The Indian Budget 1996-97 The Indian Economy Overview


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Agriculture & Rural Credit

  1. The Common Minimum Programme lays emphasis on broad-based agricultural development and calls for a doubling of the flow of credit to agriculture and agro-industries, particularly to small and marginal farmers, within five years. We have evolved an integrated plan consisting of several elements for fulfilling this important objective.

  2. First, the share capital of the National Bank for Agriculture and Rural Development (NABARD) will be increased from the present level of Rs.500 crore to Rs.2,000 crore in the next five years. I propose to double NABARD's paid up share capital to Rs.1,000 crore in the current year. A budgetary provision of Rs.100 crore is being made towards the Government of India's share and the balance Rs.400 crore will be contributed by the Reserve Bank of India.

  3. Second, the Rural Infrastructure Development Fund (RIDF) which is operated by NABARD and funded by contributions from commercial banks falling short of their priority lending targets will be augmented considerably. The RIDF provides loans to State governments for completion of projects in areas like medium and minor irrigation, soil conservation and watershed management. During 1995-96, NABARD sanctioned loans aggregating Rs.1,984 crore to 19 States for completing 2,489 projects. During the current financial year, an additional Rs.2,500 crore will be made available for financing rural infrastructure through the RIDF.

  4. In addition to the RIDF, I am proposing an Accelerated Irrigation Benefit Programme under which the Centre will provide, on a matching basis, additional Central assistance by way of loans to the States for the timely completion of selected large irrigation and multi-purpose projects. I am making an allocation of Rs.800 crore in 1996-97 to launch this scheme which is designed to accelerate the completion of irrigation projects where the project cost exceeds Rs.1,000 crore and is beyond the resource capability of the States. I am also allocating Rs.100 crore in the current financial year for irrigation projects where, with just a little additional resources, the projects could be completed and farmers could get the benefit of assured water supply. 100,000 hectares will be brought under irrigation through these schemes and I have been assured that the first crop will be harvested on these lands during one of the next four agricultural seasons. Details of the large projects and the projects to benefit 100,000 hectares will be announced by the Planning Commission in the next few days. This programme will be closely monitored by the Department of Programme Implementation.

  5. Fourth, to promote investment in commercial or high technology agriculture and allied activities such as horticulture, floriculture and agro-processing, state level agricultural development finance institutions are proposed to be set up. NABARD will be the chief promoter. Other national level financial institutions as well as the State governments concerned will be requested to participate in the equity.

  6. Fifth, it has been agreed with RBI to promote the setting up of new private local area banks with jurisdiction over two or three contiguous districts. This would enable the mobilisation of rural savings by local institutions and, at the same time, make them available for investments in the local areas.

  7. Finally, we have taken a number of decisions that will directly benefit the farmers. Two weeks ago, the Prime Minister announced increases in the subsidies for phosphatic and potassic fertilisers. Government have decided to extend the subsidy under the Integrated Cereal Development - Rice Programme to power tillers at the rate of Rs.30,000 or 50% of the cost for each power tiller. The subsidy scheme on small tractors at the rate of Rs.30,000 per tractor is presently restricted to small and marginal farmers. I am extending this scheme to all farmers. I am also enhancing the subsidy on sprinkler and drip irrigation from 50% to 70% of the cost of the system and the ceiling is also being raised from Rs. 15,000 to Rs.25,000 per hectare. In respect of small and marginal farmers, women and scheduled castes and scheduled tribes, this limit is being raised to 90% of the cost of the system.

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