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Political differences on farm reforms must be overcome: Chidambaram

Monday 11 April 2005

NEW DELHI, APRIL 10. Even as the Agriculture Summit-2005 recommended an incentive package for reforms in States, the Union Finance Minister, P. Chidambaram, today said political consensus would have to be forged on farm reforms, especially on contract farming, private mandis, opening retail trade to foreign direct investment and on public-private partnership in the sector. While admitting to "fundamental issues on which there are differences in the polity," he referred to the Prime Minister, Manmohan Singh’s reforms-oriented inaugural address at the summit on Saturday and said that from that speech it was obvious that the Government would make efforts to overcome these differences.

"Although it would not be easy to negotiate these issues, they must be resolved quickly," he said, endorsing the sweeping reforms recommended by the summitorganised by the Agriculture Ministry and the Federation of the Indian Chambers of Commerce and Industry.

Mr. Chidambaram dwelt at length on the decline in capital formation in the farm sector but was encouraged that it had been marginally reversed recently. Capital formation of 1.92 per cent in 2001-02 had risen to 1.31 per cent in 2003-04.

He said in 2003-04 the Government had promised to double in three years the credit to farm sector from Rs. 80,000 crores. In 2004-05, against a target of Rs. 1,05,000 crores, it had exceeded Rs. 1,08,000 crores. Likewise institutional credit had also exceeded the target. "This year we will talk to banks and hope to set another ambitious target of Rs. 1,40,000 crores," he said.

Expressingdissatisfaction with the functioning of cooperative banks, he said the States must wake up to the challenges of reforms in the farm sector by revitalising cooperative banks. He said he had written today to the Chief Ministers for a conference to be convened next month to impress upon them the need to bring about efficiency and comply with the Banking Regulation Act.

"The cooperative banking sector was the weakest link in the production and development of the credit delivery mechanism. The recommendations of the Task Force on cooperatives would be implemented in States agreeing to the conditionality of the Task Force."


Mr. Chidambaram said it was necessary to unclog all the arteries that supply production credit without which it would not be possible to achieve the agriculture growth rate of four per cent.

The summit recommended special incentives for farm reforms, which include compensation to States for loss of mandi revenue and as a consequence of setting up direct.

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