‘Omnibus loan waivers can demotivate repayments’

The National Bank for Agriculture and Rural Development (Nabard) will propose setting up of an agriculture market infrastrucutre fund, to ensure better return on farmer’s produce due to improved storage. HARSH KUMAR BHANWALA, chairman and managing directo

Your assessment of the farm sector crisis.

There is indeed a distress. This is on account of realisation of farm produce in the absence of any marketing infrastructure. Only three or four states have an elaborate infrastructure for procurement — Haryana, Punjab, Western Uttar Pradesh, Madhya Pradesh and, to some extent, in Maharashtra and Gujarat. Other states do not have it.

E-market reforms in agriculture need to be expedited. They (the scheme in this regard) have covered a little more than 500 mandis (wholesale markets) out of 3,000 of these, (run by) Agricultural Produce Market Committees (APMCs). You would require elaborate infra for storage, for quality control, which is absent in these markets. Even if you have a software solution to link markets, the other things are not in place.

How would Nabard like to intervene here?

For next year’s Union Budget, we’ll suggest setting up of an APMC Infra Fund. Today, with lack of storage facility, a farmer sells at whatever price one gets in the market, rather than going back without selling and incurring another cost. There is a need for better infra availability in APMCs. If the government also feels the need, we are ready to raise the money and have the fund.

A few states have announced a farm loan (repayment) waiver. How do you assess the impact?

An omnibus waiver can demotivate on regular repayment. So, it needs to be focused, specific and pointed. Second, it is important to make agriculture viable. The demand for loan waiver is an outcome, a symptom. The problem lies somewhere else. Small holdings make agriculture non-viable. The terms of trade in recent years have been adverse. Prices of commodities have not risen but the cost hasn’t come down. Land reforms are yet to take place. We need reforms that are agri market-related, land-related and that formalise oral leasing. We look forward to some of these initiatives, so that loan waivers are not as frequent as today.

The status of the Dairy Development Fund announced in the Budget this year?

We are closely working with the Ministry of Agriculture on this. The Cabinet would soon approve it. We are working on the guidelines and should operationalise it soon. A Dairy Development Fund is quite critical today. Dairy is the largest growing segment in the entire gross domestic product of agriculture. Investment is needed for capacity creation, replacement and upgradation. The dairy sector is the all-time money (ATM) for small farmers. While a crop gives a return in six months or a year, this gives a return every fortnight. It is a great impetus.

What other initiatives are coming from Nabard?

We are creating a micro irrigation efficiency fund. We have large amounts of arid areas, adversely placed on per capita water availability. In such a scenario, it is important that we synergise irrigation-related intervention.

How much capital do you plan to raise this year?

This year, we are going to raise ~40,00045,000 crore from the capital market, against ~30,000 crore earlier. We will need more funds for the dairy and irrigation initiatives.

How will the Centre’s plan to increase the capital of Nabard through amendment in the Act help lending?

I can borrow 10 times of my net-owned funds. These stand at ~31,000 crore, including the capital. Today, the capital is ~6,700 crore; my authorised capital is only ~5,000 crore. So, I need to enhance it to legalise this.

Will you issue more tax-free bonds?

We have raised 15-year bonds. We are deepening the country’s bond market. We had nearly a share of 30 per cent last year of these 15-year term bonds. We are making great efforts towards that and if the results are good and we are able to raise such offerings from the market, we will also go for a higher tenure.