200% rise in credit disbursement; AP leads the race

New Delhi, Oct 22 (UNI) Credit disbursement by Scheduled Commercial Banks posted a 200 per cent increase between 1998 and 2005 with Andhra Pradesh emerging as the dominant state in the area of agricultural finance in the country, an industry chamber said today.

On a year-on-year basis, a maximum credit of Rs 81,857 crore was extended to farmers in the state in the FY 2004-05, marking a rise of 36 per cent against 18 per cent a year ago, according to the Assocham Eco Pulse Study which covered 21 states.

There has been a 23 per cent rise in NABARD credit support in Andhra Pradesh totaling Rs 3,480.93 crore in 2004-05. Of this amount, almost half (Rs 1,856 crore) was sanctioned to cooperative banks and regional rural banks to support crop loans and other short term credits for seasonal agricultural operations.

Gujarat followed Andhra Pradesh in the farm credit growth, with total credit disbursement posted at Rs 6,003 crore, thereby posting a rise of 32 per cent in FY 2004-05 against 11 per cent in the same period previous year.

Other states with a substantial increase in the credit extension are Himachal Pradesh (77 per cent), Uttar Pradesh (35 per cent), Madhya Pradesh (34 per cent) and Punjab (30 per cent), the study said.

The emphasis in agricultural credit has continued to be on progressive institutionalisation for providing timely and adequate support to farmers with particular focus on small and marginal farmers and weaker sections of the society to enable them to adopt modern technology and improved agricultural practices for increasing agricultural production and productivity.

Besides, the total ground level credit flow for agriculture and allied activities increased from Rs 368,60 crore in 1998-99 to Rs 869,81 crore in 2003-04. The total credit requirement during Tenth Plan has been projected at Rs 7,36,570 crore.

A grant of Rs 944 crore has been given for irrigation in Bharat Nirman in FY 2006-07 and Finance Minister P Chidambaram stated to double farm credit in three years.

''For several reasons, the cooperative credit structure is facing severe problems which have restricted its ability to function viably and perform effectively the task of reaching out to all segments of the farming community and meet in full their requirements of credit,'' the chamber said.

Structural deficiencies, operationally small in size to be economical and viable, dependent mostly on finance provided by the higher tiers, lack of diversification in business portfolio, high transaction costs and overall weak financial health are some of the problems faced by the agricultural sector.

Though the credit disbursements by the banks have been on a rise for the past few years, the agricultural sector in India still suffers from low productivity mainly because of insufficient water levels and improper irrigation facilities, inadequate infrastructure the industry body said.

Agricultural segment also confronts the problem of inappropriate research facilities and controlled prices. The Agricultural produce also does not match the desired standard. There are laws that stifle private investment in the sector, it said.

One of the major reasons attributed to the impeding factors is lack of adequate capital as well as expensive capital, thereby hampering the growth of the agricultural produce. There has been a decline in the private investment in the agriculture sector.

Thus, private investment for narrowing regional imbalances, accelerating development of supportive infrastructure for agriculture and rural development particularly rural connectivity may be stepped up and to overcome the prevailing credit problem in the agricultural sector.

Some measures like scaling up efforts to enhance coverage of institutional credit; commercial banks making effort to bring into their fold at least 100 new farmers at each rural and semi-rural branch during the current year could be undertaken to enhance credit flow to agriculture, it suggested.

UNI KR PV BD1504