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Tuesday, March 1, 2011

AGRICULTURE: FM doles out cheaper loans to farmers

Providing a big pro-farm thrust, the government announced reduction in interest rate to 4 per cent for farmers who repay loans on time and raised agri-credit target by a whopping Rs 1 lakh crore to boost investments in the sector.

Faced with high food inflation, Finance Minister Pranab Mukherjee unveiled various schemes in the Budget 2011-12, with an outlay of Rs 2,200 crore to increase production of vegetables, millets, milk, pulses, palm oil and fodder.

Emphasising upon the need for affordable credit to farmers, he announced an "additional subvention to 3 per cent in 2011-12" for those farmers who repay in time.

"Thus, the effective rate of interest for such farmers will be 4 per cent per annum," Mukherjee said. The government decided to continue the existing scheme of providing short-term crop loans to farmers at 7 per cent for the next fiscal.

To increase investment in the farm sector, the Finance Minister raised the agri-credit lending target for banks to Rs 4,75,000 crore for 2011-12 from Rs 3,75,000 crore this year, with special focus on small and marginal farmers.

Pointing out that high food inflation is still a concern for the government, Mukherjee said:"Removal of production and distribution bottlenecks for these items (vegetables, milk, meat and poultry)will be the focus of my attention this year."

In view of growing demand for vegetables, he announced Rs 300 crore to set up a "vegetable cluster", initially close to metros.

To reduce 40 per cent wastage of fruits and vegetable, the Budget announced setting up of 15 more mega food parks next fiscal. Besides, it gave "infrastructure status" to boost investment in cold chains and post-harvest storage facilities. It exempted excise duty on equipments used in cold storage.

With infrastructure status, investors in cold chains will benefit tax holiday and priority sector lending from banks.

Mukherjee asked the state governments to reform the Agriculture Produce Marketing Act (APMC) urgently to improve the supply chain.

Striving to make India self-sufficient in pulses and edible oil, Mukherjee announced two separate schemes with an outlay of Rs 300 crore each to encourage production of pulses and palm cultivation.

At present, the country imports 3-4 million tonnes of pulses and nearly 9 million tonnes of cooking oils to meet domestic shortages.

Identifying rising demand in animal protein products like fish and milk, the government launched a "National Mission for Protein Supplements" with an allocation of Rs 300 crore.
The government also sought to promote balanced nutrition by enhancing production of coarse cereals like bajra, ragi, jowar and other millets. The programme will cover 25,000 villages.

Another Rs 300 crore was provided to increase fodder production, essential for sustained production of milk. To augment domestic supply of fodder, import duty was exempted on de-oiled rice bran cake and duty of 10 per cent was slapped to discourage its export.

"De-oiled rice bran cake constitutes an important ingredient of cattle feed and its improved availability would have a positive impact on milk production," he said.

The Finance Minister made a provision of Rs 400 crore for bringing green revolution in the eastern India, mainly West Bengal and Bihar's rice-based areas. This scheme was launched last year.

For sustained growth in agricultural crops, Mukherjee proposed to promote organic farming. He further announced reduction in import duty on specified machineries to 2.5 per cent from the existing 5 per cent.

Besides this, import duty on micro-irrigation equipment was also slashed to 5 per cent from the 7.5 per cent.

Last year, the government had delineated a four-pronged strategy covering agri-production, reduction in wastage of produce, farm credit support, and a thrust to food processing.

"These initiatives have started showing results but there are other issues in our food economy that require attention," Mukherjee noted.

Noting that agriculture development is central to the country's growth strategy, he said that private investment in farm and food processing activities has to be deepened further. The Finance Minister allocated a Plan and non-Plan outlay of Rs 24,176.72 crore for the agriculture ministry in the 2011-12 fiscal, against Rs 24,216 crore last year.

The central plan for agriculture ministry was lowered to Rs 13,662 crore for next fiscal from Rs 14,049 crore last year.

AGRI-EXPERT-REAX

"Budget could have done more for the farm sector"

Several agri-experts, including noted scientist M S Swaminathan,said the Budget 2011-12 did not address several important issues facing agriculture, although they welcomed some proposals as being pro-farm.

Swaminathan, known as the father of the Green Revolution in India, said the Budget had several good proposals but it did not have a strategy to keep farmers on farm and attract youth in the agriculture sector.

"It is unfortunate that in a year of emerging global food crisis and persistence of food inflation, an opportunity to accelerate agricultural progress and agrarian prosperity has been missed," he added.

Swaminathan said, "The only hope for farmers is Food Security Bill which confers legal access to food. While the right to information can be implemented with the help of files, the right to food can be implemented only with the help of farmers."

Former Union Minister and agro economist Yogendra Alagh said although the certain Budget proposals were good, especially those that push public-private partnership in the sector, there is no strong anti-inflation strategy.

India Region Head of Monsanto D Narain said increasing agri-credit limit for farmers, the interest subvention and capital infusion to NABARD were "progressive" steps.

Echoing the sentiment, Secretary General of the Consortium of Indian Farmers Association Chengal Reddy lauded the Budget, especially the steps to increase farm credit target for 2011-12, and lowered interest rate on loans.

Sanjay Kaul, Head of NCMSL, a leading commodity risk manager and service provider, said that the granting of "infrastructure status" to cold chains and post-harvest facilities will encourage more investments in the sector.

Lamon Rutten, MD & CEO of leading commodity exchange MCX said, "The Budget facilitates higher capacity-creation through increased investments, and will ensure that inflationary pressures will be countered by strong supply side response".

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