Even as the UPA government is trying to boost rural infrastructure, one of its flagship schemes for the purpose, the Rural Infrastructure Development Fund (RIDF), is facing difficulties. Incidentally, the scheme was launched by Prime Minister Manmohan Singh during his term as the finance minister.
According to official figures, over a third of the money allocated to RIDF in the last three years was never actually spent and there is a significant difference between its sanctions and disbursals, despite an Rs 4,000-crore increase in its corpus.
In 2008-09, of the Rs 14,705 crore sanctioned for projects, just Rs 10,459 crore was actually spent. In 2007-08, the ratio of sanctions to disbursals was even more skewed. Data shows that over 36% of the sanctioned Rs 12,707.86 crore lay idle. Similarly, in 2006-07, 41% of funds in the RIDF was sanctioned but never disbursed to states. Rs 18,000 crore has been allocated in this fiscal of which Rs 4,000 crore is for rural roads.
The RIDF was set up in 1995 to help finance rural infrastructure projects. Accordingly, states and panchayat bodies can approach RIDF, administered by Nabard, towards concessional loans for such projects. While it provides loans for projects like irrigation, rural connectivity, social and private sector, states often consider it to be the lender of last resort and feel there is a need to redesign the fund.
More worryingly, a large number of projects sanctioned under the RIDF never get off the ground. For instance, of the 85,440 projects sanctioned under the RIDF in 2008-09, 5,322 projects have been labelled as non-starters. Between 2006-07 and September 2009, 11% of all projects sanctioned were non-starters. The worst offenders include Karnataka (47.15%), Andhra Pradesh (35%), Chattisgarh (30.6%), Maharashtra (37.7%) and Assam (37.8%).
“There are no projects pending for sanction by Nabard. However, there are non-starter projects pending at the state government level for implementation,” minister of state for finance, Namo Narain Meena recently informed Parliament.
“Unlike the project finance model, the RIDF provides reimbursements based on actual expenditure by states. States are often cash strapped and need money in advance to start construction work, which the RIDF does not provide,” a ministry of rural development official said.
Further, states don’t find the tenure of the loan very beneficial. Under the RIDF, loans can be given for a maximum of seven years, which states don’t consider long enough for an infrastructure project. “A seven year-tenure for a loan is good, but a longer tenure can be better,” said Amrit Pandurangi, executive director, PricewaterhouseCoopers, although he said there are also other issues with RIDF. A major problem is the incapability of states to provide bills to claim reimbursement from the fund.
Meanwhile, Nabard officials said that there is always a difference between the sanctions and disbursements in the RIDF as loans are given to states in a staggered manner.
“The slow pace of actual utilisation of loans under the RIDF in some states was mainly due to delay in administrative and technical approval by the State Governments, land acquisition problems, inadequate budgetary support, etc,” Nabard’s annual report for 2009-10 stated.