Announcement of Thirty Million Dollars Credit for Agriculture in Maharashtra, India on March 2, 1972

• INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET. N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 72/17 Subject: $30.0 million credit for March 2, 19 72 agriculture in Maharashtra, India A three-year program to expand the volume and range of agricultural credit to farners in Maharashtra State, India, will be assisted by a credit of $30.0 million from the International Development Association, an affiliate of the World Bank. It will be used to finance investment in minor irrigation and land development. About 45,000 farmers in Maharashtra will participate in this scheme • designed to expand their output of foodgrains and conunercial crops. the project, wells and lift irrigation will be provided to irrigate 247,000 acres and land development will be carried out on six major irrigation schemes Under with a command area of 432,000 acres. The Indian economy will gain by an annual increase of about 247,000 tons of foodgrains and 688,000 tons of commercial crops -- cotton seeds, groundnuts, sugarcane and bananas -- together valued at $23 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 increases in output have been obtained and foodgrain production in 1970 reached a new record of 108 million tons -- an increase of 8.5% above the level in the previous year. The Government plans to achieve an annual • rate of growth of more than 5% in agricultural output in order to stay ahead of the demand for farm products during this decade. Looking toward this goal, /more IDA P.R. No. 72/17 -- India -- agriculture - 2 - the Indian Fourth Five-Year Plan (1969~- 74) has allocated more than $1 billion • equivalent a year for agricultural, irrigation and flood control investment. To sustain the D1>mentum of growth and to encourage a large number of farmers to change from traditional to modem farm techniques, the Government is trying to expand the institutional credit available for on-fartn investments. Estimates are that credit institutions will require to finance an average agricultural investtIEnt of $400 million equivalent during the Fourth Plan period as compared with some $100 million invested in 1966/67. 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 far.u-?rs to make good use of new high-yielding seed varieties, fertilizers and irrigation works. Six previous credits totaling $186.9 million, are assisting similar credit programs in the states of Andhra Pradesh, Gujarat, Haryana, Mysore, Punjab and Tamil Nadu. This has been complemented 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. The primary objectives of· Maharashtra in its dominant agricultural sector are to contribute to India's efforts to at~ain self-sufficiency in foodgrains and to expand the production of commercial crops. Since possibilities for extending the area under cultivation are limited, the State plans to achieve higher production through improvements in land productivity involving additional irrigation and improved farm techniques. The project being assisted by IDA is an element in this strategy. /more •  IDA P.R. No. 72/17 -- India -- agriculture ' - 3 - • Under the project being assisted by IDA, 45,000 loans will be given to farmers for investments in well-drilling, earth moving and hydrologic equip- nent. The project also includes provision for consultancy services to assist in the proper exploitation of groundwater resources. 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 Agricultural 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 funds. 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 5 1/2% and • the balance after 15 years at 6% per annum. ARC will channel the funds through land developmet1t banks and participating commercial banks to individual farmers at appropriate terms. Small farmers are to benefit from smaller down payments and longer maturities. The total cost of the project is estimated at $51.9 million. The IDA credit will finance 58% of the cost of the project. The balance of the cost will be provided by ARC, participating land development banks, commercial banks and farmers themselves. The project was prepared jointly with the Food and Agriculture Organiza- tion of the United Nations under the Bank/FAQ Cooperative Program. - 0 - •  \· March 2, 19 72 • TECHNICAL DATA PROJECT: Agricultural Credit in Maharashtra COUNTRY: India TOTAL COST: $51. 9 million IDA FINANCING: $30.0 million credit, 50 yeaI~, 10 years of grace, no interest, but a service charge of 3/4 of 1%. OTHER FINANCING: Balance of the cost being provided by the Agricultural Refinance Corporation (ARC), Maharashtra State Cooperative Land Development Bank and participating commercial banks ar.,d £armers. RELENDING TERMS: Proceeds of IDA credit will be relent to ARC which will repay to the Government about 70% after nine years at an interest rate of 5 1/2% and the balance after 15 years at 6%. ARC will channel • the funds through land development banks and participating coDDDercial banks to individual farmers at appropriate terms. IMPLEMENTING ORGANIZATION: The project will be carried out tmder super- vision of ARC by the Maharashtra State Cooperative Land Development Bank, Bombay, India and participating conunercial banks. PROJECT DESCRIPTION: Minor irrigation including 300 tubewells, 175 lift irrigation schemes, dugwells and dugwell inprovements, levelling of 22,000 acres, btmding of 116,000 acres and construction of water courses and field drains on 284,000 acres and consultants services for grot.mdwater development. PROCUREMENT: For well drilling, land reclamation and hydrologic equip- ment, procurement on the basis of international competitive bidding. ESTIMATED COMPLETION DATE : End of 19 75 • - 0 - •