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Budget 2018: Jaitley creates two funds worth Rs 100 bn for animal husbandry

Taken together, the value of new funds is around 30% more than total budgetary allocation for entire agriculture ministry

Sanjeeb Mukherjee  |  New Delhi 

chicken, hen, poultry

In 2018 speech on Thursday, Finance Minister announced the creation of two new funds for the sector, with a cumulative corpus of Rs 100 billion.

This, along with allocations to the existing funds, means that the has since 2015-16 created or promised to create institutional financial arrangements worth over Rs 1,730 billion, outside of budgetary allocations.

Critics, however, say that creating such institutional financial arrangements means deferring the expenditure and, many a time, this might delay the availability of funds, unless proper rules are framed. But others feel this is a better route to ensure development without impacting fiscal discipline, as the government could defer reimbursements to an institution over a longer period.

The funds created so far usually lend to state governments or governments’ own vehicles that further lend directly to projects or institutions.

To date, new long-term dedicated funds amounting to almost Rs 728.81 billion have been created in financial institutions since 2015-16 – much of that in Another Rs 1 trillion has been spent on enhancing the corpus of existing funds.

Fertile ground

  • For the second fund of Rs 50 billion for micro-irrigation, this year’s documents show a draft Cabinet note is being prepared to operationalise it
  • The third fund, for developing and modernising the and called the Dairy Processing and Infrastructure Development Fund, was created with an allocation of almost 
  • Rs 120 billion in 2017-18, and four-five projects will be funded by March
Taken together, the value of new funds is around 30 per cent more than the total budgetary allocation for the entire agriculture ministry, including and research, estimated at Rs 560 billion in Estimates for 2018-19.

For many such funds, the mechanism involves financial institutions borrowing money for financing these funds from the market at a fixed rate of interest and lending to states, government vehicles and institutions at a subsidised rate with the government providing interest subvention.

Lending to a central government vehicle also ensures that the repayment is made on time.

Of the Rs 400 billion long-term irrigation fund created in in 2017-18, around Rs 150 billion has already been disbursed, while sanctions for almost Rs 500 billion have also been received.

For the second fund of Rs 50 billion for micro irrigation, 2018-19 documents show that a draft Cabinet note is being prepared to operationalise the fund.

For a third fund, to develop and modernise in the country for boosting milk processing and generating additional employment, called the Dairy Processing and Infrastructure Development Fund (DIDF) with a total allocation almost Rs 120 billion and created in 2017-18, the Cabinet approval has been received and four-five projects will be funded by March 2018.

This fund is routed through the National Dairy Development Board (NDDB), a government vehicle.

Usually, it takes three-four months for the operational guidelines of a fund to be decided. But, if it takes longer, as has been the case with DIDF, the wait for allocations get that much longer.

“This is not a bad model for development, as all the allocations cannot be done in one and, since the repayment obligation is staggered, the pressure on the fisc is spread over a longer period of time,” Chairman Harsh Kumar Bhanwala told Business Standard.

Former Shiraj Hussain said the creation of a dedicated fund for institutional financing mechanism is a good idea, as projects get sanctioned fast through this. But much depends on states and the capacity of bodies and institutions to absorb the funds, besides the government’s swiftness in framing rules for their operations. 

First Published: Mon, February 05 2018. 23:47 IST
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