The budget has tasked the National Bank for Agriculture and Rural Development (Nabard), India’s apex bank for rural finance, with supporting irrigation and dairy schemes totalling Rs35,000 crore. According to Harsh Kumar Bhanwala, chairman of Nabard, these measures will revive public investments in agriculture, and rejuvenate the dairy sector where processing infrastructure is outdated. Edited excerpts from an interview:
How do you perceive this year’s budget announcements for the rural and agriculture sector?
For the rural and agriculture sector, the budget is futuristic. For several years, public investment in agriculture was going down. It used to be very high during the Green Revolution years (in the 1960s), but recent estimates suggest nearly 80% of it is private investment (by farmers or rural entrepreneurs). This year, lots of public investment in irrigation and dairy is a positive sign. While the long-term irrigation fund (Rs 40,000 crore corpus announced in the past two budgets) will make available large volumes of water, the micro-irrigation fund (Rs 5,000 crore) will help in efficient use of that water.
From a farmers’ income point of view, dairy will play a critical role. Our dairy processing infrastructure is outdated and requires rejuvenation. India is the largest producer of milk but only 20% of it goes for organized processing. We require larger processing capacities and whatever exists now is Operation Flood investments from 1970s and 1980s. So, the dairy processing fund announced in the budget (Rs 5,000 crore under Nabard) is a timely move.
For small and marginal farmers, a model law on contract farming (proposed in the budget) will allow for collectivization of cultivation so that scale of operations (farming) can go up and investments are made.
The budget tasked Nabard with schemes totalling Rs 35,000 crore for irrigation, dairy and cooperative banks. How will these take off ? Last year’s budget gave Nabard charge of a Rs 20,000 crore long-term irrigation fund. How much did you borrow and allocate to states?
Most of the funds will be raised from the market and advanced as loans to states and central government agencies. The idea is to make large funds available upfront, than say, allocate Rs 4,000 crore every year, for the next few years. This will help finish pending irrigation projects on time. The centre will service the interest on these market borrowings and repay the principal amount (for its share) to Nabard. States will allocate the funds they borrow from us directly to complete the projects. They will have to repay the borrowed funds within 15 years.
We have raised and disbursed Rs 5,600 crore to state governments for the long-term irrigation fund, and expect it to reach Rs 12,000 crore by year end (March 2017) depending on how projects are progressing.
Will Nabard also monitor progress of these projects?
Nabard does milestone-based funding. This means instalments are made available on satisfactory progress based on previous allocations. We have a monitoring arrangement and that’s why completion rates of projects that we are funding are higher.
That’s a lot of responsibility. Do you think the budget has entrusted Nabard with more tasks, than say, the agriculture ministry?
Nabard cannot do anything on its own. We work with state and central government departments. They need us for fund-raising upfront as there is a limitation on raising resources within one year. We are as much a part of the government as the department of agriculture is.