Prime Minister Manmohan Singh wants a more equitable and fair distribution of funds generated from the Rural Infrastructure Development Fund (RIDF) among the states, a government official close to the development has revealed.
Under the existing process, RIDF collects money from public sector banks that plough into the fund an amount equal to their shortfall in agricultural lending targets set for them. All public sector banks are required to lend a certain amount to agriculture under the government’s priority lending programme.
But the money collected is not distributed to states on the basis of any preset formula that would take into account factors such as the amount each state puts into the banking system through savings.
The Prime Minister is concerned that the money in RIDF isn’t apportioned to states depending on their savings, the official, who did not wish to be named, said
“At a presentation on agricultural strategy for the 11th Plan, which the Planning Commission made to the PM earlier this month, the issue of fair distribution of funds raised through RIDF was discussed. A suggestion was made that an alternative mechanism, which allocates a proportionate share of RIDF to states to whom credit is due, should be considered,” said the official.
RIDF was created to boost public sector investment in agriculture and rural infrastructure. Till January 2007, the cumulative amounts sanctioned and disbursed from RIDF were Rs7,811 crore and Rs3,307 crore, respectively.
“As of now, funds are allocated on the basis of projects and priorities, and criteria like the human development index, population and relative backwardness are considered for allocation from RIDF,” said an official at National Bank for Agriculture and Rural Development (Nabard), who also did not want to be named. The bank manages RIDF.
The Nabard official said that if certain states failed to generate enough projects that justify normative allocation of RIDF, they end up getting a lesser amount from the fund. “That’s where the PM’s concern lies,” added the Nabard official.
Singh is expected to discuss the five reports of the National Commission on Farmers, eight of the National Development Council’s sub-committee on agriculture, and reports of 12 working groups on the 11th Plan and the Planning Commission Steering Committee at the meeting.
Other important issues that will be discussed include steps to increase public investment in agriculture and facilitating public-private partnerships.
This will be the second full Planning Commission meeting on agriculture since the ruling United Progressive Alliance came to power