How Government Policies Shape Agricultural Logistics and Marketing

Every time a farmer harvests a crop, a complex chain of events determines whether that produce reaches a market in good condition – or is lost to spoilage, poor storage, or lack of buyers. In India, where agriculture employs nearly half the workforce, the efficiency of this chain is not just an economic issue; it’s a matter of livelihoods. Government policies play a decisive role in shaping this system. From creating dedicated export zones to funding cold storage networks, policy-driven interventions directly influence how agricultural produce moves, gets stored, and finds markets – both at home and abroad.

Why government policy matters in agricultural logistics
Agri Export Zones (AEZs): creating focused export ecosystems
How AEZs were structured
What AEZs achieved – and their limitations
Agriculture Infrastructure Fund (AIF): building from the farm gate up
What the AIF finances
Scale and impact on the ground
Other key government policies shaping agricultural logistics
e-NAM and digital market integration
Operation Greens and the cold chain push
Agricultural Marketing Infrastructure (AMI) and price support
The broader impact: from policy to profitability

Why government policy matters in agricultural logistics

Agricultural logistics is more than transportation. It covers how produce is stored after harvest, how it is processed and graded, how it reaches buyers, and ultimately, what price a farmer receives. Without supportive policy frameworks, private investment in rural infrastructure remains thin – largely because the returns are uncertain and the upfront costs are high. Research on agricultural marketing in India consistently highlights that inadequate storage, poor transport connectivity, and fragmented markets are the key reasons farmers are unable to realise fair prices for their produce. Government intervention helps fill this gap by reducing risk, subsidising infrastructure, and creating institutional frameworks that make investment viable.

India’s cold storage capacity stands at approximately 35 million tonnes – enough to cover only around 10% of total agricultural production. The shortage of refrigerated transport, high logistics costs, and fragmented market structures continue to push farmers into distress sales during peak harvest periods. Policies targeting these specific bottlenecks are what make a tangible difference on the ground.

Agri Export Zones (AEZs): creating focused export ecosystems

The Agri Export Zone (AEZ) scheme was launched as part of India’s Exim Policy 2001-2002 with the goal of adopting an integrated approach to export promotion through public-private partnerships. The idea was straightforward: identify geographic clusters known for specific crops, provide them with the infrastructure and institutional support they need, and convert those clusters into viable export hubs.

How AEZs were structured

Each AEZ was tailored to focus on specific, regionally grown agricultural commodities – products well-suited to the local climate and soil. State governments identified these zones and coordinated a package of services covering pre-harvest treatment, processing, packaging, and storage. The central body APEDA (Agricultural and Processed Food Products Export Development Authority) was nominated as the nodal agency to coordinate central government support, while corporate entities with proven credentials were encouraged to sponsor or manage zones.

In total, 60 AEZs were sanctioned across 20 states, covering 40 agricultural commodities. These included fruits, vegetables, spices, cashew, basmati rice, medicinal plants, and flowers. Units operating within AEZs could import capital goods duty-free under the Export Promotion Capital Goods (EPCG) scheme and were entitled to all facilities available under existing export promotion frameworks.

What AEZs achieved – and their limitations

The AEZ model contributed to building export-oriented infrastructure and gave structure to value chains that had previously been informal and disorganised. However, challenges emerged over time. A Planning Commission report found that many AEZs lacked long-term sustainability, with limited institutional coordination and several private stakeholders exiting after the initial incentive phase. The scheme was formally discontinued in 2015, but its legacy lived on in the policy frameworks that followed – including the Districts as Export Hubs initiative and the PM Gati Shakti National Master Plan, both of which drew lessons from the AEZ experiment.

The AEZ experience also underlined a key insight: export promotion infrastructure cannot function in isolation. It requires sustained coordination between central and state governments, consistent private sector participation, and quality compliance systems that meet international standards – including food safety norms under FSSAI and phytosanitary standards aligned with international requirements.

Agriculture Infrastructure Fund (AIF): building from the farm gate up

Where AEZs focused on exports, the Agriculture Infrastructure Fund (AIF) addresses a more fundamental challenge: the absence of post-harvest infrastructure at the farm level itself. Announced in May 2020 and operational from 2020-21 to 2032-33, the AIF provides a financing facility of ₹1 lakh crore for creating storage, logistics, and processing infrastructure at farm gates and aggregation points across India.

What the AIF finances

The scheme was designed to address existing gaps in post-harvest management infrastructure by enabling farmers to store and preserve produce properly, sell at better prices, and reduce reliance on intermediaries. Eligible projects include warehouses, cold storage units, grading and assaying centres, pack houses, ripening chambers, logistics facilities, e-marketing platforms, organic input centres, and even drone purchases and smart agriculture systems.

