Punjab CM bats for structural reforms

'Credit played a crucial role in the private capital formation of agriculture'

Written by Charanjit Ahuja | Chandigarh | Updated: February 6, 2014 4:01 pm

In a bid to boost overall development of country’s agriculture and rural economy,Punjab Chief Minister Parkash Singh Badal today called upon the Central government to immediately initiate structural reforms in the long term credit to make it self-sustainable for meeting diverse credit needs of rural sector.

In his inaugural address on the first ever national Conference of Principal Secretaries (Cooperation) jointly organized by the Punjab government and National Co-operative Agriculture and Rural Development Bank here today,the Chief Minister said credit played a crucial role in the private capital formation of agriculture,but unfortunately,the farm credit policy of our country was un-favourable to promote private investments in agriculture. He pointed out that the Central Government had now contributed to bring the cost of crop loans to the moderate rate of four per cent after providing three per cent interest subvention. But the cost of investment credit continued to be unaffordable being as high as 13% to 14%,against the re-finance given by NABARD for long term credit at the interest of 10% which was a huge disincentive for farm sector.

The Chief Minister also pleaded that the interest subvention scheme of the Central government for crop loans should be extended to long term loans to address this problem. Traditionally,Agriculture Rural Development Banks (ARDBs) were the main agencies for giving investment loans to farmers but these institutions were not getting adequate support from the central government in term of revival and lending packages.

Showing concern over the recent decision of NABARD to reduce the rate of refinance to 90% of loans from the earlier 95% and equating the repayment period of refinance with the tenure of loans advanced to farmers have put more hurdles in the operations of ARDBs. Earlier a two year moratorium was provided by NABARD allowing better cash flow and credit to the ARDBs. He urged the NABARD to review its decision in the larger interest of farming community and also in view of the fact that NABARD was completely insulated through state government guarantees against any risk in financing ARDBs.

The Chief Minister also asked the Central government to implement the recommendations of Vaidyanathan Task Force to revive the long term credit structure without any further delay. Chairman NCRDB Federation,K.Sivadasan Nair appealed to the Chief Minister for taking up the issue of revival package of long term structure involving recapitalization and reforms as recommended by the Vaidyanathan Task Force with the Central government forthwith. Managing Director NCRDB KK Ravindran pointed out that this fragile structure had led to deprivation of continued credit support to about 138 lakh rural households which pledged their lands to these institutions for talking long term loans in the past. The experience of the structure in states like Kerala and Punjab shows that these challenges to a large extent could be met with enhanced policy support from the state government.

Punjab’s Principal Secretary Co-operation Viswajeet Khanna shared some the best experiences in the state co-operative sector like successfully functioning of 1300 Agro Service Centres across the state to provide farm equipment and machinery to the farmers on custom hiring basis.

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