Surinder Sud: Where's the 'new deal'?

FARM VIEW/ Most of the Budget's pro-farmer measures are merely repackaged old schemes

By devoting a good part of his Budget speech to agriculture, Finance Minister P Chidambaram has managed to convey the impression that the United Progressive Alliance (UPA) government's maiden Budget remedies the historic neglect of the farm sector.

In reality, barring a few bold moves like a tax holiday for the agro-processing industry and duty concessions on tractors and dairy machinery, which will indirectly benefit the farmers, there is not a single new initiative for the progress of the farm sector.

Most of the pro-farmer or pro-agriculture measures proposed by Chidambaram are nothing but repackaged or reprioritised old schemes. Calling it a "new deal" for rural India will, indeed, be a misnomer.

Of the total plan outlay, only 3 per cent has been allocated to agriculture and allied activities. This is surely inadequate to boost capital formation in agriculture, which has declined from 1.9 per cent in the early 1990s to 1.3 per cent after 2000-01.

No doubt, the finance minister seeks to increase investment through augmented flows of credit. But considering the poor credit delivery system, the success may not be commensurate with the hopes.

The cooperative credit infrastructure "" that has bank outlets all over the country "" is still a shambles. And the finance minister has only talked about setting a task force to look into it rather than doing something concrete.

This is despite the fact that the government is in possession of reports of at least two committees "" the Capoor and the Patil committees "" on revitalising the cooperative credit system. Of course, the emphasis on linking self-help groups with the banking system is well placed, but that again is nothing new.

In any case, the measures to improve the credit flow and make it cheaper are the ongoing ones, having been initiated by the previous government.

What the UPA government's agriculture credit package unfolded on June 18 has done is to primarily facilitate the rescheduling of overdues and one-time settlement of pending cases to open the doors for fresh credit even for the defaulters.

Chidambaram might claim that this package was well received but not everyone is satisfied. Even the agriculture ministry wants this package softened some more.

It wants the banks to ask farmers only to pay the clubbed amount as on March 31, 2004, without any additional interest over five years, including an initial moratorium of two years.

Besides, the ministry wants the one-time settlement scheme to be extended to all categories of farmers. What impact this package will have on the economic health of the concerned banks and other financial institutions is yet to be seen.

Chidambaram's stress on irrigation, renovation of water bodies and water harvesting, albeit welcome, is also not new. A countrywide programme of rainwater harvesting and soil conservation through watershed development is already being implemented.

The "massive" and "ambitious" scheme to repair, renovate and restore all the water bodies mooted in the Budget actually proposes to take up only five of the 5,00,000 such water bodies this year.

The cost of this work is supposed to be met by diverting funds from the existing rural employment schemes and the ongoing programmes for the development of drought-prone, desert and arid areas. In any case, it is estimated that the task will take about seven to 10 years.

In the case of the accelerated irrigation benefit programme, the finance minister has stated that it is being restructured to give overriding priority to last mile projects that can be completed by March 2005.

In fact, this strategy, too, is not new and was introduced in February 2002 as a "fast-track programme" for completing major and medium irrigation projects that could be completed in a year (that is, two working seasons) with full Central assistance.

Similarly, the Rural Infrastructure Development Fund (RIDF) that Chidambaram seeks to revive, had actually not been abandoned but was only replaced in February 2004 by the Lok Nayak Jai Prakash Narayan Fund for agriculture infrastructure and credit. Indeed, the need for this move may have more to do with the name rather than the nature of the fund.

The other proposals, such as the creation of a horticulture mission on the lines of the Anand dairy cooperative and a single market for agricultural produce by amending marketing laws are subjects that fall in the domain of state governments.

Besides, the process of reforming agricultural marketing laws is already underway and 10 states have even initiated action on this front.

In fact, one of the major road blocks in free marketing is the Essential Commodities Act, on which the Budget is completely quiet.