Announcement of Thirty Five Million Dollars Lent for Agriculture in India on May 6, 1970

• INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET. N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 70/16 Subject: $35 million lent for agri- May 6, 1970 culture in India A credit of $35 million from the International Development Association (IDA) to India will provide funds for an agricultural credit program in the State of Gujarat. Under the program, loans will be made to farmers for investments in mino~ irrigation works, mainly dugwells and tubewells, and farm mechaniza- tion. At full development, after three years, foodgrain production should in- Ci.'ease by over 601., on farms of participating farmers. This will provide more food for the growing population of the State, and substantially increase farmers' • incomes • Since 1965 India has given highest priority to agricultural development, with a major effort being made to accelerate the introduction of new agricul- tural technology. The results have been encouraging, but with credit available many more farmers could take advantage of the new technology. In late 1968 a mission comprising members of the World Bank and the Food and Agriculture Organi- zation of the United Nations (FAO), under the Bank/FAO Cooperative Program, re- viewed agricultural credit institutions and on-farm investment requirements in selected parts of India in order to identify high-priority agricultural credit projects. Because of its agricultural potential, existing well-developed infra- structure, and well-functioning statewide institutional credit system, the State of Gujarat was selected for the first agricultural credit project. The State of Gujarat, in west-central India, has a population of about 26 ~ million. Agriculture provides employment for two-thirds of the working /more IDA P.R. No. 70/16 - India-Agriculture population. - 2 - Cultivated land in Gujarat is now owned by approximately 2.2 mil- lion famUies, with farm sizes varying greatly. Because of scarce and l.Dl- • reliable rainfall and limited irrigation, crop production has barely kept pace with population growth. Even on irrigated larger farms the inadequacy of bul- lock power has prevented expansion of cropland, intensification of cultivation, and the full exploitation of new seed varieties. Under the program being assisted by the IDA credit, long-term finance will be provided to farmers for minor irrigation works which include the installation of pump sets for existing wells, construction of new open wells complete with pump sets, the installation of shallow and deep tubewells, the construction of lift irrigation schemes, the laying of pipelines, the lining of distributaries and field channels, and electrification for these installations. The farmers will also receive finance for the purchase of tractors, tractor implements and harvesters, and contractors will receive credits for the purchase of drilling rigs, including spares. The newly-formed State Groundwater Directorate, with the assistance cf consultants, will make a survey of Gujarat's groundwater re- • sources to determine the amount of water that can be safely ·tapped for wells • The total cost of the program over a three-year period is estimated at the equivalent of $67 million, of which $35 million will be covered by the IDA credit. Farmers and contractors are expected to contribute at least 20% of the finance for individual investments. The remaining finance will be provided by the Gujarat State Coope,ative Land Development Bank (LDB), the Agricultural Refinance Corporation (ARC), and the State of Gujarat. The IDA credit will be extended to the Government of India for a period of SO years, including 10 years of grace. It will be interest-free but a ser- vice charge of 3/4 of i i will be made to cover IDA's administrative costs. The Government will make the proceeds of the cre~i~ available to ARC repay- able after 9 years, with interest at 51.. ARC will channel the funds through LDB to individual borrowers at appropriate terms. - 0 - •