Subsidy Payment Delays Hamper Micro-Irrigation
The lack of a proper mechanism for direct payment of subsidies to manufacturers and suppliers is preventing the development of the micro-irrigation system, especially in Orissa, Maharashtra and the southern states where water management for irrigation has become necessay due to scarce water sources.
In the last budget, the Union government had increased the subsidy component for micro-irrigation to nearly 70-90 per cent from the earlier 50 per cent, hoping that such a step would boost the demand for micro-irrigation.
Though the announcement of higher subsidies was made in July 1996 when the budget was presented, it was only by the end of September that the concerned ministry drew up the revised guidelines and communicated them to the states.
The state governments could not communicate the guidelines to their respective horticultural departments, responsible for disbursing the subsidies, until the end of December. Thus, nine months went by without the industry entering the higher subsidy channel.
Against a subsidy allocation of Rs 2,000 million for horticulture crops in the eighth plan, hardly Rs 800 million has been utilised in the first four years. This is inspite of the fact that the area with the potential to be brought under micro-irrigation is estimated at a whooping 20 million hectares. At present, just 130,000 hectares has been covered under the system.
Under the existing system, the horticulture department releases the subsidy amount after a site inspection. The inspection is delayed due to lack of required personnel in the department and the inability of some farmers to pool their portions of the subsidy.
The state governments maintain that several fly-by-night operators have entered the micro-irrigation field and unless there is a proper site inspection, bogus claims cannot be checked.
Micro-irrigation offers fairly attractive and easy prospects as there are few barriers for entry in terms of technical strengths. It is a business which constitutes simple products and skills for installation and service, besides, of course, the ability to liaise with government departments effectively to get subsidies out in time.
Industry sources maintain that in the backdrop of the subsidy regime and intense competition, there must be a high level of investment in stocks and credit to customers for any player to make a headway. Profitability is also under pressure as there is little product differenciation or value addition at any stage of the business cycle with business operating at the commodity end.