Micro-irrigation: North Block stymied Rs 5,000-crore fund for a year

Updated: March 21, 2018 3:06 PM

A dedicated Micro-Irrigation Fund (MIF), proposed nearly 14 months ago in the Budget 2017-18, hasn’t become operational as yet as its proponent, the Union finance ministry, couldn’t decide if the state governments are to be given interest subsidy on the MIF loans.

NABARD, AGRICULTURE SECTOR, AGRICULTURE INDUSTRY, ECONOMYEven though Nabard was to create the fund, envisaged to have initial corpus of Rs 5,000 crore, from its own resources, the EFC approval was required because both the agriculture ministry and the bank felt states must get loans at subsidised rates. (PTI)

A dedicated Micro-Irrigation Fund (MIF), proposed nearly 14 months ago in the Budget 2017-18, hasn’t become operational as yet as its proponent, the Union finance ministry, couldn’t decide if the state governments are to be given interest subsidy on the MIF loans.

According to official sources, the Expenditure Finance Committee (EFC), headed by the expenditure secretary, had approved the plan only on February 23, 2018. It is for the agriculture ministry now to seek the Cabinet’s approval for creation of MIF at National Bank for Agriculture And Rural Development (Nabard).

Even though Nabard was to create the fund, envisaged to have initial corpus of Rs 5,000 crore, from its own resources, the EFC approval was required because both the agriculture ministry and the bank felt states must get loans at subsidised rates (some 3% lower than the base rate).

And the deliberations went on for a long period, with the finance ministry expressing reservations about subsidising the MIF loans to state governments.

According to the agriculture ministry, given the robust demand for funds for micro-irrigation projects from state governments, the size of MIF could multiply and the interest subsidy might cost Rs 500 crore annually, in two to three years. Currently, the ministry runs schemes under the Rashtriya Krishi Vikas Yojana that allow farmers to get 50% direct subsidy on investment made on micro irrigation facilities such as drip and sprinkler systems. The cost of subsidy under these schemes is shared between the Centre and states, at 60:40 ratio. The idea is that MIF would help states to meet their share of the subsidy cost.

Nabard had told the EFC that states might not show interest to avail loans from MIF. The states used to get the benefit of low interest rates under another fund, Rural Infrastructure Development Fund (RIDF), until 2012. The RIDF loans to states for irrigation and several other infrastructure projects, were 3% lower than the minimum rate at which banks can lend to their customers. Of course, some states like Odisha have been giving subsidy from their own budget on bore well construction, covering 90% of the cost.

Irrigation projects are central to the Narendra Modi government’s avowed objective to double farmers’ income by 2022. Around 55% of the cultivable farm land in the country are still not irrigated.

Drip irrigation started in India during 1970s. Studies have shown that drip irrigation cuts down the overall water use by 40-70% and raises crop yield by up to 200% for many crops.

Jain Irrigation Systems, Finolex Plasson Industries and Premier Irrigation Adritec are some of the major companies in the micro irrigation sector in India and mostly catering to horticulture sector. Recently, Karnataka and Maharashtra have taken steps to make drip irrigation compulsory for sugarcane, one of the highest water-consuming crops. The Centre has been encouraging other states to make drip irrigation mandatory for sugarcane.

 

By Prabhudatta Mishra

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