Farm package

Almost all the pre-Lok Sabha dissolution packages announced by Finance Minister Jaswant Singh have had measures aimed at wooing Indian farmers and for strengthening the agriculture sector.

The most potent dose of this potion has been administered through the interim Budget. Though the Budget package has focused largely on reforming and liberalising agricultural credit, it also contains some goodies for agriculture's related fields, like livestock, and the tea and sugar industries.

What is interesting is that most of these measures, barring a few like excise reduction on tea and abolition of capital gains tax on compensation for land acquisition, will not adversely affect the government's fiscal numbers. The brunt of the burden of most of the measures is to be borne by others, such as the banking sector or the state governments that would have to share the costs if they want their farmers to benefit from the central packages.

A closer look at the pronouncements indicates that while some of them are oriented towards ending discrimination against the agricultural sector (like demanding unduly high collateral and interest rates on farm loans), a few others are merely cosmetic (such as the use of kisan credit cards on ATM machines). There are also some that can be dubbed as old wine in new bottles. The Rs 15,000-crore package for the revitalisation of the cooperative banks and a revival package-cum-debt restructuring proposal for the sugar industry, fall in this category.

Both these proposals had been mooted earlier and have been awaiting implementation. Not only that, their early and effective execution is not beyond doubt even now. Where the cooperative package is concerned, implementation is subject to sharing money with the states and putting in place a new regulatory framework for the cooperative banks.

Similarly, the sugar package is to be evolved in consultation with all the stakeholders. Considering the diverse and, in some ways, conflicting interests of different stakeholders in this sector, building a consensus will not be easy. In fact, the divergence of interests has been one of the reasons for the failure of existing policies and provisions to bail out the sugar industry.

The proposed restructuring of loans, on the other hand, will benefit largely the cooperative sugar mills and the financial burden will fall on the banks that have lent money to them.

All this is not to belittle the significance of the budgetary exercise. Some good is bound to result for the farm sector from the various pronouncements. One of the least conspicuous but most important of these announcements that can have far-reaching impact concerns the promotion of self-help groups (SHGs). These groups have a proven record of benefiting the poor, helping most of them to come out of the poverty bracket. What is even more significant is that repayment of the bank finance disbursed through these SHGs has been close to 100 per cent.

This, coupled with the kisan credit cards for non-poor farmers, can potentially produce tangible change in the rural economy.