Stabilisation Fund For Co-op Banks In Drought-Affected Areas On Cards

New Delhi, Aug 25: | Updated: Aug 26 2002, 05:30am hrs
The government has decided to set up a stabilisation fund jointly with National Bank for Agriculture and Rural Development (Nabard) and district cooperative banks (DCBs) that will help the cooperative banks to meet immediate credit requirements in the drought affected areas.

According to additional agriculture secretary, Hemendra Kumar, Nabard will contribute 60 per cent of the corpus, while the Centre and the DCBs will contribute the balance 40 per cent.

According to Mr Kumar, the total corpus of the fund will be decided after examining the demands to be made by the state cooperative banks. The Union agriculture ministry has already asked the state cooperative banks (SCBs) to send in their demands.

He said that the SCBs are already in trouble as the debt recovery has been suspended in the drought affected areas and hence the need for a stabilisation fund to enable the cooperative banks to continue their disbursement operations. The farmers will need more credit as the cost of cultivation has gone up due to increased consumption of diesel and power for extracting water from underground sources.

Currently, the debt recovery has been suspended in drought affected areas. The banks have been asked to convert short (90-days) loans into medium-term loans ranging over three to five years. But the agriculture ministrys suggestion for waiving off of interest on loans in the drought period has not been considered favourably by the Union finance ministry.

This means that the farmers will be paying back the accumulated interest burden at a later date.

When questioned as to why the commercial banks and the regional rural banks (RRBs) are kept out of receiving the benefits from the stabilisation fund, Mr Kumar said that these banks have enough funds to meet this contingency. It is only the cooperative banks who have presence at grassroot levels need some assistance.

Mr Kumar said that the Union agriculture ministry has already extend subsidy on labelled oilseeds and pluses seeds. Oilseeds and pulses are under the technology mission under the ministry it was possible to take this immediate action. Earlier, only certified seeds were eligible to subsidy. Regarding extension of similar subsidy to labelled seeds of other crops, the agriculture ministry has written to the finance ministry to consider the case.

Meanwhile, the Centre has already released to 12 drought affected states a sum of Rs 1,157.26 crore out of the its total share of Rs 1,647.22 crore under the Calamity Relief Fund (CRF).

The contribution of the Centre and states under CRF is in the ratio of 75:25. CRF covers as many as 23 items including fodder and water. State-level committees have been formed under the chairmanship of chief secretaries of respective states to oversee the implementation of work covered under CRF.

Ten drought affected states have asked the Centre to release a total sum of Rs 19,326.33 crore from the National Calamity Contingency Fund (NCCF). NCCF is created solely by the Centre. The NCCF has now only Rs 500 crore as balance and a sum of Rs 1,600 crore is expected to be garnered for the fund at the end of the fiscal year through sin tax.

For meeting the demands of the states under NCCF, it will mean levying of special taxes and surcharges on luxury item, which is under the consideration of the finance ministry, Mr Kumar said.