The Hindu : Centre provides Rs. 50,000 crores for `second Green Revolution'

Online edition of India's National Newspaper
Saturday, Jan 10, 2004

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Centre provides Rs. 50,000 crores for `second Green Revolution'

By Alok Mukherjee

NEW DELHI, JAN. 9. In a sequel to the decisions taken on Thursday, the Union Finance Minister, Jaswant Singh, today announced another round of pre-election sops, this time aimed at rural India, the small-scale sector and senior citizens. The amounts involved are huge — Rs. 50,000 crores over the next three years for what he calls "the second Green Revolution," another Rs. 50,000 crores for infrastructure development and Rs. 10,000 crores for the small-scale sector.

For senior citizens, he announced the launch of `Dada-Dadi' bonds to enable people above 60 years of age to earn interest higher than the prevailing market rate. These bonds will be introduced from April 1, 2004. Bright young Indians too have been covered under the latest announcements and the existing education loan scheme of banks would be liberalised to allow access to higher loans at 200 basis points below the Prime Lending Rate (PLR), the rate that banks charge from their best customers.

A new rural housing scheme called `Atal Grameen Griha Yojana' will become operational from April this year and would include, among others, a mechanism to provide insurance cover against defaults arising from non-enforceability of the security because of defects in the title or title disputes. Incentives would also be provided to lending agencies for rural housing finance and compensation has been proposed for commercial banks, regional rural banks and housing finance institutions for higher incidence of non-performing assets in rural areas by way of a tax exemption on the entire income derived from advances for rural housing. Flexibility for repayment of rural housing loans in line with the harvesting season would also be introduced from April this year.

For the small-scale sector, a Small and Medium Industry (SMI) fund would be structured by the Small Industries Development Bank of India with an initial amount of Rs. 10,000 crores, spread over two years. The interest burden on the ultimate borrower would be 200 basis points below PLR, consistent with reasonable risk premia over the current cost of funds. This fund would be operational in four weeks.

To develop infrastructure, a package would be evolved with a mix-match approach of external commercial and domestic borrowing and capital would be provided speedily at rates 200 basis points below PLR. Towards this end, an aggregate additional investment of Rs. 50,000 crores would be catalysed over the next three years in infrastructure and manufacturing projects like power generation, sea ports, airports, roads, tourism, telecommunications and urban infrastructure. To the extent necessary, the Government would provide financial guarantees, appropriate risk mitigation measures and other financial resources. The details of the fund would be finalised by March 1 this year.

For the `second Green Revolution' which includes wasteland development, minor irrigation, functioning and viability of cooperatives, grading, certification, storage of agro-products and their processing, cold chains and modern abattoirs, the National Bank for Agriculture and Rural Development (NABARD) has been asked to work out details of a Rs. 50,000-crore programme spread over the next three years. Any funds required by NABARD, in addition to the existing unutilised portion of the Rural Infrastructure Development Fund (RIDF), would be made available by the Government in an appropriate mix of finances raised from the capital markets and budgetary resources. For the ultimate borrowers, the rate of interest would be 200 basis points below PLR. The Government expects the fund to be operational in four weeks.

The food subsidy policy is also being amended with the Government now allowing the Food Corporation of India to borrow for its procurement operations from the market through bonds, backed by Government guarantee. This is likely to reduce the Government's food subsidy bill by a minimum of Rs. 2,000 crores a year.

A new external commercial borrowing policy is also being formulated which would promote investment in industry, including in small and medium enterprises. While making these announcements, the Finance Minister again maintained that these were not done with an eye on the elections. These steps were required to provide a further impetus to the on-going growth process in the economy.

Highlights

A Rs. 50,000 crore Agricultural Infrastructure and Credit Fund to be operational in four weeks.

A Rs. 10,000 crore small and medium industry fund spread over two years and operational in four weeks.

Cheap credit at a highly-competitive rate of interest to the infrastructure and manufacturing sectors through external commercial and domestic borrowings.

`Atal Grameen Griha Yojana' to provide, among others, insurance cover against defaults arising from any non-enforceability of the security because of defects in the title or title disputes.

Liberalising the education loan scheme of banks to allow higher student loans at two per cent below the prime lending rate.

`Dada-Dadi' bonds for elders bearing returns higher than the existing rates of interest, applicable to those above the age of 60.

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