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Friday, Feb 20, 2004

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Creditable effort at wooing farmers

K. P. Prabhakaran Nair

The lack of affordable farm credit was seen as the biggest impediment to agricultural growth until the Finance Minister, Mr Jaswant Singh, in his Interim Budget declared that if less than 6 per cent interest rate is good enough for the corporates, there is no reason why it should not be so for farmers. This and his direction that farmers should no more be required to produce as loan collateral their entire holdings should be welcome news to the sons of the soil.

THE NDA Government has taken a calculated risk in wooing the farmers — close to 70 per cent of the electorate — in the hope that it would storm back to New Delhi with a thumping majority.

For long, the lack of cheap credit to those who till the land and fill the granaries has been seen as the biggest impediment to progress on the farm front. That flaw seems to have been removed now, at least on paper.

Mr Jaswant Singh's words in the Budget speech were music to those who toil on the soil. He said that if a lower than 6 per cent interest rate is good enough for corporates, there is no reason why it should not be so for farmers. The icing on the cake was his declaration that, hereafter, farmers would no more be required to produce as collateral for a bank loan their entire holdings, but only a portion that is equated in value to the loan applied for.

Even if the NDA does not ride back to power, any other outfit that occupies the South Block in New Delhi would find it too embarrassing to antagonise the farmer. In this game, Mr Jaswant Singh has clearly outwitted his opponents. But this is no reason to downplay the importance of this important step.

The Finance Minister has made room for about Rs 15,000 crore to clean up the balance-sheets of the co-operative banks.

More important, the constitution of a High-Power Committee, under the guidance of Mr Vats, a noted economist, to go into the question of farm credit is a worthy step in this direction. If one goes by the history of farm credit in India, there are many blind spots which do not speak well of the earlier schemes.

For instance, the question of irrigation. A number of farmers in Kerala, the State with abundant rainfall, apply for loans to set up drip irrigation systems, but the loan gets clandestinely diverted for other purposes.

And there are ever so many instances where money has been thoughtlessly used to install deep tube-wells even in places where the water table is very high and the water pumped is simply wasted in huge quantities.

Admittedly, these are technical matters pertaining to the execution part of the agricultural loan. But it highlights the fact that the lack of ethics in using borrowed money is not confined to the corporate world. One notable fact in the Budget is the total silence on funds for farm research. This may as well be so. Last year, Mr Jaswant Singh provided Rs 50 crore for horticulture and precision farming. Looking back, nothing purposeful came out of the exercise. Agriculture was, and still is, a gamble, with much dependin on the monsoons, and no amount of precision farming is going to change that. Perhaps in small patches of land, yes. Not on a country-wide scale.

Why, then, is there so much hunger in the country despite nearly more than three decades of the so-called Green Revolution, which is supposed to have filled our granaries, and the Food Corporation of India (FCI) actually exported 35 million tonnes of foodgrains valued at $4 billion, which looks so attractive on the surface? The futility of this exercise surfaces only when one examines the data more critically.

The value of wheat exported works to just Rs 5 a kg. That this export charade is enacted at enormous cost to the national exchequer is clear when we take into account that wheat was procured at Rs 6.30 a kg (the minimum support price — MSP), the incidentals were Rs 1.60 a kg and the distribution cost Rs 1.49 a kg.

Obviously, it is the very rich farmers of Punjab, Haryana, Western Uttar Pradesh and Andhra Pradesh who benefited from the largesse of New Delhi through the MSP regime.

More important, the country lost very valuable grain, a substantial portion of which could have filled the stomachs of so many millions of hungry women, children and men. A passing mention must then be made of the vote-on-account Budget provision of adding five million more to the already existing 1.5 million of the poorest of the poor for the Antyodaya Anna Yojana (AAY), where rice will be sold at Rs 3 a kg and wheat at Rs 2 a kg.

Of the total budgeted food subsidy Bill of Rs 27,800, Rs 2,000 crore (from the earlier Rs 1,000 crore) is meant for the AAY. The first point to be noted is that it would be very difficult to demarcate those in this category among the below poverty line population (BPL), when this segment is itself not properly demarcated. Besides, one needs to note that wheat prices now rule at Rs 1,000 plus a quintal, making it Rs 10 a kilo. And the temptation for the unscrupulous to divert the extra grain for private profit could be too tempting. Buying wheat clandestinely at Rs 2 a kilo and selling at Rs 10 a kilo will be a definite kill for the unscrupulous.

If the country is to address the problem of hunger, there is no escape from producing foodgrains in abundance. If, today, there is so much hunger, it is not because of low purchasing power alone. Sub-Saharan Africa suffers much more lower purchasing power; yet, its record in mitigating hunger is far better than India's.

As of now, that is part of the problem. But the larger question is one of abundant production. Most unfortunately, the agricultural fraternity has failed miserably in this objective. While China is racing ahead with the hybrid rice, India's plant genetic engineers have only been decoding the rice genome for the past almost five years.

Unless the country has superlative crop varieties, which the plant breeders clearly are unable to evolve, there is no hope of breaking the yield barrier. Probably, the reluctance of the Finance Minister to pump more into the kitty of monoliths such as the ICAR is an acknowledgment of this unfortunate and unpalatable truth.

India's investments in agricultural research and development (R&D) compare so well with China, yet, we have too little to show by comparison. For a population comparable to India's (1.3 billion in China compared to 1 billion in India), China has been harvesting upwards of 500 million tonnes of foodgrains over the last few years. India's 200 million plus pales in comparison.

The Finance Minister would continue with the kisan credit card and also extend the farm insurance scheme to 100 districts. The intensification of self-help groups (SHG) in Madhya Pradesh, Uttar Pradesh and Rajasthan is a welcome move. One would have wished the Finance Minister to give a new direction in terms of resource allocation to boost value-addition in the farm sector.

Amul, in the dairy industry, is a classic success story where Dr Varghese Kurien set a blazing trail for others to follow. There is an array of crops, starting from rice and ending in gooseberries, where the value-addition chain would bring about a world of change in the farmer's profits.

Unfortunately, the sector continues to be under the multinationals and other big business houses of India which go for a big kill at the expense of the real farmer.

(The author was formerly National Science Foundation Professor, Royal Society, Belgium, and can be contacted at

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