Budget 2001-2002

9. The provision of adequate credit flow is critical for agricultural production. Total credit flow to agriculture through institutional channels of commercial banks, cooperative banks and regional rural banks is estimated to have reached a level of Rs 51,500 crore this year, an increase of about 15 per cent over last year. It is expected to increase to Rs 64,000 crore in 2001-2002 representing an increase of 24 per cent. In order to ensure continued healthy growth of the agricultural sector, I propose the following steps:

• The operation of the Rural Infrastructure Development Fund (RIDF), set up in 1995-96 with NABARD, has been very successful in upgrading rural infrastructure with about 1,84,000 projects sanctioned so far. To help the States, I have decided to reduce the interest rate charged by NABARD from 11.5 per cent to 10.5 per cent. The corpus of RIDF VII will be increased from Rs 4500 crore to Rs 5000 crore next year.

• The innovation of Kisan Credit Cards has proved to be very successful. Since the year of its introduction in 1998-99, almost 110 lakh of KCCs have been issued. I am asking our banks to accelerate this programme and cover all eligible agricultural farmers within the next 3 years.

• I am also asking the banks to provide a personal insurance package to the KCC holders, as is often done with other credit cards, to cover them against accidental death or permanent disability, upto maximum amount of Rs 50,000 and Rs 25,000 respectively. The premium burden will be shared by the card issuing institutions.

• NABARD and SIDBI were asked to link one lakh Self-Help Groups during the current year. NABARD by itself is well poised to exceed this target by the end of next month. I expect NABARD to link 1 lakh additional Self Help Groups during 2001-02, which would help in providing access to credit to an additional 20 lakh families. Share-croppers and tenant farmers will also become eligible for this scheme and special attention will be given to SC/ST groups. A micro finance development fund has also been set up in NABARD with contribution of Rs 40 crore each by NABARD and RBI.

• I had permitted NABARD to issue capital gains tax exemption bonds last year. This has helped NABARD to mobilise more than Rs 1000 crore at lower than normal interest rates thereby reducing its cost of funds. I propose to continue with this tax exemption.

• The resources from the Watershed Development Fund set up in NABARD would be used to promote people’s participation and also enable water users’ associations to implement, operate and maintain irrigation schemes.

10. In 1999, I had announced a credit linked subsidy scheme for construction of cold storages for perishable commodities. So far, NABARD and NCDC have provided Rs 161 crore of credit for creation of additional capacity of 9.69 lakh tonnes. A subsidy of Rs 78 crore for setting up these cold storages was provided during 2000-2001. I now propose to extend the coverage of this scheme to also cover rural godowns. The subsidy to be provided by the Government would be suitably enhanced to take care of increased coverage. The loans would carry an adequate long-term repayment period and would enable individuals, cooperative societies and others to build godowns by availing of loans from cooperative banks, commercial banks and RRBs.

11. This scheme will enable small farmers to enhance their holding capacity in order to sell their produce at remunerative prices. NABARD proposes to reduce its rate of interest for funding the storage of crops, from 10 per cent to 8.5 per cent. Small farmers will particularly benefit from this scheme by avoiding distress sales.

12. With the diversification and modernisation of agricultural practices, there is a need to augment support and extension services for agriculture. For this purpose, a scheme for setting up Agriclinics and Agribusiness Centres by agricultural graduates will be launched with the support of NABARD. These centres will provide a package of soil and input testing facilities and other consultancy services, They will strengthen transfer of technology and extension services and also provide self-employment opportunities to technically trained persons. Loans on attractive terms for setting up these centres will be provided by banks with refinance from NABARD.

13. There is a significant potential of improving crop productivity in the Eastern and North Eastern regions through crop diversification and adoption of improved technologies. These regions also have large untapped ground water resources. A sum of Rs 61 crore has been provided for the Centrally Sponsored Scheme on "On-Farm Water Management for Increasing Crop Production in Eastern India". 

14. I am also happy to inform the House that I have provided Rs 38 crore for the "Technology Mission for Integrated Development of Horticulture in the North-Eastern States", announced by me last year.


Rural Roads

15. In my last Budget, I had announced the launching of a new scheme, the Pradhan Mantri Gramodaya Yojana (PMGY) with the objective of undertaking time bound programmes to fulfill the critical needs of the rural people. As a follow up, particularly with the objective of achieving rural connectivity, the Pradhan Mantri Gram Sadak Yojana has been launched by the Hon’ble Prime Minister on December 25, 2000. A Central allocation of Rs 2500 crore was provided for 2000-01. I am providing another allocation of Rs 2500 crore for the coming year. 50 per cent of the diesel cess is earmarked for development of rural roads.


Rural Electrification

16. It is a matter of concern that even after 50 years of planned development there are still about 80,000 villages, which do not have access to electricity. A package of initiatives is therefore being launched to improve the power distribution system in rural areas. This includes:

1. Completion of electrification of bulk of the remaining villages in the next 6 years.

2. Extension of assistance to the States for village electrification works under the PMGY whose funding is being augmented.

3. Stepping up credit support from Rural Electrification Corporation to SEBs for speedy electrification of dalit bastis, households of scheduled tribes and other weaker sections of society.

4. Improving the quality of power supply in villages, augmentation of distribution networks in rural areas supported by REC under the Accelerated Power Development Programme.

5. Earmarking a sum of at least Rs 750 crore out of RIDF for rural electrification works.

6. Augmenting the resources of REC, by allowing it to float capital gains tax exemption bonds along with NABARD and NHAI under Section 54 EC of the Income Tax Act.