Announcement of 24.4 Million Credit for Agriculture in India on December 17, 1970

• INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET. N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 70/56 Subject: $24.4 million credit for December 17, 1970 agriculture in India India's efforts to sustain the momentum of growth in the agricultural sector by enabling a larger number of farmers to take advantage of the new agricultural technology will be assisted by a credit of $24.4 million from the International Development Association (IDA). The credit, part of the Association's continuing program to assist India in expanding credit facilities to farmers, will provide funds for an agricultural credit program for minor irrigation, land leveling and fann mechanization in the • State of Andhra Pradesh. Two previous IDA credits, totaling $62.5 million, are assisting similar agricultural credit programs in the States of Gujarat and Punjab. The project will bring major benefits to the Indian economy in the form of t increased production of food grains aiid other crops, resulting in better income and job opportunities for farmers. The increase will come both from better yields and higher cropping intensity and from an expansion of the cropped area in Andhra Pradesh by 123,500 acres. Production of food grains alone will increase by 160,000 tons a year. In connnon with other Indian states, Andhra Pradesh has given priority to its agricultural development. Over 75% of the state's population depends on agricul- ture which provides 57% of the state's GNP. Andhra Pradesh is a surplus producer of rice and other food crops, and traditionally exports its surplus to other • areas of India. Compared with its potential, however, its progress has been held back by relatively limited irrigation. Even in areas where irrigation water is available, the insufficiency of draft power has prevented the expansion of cropped /more IDA P.R. No. 70/56 - India-Agriculture - 2 - la!.1G.. To help overcome these problems, the State Government has initiated .:mr.i • substantially financed a number of large surface irrigation schemes. Two of these schemes are now being developed and farmers in their cnnunand areas rcqui.re long-term loans to level their land and thus make effective use of irrigation water. The Government has also supported lending programs for the expansion of on-:arm well development and farm mechanization. But lack of credit And insuffi- cient tractor supplies have limited progress. Under the program being assisted by the IDA credit, medium and long-term institutional credit will be provided to farmers for the installation of about 1,350 tubewells and 14,000 dugwells and for improving some 5,000 existing dug- wells. In addition, almost 20,000 electric and oil engines will be financed to pump water from the wells. Most of the investmeat in land leveling will be on small farms within the two major irrigation schemes of Nagarjunasagar and Pochampad. The project also provides for consultants' services to a State Ground W&ter Directorate to be established. About 31,000 individual on-farm investmentJ will be made under the program. Investments in farm mechanization will finance the purchase of 1,500 tractors, as well as tractor i~plernents and trailers. To ensure that the benefits of the program are available to small-scale f&.rmers, a farmer is not required to farm a minimum acreage to be eligible to purchase a tractor under the project. Purchasers, however, will have to pro- vide assurances that the tractor will be used to crop at least 99 acres a year or be used for at least 1,000 hours of productive work annually. This provision is expected to increase the number who will carry out farm custom services. For certain minor irrigation and land leveling investments, small farmers will benefit by reduced down payments and longer repayment periods. The total cost of tne project is estimated at the equivalent of $45 mil- lion. The IDA credit will finance the foreign exchange costs of $7.1 million • and about $17.3 million equivalent of local expenditures. The balance is being PL~vided by the Andhra Pradesh Cooperative Central Land Mortgage Bank, partici- pating farmers and corrnnercial banks and the Agricultural Refinance Corporation (ARC)f which also will be the channel for IDA finance. The Andhra Pradesh State AgLo-Industries Corporation will organize the procurement of equipment to be financed out of the proceeds of the IDA credit. The Food and Agriculture Organization of the United Nations (FAO) joined IDA in identifying and preparing the project under the Bank/FAO Cooperative Program. The IDA credit will be extended to the Government of India for a period of 50 years, including 10 years of grace. It will be interest-free, but a service charge of 3/4 of 1% will be made to cover IDA's administrative costs. The Government will re-lend the proceeds of the credit to ARC for 9 and 15 years with interest at 5% and 5-1/2% respectively. ARC will channel the funds through the Land Mortgage Bank and participating connnercial banks to individual borrowers at appropriate terms. - 0 - •