EXECUTIVE SUMMARY Overview of State Focus Paper - 2006-07 State Profile The Geographical Area of the State is 308

thousand Sq. Km ( 9.37% of all India ) and the State population is 969 lakh ( 9.42% of all India ). The density of population in the State is 315 per Sq.Km. as against 325 per Sq.Km. in the country. The decennial population growth in the State from 1991 to 2001 has been 22.73% as against 21.54% in the country. Literacy rate in the State is 76.9% as against 64.8% at the National level. Urbanisation in the State is on increase and 42.43% of the State population, as per 2001 census, are in urban areas, as against 38.69% as per 1991 census. The Sex ratio in the State is 922 female per 1000 male ( 933 All India ), yet there is wide variation in Sex ratio between Urban and Rural areas at 873 and 960 female per 1000 male respectively. The per capita income in the State, as at the end 2003-04 has been Rs. 29204 as against Rs. 20989 in the country. The State is divided into nine zones on the basis of agroclimatic conditions. The rainfall in the State varies from a heavy 4000 mm in the Konkan area to barely 500 mm in Khandesh area. The varied agro-climatic conditions offers good scope for cultivation of variety of cereals, cash crops and horticultural crops. Infrastructure is one of the most important factor which influences the process of development. Composite Rural Infrastructure has got a bearing on agriculture and rural development. In terms of the Composite Rural Development Index assigned to various states, based on the status of rural infrastructure development, Maharashtra ranks 8th, while the states like Punjab, Goa, Kerala and Tamilnadu are ahead of Maharashtra. State Economy 2. During the year 2004-05, the national economy grew by 6.9% as against 8.5% during 2003-04, whereas during 2004-05, the State economy grew by 7% which is higher than the national average. Sector-wise, primary sector grew by (-)1.1%, secondary sector by 8.1% and tertiary sector by 8.5% in the state. During the year 2005-06, due to good monsoon, the state economy is expected to grow much faster and likely to achieve the projected growth rate of 8 per cent. The National Gross Domestic Product for the year 2004-05 has been estimated at Rs. 25,19,785 crore and the Gross State Domestic Product at Rs. 3,33,145 crore constitutes 13.22% of the GDP, indicating a growth of 12.7% over the previous year. Banking 3. The State has a well spread banking net work. There are 6.2 public sector bank branches per lakh population. 38 commercial banks, 8 Regional Rural Banks, one State Cooperative bank with 31 affiliated DCCBs, with 5484 rural and 1654 semi urban branches have been providing the banking facility in the state. In addition to the above, large number of urban cooperative banks also provide banking facilities to their members in urban and rural areas. Long term cooperative credit structure in the state is defunct and mostly under various stages of liquidation.

Rural Credit Planning Process (PLPs) 4. With a view to obviating the shortcomings and restrictive provisions in credit planning, under the Lead Bank Scheme, Reserve Bank of India, has modified the applicability of Service Area Concept to confine the implementation of Government Sponsored Programmes. Consequently, the banks as well as farmers have got the much needed freedom to select their client or bank branch respectively. Further, under the revised guidelines, the bank branches will prepare their credit plans for 2006-07, based on projections made in PLPs, outlays of which have been prepared taking into account the natural and human endowment, infrastructure etc., in the respective district. Aggregation of PLPs for the year 2006-07 has projected a credit flow of Rs16395 crore. However, the achievement of the credit flow projections hinges up on various issues to be addressed, including plugging of several infrastructure gaps identified in the plans. Some of the infrastructure gaps may be in the nature of commercial activities which could be developed by private sector while some others may not be commercially viable activities where the public sector alone has to develop them by making adequate resource allocation in the state budget. These issues are dealt with in detail in the chapter on sectoral analysis as well as under infrastructure. Policy Initiatives 5. Several policy initiatives have been taken during the year 2005-06 by Government of India, Government of Maharashtra, Reserve Bank of India and National Bank for Agriculture and Rural Development, for accelerating the growth in agriculture and related areas. In his address to Parliament, His Excellency the President outlined an overarching vision to build India, and called it Bharat Nirman envisaging improvement in infrastructure under irrigation, roads, water supply, housing, rural electrification and rural telecom connectivity for development of rural areas. An outlay of Rs. 30,000 crore (till 2009) is being considered of which, Rs. 4,000 crore per year (till 