The much-vaunted Kisan Credit Card (KCC) scheme was launched in 1998-99 and is expected to cover all eligible farmers by March 2004. But issuing KCCs is not the same as extending credit. Studies show that KCCs generally have only one disbursement per person and that too, for fertilisers rather than all inputs. Interest rates are too high, high stamp duties discourage large loans when mortgages are involved and many states have hardly implemented the scheme. Procedures from the old crop loan scheme have been borrowed. For example, district committees decide credit entitlements for various crops and such district committees often dont exist. Bureaucratic procedures have eliminated flexibility from the KCC scheme. Despite ambitious targets for self-help groups, the idea of community or group collateral hasnt quite taken off.
The kisan pattadar scheme with accompanying computer-generated land rights has legal sanction only in Andhra Pradesh. Non-existent or non-functioning land markets substantiate the Peruvian economist Hernando de Sotos thesis that the poor are deprived access to their most important source of capital. Pledge financing or limited credit for marketing crops is hamstrung because the National Bank For Agriculture and Rural Development doesnt refinance the regional rural banks (RRBs) for pledge financing. Controls on marketing prevent the private sectors entry, although if the Agriculture Produce Market Committees Acts are revamped, pledge financing can explode. Warehouse receipts are non-negotiable and non-transferable, so they cannot be used by anyone other than the original receipt-holder for obtaining credit. Forward trading is limited in scope. Such reforms often require legislative changes, usually at the state-level and the agenda has been set out not only in the Approach Paper to the Tenth Plan, but also in several government committee reports. Unfortunately, little gets implemented. The centre equates agricultural policy with a foodgrain policy and conveys perverse signals by hiking procurement prices. Not only does this discourage diversification, the required institutions for diversification also fail to emerge because state governments generally equate institutions with centralised public sector entities. Had such centralised delivery systems worked, the RRBs with their network of 14,500 branches would have ensured that credit flow to agriculture was no longer a problem. Missed credit targets during the Ninth Plan merely substantiate this point. Credit is not the only constraint but is a major one for 4 per cent agricultural growth in the Tenth Plan.