labels: economy - general, agriculture
Impact on the farm sector news
B B Rao
28 February 2006

As expected, finance minister P. Chidambaram, in his budget, allocated substantial amounts for the agriculture and rural development sectors, underlining the UPA government's commitment to these segments.

Reflecting this commitment is the government's flagship programme, Bharat Nirman, which Chidambaram referred to in his speech. "It epitomises the UPA's approach to governance," he pointed out. "It is a paradigm shift that will enable us to use the resources thrown up by the engine of growth for building infrastructure and bringing basic amenities to rural India."

Chidambaram had last year set ambitious targets for the six components - the 'accelerated irrigation benefit programme', the 'accelerated rural water supply project', the 'rural roads programme', the 'rural houses programme', the 'rural electrification programme', and the 'rural telecommunications programme' - of Bharat Nirman, to be achieved by 2009.

Budgetary support for these programmes have been raised by a whopping 54 per cent, from Rs12,160 crore last year, to Rs18,696 crore for 2006-07.

The other rural-oriented flagship programmes of the UPA government - the 'sarva siksha abhiyan', 'mid-day meal scheme', 'Rajiv Gandhi drinking water mission', 'total sanitation campaign', 'national rural health mission', 'integrated child development services', and 'national rural employment guarantee scheme' - have also received significant boosts in resource allocation this year.

Chidambaram raised the total allocation for the eight flagship programmes (which also includes the Jawaharlal Nehru National Urban Renewal Mission) by 43.2 per cent, from Rs34,927 crore last year to Rs50,015 crores. The total allocation for rural employment amounts to Rs14,300 crore, which includes Rs11,300 crore under the 'national rural employment guarantee act', and Rs3,000 crore under the 'sampoorna grameen rozgar yojana'.

While allocating funds for the agriculture sector, Chidambaram noted that the thrust areas were assured irrigation, credit, diversification and creating a market for agricultural products.

He raised the outlay for the 'accelerated irrigation benefit programme' for 2006-07 to Rs7,121 crore, from Rs4,500 crore last year. The grant component has been increased from Rs1,680 crore to Rs.2,350 crore.

The finance minister plans to ask banks to increase the level of farm credit to Rs175,000 crore in 2006-07, up from Rs141,500 crore in the previous fiscal. Five million more farmers are expected to be covered in the farm credit portfolio. Chidambaram is confident of doubling farm credit in a span of three years.

Importantly for farmers, effective kharif season 2006-07, the government has decided to ensure that they get short-term credit at 7 per cent, with an upper limit of Rs300,000 on the principal amount. The National Bank for Agriculture and Rural Development will provide refinance to cooperative banks and regional rural banks at an economical rate.

Chidambaram has also decided to raise the corpus of the Rural Infrastructure Development Fund (RIDF) XII to Rs10,000 crore, from Rs.7,301 crore for RIDF XI. A separate window under RIDF XII for rural roads, with a corpus of Rs4,000 crore, has also been proposed for fiscal 2006-07.

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Impact on the farm sector