2009) would be routed through NABARD. The Ministry of Agriculture has prepared road maps for agricultural diversification by focusing on fruits, vegetables, flowers, dairy, poultry, fisheries, pulses and oilseeds. Efforts are being made to establish Knowledge Centres in rural areas. The State Government has initiated plans for the growth of the rural sector ranging from promotion of micro irrigation projects, development of hydro electric projects, horticulture development programmes to promotion of SHGs. In tune with the policies of the Central Government, Reserve Bank of India and NABARD have also taken series of measures for ensuring smooth flow of credit to the agriculture and rural sector through the credit institutions. Present Status of Rural Credit in the State 6. During 2004-05, GoI issued directives to banks to double their credit dispensation to the sector in three years during 2004-2007. Accordingly, credit flow target for the year 2004-05 was revised. As a result of several initiatives, credit flow during 2004-05 has shown substantial growth during 2004-05 over previous year. Agricultural Credit flow reached a level of Rs.8383 crore during 2004-05 rising from Rs.4935 crore for agriculture during 2003-04. For the year 2005-06 a target of Rs.8535 crore has been fixed and the SLBC convenor is confident of achieving the target. Despite these measures, large number of unbanked rural poor have not been able to get the banking services due to varied reasons. They continue to be in the hold of money lenders. For addressing the issues of these poor people NABARD has been pursuing the concept of SHG. During 2004-05, over 35000 SHGs have been credit linked and for the current year, NABARD has a goal to credit link 45000 SHGs. Further, large number of tenant farmers, lessee farmers and share croppers who do not have a title to land are resorting to borrowing from money lenders. NABARD with the association of Aurangabad Jalna Gramina Bank has introduced the concept of Joint Liability Groups to meet their credit needs. The initial results of the experiments are very encouraging and it is expected to provide another alternate credit delivery mechanism in the near future. The cooperative credit structure in the state has been suffering from several weaknesses. In order to

strengthen the cooperative credit structure, the State Government has shown its interest for implementation of the co-operative reforms. This is expected to strengthen short term cooperative structure and result in enhanced credit flow to agriculture. The Long term cooperative credit structure in the state has become weak due to several reasons and is undergoing the process of liquidation. There is a need to take up corrective measures to bridge the void created on account of failure of the LT Cooperative Structure. The process of consolidation of Regional Rural Banks has also been taken up. Accordingly three RRBs viz., Akola Gramina Bank, Buldhana Gramina Bank and Yavatmal Gramina Bank sponsored by Central Bank of India have been merged to form a single bank viz., Vidarbha Kshetriya Gramina Bank with headquarters at Akola. Consolidation of other RRBs in the state is under process. Sectoral Analysis 7. NABARD, for the year 2006-07, has completed the exercise of preparation of PLPs for all the 33 districts in the State, in consultation with bankers and line departments at each of the districts in the state. Credit flow projection for development of different rural development sectors has been made, keeping in view all relevant factors such as latent sectoral potentials, infrastructure support available, absorption capacity and strengths/weaknesses of rural credit institutions. PLPs have been supplied to banks for enabling them to prepare their branch credit plan for 200607 and Govt. departments as a resource document, for initiating annual budget exercise to strengthen the infrastructure gaps. The aggregate projections of PLP of all the districts reflects an estimated credit flow of Rs.16395 crore for Priority Sector consisting of agriculture sector of Rs.11135 crore, NFS at Rs.1671 crore and Other Priority Sector at Rs.3588 crore. Sub sector-wise estimates are given in Annexure A-1 separately. Sector-wise potential and important suggested measures are discussed briefly in the following paragraphs. Chart showing allocations to 6 major sectors and other sector is given below :(Rs.crore) Sr.No 1 2 3 4 5 6 7 8 Sector Crop loan Minor Irrigation Farm Mechanisation Plantation and Horticulture Animal Husbandry Storage/Market Yard Fisheries Others Grand total Potential 8029.43 718.54 660.04 522.76 616.56 161.29 80.59 5605.67 16394.88

