Greater credit needed for agri sector

PUNE: There is an explosive cocktail building in rural Maharashtra, comprising low agricultural productivity, low irrigation and a large below the poverty line (BPL) population despite a larger than national average land-holding.
While an additional dose of credit would help, the state’s finances do not permit that solution, DK Sankaran, additional chief secretary and secretary (planning), government of Maharashtra, said.
Mr Sankaran, who was speaking at a state credit seminar organised by the regional office of Nabard, pointed to the "skewed structure" in the state. He attributed this to low agricultural productivity in the state, barring sugar cane and horticulture, with a mere 16 per cent of land under irrigation. This is the second lowest in the country and is inspite of having spent Rs. 39,000 crore in irrigation projects, a majority of which are incomplete.
"Over the past 20-25 years, the state has spent Rs. 39,000 crore in irrigation projects of which Rs. 30,000 crore worth are incomplete. Of this, Rs. 8,000 crore worth of projects have reached the last mile, with 75 per cent of the work completed," Mr Sankaran said.
He added, "The rural economy does not get sufficient funds from Plan grants; we are trying to contain ballooning loans.The major problem is lack of investment, which is needed but the state government’s finances do not allow that."
He stressed the need for major policy changes, since tinkering does not work. Recalling a presentation made to the DF government after it assumed office in October 04, he said it had emphasised the need for a change in the delivery of services to the rural areas. A suggestion to remove the current monopoly enjoyed by the agriculture produce marketing committees (APMCs) was put forward. It is part of a package which involves allowing the private sector to market the produce.
"A few licences for marketing of agri produce have been issued to private players in the Vidarbha region. We will issue licences wherever private players ask for them," Mr Sankaran said. The move, he explained was to improve the marketing of agri produce since this improves the credit structure in the rural area.
"Privatisation has worked in the non-farm sector so let it work in rural areas. Allow contract farming since we have seen the benefit of privatisation in sectors like telecom, etc, benefitting the vocal urban middle class," he said.
Maharashtra’s poor agriculture record despite having highly diver sified agricultural conditions, came in for some scathing comments. UC Sarangi, commissioner of cooperation and registrar of cooperatives (RoC), said that while the national average agricultural growth has been 4 per cent, Maharashtra’s has been under 2 per cent.
"It is normal for the services sector to grow as compared to the agriculture sector but we have had a faster than normal growth in the services and industry sectors and a lower than normal growth in the agriculture sector. This is not desirable," he said.
Among the reasons for this is the delivery of credit to the sector, Mr Sarangi said. Sixty-five per cent of agriculture credit in the state is delivered by the District Credit Cooperative (DCC) system and 35 per cent by commercial banks. This is in contrast to the national average, where 44 per cent is delivered by the credit cooperative system and 66 per cent by commercial banks.
"Commercial banks, flush with funds, look to lend to the cream of large, irrigated lands with cash crops. This leaves the small and marginal farmer with the DCC system and the repercussions of this are negative. In Maharashtra, with limited access to irrigation, the state’s food and coarse grains requirements are met by marginal or farmers in rainfed areas," he said.
The state has never reached its record food grain production level of 1996, of 146 lakh ton, because the sector does not get credit for inputs.
"Only 25 per cent farmers get credit, of who 90 per cent go for commercial farming. Although 60 per cent land is under food grain cultivation, it does not get the requisite attention or credit. Commercial banks need to get into the act ," Mr Sarangi said.
Mr Sankaran, seeking to allay fears of commercial banks over lending to farmers, said the state government will extend help in recovery in case of waivers of interest or write off of loans. Later, speaking to the ET, Mr Sankaran said they have not yet been approached by the banks but if asked, will extend all necessary help.
N Srinivasan, chief general manager, Nabard, Pune region, pointed to the need for banks to prepare a realistic preparation at the branch level for agriculture. What the sector needs from government is a private sector friendly policy for investment in infrastructure. He pointed to the experience with the Milk and Milk Producers Order (MMPO) where minor changes lead to large investments by the private sector in milk processing.