Announcement of Forty Million Dollars Credit for Agriculture in Mysore State, India on December 23, 1971

.. • INTERNATIONAL DEVELOPJ.\K...E~~T .A.SS0CLA1TIOi~ 1818 H STREET. N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 71/ 4 8 Subject: $40.0 million credit for Decen..-ber 23, 1971 agriculture in Mysore State, India A credit of $40.0 million from the International Development Association (IDA) will help to provide more agricultural credit for farmers in Mysore State, India. It will be used to finance investment in minor irrigation, farm mechanization and land levelling. This investment will bring reliable irrigation and higher cropping intensity to 350,000 acres. About 123,500 acres of this area will be made • more productive by the use of 2,000 tractors to be financed tmder the credit. Some 36,000 farmers will benefit by being able to grow more for their own consumption or for sale. The Indian economy will gain by an annual increase of 192,000 tons of food grain and 252,000 tons of commercial crops like groundnut, cotton seed and vegetables valued at $42 million. In recent years, the Government of India has given priority to the introduction of new agricultural technology through increasing the supply of improved inputs and by providing economic incentives to farmers. Already, significant inc~eases in output have been obtained and food grain production in 1970 reached a new record of 108 million tons. In order to maintain this momentum, the Government is trying to e1q>and the institutional credit available for on-farm investments. Estimates are that credit institutions will require to finance an average annual agricultural •• investment of $400 million equivalent during the Fourth Five-Year Plan (1969/1974) as compared with sone $100 million invested in 1966/67. /more IDA P.R$ No. 71/48 -- India -- agriculture ' - 2 - Today's IDA credit is part of the World Bank Group's continuing efforts to support such institutional credit programs that will. enable a large number of • farmers to make good use of new high-yielding seed varieties, fertilizers and irrigation works. Five previous IDA credits totaling $146.4 million, made in fiscal years 1970 and 1971, are assisting similar credit programs in the states of Andhra Pradesh, Haryana, Gujarat, Punjab and Tamil Nadu. This has been supplemented by Bank Group assistance to production of fertilizers and high- yielding seeds, by extending irrigation, by building grain stores and by aerial spraying with pesticides. As in other states of India., agriculture is the dominant sector in M"Jsore, absorbing about 75% of the State's working force.. As expansion has barely kept pace with the increase in population, the State has suffered from food grain deficits. Food grain production in the State has shown only a 20% increase • during the last decade -- from an annual average of 3.8 million tons in 1959/60 to 4e5 million tons in 1968/69. The most important objective of Mysore's current development plan (1969-74) is to expand foodgrain production. The project being assisted by IDA is an important element in the plan. Under the project being assisted by IDA, about 35,000 medium and long-term loans will be given to farmers for carrying out land levelling on 282,000 acres, for sinkir.g 5,000 borewells and 5,000 dugwells and coverting 6j000 existing dugwells into dug-cum-borewells and constructing 30 lift irrigation schemes. Investments in farm mechanization will include the import of about 2,000 tractors and associated implements. The IDA credit will be extended to the Government of India for a period of • 50 years, including 10 years of grace. They will be interest free, but a /more ., • • Deceni>er 23, 1971 TECHNICAL DATA PROJECT: Agriculture COUNTRY: India TOTAL COST: $70.4 tuillion IDA FINANCING: $40 .O million equivalent, 50 years, 10-year grace period, 3/4 of 1% service charge. OTHER FINANCING: $30.4 million equivalent from Indian sources including participating farmers. IMPLEMENTING ORGANIZATION: Mysore State Cooperative Land Development Bank Ltd., Mysore, India. • PROJECT DESCRIPTION: To expand the volume and range of agricultural credit to farmars for on-farm development. PROCUREMENT: Tractors, incl~ding an initial set of spares, to be procured from Bank member country suppliers having manufacturing facilities in India or having licenses to manufacture and have clearance for import of capital goods; drilling rigs and land reclamation machinery to be procured on the basis of international competitive bidding. CONSULTANTS: None ESTIMATED COMPLETION DATE: Early 1975. - 0 - • IDA P.R. No. 71/48 -- India -- agriculture . - 3 - service charge of 3/4 of 1% will be made to cover IDA's administrative costs. The Agricultur.·al Refinance Corporation (ARC), an agency established in 1963 to • provide medium and long-term finance to agricultural credit institutions, -will be the channel for IDA finance. The proceeds of the IDA credit will be relent to ARC which will repay to the Government about 70% after nine years at an interest rate of 4 3/4% and the balance after 15 years at 5 1/4% per annum. ARC will channel the funds through land deY%llopment banks and participating commercial banks to individual farmers at appropriate terms. Small farmers are to benefit from smaller down- payments and longer maturities. 'llle total cost of the project is estimated at $70.4 million. The credit will finance the foreign exchange cost, estimated at $20 million, and part of the local currency cost. The balance of the cost will be provided by ARC, participating land development banks, connnercial banks and farmers themselves. • - 0 - •