The Hindu Business Line : `Political consensus needed for FDI in retail trade'

While the Centre will ensure that commercial banks and regional rural banks work for farmers, the onus of low-cost funding through co-operative banks rests squarely with the State Governments.

New Delhi , April 10

THE Union Finance Minister, Mr P. Chidambaram, has said that political consensus was required for allowing foreign director investment (FDI) in retailing.

Speaking at the valedictory session of the two-day Agricultural Summit 2005 on `reforms for raising farm income' jointly organised by the Ministry of Agriculture, Government of India, and the Federation of Indian Chambers of Commerce and Industry (FICCI), the Finance Minister said there are some issues such as privatisation of mandis, opening of retail trade to FDI especially for food products and contract farming, where there is difference in polity. He, however, cautioned that building consensus might not be an easy task.

Mr Chidambaram expressed confidence that the UPA Government would be able to resolve the issues for implementing large-scale agricultural reforms. The Finance Minister also said that the Government was keen on ensuring that the APMC Act is amended and the new Seed Bill is converted into an Act.

For improving credit access to farmers, Mr Chidambaram said, he was determined to ensure that the interest rates on agricultural loans by co-operative banks are made affordable. He said the co-operative banking sector is the weakest of the three links in the credit delivery mechanism in the rural sector. To deliberate upon the ways to improve credit flow to the farm sector and to increase efficiency of co-operative banks for making development credit available to the farmers at a cheaper rate, the Finance Minister announced that a conference of Chief Ministers would be convened next month.

The conference is a follow-up of the Vaidyanathan Committee report, which went into the question of production credit. New terms of reference will be given to the committee for suggesting ways to improve development credit to farmers, said Mr Chidambaram. While the Centre will ensure that commercial banks and regional rural banks work for farmers, the onus of low-cost funding through co-operative banks rests squarely with the State Governments, the Finance Minister said.

He expressed concern at the declining share of capital formation in agriculture as a proportion of farm GDP from 1.92 per cent in the 90s to 1.28 per cent in early 2000. "This was largely because of decline in public investment," he said.

Mr Chidambaram said the Government was committed to public-private partnership in increasing agriculture investments especially in the areas of irrigation, watershed and wasteland development and doubling farm credit in three years. Expressing satisfaction that the declining trend of capital formation in agriculture through public and private investment has been reversed in 2003-04, the Finance Minister said his Ministry has set a target of Rs 1,40,000 crore for agriculture credit in 2005-06, against Rs 1,08,000 crore disbursed in 2004-05. The farm credit was Rs 80,000 crore in 2003-04, when this was available to four crore families.

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