Minor Irrigation 8. Exploitable potential under minor irrigation sector during 2006-07 are Pump sets, new wells, drip sets, sprinklers, Lift Irrigation Schemes, Pipelines etc. An additional area of 4.5 lakh ha can be brought under irrigation. The total credit requirements for these investments has been estimated Rs.718.5 crore. Certain issues like revival of cooperative LI societies, encouragement of individual LI schemes, construction of KT weirs for augmenting water availability during lean season, quick power connection to lifting devices, propagation of micro irrigation, artificial ground water recharge measures to revive failed wells or on the verge of failure, rainwater harvesting to control run off etc., are required to be addressed, for effective exploitation of potential under MI sector. Land Development and Watershed Developments. 9. Major investment identified under this sector through bankable programmes are land levelling, bunding etc., for soil and water conservation. Innovative projects like preparation of bio fertilisers, bio pesticides, vermi composting etc., can also be covered under this sector. The total credit requirement for these investments during the year 2006-07 has been estimated at Rs.154 crore. There is substantial scope for taking up On Farm Development works in the commands of completed irrigation projects and popularising vermicomposting and organic farming practices. The salinity affected lands in Sangli, Kolhapur, Satara etc., could be reclaimed, in coordination with the sugar cooperatives. The Government of Maharashtra have taken several initiatives for implementation of watershed development projects. NABARD has been supporting watershed projects under the Indo German Watershed Development programme and also under the auspices of the Watershed Development Fund. Specific credit plans for the watershed villages have been prepared by NABARD in consultation with watershed Community for facilitating the banks to finance the activities identified. Plantation and Horticulture 10. Maharashtra contributes 16.76 % of the area and 17.63 % of horticulture production at the national level. Accordingly, horticulture has been considered as a thrust area by the State Government and several initiatives for improving the sector viz., supply of planting material under Rural Employment Guarantee Scheme, establishment of commodity specific institutions, common auction centres setting up of Agri- Export Zones, amendment to APMC act, contract farming initiatives etc., have been taken up by the State Government and expected to yield results in the coming years. The total credit requirement for various on farm horticultural activities in the state has been estimated at Rs.5348 crore for the year 2006-07. Promotion of high density planting, organic cultivation, quality upgradation so as to suit the upcountry and export market, post harvest management like storage, grading, packing, agro processing for preservation and value addition, quality certification, supply of market information, contract farming arrangement particularly for medicinal plants, leasing of waste land under Govt. ownership to private sector for developing orchards / plantations etc. are some of the issues to be addressed for ensuring the growth and development of the sector. The increasing output of fruits should be taken up for processing in order to provide a reasonable return for farmers.

Forestry and Wasteland Development 11. Only 20.44% of the geographical area of the state is under forest as against required percentage of 35% for maintaining ecological balance and controlling soil erosion. Over 17% of the geographical area in the state is degraded due to several reasons. Thus, there is scope for the development of both forestry as well as development of waste land. If developed, it can support establishment of forest based industries like paper mills, ply wood, bio- diesel units etc... It is estimated that credit requirement for 2006-07 for forestry and waste land development has been estimated at Rs.38.02 crore. There is a need to develop a coherent state policy to exploit the revenue potential offered by Carbon Trading mechanism. Animal Husbandry Sector 12. Animal husbandry activities have immense scope for development in Maharashtra, in terms of its capacity to create employment opportunities, additional income generation by Small and marginal farmers. The gross value of animal husbandry products, at current prices, in the state during 2003-04 stood at Rs.1288.55 crore accounting for about 3.87% of GSDP. The state is one of the largest producer of broilers and sterile eggs. For achieving the X plan target for milk, egg, wool and meet production, there is scope for induction of capital in the sector. PLPs for the year 2006-07 projected credit requirement of Rs. 383.36 crore for dairy development, Rs.88 crore for poultry development and Rs145 crore for miscellaneous livestock activities. For sustained development of the sector, focussed attention would have to be paid on expansion of veterinary health care facilities, promotion of setting up of veterinary clinics under venture capital scheme, promotion of ACABC for veterinary purposes, incentive for private professional breeders for augmenting supply of quality animals, developing fodder cultivation in association with Forest Department, setting up of bulk milk coolers, automatic milk