Presenting the Union Budget for the year 2008-09, the finance minister P Chidambaram said that all agriculture loans of three crore small and marginal farmers that were disbursed by banks till March 31, 2007 and were overdue on December 31, 2007 and remained unpaid till February 29, 2008 would be waived off. According to government's estimate these unpaid loans would aggregate to Rs 50,000 crore. For another one crore farmers, the government has decided to offer a one time settlement package for clearance of their outstanding loans relating to these dates. The package would offer a 25% rebate to farmers for payment of the balance 75%.
Farmers, whose loans were restructured and rescheduled in 2004 and 2006, will also be eligible for benefits of a waiver or one time settlement package. The package implementation is expected to be completed by June 30, this year. But in the meantime the farmers who gets the assurance for waiving of his loans or who enter into a one-time settlement of loans can avail fresh loans from banks. Marginal farmer has been defined as having holding up to one hectare and small farmer as having holding up to two hectare.
The bankers have also welcomed the finance minister's decision to waive off farmers' loans. The chairman of Punjab National Bank, KC Chakravarty told FE : "The government has taken up the responsibility to clear some outstanding loans of farmers. This will help the banks to reduce their NPAs and extend fresh credit. It is also good for the farmers and agriculture."
The president of Bharatiya Krishak Samaj, Krishan Bir Chaudhary when contacted welcomed the finance minister's decision but said : "the government need to understand the real cause of farmers' indebtedness and suicides. Unless the imposed model of capital-intensive farming is not changed the situation would not improve and the government would have to come out with another loan waiver package. The present capital-intensive farming largely benefits the companies supplying seeds, fertilizers, pesticides and less the farmers who invest more and get low returns."
According to the government farm credit has doubled in the first two years since may 2004 and is poised to reach a level of Rs 240,000 crore by March 2008. The government has proposed to provide Rs 644 crore in 2008-09 to the ongoing National Agriculture Insurance Scheme (NAIS). The NAIS is proposed to restructured to better cater to the needs of farmers and the insurer. The government has also proposed to provide Rs 50 crore for the Weather Based Crop Insurance Scheme which is being implemented as a pilot scheme in five select states.
The Special Purpose Tea Fund for re-plantation and rejuvenation, which was set up last year, will get Rs 40 crore as budgetary allocation. Similar funds for rendering similar support to other plantation crops have also been proposed for other plantation crops cardamom (Rs 10.68 crore), rubber (Rs 19.41 crore) and coffee (Rs 18 crore). The National Horticulture Mission will get Rs 1,100 crore.
The government has also proposed to raise the corpus of the Rural Infrastructure Development Fund- XIV to Rs 14,000 crore. The Budget has proposed a fund of Rs 5,000 crore to Nabard to enhance its refinance operations to short-term cooperative credit institutions.
Chidambaram also announced Rs 32,667 crore as food subsidy for procuring grains against minimum support prices and its distribution to the poor. He informed that pilot project of using smart cards for delivery of ration to the poor would begin in Haryana and Chandigarh. In 2007-08 the food subsidy bill aggregated to Rs 31,545.59 crore.
Customs duty on project imports have been reduced from 7.5% to 5%. With a view to support domestic fertilizer production, customs duty on crude and unrefined sulphur has been reduced from 5% to 2%. Fertiliser units are allowed to import naphtha against zero duty. "Though this benefit is fringe, we welcome it," said the deputy director of Fertiliser Association of India, RC Gupta.
The subsidies on urea produced in the country and on DAP and MoP remain unchanged for 2008-09, while that on imported urea has been raised from Rs 6,753.54 crore to Rs 7,238.89 crore.
Agricultural income is exempted from income tax, a move that would benefits corporate farms and saplings and seedlings raised in nurseries are also exempted from income tax. A weighted deduction of 125% is allowed on any payment made to companies engaged in research and development. "We welcome this move. But we had asked for 150% weighted deduction in income tax on payments made to seed and crop biotech companies and infrastructure status for seed companies," said the executive director of National Seeds Association of India, RK Sinha.
The corporate income tax rate and surcharge rate remain unchanged.
With a view to reduce the cost of manufacture of cattle and poultry feeds, the duty on vitamin premixes and mineral mixtures has been reduced from 30% to 20% and on phosphoric acid from 7.5% to 5%. The duty on bactofuges has been reduced to zero to benefit the dairy industry in increasing the shelf life of milk. With a view to encourage cold chain facilities, excise duty exemption has been proposed on end-use basis refrigeration equipment (consisting of compressor, condenser units, evaporator) above 2 TR (tonne refrigeration) utilizing power of 50 KW and above.
Coir Board has been granted exemption from payment of income tax, while commodity futures exchanges have been brought under service tax net and commodities transaction tax on options and futures.
Excise duty on paper, paper board and articles manufactured out of non-conventional raw materials by units not having captive bamboo/wood pulp making plant has been reduced from 12% to 8%.. Same level of taxation has been imposed on filter and non-filter cigarettes.
Government has increased allocations Accelerated Irrigation Benefit Programme to Rs 20,000 crore with grant component of Rs 5,500 crore. The Rainfed Area Development Programme will be implement in 2008-09 with a corpus of Rs 348 crore The centrally sponsored scheme on micro irrigation will get an allocation of Rs 500 crore with a target of covering 400,000 hectare. Irrigation and Water Resources Finance Corporation will be set up with an initial corpus of Rs 100 crore. State governments and financial institutions would also be invited to contribute to its equity. The president of the Confederation of Indian Horticulture, Sopan Kanchan said : "the proposal to increase allocation for irrigation is a welcome move. But canal water should be exclusively used for agriculture and not diverted to cities."