Budget Speech

Agriculture and Rural Development

8. As I have noted, reforms in the agriculture sector have been inadequate and must be speeded up. The Government has already announced the first ever National Policy in Agriculture.

9. The provision of adequate credit flow is critical for agricultural production. Total credit flow to agriculture through institutional channels of commercial banks, cooperative banks and regional rural banks is estimated to have reached a level of Rs 51,500 crore this year, an increase of about 15 per cent over last year. It is expected to increase to Rs 64,000 crore in 2001-2002 representing an increase of 24 per cent. In order to ensure continued healthy growth of the agricultural sector, I propose the following steps:

• · The operation of the Rural Infrastructure Development Fund (RIDF), set up in 1995-96 with NABARD, has been very successful in upgrading rural infrastructure with about 1,84,000 projects sanctioned so far. To help the States, I have decided to reduce the interest rate charged by NABARD from 11.5 per cent to 10.5 per cent. The corpus of RIDF VII will be increased from Rs 4500 crore to Rs 5000 crore next year.
• · The innovation of Kisan Credit Cards has proved to be very successful. Since the year of its introduction in 1998-99, almost 110 lakh of KCCs have been issued. I am asking our banks to accelerate this programme and cover all eligible agricultural farmers within the next 3 years.
• · I am also asking the banks to provide a personal insurance package to the KCC holders, as is often done with other credit cards, to cover them against accidental death or permanent disability, upto maximum amount of Rs 50,000 and Rs 25,000 respectively. The premium burden will be shared by the card issuing institutions.
• · NABARD and SIDBI were asked to link one lakh Self-Help Groups during the current year. NABARD by itself is well poised to exceed this target by the end of next month. I expect NABARD to link 1 lakh additional Self Help Groups during 2001-02, which would help in providing access to credit to an additional 20 lakh families. Share-croppers and tenant farmers will also become eligible for this scheme and special attention will be given to SC/ST groups. A micro finance development fund has also been set up in NABARD with contribution of Rs 40 crore each by NABARD and RBI.
• · I had permitted NABARD to issue capital gains tax exemption bonds last year. This has helped NABARD to mobilise more than Rs 1000 crore at lower than normal interest rates thereby reducing its cost of funds. I propose to continue with this tax exemption.
• · The resources from the Watershed Development Fund set up in NABARD would be used to promote people’s participation and also enable water users’ associations to implement, operate and maintain irrigation schemes.

10. In 1999, I had announced a credit linked subsidy scheme for construction of cold storages for perishable commodities. So far, NABARD and NCDC have provided Rs 161 crore of credit for creation of additional capacity
of 9.69 lakh tonnes. A subsidy of Rs 78 crore for setting up these cold storages was provided during 2000-2001. I now propose to extend the coverage of this scheme to also cover rural godowns. The subsidy to be provided by the Government would be suitably enhanced to take care of increased coverage. The loans would carry an adequate long-term repayment period and would enable individuals, cooperative societies and others to build godowns by availing of loans from cooperative banks, commercial banks and RRBs.

11. This scheme will enable small farmers to enhance their holding capacity in order to sell their produce at remunerative prices. NABARD proposes to reduce its rate of interest for funding the storage of crops, from 10 per cent to 8.5 per cent. Small farmers will particularly benefit from this scheme by avoiding distress sales.

12. With the diversification and modernisation of agricultural practices, there is a need to augment support and extension services for agriculture. For this purpose,
a scheme for setting up Agriclinics and Agribusiness Centres by agricultural graduates will be launched with the support of NABARD. These centres will provide a package of soil and input testing facilities and other consultancy services, They will strengthen transfer of technology and extension services and also provide self-employment opportunities to technically trained persons. Loans on attractive terms for setting up these centres will be provided by banks with refinance from NABARD

13. There is a significant potential of improving crop productivity in the Eastern and North Eastern regions through crop diversification and adoption of improved technologies. These regions also have large untapped ground water resources. A sum of Rs 61 crore has been provided for the Centrally Sponsored Scheme on "On-Farm Water Management for Increasing Crop Production in Eastern India".

14. I am also happy to inform the House that I have provided Rs 38 crore for the "Technology Mission for Integrated Development of Horticulture in the North-Eastern States", announced by me last year.

Rural Roads

15. In my last Budget, I had announced the launching of a new scheme, the Pradhan Mantri Gramodaya Yojana (PMGY) with the objective of undertaking time bound programmes to fulfill the critical needs of the rural people. As a follow up, particularly with the objective of achieving rural connectivity, the Pradhan Mantri Gram Sadak Yojana has been launched by the Hon’ble Prime Minister on December 25, 2000. A Central allocation of Rs 2500 crore was provided for 2000-01. I am providing another allocation of Rs 2500 crore for the coming year. 50 per cent of the diesel cess is earmarked for development of rural roads.

