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Irrigation: SPV for funding Rs 20K cr projects set to take off

Rs 6,300 crore bonds to be raised will be repaid by the govt, Rs 12,000 crore bonds by Nabard on its own.

Written by George Mathew | Mumbai | Published: July 7, 2016 1:47:01 am
farming, indian farmers, India farmers, irrigation system, irrigation farmer, NDA government, irrigation fund, special irrigation purpose vehicle, Water Resources Development Authority, agriculture sector, india news The bank will be tapping the capital market for funding the scheme.

The NDA government’s ambitious irrigation fund is set to take off. The government will soon unveil the mega Rs 20,000 crore irrigation fund through the special purpose vehicle (SPV) route — Water Resources Development Authority — as part of a major initiative to boost the agriculture sector.

“This proposal is in the final stage of launch. The scheme will be launched in a month’s time,” National Bank for Agriculture and Rural Development (Nabard) chairman Harsh Kumar Bhanwala said.

The bank will be tapping the capital market for funding the scheme. “Of the initial Rs 20,000 crore corpus, some will come as budgetary allocation from Ministry of Water Resources, Rs 6,300 crore will be bonds raised by Nabard to be repaid by the Government of India and close to Rs 12,000 crore will be bonds raised by Nabard on its own. All this will be pooled together,” he told The Indian Express in an interview.

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“This money will be raised in the first year itself as 23 projects will be taken up. The repayment period is 15 years unlike Rural Infrastructure Fund (RIDF) which is available to us for seven years. So banks will have comfort. For repayment, they will get 15 years,” he said. The government is creating a vehicle WRDA (Water Resources Development Authority). “WRDA would be borrowing from Nabard because the government can’t borrow. This will be around 60 per cent and the States will borrow the balance 40 per cent. There will be agreements with Central government, SPV, states and Nabard,” Bhanwala said. “They have identified 99 irrigation projects which are low hanging fruits. There will be 23 in the first year, 31 in the second year and 45 in the subsequent two years. The total requirement will be around Rs 91,000 crore in the next four years. If you include some of the national priority projects like Polavaram in Andhra and another one in Uttarakhand, it will be close to Rs 1 lakh crore,” he said.

“With this, we will see the completion of some of the projects which are close to completion. This will also lead to command area development and better irrigation potential utilisation. We are trying to promote water efficiency measures at farmers’ fields. All these will help in solving the irrigation problems in the country,” he said.

Nabard is also getting fresh capital from the government to facilitate the formation of the irrigation fund. “We have already received Rs 500 crore. We have asked for another Rs 1500 crore. This year we will be raising around Rs 60,000 crore from the market,” the Nabard chairman said.

In the 2016 Budget, finance minister Arun Jaitley proposed creation of a dedicated Long Term Irrigation Fund (LTIF) for implementing major/medium irrigation projects covering a command area of over 8 million hectares. As many as 46 projects that are closer to completion require funding of Rs 29,000 crore, but the current annual budget allocation of around Rs 3,000 crore under the Accelerated Irrigation Benefit Programme clearly cannot meet. Two successive drought years have prompted the government to speed up the irrigation projects to bring relief to the rural agriculture segment. Even the State governments were seeking more funds under the RIDF scheme to complete various projects despite the limitations of shorter repayment requirement. For the first time in the last 21 years, under the RIDF, lending for irrigation was close to 40 per cent.

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