The Hindu Business Line : `Low public investment makes farming unprofitable'

While delivering the convocation address of the Punjab Agriculture University, the Union Finance Minister, Mr P. Chidambaram, has said that though agriculture was the biggest private sector economic activity in India, two factors, small land holdings and low public sector investments, made farming a non-remunerative activity.

He said that farm holdings were small, the average size being one hectare.

"In fact, 66 per cent of all farm holdings are one hectare or less. Furthermore, only 54 per cent of all agricultural land is assured of irrigation facilities," he added.

Low investment

Mr Chidambaram said that public investment in agriculture had been low. For example, in 1999-2004, public investment, on an average, was only Rs 8,790 crore a year.

"Since 2004, an attempt has been made to correct the situation.

Public investment increased to Rs 12,590 crore in 2004-05 and is expected to have increased further. The share of public investment in gross investment of agriculture has also increased from 18 per cent in 1999-2000 to 29 per cent in 2004-05," he said.

Likewise, the growth of credit was sluggish between 1999 and 2004 at 18.7 per cent. In June 2004, a decision was taken to double agricultural credit within three years and in 2004-05, the growth of credit to agriculture was 44 per cent and in 2005-06, it was 34 per cent. In 2006-07, the target for farm credit of Rs 1,75,000 crore is likely to be exceeded, said the Finance Minister.

He said that while denying the externalities of public investment to the farming community, the Government has expended a large amount of money in the form of subsidies.

Fertilisers, seeds, power and, in some cases, water was subsidised.

He said that the Government had also tried to compensate the farmer through procurement of food grains at prices that were believed to be reasonable and remunerative.

Mr Chidambaram said, "In my view, the time has come to reorder our priorities.

The question that I would like to put to you, and I would urge you to answer is, whether we should not reallocate more resources to public investment, especially irrigation, which has large externalities, even if that requires a scaling down of other subsidies?"