Now sops for agri, rural sector

The government is not leaving any stone unturned when it comes to offering sops before the elections. After Thursday’s tax sops for the...

The government is not leaving any stone unturned when it comes to offering sops before the elections. After Thursday’s tax sops for the industry, the government on Friday announced another series of measures to woo rural India and specially the farmers with a massive Rs 50,000 crore three-year programme to build agri-infrastructure and provide more rural credit.

Announcing a series of agri-reform measures, Finance Minister Jaswant Singh said Nabard has been asked to work out details for creation of an Agricultural Infrastructure and Credit Fund (AICF) to implement the programme. The fund would be made operational within four weeks and would be in addition to the already functional Rural Infrastructure Development Fund (RIDF).

Under the AIFC, the interest rate would be 2 per cent lower than the PLR to provide cheap credit to farmers and mitigate the difficulties of the farm sector. A consortium of IDBI, IDFC, LIC, ICICI Bank and SBI have been designated for policy, procedural and financial closure of investments of Rs 50,000 crore over the next three years. Singh said that IDBI would be converted into a bank and its functioning reoriented for focus on development financing. Similarly, the IFCI would be restructured through transfer of its impaired assets to an asset reconstruction company and its merger into another large public sector bank. For both these FIs, the target date of completion is April 1, 2004.

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Singh said the AICF programme would aim at wasteland development, minor irrigation, help improve functioning and viability of cooperatives, grading, certification storage of agro-products, their processing, cold chains and modern abattoir, Singh added.

The government also launched a new rural housing scheme ‘Atal grameen griha yojana’ that would extend the benefit of cheap housing loans to rural India. The scheme would be operational by April 1, 2004. The government would compensate all commercial banks, regional rural banks and housing finance institutions for higher incidence of NPAs in rural areas by introducing a new fiscal benefit by way of tax exemption on the entire income derived from advances for rural housing.

The government also decided to set up a Rs 10,000 crore fund for providing small and medium enterprises loans at rates lower than the bank lending rates. Sidbi would structure a Rs 10,000 crore fund to finance small and medium scale industries over the next two years. The interest on loans advanced from SMI would be 2 per cent below the PLR. The fund would be operational within 4 weeks. The government also liberalised external commercial borrowing policy for promoting investment in industry and infrastructure. The revised policy would provide automatic approvals for industrial sector, especially infrastructure and small and medium enterprises, provided ECB was for a minimum of five-year period.