The Hindu Business Line : `Agriculture must be made a viable economic activity'

DEBATING THE BUDGET: (From left): Mr V. Murali, Partner, Victor Grace & Co; Mr M.S. Sundara Rajan, Executive Director, Indian Bank; Mr P.B. Sampath, Director and Secretary, Tractors & Farm Equipment Ltd; and Mr R. Raghuttama Rao, Managing Director, ICRA Management Consulting Services Ltd, at the Budget analysis for BL Club colleges held recently at the Meenakshi College for Women in Chennai.

Chennai March 11 In aiming for the development of the agricultural sector, the aim of the Government should be not merely raising production, but to make agriculture an attractive economic activity, Mr P.B. Sampath, Director and Secretary, Tractors & Farm Equipment Ltd, said.

Speaking at a Budget analysis meeting organised by the Business Line Club here last week, Mr Sampath asked whether the funds allocated to agriculture were productive. Reiterating a view expressed by the noted agricultural scientist, Dr M.S. Swaminathan, Mr Sampath said that the `Anand milk co-operative model' could be tried for foodgrains too. (Under this model, the farmers would market their produce themselves through co-operative societies.)

Pointing out that the farmer himself did not get much for his production, Mr Sampath said that an auction model (as is being done for tea and coffee) could be tried out for foodgrains. He observed that many farmers had lands but no money for farming.

A panel of experts, along with Mr Sampath, was addressing 450 students from 35 city colleges, which are part of the Business Line Club, at the Meenakshi College for Women.

Double taxation

Touching on the issue of dividend distribution tax, he said that the tax was "morally wrong" because it was tantamount to double taxation (because it taxed an income that had already suffered a tax).

Mr Sampath said that personal taxation began at a monthly salary of Rs 9,000, which was "peanuts". He said that personal income tax was collected largely from salaried individuals and some relief ought to have been given.

Speaking at the meeting, Mr R. Raghuttama Rao, Managing Director, ICRA Management Consulting Services Ltd, called for transparency in Government's financial statements. Terming them as "most opaque", Mr Rao said that it was difficult for even a trained mind to ascertain how government monies were spent. He said that about 70 per cent of Government's revenues came from taxes on corporate activity — taxes such as excise, customs, corporate income tax, central sales tax and dividend distribution tax.

Another speaker, Mr V. Murali, Partner, Victor Grace & Co, said that for the first time in history, taxation rates on partnership firms were less than personal income tax rates.

Mr Murali criticised the changes brought about in relation to the `Settlement Commission' saying that the Commission "has more or less been abolished".

Giving a perspective from the banking industry, Mr M.S. Sundara Rajan, Executive Director, Indian Bank, said that the Budget had many good provisions for the banking industry. He said that the regional rural banks (RRBs) would now be allowed to accept foreign currency deposits. The benefits of the SARFAESI Act, that facilitates selling of hypothecated assets in case the loans are not repaid, would be extended to the RRBs too, he said, pointing out that such a measure would help strengthen the RRBs.

Mr Sundara Rajan said that the Government had promised to recapitalise weak RRBs and it would help the rural banks perform better. The proposed introduction of the mortgage guarantee scheme and reverse mortgage would further help the banking sector, he said.

Mr Sundara Rajan said that the only provision in the Budget that was negative to the banking sector was the introduction of service tax on commercial rents. Since many banks had thousands of branches on rented premises, they would be hit by the service tax, he said. Moderating the panel discussion, Mr D. Sampath Kumar, Associate Editor, Business Line, said that institutional constraints and lack of consensus among political parties hampered development. Even if expenditure happened, "the benefits to be captured by a rupee of expenditure sometimes do not materialise."

For example, he said that while funds may be actually spent, say, on building an irrigation canal, because of various constraints such as land acquisition and technical impediments, the expenditure might have actually happened in building the canal in disjointed segments — with no benefits to the farmer.

He said such problems explained why development did not happen despite moneys being spent, and it might be too facile to blame the Finance Minister (for absence of outcomes).

The event had a host of sponsors: Radio One 94.3 FM, Reliance Web Stores Ltd, Turakhia Opticals, Wrist World, Vummidi Bangaru Jewellers, Rekha Boutique, Tulsi Silks, India Handicrafts and Sabol.

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`Agriculture must be made a viable economic activity'