The financial structure of the scheme makes it particularly accessible. All loans under the AIF receive an annual interest subvention of 3%, making borrowing significantly cheaper for farmers, Farmer Producer Organisations (FPOs), cooperatives, agri-entrepreneurs, and startups. For loans up to ₹2 crore, credit guarantee coverage is also provided through CGTMSE, with the guarantee fee borne by the government – removing a major barrier for those without conventional collateral.

Scale and impact on the ground

As of June 2025, ₹66,310 crore had been sanctioned under the AIF for over 1,13,419 projects across India, mobilising a total investment of ₹1,07,502 crore in the agriculture sector. Among these, 2,454 cold storage projects were sanctioned with a cumulative amount of ₹8,258 crore. An independent impact assessment by the Gokhale Institute of Politics and Economics found that AIF-supported projects had generated more than 9 lakh employment opportunities, with nearly 97% of these projects located in rural areas.

Cold storage and logistics hubs developed under AIF have improved the reach of perishable goods, ensuring that fruits, vegetables, and dairy products can travel farther without spoilage. Grading and assaying units are connecting farmers to organised markets and digital platforms, allowing them to command better prices directly. According to NABARD, cold chain access can increase income realised by farmers by an estimated 15-20%.

Other key government policies shaping agricultural logistics

While AEZs and AIF are central frameworks, several other policies work alongside them to strengthen the overall agricultural marketing and logistics ecosystem.

e-NAM and digital market integration

The e-NAM (Electronic National Agriculture Market) platform has integrated over 1,410 mandis across 23 states and 4 Union Territories, with 1.78 crore farmers and 2.63 lakh traders registered on the portal as of December 2024. By enabling transparent price discovery online, e-NAM reduces the dependence on local intermediaries and connects farmers to a much wider buyer base. FPOs have also been onboarded onto ONDC (Open Network for Digital Commerce) and GeM (Government e-Marketplace) to further improve market access and price realisation.

Operation Greens and the cold chain push

Operation Greens is an initiative aimed at stabilising the supply and prices of essential fruits and vegetables, reducing price volatility, and promoting sustainable agri exports. Combined with the Integrated Cold Chain, Food Processing and Preservation Infrastructure Scheme under PMKSY, these programmes directly tackle the perishability problem – one of the most persistent causes of post-harvest losses in India.

Agricultural Marketing Infrastructure (AMI) and price support

The Agricultural Marketing Infrastructure scheme aims to develop and upgrade market yards, cold storage facilities, warehouses, and other essential infrastructure across the country. The Minimum Support Price (MSP) mechanism, meanwhile, provides a price floor for key commodities, protecting farmers from sharp market downturns. In June 2024, the MSP for several kharif crops was raised – with rice seeing a 5.4% increase and maize a 6.5% increase – signalling continued commitment to income support for farmers.

The broader impact: from policy to profitability

The cumulative effect of these policies goes beyond individual schemes. Together, they represent a shift in how India thinks about agriculture – from a production-focused model to a value-chain-centred approach. When farmers have access to cold storage near their fields, they are less likely to sell at distress prices immediately after harvest. When processing units are available locally, more value is retained within the farming community rather than being captured downstream. When export infrastructure is in place, niche crops with strong global demand – like organic spices, GI-tagged produce, or fresh floriculture – can actually reach those markets competitively.

India’s agriculture policy direction in 2025 emphasises reducing middlemen’s dominance, cutting post-harvest losses, and building unified digital market platforms to improve price transparency and payment speed. Farm Producer Organisations are being recognised as a key institutional innovation to help smallholders overcome scale disadvantages and extend their reach to modern technology and distant markets. These elements – digital infrastructure, physical infrastructure, and institutional support – are the three pillars on which effective agricultural logistics policy now rests.

That said, the effectiveness of these policies depends heavily on implementation quality, coordination between state and central agencies, and the ability of small farmers to actually access and benefit from what is being offered. Schemes with strong potential on paper have historically underperformed when awareness is low, bureaucratic processes are cumbersome, or private sector participation is inconsistent.

What do you think? With large-scale schemes like the AIF and digital platforms like e-NAM already in place, what do you think is the biggest remaining barrier preventing small and marginal farmers from fully benefiting from government logistics and marketing policies? And should India revive a focused export zone model like AEZs – but with stronger accountability mechanisms – to boost agri exports in today’s competitive global market?

References

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Table of Contents

Why government policy matters in agricultural logistics 🔗

Agri Export Zones (AEZs): creating focused export ecosystems 🔗

How AEZs were structured 🔗

What AEZs achieved – and their limitations 🔗

Agriculture Infrastructure Fund (AIF): building from the farm gate up 🔗

What the AIF finances 🔗

Scale and impact on the ground 🔗

Other key government policies shaping agricultural logistics 🔗

e-NAM and digital market integration 🔗

Operation Greens and the cold chain push 🔗

Agricultural Marketing Infrastructure (AMI) and price support 🔗

The broader impact: from policy to profitability 🔗