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Indian Budget 2006-07- Full Text
Full Text of P. Chidambaram, Minister of Finance, Budget Speech(Feb 28, 2006)


44. Let me now turn to the productive sectors of the economy. As always, our Government’s focus is on agriculture. Assured irrigation, credit, diversification and creating a market for agricultural products are the thrust areas.


45. Out of an outlay of Rs.4,500 crore under AIBP in 2005-06, the grant component is Rs.1,680 crore. The States are expected to spend about Rs.2,520 crore from their resources, and 25 projects are expected to be completed before the end of the year. The outlay for 2006-07 has been increased to Rs.7,121 crore, and the Central Government will support the programme through a grant of Rs.2,350 crore. The Ministry of Water Resources will revamp the Command Area Development Programme to allow participatory irrigation management through water users’ associations.

46. The programme for repair, renovation and restoration of water bodies is being implemented through pilot projects in 23 districts in 13 States. The design of the programme has been finalized in consultation with the States. 20,000 water bodies with a command area of 1.47 million hectares have been identified in the first phase. The estimated cost is Rs.4,481 crore. The funding pattern (Centre, States and external assistance) has been finalized, and I intend to seek, and receive, funds from multi-lateral agencies. The participating State Government will be requested to sign a memorandum of understanding and the water bodies in that State will be taken up for repair, renovation and restoration in 2006-07.


47. Farm credit increased to Rs.125,309 crore in 2004-05 (well above the target) and is again expected to cross the target of Rs.141,500 crore set for the current year. I propose to ask the banks to increase the level of credit to Rs.175,000 crore in 2006-07 and also add another 50 lakh farmers to their portfolio. We shall not only achieve but exceed the target of doubling farm credit in three years. Since tenant farmers are not adequately served, I have asked the banks to open a separate window for self-help groups or joint liability groups of tenant farmers and ensure that a certain proportion of the total credit is extended to them. I intend to monitor closely progress in this behalf.

48. I am aware of the severe difficulties faced by farmers in the last two years. Ours is a compassionate Government. I also have severe fiscal constraints. When faced with a dilemma, I usually turn to my favourite poet-philosopher, Saint Tiruvalluvar. Writing over 2,000 years ago, he said:

"Karumam Sidhaiyamal Kannoda Vallarku
Urimai Udaithu Iv Ulagu"
(The world is his who does his job With compassion)

I am prepared to go the extra mile to come to the aid of our farmers. To begin with, I propose to grant some relief to the farmers who have availed of crop loans from scheduled commercial banks, RRBs and PACS for Kharif and Rabi 2005-06. Accordingly, an amount equal to two percentage points of the borrower’s interest liability on the principal amount up to Rs.100,000, will be credited to his/her bank account before March 31, 2006. I have provided a sum of Rs.1,700 crore for this purpose. I hope the House will welcome this exceptional gesture of the Government.

49. For our farmers, I have more. Farmers obtain short-term credit from the cooperative credit structure and Regional Rural Banks (RRBs), with refinance from NABARD. Increasingly, scheduled commercial banks are also lending more to farmers. It is my intention to ensure that NABARD continues to provide refinance at an economical rate, so that the farmer ultimately gets the loan at a reasonable rate. Accordingly, after giving anxious consideration to market conditions, Government has decided to ensure that the farmer receives short-term credit at 7 per cent, with an upper limit of Rs.300,000 on the principal amount. This would require a certain level of subvention to NABARD. I propose to give the subvention. This policy will come into force with effect from Kharif 2006-07, and I shall make a detailed statement in due course.

50. The Rural Infrastructure Development Fund (RIDF) has so far disbursed funds in 11 tranches. RIDF XI sanctions have touched a level of Rs.7,301 crore as on January 31, 2006. A special feature this year has been that Rs.346 crore has been sanctioned to the North Eastern States. This sum is likely to touch Rs.600 crore by the year end. Keeping in view the expanding requirements for creating rural infrastructure, I propose to increase the corpus of RIDF XII to Rs.10,000 crore, and I urge State Governments to make the best use of these funds.

51. I also propose to allow specified projects under the Public Private Partnership (PPP) model to access RIDF funds.

52. The rural roads component of Bharat Nirman requires large funds. Hence, I propose to open a separate window under RIDF XII for rural roads with a corpus of Rs.4,000 crore during 2006-07.

Agricultural Insurance

53. The National Agricultural Insurance Scheme (NAIS) will be continued in its present form for Kharif and Rabi 2006-07.

Plantation Sector

54. In continuation of the announcement in the last Budget to introduce a 15 year programme for massive re-plantation and rejuvenation of tea, Ministry of Commerce has proposed to set up a Special Purpose Tea Fund. While the details are being worked out, to signal my support to the idea, I propose to make a levelized contribution every year to the Fund. For 2006-07, the contribution is expected to be Rs.100 crore. When established, the Fund will benefit growers in the tea growing States including Assam, West Bengal, Tamil Nadu, Kerala and Uttaranchal.

Micro Finance

55. I had proposed major initiatives in respect of micro finance in the last Budget. RBI has since issued guidelines to enable banks to appoint banking correspondents and banking agents. A window to access ECB funds has also been opened. A Bill to provide a formal statutory framework for the promotion, development and regulation of the micro finance sector will be introduced in this session.

56. The Self Help Group (SHG) movement is making rapid strides. In the two years of the UPA Government, we have credit-linked 801,000 SHGs. The credit disbursed to these SHGs is approximately Rs.4,863 crore. I propose to ask the banking sector to credit-link another 385,000 SHGs in 2006-07. I shall also ask NABARD to open a separate line of credit for financing farm production and investment activities through SHGs.

57. The findings of the NSS 59th Round (2003) reveal that out of the total number of cultivator households only 27 per cent receive credit from formal sources and 22 per cent from informal sources. The remaining households, mainly small and marginal farmers, have virtually no access to credit. With a view to bringing more cultivator households within the banking fold, I propose to appoint a Committee on Financial Inclusion. The Committee will be asked to identify the reasons for exclusion, and suggest a plan for designing and delivering credit to every household that seeks credit from lending institutions.

Horticulture and Fisheries

58. The PPP model will be employed to set up model terminal markets in different parts of the country. A sum of Rs.150 crore has been earmarked for this purpose in 2006-07 under the National Horticulture Mission. A Central Institute of Horticulture will be established in Nagaland. The National Fisheries Development Board will be constituted shortly.

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