collection units, encouraging private sector to set up milk processing units and extension of organised market infrastructure. The recently introduced venture capital scheme implemented through NABARD would facilitate upgrading the processing technology as well quality of animals. Fisheries 13. Large area suitable for marine/ brackish water fisheries development exist in the state. Likewise, a number of water bodies are available across the state for development of inland fisheries. These potential have not been fully exploited. Further, the areas which have been brought under fish farming are not used optimally as a result of which, per hectare production has been quite low. Taking into account vast potential the PLPs for the year 2006-07 have projected a credit out lay of Rs. 81 crore. Issues concerning development of fish landing centers, jetties, fishing harbours and , construction of approach roads at landing centers have to be addressed immediately. The lease period of public water bodies has to be enhanced so that the fishermen would be able to avail bank loan for their venture. The fish seed production centers are also required to be modernized for ensuring development of this sector. Storage Godowns/ Cold Storage units/ Market Yard 14. In the liberalised economic scenario, storage facilities and market yards assume importance. Storage, grading, packing, etc., increases life of the produce on the one hand and helps farmers to take advantage of the price fluctuations on the other. With a view to providing impetus for construction of godowns and cold storage units, Government of India has been operating several credit linked capital subsidy schemes like Onion Godown Scheme, Cold Storage Scheme, Gramina Bhandar yojana etc. PLPs for the year 2006-07 have estimated a credit requirement of Rs.161 crore for storage godown and market yard sector. Additional Storage capacity of 3 lakh tonnes is required to be created in the next three years for horticulture produce, keeping in view the programmes implemented under the auspices of AEZ, National Horticulture Mission etc.

Efforts also have to made to link food and agro processing units with farmers, financing modernisation of old cold storage units etc by providing finance to the entrepreneurs. Production Credit 15. Production Credit for the year 2006-07 has been estimated at Rs.8029 crore. Although production credit forms about 70% of the total agriculture credit, there is enough scope for further expansion of credit flow to production purposes. Despite manifold expansion of borrowing members from banks, it is estimated that about 35% of the farmers are yet not covered by formal credit delivery system. The Kisan Credit Card Scheme which was intended to provide adequate hassle free credit to the farming community needs to be implemented in its true spirit. There is a need to widen the scope of KCC by including small amount of consumption credit as also the investment credit requirement for the farming operations along with the crop production credit, while arriving at the limit to be sanctioned to the farmers. Further, in a number of cases, there has been no change in the quality of credit supplied under KCC, compared to the loans provided under the traditional loaning system. Large number of tenant farmers, oral lessees, share croppers have been deprived of the credit facility from the banking system. There is a need to work out a mechanism to bring this segment of the farmers in the institutional fold adopting SHG/JLG concepts. Several DCCBs in the state which are very weak and not in a position to meet the credit demand in their respective area of operation. It is hoped that the short term cooperative credit structure will gain strength through the reform process and purvey larger credit facilities to farmers. In view of limited scope for expansion of irrigation and reliance of large tracts of land on precipitation, it is essential for the state Govt. to orient its policies and priorities to create an environment suitable to dry land farming to boost the agriculture growth, particularly oilseeds and pulses, which can save large amount of foreign exchange. Rural Non-Farm Sector 16. Rural non-farm activities encamps large number of diversified production and service activities carried out in rural areas supporting primary sector. Importance of RNFS lies in its capacity to provide employment to traditional artisans, under employed agriculturists, boost export of ethnic products. In the recent past, these RNFS activities have been decaying and artisans are abandoning the activities and migrating to urban areas in search of wage employment creating stress on urban infrastructure. PLPs for the year 2006-07 have projected estimated credit potential of Rs.1672 crores. Important issues confronting the sector required to be addressed are mapping of various rural non farm activities having scope, arrangements for supply of raw material, skill upgradation, branding and packing, market information, etc. Micro Credit 