NEW DELHI : Bowing to intense pressure, Finance Minister P. Chidambaram has made some conditional concessions on the interest rate on farm loans, but left the languishing crop insurance scheme unattended and given no relief to States on the loan component of the Accelerated Irrigation Benefit Scheme.

While he announced a Committee on Financial Inclusion for the over 50 per cent small and marginal farmers who have no access to credit, he left the issue of the 22 per cent farmers who depend on "informal sector" for loans. Unpaid interest/credit and debts is one of the major causes of farmer suicides.

The Finance Minister identified assured irrigation, credit, diversification and creation of markets as thrust areas for the agriculture sector to raise productivity for achieving a four per cent growth rate. The farm growth rate bounced back to 2.3 per cent and food output was expected to be five million tonnes higher than last year. He did not go into the food subsidy bill issue. The food subsidy is budgeted at Rs. 24,200 crore for 2006-07.

Mr. Chidambaram declared a two percentage point rebate in farm interest on institutional loans up to Rs.1 lakh for 2005-06 and also reduced interest on short-term farm loans up to Rs. 3 lakh from nine to seven per cent from the next kharif season. He would make up the difference on this to National Agriculture Bank for Agriculture and Rural Development (NABARD).

Farmers who secured crop loans from scheduled commercial banks, Regional Rural Banks and Primary Agriculture Cooperatives for the kharif and rabi 2005-06 would have two percentage points of interest liability credited to their bank account before March this year. A sum of Rs. 1,700 crore has been set aside for this.

At the same time, NABARD will open a separate line of credit for financing farm production and investment activities through Self-Help Groups. Nearly 4 lakh SHGs would be thus credit-linked.

In keeping with the declared intent of public-private partnership, the Finance Minister announced a provision of Rs. 150 crore for setting up modern terminal markets in parts of the country under the National Horticulture Mission. A Central Horticulture institute will be established in Nagaland. A National Fisheries Development Board will also be constituted.

Food processing would be treated as a priority sector for bank credit. NABARD would create a separate window with a corpus of Rs. 1000 crore. A Food Technology Entrepreneurship and Management would be set up and the Paddy Processing Research centre at Thanjavur would be upgraded. Excise duty has been exempted on packaged items of milk, ice cream, meat, fish and poultry, pectins, pasta and yeast and ready-to-mix dosa and idli mixes.

Recognising the contributions made by the Punjab Agriculture University in Ludhiana, the Finance Minister announced a grant of Rs. 100 crore to it as an "institution of excellence."

Mr. Chidambaram also announced the setting up of a Special Purpose Tea Fund with an annual contribution of Rs. 100 crore to it to benefit growers in Assam, West Bengal, Tamil Nadu, Kerala and Uttranchal.

A Bill to promote development and regulation of the micro finance sector would be introduced in this session of Parliament. The total outlay for the agriculture and allied sectors has been raised from Rs. 6967 in 2005-06 to Rs. 8199 for 2006-07.

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