'Farm sector needs to diversify for growth'

The increasing oil prices are a cause for concern, said Montek Singh Ahluwalia, deputy chairman, Planning Commission and added that it has been very difficult to manage the oil prices.

Rejecting the suggestion of a regulatory body to control the prices, he said that the prices must be 'mechanised'. It should be brought on a par with the world oil prices. He said that the new energy policy report will be ready by September and will include methods to address this problem.

Speaking on the metro rail project, he said that his only apprehension is about its operating cost as the capital cost could be easily covered.

The National Rural Employment Guarantee Scheme will be included in the next budget and will be implemented in 200 districts. The total fund allotted for this is Rs 13,000 crore and as it is a replacement for the Food-For-Work programme, the additional cost will be "just" Rs 3,000 crore.

He said that the Planning Commission has completed the mid-term appraisal of the Tenth Plan, which is running its penultimate year.

He said that the Planning Commission expects the economy to grow at 7 per cent and doubted if the Tenth Plan's target of 8.1 per cent can be achieved as the growth in the past three years of the plan was not satisfactory.

The Planning Commission is also working on the strategies for the Eleventh Plan and aims to set a growth target of 8 per cent. "We have a good record of a steady growth and our growth rate has averaged 6 per cent for many years and so we feel that the 8 per cent growth rate is well within the capacity," Ahluwalia said.

Elaborating on the strength and weaknesses of the economy during a seminar of the Bangalore Chamber of Industry and Commerce (BCIC), he said that the significant increase in the savings rate and the restructuring of the Indian industries which is the result of the change in the policies of the government has helped the economy grow at a healthy rate.

Although the industry has not boomed to see a 10 per cent growth rate, he expects it to gradually pick up as many of the small and medium scale industries are undergoing restructuring.

Expressing unhappiness over the agriculture sector, he said that after mid 90s the growth rate of the sector has fallen. It was 3.2 per cent for the period 1980-96 and has fallen to 1.1 per cent, less than half its target (4 per cent) for 1996-05. The greatest problem in the sector is the inefficient use of water resources.

"Irrigation projects are either delayed or their designs fail to deliver the expected impetus," he said and added that the irrigation, which is in the state list, is poorly funded.

Another important step towards boosting growth in the sector is diversification. "India has attained food security in terms of grain production, but it is not enough. Agriculture has to diversify into horticulture, sericulture and other areas," he noted.

This requires better marketing and a synergy between the corporate sector and agriculture. There is also the need for better grading systems and modern storage facilities for the perishable goods.

The improvement in the rural infrastructure like irrigation and the connectivity to markets will also improve the agriculture sector.

On the social sector, which includes education and health, he said the Centre's Sarvashiksha Abhiyaan has led to a huge increase in the enrollment to primary schools but cautioned that 'just increasing the enrollment' is not enough.

On the poor infrastructure, which is affecting the growth of industry he said the government has divided it into four "" power, roads, ports and Railways.

He said that the power sector reforms are the most difficult as the reforms needed are outside the Centre's control. The transmission and distribution (T&D) loss is 44 per cent. The tariffs are pushed up and most of the electricity boards are in the red. Hence electricity is expensive. He asserted that the deficits in the power sector cannot be filled just by providing funds to states.

"The money provided has to be incentivised," he added. Making a case for the introduction of open access system by the states, he said the Electricity Act 2003 allows 'buying electricity from anyone'. The issue of levy of cross subsidies charges will be addressed to in the National Tariff Policy which the government plans to bring in 6-7 weeks.

On telecommunications sector, he said 'it is a success story' but there is a need for substantial improvement in the broadband connectivity. "We have to achieve sufficient rural penetration," he said.

On ports he said, "We are getting enough private investments for the ports and the volume of traffic is increasing."

In case of roads, the National Highway Authority has spent Rs 30,000 crore in the last five years and plans to spend Rs 1.7 lakh crore in the next 7-8 years. The plan is to build roads with the government providing capital grants through competitive bidding.

"The next stage will see an increase in BOT projects and for transparency, the government is preparing the model concession agreement," he said. This year, the government will award 30 BOT projects and 18 have been awarded. It is also working on six-laning the Golden Quadrilateral.

The government will give priority to modernise Mumbai and Delhi airports and it is drafting the details after which the government will invite bids. "The bids will be awarded by October and will be operational by 2009," he added.

Regarding Bangalore airport he said it will not be operational till 2008 and the delay in such projects is obvious. On Railways, the government plans to bring a dedicated rail freight corridor. The Railways have featured a study which will he tabled by June 2006. The work is expected to start by the end of '06 and will take 3-4 years to complete.

He agreed that the policy of subsidised passenger fare and increased freight charges are affecting the industry.

To improve efficiency of banks in lending the best thing the government can do is reduce the fiscal deficit.