Booster dose likely for private funds in agriculture

The path drawn up by the government's first-ever official agriculture survey in suggesting more private investment in farming is likely to find resonance in this year's Budget.

Officials said apart from infrastructure and skill development, agriculture could be the next big focus area.

In 2009-10, private sector investment in agriculture stood at Rs 1.09 lakh crore (Rs 1.09 trillion), constituting 82 per cent of the total investment in the farm sector.

Total investment in agriculture was as low as 2.7 per cent of gross domestic product, when the total investment rate was 36.6 per cent.

Of that 2.7 per cent, as much as 2.3 per cent came from the private sector.

The rest was from the public sector and this proportion has been stagnant since 2005-06.

"This clearly shows public investment in agriculture is not the way to achieve faster farm growth, but private investment is," officials said.

They said the Budget would try to encourage private investment in seed research and production, capacity building, storage, allied activity like dairying, fisheries and, most important, in farm marketing, with the help of business chambers such as Federation of Indian Chambers of Commerce and Industry and Confederation of Indian Industry.

Officials said the Budget could also lay down the framework for enabling public-private partnership in the United Progressive Alliance government's flagship programme for the farm sector, the Rashtriya Krishi Vikas Yojana.

The draft framework for such a proposal involves corporate help in developing integrated agricultural development projects, comprising a minimum of 5,000 farmers.

"The average investment per farmer will have to be a minimum of Rs 1,00,000, of which half will be provided by the government and the rest has to be mobilised by private companies," officials said.

He said corporate and big companies would be free to have projects encompassing all activities of farming from production to marketing, but the project span would have to be three to five years.

Research, credit

Another area in which the Budget could lay some emphasis is involvement of the private sector in seed development and research, mainly transgenic.

Officials said a Rs 150-200 crore (Rs 1.5-2 billion) nationwide programme to develop India's own transgenic cotton crop, with the active involvement of the private sector, was likely.

"The Budget could sanction some amount for agriculture research and also lay down the road map for the private sector's active role in that," the official

said.

The Indian Council of Agricultural Research has already placed a proposal for genetic research on developing indigenous biotech crops, with more properties than the current versions of, for instance, genetically modified cotton.

"There are many other fields like horticulture, storage and warehouses, where the private sector can play an active role and the Budget could show the door for that," one of the officials said.

Credit penetration is also expected to find a mention in the finance minister's Budget speech on Friday.

Officials said the document could give a bigger focus to farm credit, with expanded Kisan Credit Cards, more interest subvention on timely repayment of loans and a focus on improving the institutional credit penetration.

The target for farm credit disbursal could be enhanced from the Rs 4,75,000 crore (Rs 4,750 billion) in 2011-2012 to Rs 540,000 crore (Rs 5,400 billion) in 2012-2013.

The scope of KCCs, which provide easy access to loans for purchase of seeds and other farming activities to small and marginal growers, could be expanded from the current 58 million farming families to the entire farming population of 120 million.

The agriculture survey, tabled on Monday, also highlighted the need for improving credit penetration among small and marginal farmers.

"Small farmers continue to resort to informal lenders (despite KCCs), as the current system of institutional credit to farmers suffers from non-farmer friendly practices, delays in credit delivery and collateral problems," the survey said.

The agriculture ministry is also in favour of raising the interest subvention from three per cent to four per cent for timely repayment of short-term crop loans.

This would put the interest rate on such loans at three per cent.

Agricultural production in India has been volatile over the years, particularly because only 40 per cent of arable land is irrigated and the rest depends on monsoon vagaries.

In the ongoing five-year plan (2007-08 to 2011-12), agricultural output was targeted to grow by a yearly four per cent.

Actual growth would be somewhere close to 3.5 per cent, but the period also saw huge ups and down.

Agriculture and allied sectors grew 5.8 per cent in the first year of the plan, remained almost flat by rising only 0.1 per cent the following year, then rose to just one per cent in 2009-10. In 2010-11, farm output grew a whopping seven per cent.

This financial year, advance estimates peg the growth at 2.5 per cent.

Union Budget 2012-13: Complete coverage