Demand for loan waivers because agriculture today is not viable: Bhanwala

Nabard to propose setting up of an agriculture market infrastructure fund, says Harsh Kumar Bhanwala

The National Bank for Agriculture and Rural Development (Nabard) will propose setting up of an agriculture market infrastructure fund, to ensure a better return on farmer's produce due to improved storage. Harsh Kumar Bhanwala, Chairman & Managing Director, National Bank for Agriculture and Rural Development (Nabard), on the agitation by farmers and policy responses, tells Dilasha Seth. Edited excerpts:

Your assessment of the farm sector crisis?

There is indeed a distress. This is on account of realisation of farm produce in the absence of any marketing infrastructure. Only three or four states have an elaborate infrastructure for procurement -- Haryana, Punjab, Western Uttar Pradesh, Madhya Pradesh and, to some extent, in Maharashtra and Gujarat. Other states do not have it.

E-market reforms in agriculture need to be expedited. They (the scheme in this regard) have covered a little more than 500 mandis (wholesale markets) out of 3,000 of these, (run by) Agricultural Produce Market Committees (APMCs). You would require elaborate infra for storage, for quality control, which is absent in these markets. Even if you have a software solution to link markets, the other things are not in place.

How would Nabard like to intervene here?

For next year's Union Budget, we'll suggest setting up of an APMC Infra Fund. Today, with a lack of storage facility, a farmer sells at whatever price one gets in the market, rather than going back without selling and incurring another cost. There is a need for better infra availability in APMCs. If the government also feels the need, we are ready to raise the money and have the fund.

A few states have announced a farm loan (repayment) waiver. How do you assess the impact?

An omnibus waiver can demotivate on regular repayment. So, it needs to be focused, specific and pointed. Second, it is important to make agriculture viable. The demand for loan waiver is an outcome, a symptom. The problem lies somewhere else. Small holdings make agriculture non-viable. The terms of trade in recent years have been adverse. Prices of commodities have not risen but the cost hasn't come down. Land reforms are yet to take place. We need reforms that are agri market-related, land-related and that formalise oral leasing. We look forward to some of these initiatives, so that loan waiver are not as frequent as today.

The status of the Dairy Development Fund announced in the Budget this year?

We are closely working with the ministry of agriculture on this. The Cabinet would soon approve it. We are working on the guidelines and should operationalise it soon. A Dairy Development Fund is quite critical today. Dairy is the largest growing segment in the entire Gross Domestic Product of agriculture. Investment is needed for capacity creation, replacement and upgradation. The dairy sector is an All Time Money (ATM) for small farmers. While a crop gives a return in six months or a year, this gives a return every fortnight. It is a great impetus.

What other initiatives are coming from Nabard?

We are creating a micro irrigation efficiency fund. We have large amounts of arid areas, adversely placed on per capita water availability. In such a scenario, it is important that we synergise irrigation-related intervention. Last year, we created a long-term irrigation fund and have disbursed Rs 9,000 crore to various state governments for infra projects languishing for years. Now, we are thinking, should we not have micro irrigation, more crop per drop?

How much capital do you plan to raise this year?

This year, we are going to raise Rs 40,000-45,000 crore from the capital market, as against Rs 30,000 crore earlier. We will need more funds for the dairy and irrigation initiatives.

How will the government's plan to increase the capital of Nabard through the amendment in the Act help lending? Is it constrained at the moment?

Certainly. I can borrow 10 times of my net owned funds. These stand at Rs 31,000 crore including the capital. Today, the capital is Rs 6,700 crore; my authorised capital is only Rs 5,000 crore. So, I need to enhance it to legalise this. I am holding it in the form of share capital deposit. The role we are playing, the type of infrastructure development is needed in rural areas, we need much higher capital from the government.

Will you issue more of tax-free bonds?

Certainly. We have raised 15-year bonds. We are deepening the country's bond market. We had nearly a share of 30 per cent last year of these 15-year term bonds in the entire country. We are making great efforts towards that and if the results are good and we are able to raise such offerings from the market, we will also go for a higher tenure.