17. Financing of SHGs has been increasingly accepted as a cost-effective mechanism for banks expanding their outreach to the poor and adding quality to the loan portfolio of their branches. The strategy in adopting SHG mode is intended to create a suitable delivery mechanism for the under-served and un-served rural poor, on a sustained basis, who had been so far by-passed by the banking system, in securing various financial and non-financial services, on a regular basis. The process of SHG helps the poor to understand their strength that they can also keep their small savings in a safe manner. The Government of India has accorded national priority for SHG Bank Linkage Programme since 1999 for covering rural poor through SHGs. The Honble Union Finance Minister, in his Budget speech for 2004-05 indicated that 5.85 lakh additional SHGs may be linked during the next three years in order to provide financial services to the rural poor. For promotion, credit linking or for recovery of loans from SHGs in the rural areas, banks can avail the services of NGOs, religious organisations, farmer's clubs, Individual Rural Volunteers [IRVs] etc., which could facilitate externalisation cost effectively. In the long run, it is expected that SHGs would develop in to a micro enterprise. For facilitating the process, a Micro Finance & Entrepreneurship Development Fund (MFEDF) has been set up in NABARD with contributions

from NABARD, RBI and a select commercial banks. The fund is being utilised for providing promotional and technical support for encouraging orderly growth of micro Finance sector in the country, encouraging those engaged in mF to graduate to micro-enterprise stage, development of micro-Finance Institutions [mFIs] etc. 18. In order to ensure that maximum number of SHGs are promoted and get linked to bank credit, the following strategy may be drawn. Dissemination of the concept of SHGs among rural masses on a large scale. Thrust on promotion of quality SHGs adopting appropriate grading system Designing and funding suitable training and exposure programmes for all stakeholders. Encouraging cooperative banks to take up SHG financing. Providing promotional assistance to NGOs for promotion and nurturing of SHGs as add-on activity. Expanding the outreach of existing NGO partners and induction of new NGOs. Involvement of Farmers Clubs / Individuals in SHG promotion Capacity building of various agencies including banks, NGOs, Government and other functionaries etc., through workshops/ sensitisation programmes. Exposure visits for bankers after BLBC meetings to good SHGs 19. It is observed that there are wide variations across the regions/districts in SHG promotion and credit linkage in the State. SHG promotion and linkage is poor in Konkan region and Marathwada region. Focussed attention is required to be provided by all the banks/NGOs/Govt. agencies working in these regions/districts. A large number of SHGs promoted by NGOs, Government agencies, Farmers Clubs, and Banks themselves have not been credit linked. The banks are required to consider financing all eligible SHGs, on priority basis. A project on providing support to SHGs to take up livelihood activities for generating adequate income is envisaged in Chandrapur district by NABARD. Government departments and banks may support this initiative, so that a replicable model can be designed for its application in other districts, at a later stage. Rural Infrastructure Development Fund (RIDF) 20. RIDF has been created at NABARD for providing resource support to State Governments for hastening the process of creation of long term infrastructure supporting the rural economy. Although, in the initial years, the assistance was provided to support irrigation and rural roads projects, the scope of assistance under the Fund has been widened in the recent period in order to cover wide range of activities for the development of rural areas. Much of the infrastructures required to be created may not find adequate budget support, in view of more important issues prioritised by the State Governments. In all such cases, where the budget cannot support the infrastructure requirement, the State Government can consider borrowing from the RIDF and make the investment self liquidating as infrastructure can act as a catalyst for the process of development. The setting up of village knowledge centres proposed by the National Commission on farmers is an area of priority. The State can avail RIDF loans if necessary for the purpose. Further such investments in the ongoing irrigation projects could be unlocked by adequate funding and speeding up completion. Feedback/ Response from Farmers Apart from assessing the potential, while preparing the PLPs, an attempt has also been made in all the districts to elicit feed back from cross section of farmers their perceived requirements, support expected from the government, constraints hindering agriculture sector etc. Feed back received has been compiled and furnished in the State Focus Paper separately.