Home / Politics / News /  Ministry has long wish list to get rural business hubs going

New Delhi: Three years after Prime Minister Manmohan Singh proposed rural business hubs, the ministry charged with managing them wants village panchayats be made the sole nodal agencies.

The hubs, which are proposed as a public-private partnership, were to be jointly promoted by the panchayats, industry lobby Confederation of Indian Industry and state government-controlled district planning bodies.

The panchayati raj ministry also wants other schemes that promote rural artisans—which are run by other ministries— to be merged into the hubs, to enlarge funds and improve coordination.

Adapted from the Chinese model of rural development, the rural hubs were aimed at collecting rural produce to generate economies of scale and better returns for rural artisans.

Thinking ahead: Prime Minister Manmohan Singh. (Photo: Ramesh Pathania/Mint)

“The government runs many schemes in the rural areas, but a majority have gaps that they cannot fill. Our aim is to converge these schemes with the general objectives of the rural business hubs—that is to make private sector financing possible for schemes and products that are financially viable," said a senior official at the panchayati raj ministry, who did not wish to be identified.

The hubs programme, which covers 850 blocks, an administrative subdivision, is facing a financial crunch though changes in its funding plans are under way to speed up release of funds. The goal is to try and reduce dependence on the government’s Backward Regions Grant Fund (BRGF).

Each hub can get up to Rs16 crore per district from the fund. This money is meant to pay local consultants appointed to identify business hubs and prepare a district profile that would be useful to companies. Some of the funds are also meant for upgrading skills of rural artisans.

While the total allocation to BRGF was Rs5,800 crore in 2007-08, less than one-third of it has been disbursed to states until now, with some 12 states failing to access the available funds. As a result, the hubs are not getting their share of that money.

The hubs “are not funded to a great extent, but they make market access possible. That would be a crucial advantage for the village artisans benefiting from other schemes at present, who do not know how to make their products saleable", said the same official.

The ministry would also like the cluster development programme, run by the National Bank for Agriculture and Rural Development (Nabard), be linked to the hubs. The ministry wants panchayats to be involved in selecting non-governmental organizations and development agencies that draw up action plans and monitor Nabard’s clusters.

Nabard currently supports at least 100 clusters, which have about 80-100 artisans in a single area, and provides links as well as refinancing through banks.

“We have received suggestions from the panchayati raj ministry and we are willing to work closely with panchayats on this as (the hubs) are meant for skill development and providing marketing facilities to artisans," said a Nabard official, who did not wish to be identified.

Other schemes run by other ministries that the panchayati raj ministry would like to be “dovetailed" include scheme for fund for regeneration of traditional industries, the Baba Sahib Ambedkar Hast Shilp (Handicraft) Vikas Yojana, the provision of urban amenities in rural areas, integrated handloom cluster development programme, and the scheme for infrastructure development of the ministry of food processing industries.

“We are at an advanced stage in getting the convergence implemented and are working with state governments to educate them on the advantages of converging existing schemes...," said the ministry official.

Some experts say that the hubs are too narrow in scope and lack an integrated market for agricultural produce.

They are “not scalable and will cater to only those who are interested in procuring products of rural artisans and marketing them in cities. Once the agricultural produce market is integrated, rural artisans will automatically see their products make way through these markets", said Amirullah Khan an economist at the India Development Foundation, a non-profit organization.

Khan said that for the agricultural market to integrate, regulations such as the Agricultural Product Marketing Control Act and the Essential Commodities Act will have to be removed along with the controls on inter-state movement of commodities.


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