credit Societies (PACs) can provide valuable insights into the
agricultural finance landscape and the services available to farmers. Here's what you might
expect during a visit to these institutions:

Primary Agricultural Credit Societies (PACs)

- Purpose: PACs are grassroots-level cooperative credit institutions that provide credit and other
financial services to rural farmers.

-Enlist the Activities of PACs:

- Observations:

District Central Banks (DCBs)

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 Practical 13: Visit to District Cooperative Banks

- Purpose: DCBs act as central cooperative banks at the district level, coordinating and
supervising the activities of PACs and other cooperative institutions.

- Activities:

- Observations:

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 Practical 14 : Visit to State Cooperative Banks (SCBs)

- Purpose: SCBs are apex cooperative banks at the state level, providing financial services to
PACs, DCBs, and other cooperative institutions.

- Activities:

- Observations:

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 Practical 15 : Visit to Commercial Banks (CBs)

- Purpose: CBs are private or public sector banks that provide financial services to individuals,
businesses, and agricultural borrowers.

- Activities:

- Observations:

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 Practical 16: Visit to Regional Rural Banks (RRBs)

- Purpose: RRBs are financial institutions established by the Government of India to provide
credit and other financial services in rural areas.

- Activities:

- Observations:

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Suggested Readings

1. Lins, D.A. and Penson, J.B. 1980. AgrculturalFinanace:an introduction to Micro & Macro Concepts.
Prentice-Hallnc Publishers, New Jersy

2. Mohanan, N. 1981. Development Finance for Small Farmeres. Rainbow Publishers, Coimbatore

3. Nakkiran, S. 1980. Agricultural Finance and Rural Banking in India: an Evaluation. Rainbow Publishers,
Coimbatore

4. Paramjith, I.and Ravi, V.G. 1980. Agricultural Finance by Commercial Banks. Ashish Publishing Home,
New Delhi

5. Reddy, S. and Ram, P.R.2005. Agricultural Finance and Management.Oxford and IBH Publishers, New
Delhi.

6. Reddy, S., Raghuram, P., Neelakantan,T.V and Bhavani, D.I. 2004. Agricultural Economics. Oxford and
IBH Publishers, New Delhi.

7. Tomar, J.S. 1978. Farm Credit & Finance.Verma Brothers, Delhi

Websites

SCB: http://www.keralacobank.com

RBI: https://www.rbi.org.in

NABARD: https://www.nabard.org

World Bank: http://www.worldbank.org

ADB: http://www.adb.org

RRB: http://www.keralagbank.com

Lead Bank: http://www.canarabank.com

SLBC: http://www.slbckerala.com

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