Announcement of Seventy-One Million Dollars in Two Credits for Agriculture in Madhya Pradesh and Uttar Pradesh, India held on May 29, 1973

• 1 .INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET. N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 73/39 Subject: $71.0 million in two credits for May 29, 1973 agriculture in Madhya Pradesh and Uttar Pradesh, India The Indian States of Madhya Pradesh and Uttar Pradesh will expand the volt.lllle and range of agricultural credit to farmers with the help of two credits totaling $71.0 million from the International Development Association (IDA), an affiliate of the World BAnk. Both projects, when completed in 19 77, will bring major benefits to the Indian economy through higher production of foodgrains and other crops and in- creased employment opportunities i:.1 the rural sector. The value of additional agricultural production resulting from the projects will ammmt to $68.0 million a year at current prices. The livelihood of about 114,000 farmers, including a • majority of small farmers, and their families will be improved • In recent years, India has given high priority to the introduction of the new agricultural technology through increasing the availability of improved inputs and by providinb economic incentives to farmers. The recent severe drought under- lines dramatically India's need to exploit as fully and as quickly as possible its irrigation potential in order to insure against future monsoon failures and to achieve the marketable surpluses which only intensified cropping based on the irrigation of farm land can provide. An increased supply of credit for farm investment is essential to continued growth of agricultural production. Estimates are that credit institutions in India will require about $2,000 million equivalent for long-term agricultural lending during the country's Fourth Plan (1969/70 - 1973/74) or an annual average of $400 million. Long-tenn credit supply, however, has been lower -- around $240 million in 1970/71. Today's IDA credits are part of the Bank Group's con- tinuing efforts to support India in expanding institutional credit programs to er.aole a larger number of farmers to make good use of the new technology. Earlier IDA credits totaling $216.9 million are assisting the expansion of rural credit in • seven other Indian States -- Andhra Pradesh, Gujarat, Haryana, Maharashtra, Mysore, Ptmj ab and Tamil Nadu. /more IDA P.R. No. 73/39 -- India -- agriculture - 2 - '' Today's IDA credits will finance in each State a three-year P..rogra."n of medium and long-tenn credits to farmers for on-farm investments/ case of the previous seven credits, the Agricultural Refinance Corpora,tion 'of India (i\RC), will be the channel £or IDA funds. As in the ARC was establishe1d i.n 1963 to • provide medium and long-term fi.nance to agricultural credit instit;utions i.n India, The total cost of the two projects is e.stimated at the equiva.].ent .:.of $D2. 8 million. The IDA credits will finance more. tha.11 half of the cos.ts. of the projects, including the foreign exchange coats. ARC will provi,.:qe 33% of th~ costs. Th2 balance is bein6 proviC.'2d by participat:i.ng land development banks, commercial banks and the farmers themselves~ Both IDA credits to t!1e Government of India ere for a te:rm ot' 50 years, incl.udin;; lQ ye.ars of ~~~ac~. They i,;,;i:.1 be in~e::::r2st fr-ee, but a serv~·ce charge of 3/4 of 1;~ tdll bE! made to e:.:iver IDA 1 s administra.tivi::~ expenses. The Government will re-lend the p:-ocec~s vf ttw cr~J.it.s to ARC, which will repay about 50% at the 2nd •Jf the nine years at aZ! interest rate of s\;{ fu"ld the balance at· the ~nd o.t 15 years at in:eri2st of 5 J/!.:,% per annum. ARC will channel tbe funds • 3n tb.rcugh the Land 0..2•vt:.lopmt.rn.t .3d.nks of :-iadhya Pradesh and Uttar Pradesh and par- ;.:ici~~<}t~ qg comnercial c.~nks ::c individ'..Lz.1 tor;::-owers at appropriate terms. ·Small :'.",.:..._-:~2rs ace to ber:efi t fr,;::ir·; smaL:.e:: down :)s:n.11eri.ts a'.:'.1.d lo;:ige.r maturities. !.l ,wl:i.i10od to .s:bouc 85"'. 0: tt". .2: State f s population of 42 million ~n.d •acco.un:t~. for n~r~ than half the StEtg's income. Like othar States in India, Madhya Pradesh 1s givinr priority to i~.r.:ri:::ri::d~.1g agric:.2ltural ri:rodt:ction .:md rural employment. Thl:' IDA credit of :)JJ. 1 ) mill.ion will support a th:ree·-year lending 'program of th2 ~ \adhya Pradesh 3tate Gcope:ra.t i ve Lar.d Dc'lelopment Bank and q~ali fied commercial banks. The or:.- far::: i1'!vestments incLi.de construction of :about 25,000 I new (1Ugwells, improver.-,ent -f l.5~000 existi.ng dug.wells, installati,on,of 29,000 electric and 12,000 diesel rJ0~:er-ecl pu.T.psets and about 2,700 Persian ·whee.ls (a traditional Hft device). .Bc::cause the terrai:1 in the project ari=a i~ 'not uni- formly level, land developmeEt cf some 75~000 c:cres will also be undert.aken. The project will h.:::.;re substantial ecor.cnic and social benefits . . 11:· will raise .:1gr-icult ural yields and cropping intensity~ as well as increase on·-farm employment opportunities in onr.;; of the economically less developed areas in India. proved. The .livelih·Jod of a.bout 4L; ,000 farmers and their families will· be. im- ~\dditional agricultural production resulting from the project will amount to S22.0 million. a yPar at current pri.ces. • /more  IDA P.R. No. 73/39 -- India -- agriculture - 3 - • The total cost of the project is estimated at $60.J million. The IDA credit will meet 55% of the costs :lncluding the foreign exchange costs equivalent to $2.9 million. $38.0 million credit for agriculture in Uttar Pradesh With a population of 90 million, Uttar Pradesh is the largest State in population in India. Higher·population pressure has resulted in the predominance of small farms and poor farmers. Compared with other States, Uttar Pradesh is relatively less developed and heavily dependent on the agricultural sector for the income and employment of its population. To accelerate the pace of agricultural development, principally by expanding foodgrain production and providing employment for a growing labor force, the State has given priority to the introduction of the new agricultural technology. The IDA credit of $38.0 million will finance a three-year lending program of the Uttar Pradesh State Cooperative Land Development Bank. Investments to be financed under the project will be the construction cf 10,000 mascmry or dug- wells equipped with Persian wheels, 20,000 shallow tubeMells and 20,000 medim • depth tubewells energized by electric or diesel pumpsets. The project, at full development, will contribute to an increase in agricultural production valuedat $46.0 million a year. In addition, the livelihood of about 70,000 farmers and their fanilies will be improved. The total cost of the project is estimated at $72.5 million. The IDA credit will cover about 52% of. the costs. - 0 - •