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AGRICULTURAL CREDIT: SCRATCHING THE SURFACE OF RISING NUMBERS Total agricultural credit has increased substantially since the turn of the century. The annual rate of growth that averaged 6.8 % in 1981-1991, was at 17.8 % for 2001-2011. |
- Capital to risk weighted assets ratio (CRAR) is arrived at by dividing the capital of the bank with aggregated risk weighted assets for credit risk, market risk and operational risk.
- Leverage ratio is defined by the RBI as ratio of total assets to total capital. The international definition, for example as laid out by the Bank of International Settlements, is typically the inverse.
- Return on Assets (ROA) is a profitability ratio which indicates the net profit (net income) generated on total assets. It is computed by dividing net income by average total assets.
- Non-Performing Asset: An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank.
- Restructured Asset: A restructured account is one where the bank, grants to the borrower concessions that the bank would not otherwise consider.
- The establishment of railways led to integration of markets and boosted incomes. Today the ‘lifeline of the nation’ operates over 19,000 trains carrying 23 million passengers and over 3 million tones of freight per day while employing over 13 lakh people.
- In 1990 the Chinese rail network of about 57,900 route kilometers lagged behind India’s 62,211 route kilometers. By 2010, the situation was reversed in favour of China with the country’s network expanding to over 90,000 route kilometers while India’s grew marginally to 64000 route kilometers.
- As compared to road, railways consume 75 to 90 % less energy for freight and 5 to 21 % less energy for passenger traffic and, typically, the unit cost of rail transport for freight was lower vis-à-vis road transport by about 2 per net tonne-kilometer (NTKM) and for passenger by 6 per passenger-kilometre (PKM) (in the base year 2000).
- The speed of the average freight train has remained virtually constant between 2000-01 and 2012-13 at around 24-25 km/hour. In contrast, in China, the maximum speed of freight trains was 80 km/h around 2008-09, and the maximum train speed that was around 80 – 100 km/h in 1991 was raised in stages to 160 and 200 km/h on the most popular passenger corridors by 2008 and is above 300 km/h at present.
- Take India’s largest state Uttar Pradesh. It reached its peak share of manufacturing in output at 10 % of GDP in 1996 at a per capita state domestic product of about $1200 (measured in 2005 purchasing power parity dollars). A country like Indonesia attained a manufacturing peak share of 29 % at a per capita GDP of $5800. Brazil attained its peak share of 31% at a per capita GDP of $7100.
- Presently, markets in agricultural products are regulated under the Agricultural Produce Market Committee (APMC) Act enacted by State Governments. There are about 2477 principal regulated markets based on geography (the APMCs) and 4843 sub-market yards regulated by the respective APMCs in India.
- This Act notifies agricultural commodities produced in the region such as cereals, pulses, edible oilseed, fruits and vegetables and even chicken, goat, sheep, sugar, fish etc., and provides that first sale in these commodities can be conducted only under the aegis of the APMC through the commission agents licensed by the APMCs set up under the Act.
- The typical amenities available in or around the APMCs are: auction halls, weigh bridges, godowns, shops for retailers, canteens, roads, lights, drinking water, police station, post-office, bore-wells, warehouse, farmers amenity center, tanks, Water Treatment plant, soil-testing Laboratory, toilet blocks, etc. Various taxes, fees/charges and cess levied on the trades conducted in the Mandis are also notified under the Act.
- The levies and other market charges imposed by states vary widely. Statutory levies/mandi tax, VAT etc. is a major source of market distortion.
- Even the model APMC Act (described below) treats the APMC as an arm of the State, and, the market fee, as the tax levied by the State, rather than fee charged for providing services. This is a crucial provision which acts as a major impediment to creating national common market in agricultural commodities. Removal of this provision will pave a way for creating competition and a national common market for agricultural commodities.
- Moreover, though the market fee is collected just like a tax, the revenue earned by the APMCs does not go to the State exchequer and hence does not require the approval of State legislature to utilize the funds so collected. Thus APMC operations are hidden from scrutiny.
- The scope of the Essential Commodities Act (EC Act) is much broader than the APMC Act. It empowers the central and state governments concurrently to control production, supply and distribution of certain commodities, including pricing, stock-holding and the period for which the stocks can be kept and to impose duties.
- The APMC Act on the other hand, controls only the first sale of the agricultural produce. Apart from food-stuffs which are covered under the APMC Act, the commodities covered under the EC Act generally are: drugs, fertilisers, and textiles and coal.
- Since these State Acts created fragment markets for agricultural commodities and curtailed the freedom of farmers to sell their produce other than through the commission agents and other functionaries licensed by the APMCs, the Ministry of Agriculture developed a model APMC Act, 2003 and has been pursuing the state governments for over a decade now to modify their respective Acts along the lines of the Model APMC Act, 2003.
- The Model APMC Act:- (a) provides for direct sale of farm produce to contract farming sponsors; (b) provides for setting up “Special markets” for “specified agricultural commodities” – mostly perishables; (c) permits private persons, farmers and consumers to establish new markets for agricultural produce in any area; (d) requires a single levy of market fee on the sale of notified agricultural commodities in any market area; (e) replaces licensing with registrations of market functionaries which would allow them to operate in one or more different market areas; (f) provides for the establishment of consumers’ and farmers’ markets to facilitate direct sale of agricultural produce to consumers; and (g) provides for the creation of marketing infrastructure from the revenue earned by the APMC.
- The model APMC Act provides some freedom to the farmers to sell their produce directly to the contract-sponsors or in the market set up by private individuals, consumers or producers. The model APMC Act also increases the competitiveness of the market of agricultural produce by allowing common registration of market intermediaries. Many of the States have partially adopted the provisions of model APMC Acts and amended their APMC Acts.
- Some states —— such as Karnataka —— have however adopted changes to create greater competition within state.
- In Karnataka, 51 of the 155 main market yards and 354 sub-yards have been integrated into a single licensing system.
- Rashtriya e-market Servies Ltd. (ReMS), a joint venture created by the State government and NCDEX Spot Exchange, offers automated auction and post auction facilities (weighting, invoicing, market fee collection, accounting), assaying facilities in the markets, facilitate warehouse-based sale of produce, facilitate commodity funding, price dissemination by leveraging technology.
- Though the model APMC Act bars the APMCs and commission agents from deducting the market fee/commission from the seller, the incidence of these fees/commission falls on the farmers since buyers would discount their bids to the extent of the fees/commission charged by the APMC and the Commission agents.