Rural Electrification

16. It is a matter of concern that even after 50 years of planned development there are still about 80,000 villages, which do not have access to electricity. A package of initiatives is therefore being launched to improve the power distribution system in rural areas. This includes:

• Completion of electrification of bulk of the remaining villages in the next 6 years.
• Extension of assistance to the States for village electrification works under the PMGY whose funding is being augmented.
• Stepping up credit support from Rural Electrification Corporation to SEBs for speedy electrification of dalit bastis, households of scheduled tribes and other weaker sections of society.
• Improving the quality of power supply in villages, augmentation of distribution networks in rural areas supported by REC under the Accelerated Power Development Programme.
• Earmarking a sum of at least Rs 750 crore out of RIDF for rural electrification works.
• Augmenting the resources of REC, by allowing it to float capital gains tax exemption bonds along with NABARD and NHAI under Section 54 EC of the Income Tax Act.

17. Increased production and rising productivity makes the proper management of the food economy more critical then ever before. Our policy has to be transformed to deal with surpluses rather than only shortages. The present arrangement of Government of India procuring foodgrains and States managing the PDS has led to many problems. While the subsidy has increased from Rs 8210 crore at B.E. to Rs 12,125 crore at R.E. stage this year, the satisfaction level has gone down. I propose, therefore, to give an enlarged role to the State Governments in both procurement and distribution of foodgrains for PDS in their respective states. Instead of providing subsidised foodgrains, financial assistance will be provided to the State Governments to enable them to procure and distribute foodgrains to BPL families at subsidised rates. FCI will continue to procure foodgrains for maintaining food security reserves and for such State Governments who will assign it this task on their behalf. Details for operationalising these arrangements will be worked out in consultation with the State Governments at the earliest.

18. The agricultural sector continues to be constrained by the existence of a number of inhibiting controls and regulations. The Essential Commodities Act, 1955 provides for the control of production, supply and distribution of certain commodities identified as essential commodities under the Act to protect the interest of consumers. State Governments have issued a large number of Control Orders under this Act inhibiting free movement of some food and agriculture products. In the changed present situation undue restrictions on movement and stocking of foodgrains and agricultural produce is acting as a disincentive to farmers.

19. Government therefore proposes to review the operation of the Essential Commodities Act, 1955 and remove many of the restrictions that have been imposed on the free inter-State movement of foodgrains and agricultural produce and also on the storage and stocking of such commodities. It will also review the list of commodities declared as essential under the said Act and bring their number down to the minimum required. My colleague the Food Minister will issue necessary direction in this regard after consultations with the State Governments. Infrastructure.

20. Rapid development of the economy depends on adequate investment in infrastructure. A key issue here is imposition of appropriate user charges necessary to provide adequate returns on investment. Public resources have been invested in the public sector over the last 50 years for the provision of infrastructure services in the country. One consequence of this has been that user charges have inevitably become politically determined. Over time non-merit subsidies inherent in such low user charges have mounted to over 10 per cent of GDP, a figure similar to the total fiscal deficit of the Central and State Governments combined. Hence they are a major cause of the fiscal distress being experienced at all levels.

21. I believe that this issue is now so important that it needs urgent discussion throughout the country. The challenge is to achieve a consensus on the imposition of appropriate user charges in such a manner that the poor are protected while those who can pay are made to do so. Only then will we be able to accelerate investment in these essential services in both the public and private sectors. A prime example of this is the power sector.

Power

22. The importance of power in fuelling economic growth cannot be over emphasised. The total cost to the State Electricity Boards of implicit subsidies amounts to about Rs 36,000 crore this year. After accounting for cross subsidy and State subventions, actual commercial losses of all SEBs combined are estimated to be about Rs 24,000 crore. Hidden in these loss figures are extremely high T&D losses.

23 Although all of these losses are borne by SEBs and State Governments, I have to express my concern on this issue since this is a massive national loss and affects Central Government undertakings also. The total dues owed to Central Government utilities by SEBs and others now amount to over Rs 25,000 crore. If these resources were available, the country would have no difficulty in investing adequately in power sector expansion to the benefit of all. Theft of electricity must be stopped and economic tariffs levied.

24. The most vital element of the reform process is the restoration of financial viability of the State Electricity Boards (SEBs). On the basis of consensus that has progressively emerged in the National Development Council Resolution of 1992, the Common Minimum National Action Programme drawn up in 1996 and the Power Ministers’ Conference of February 2000, the Central Government is accelerating the programme of reforms in SEBs on the basis of specific milestones that are being built into MOUs entered into with State Governments. These MOUs include specific milestones such as:

• A time bound programme for installation of 100 per cent metering by December 2001.
• Energy audit at all levels.
• A specific programme for reduction and eventual elimination of power theft.
• Tariff determination by SERCs and compliance thereof.
• Commercialisation of distribution and
• SEB restructuring.
• To demonstrate the importance of this task, the Prime Minister will hold a meeting of State Chief Ministers on March 3, 2001.

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