ANTECEDENTES

making possible one or more of the following changes, a rise in the

1 2

proportion of irrigated area, an increase in the intensity of cropping and a change in cropping pattern and/or an increase in yield per acre.

As a consideration of all these factors will make the analysis very com­

plicated, not to speak of the demands made on data, only primary benefits in terms of the value of additional yield made possible by controlled irrigation is taken into account. It is here that our assumption of the hypothetical owner comes into its own. We assume that the actual present yields on farms is not the maximum obtainable owing to the unsuitability of the existing system of irrigation for the controlled application of water. The maximum obtainable yield is taken to be that which is secured on experimental farms. These yields are obtained, after all, by those very water management practices which tubewells and electrified wells make possible. As a result of investment in tubewells and electrified wells, yield per acre is assumed to increase by 100 per cent on farms irrespective of sise.

1 This possibility can be discounted right away because all farms in our sample are fully irrigated, see Appendix Tables VII and IX for details.

2 By intensity of cropping is meant the ratio of gross cropped area to net cultivated are multiplied by one hundred, Directorate of Economies

& Statistics, Ministry of Food & Agriculture, Community Development &

Cooperation, Construction of Agricultural Index Numbers in India, (Report of the Technical Committee), New Delhi, 1967, p 16.

101^. Gross income in the post-tubewell/well period has been obtained

1

by multiplying the estimated yield on farms by the weighted average of harvest prices by size class of farms. Estimates of gross income before and after installing tubewells/wells are given in Table II* 9» Columns 2

& 5 respectively. It is assumed that gross incomes from investment in both tubewells and wells are the same.

Project costs including costs of maintenance have been cal­

culated in relation to the lending policy of Land Mortgage Banks in Andhra Pradesh. 2 The Land Mortgage Banks in West Godavary give loans for con­

structing tubewells upto 50 per cent of the value of mortgaged land. This policy along with the duration of the repayment period has a bearing upon the eligibility of farms of different sizes to acquire loans. The nature of the lending policy of Land Mortgage Banks Is spelt out in order to show how small farmers are automatically disqualified from acquiring loans.

Land is generally valued according to two prices in Andhra Pradesh. The open market price and that offered by the Land Mortgage Bank3.

The market price is usually based on the cultivator's valuation of land and is normally based on a three year sales statistics of land transactions.

It is higher than the price offered by the Land Mortgage Banks.3

1 This monstrous expression refers to the situation on the farms after the installation of tubewells or wells.

2 The method of calculating project costs has already been discussed, refer p 98 above.

5 The price offered by Land Mortgage Banks like the one offered by the

Government is only a quarter of the market price, Studies in Agricultural Credit, op.cit., p 166.

TableII.9. let IncomeBeforeand AfterInstallingTubewells/Wells inWestGodavary,Kharif& Rabi,1968-69

Columns2 &•3, AppendixTable711.Column% AppendixTableV.All othercomputationsare basedon Columns2 & 5*

1f>3

The price used for calculating the value of land for our purposes is that offered by the Elloi*e Cooperative Land Mortgage Bank which is Rs 5000 per

1 2 3

acre of irrigated land. The valuation of owned land at this price according to the different farm sizes is given in Table 11*10,

Table 11,10 Valuation of Land, West Godavary, Kharif & Rabi, 1968/69

Size Group Average Size Value of Land at

of Farms of Farm Rs 3000 per acre

( acres )

Kharif Rabi Kharif Rabi

1 2 _{3 4 5}

0.01 - 5.00 _3.34 2.56 10020,00 7740.00

5.01 - 10.00 6.87 6.98 20610.00 20940.00

10.01 - 15.00 12.09 13.04 36270.00 39120.00

15.01 - 20,00 _17*33 16.10 51990.00 48300,00

20.01 & Above 39.14 24,10 II742O.OO 72300.00

All Sizes 19.29 7.48 57870.OO 22440.00

Sources Frankel, P.P. India's Green Revolution - Economic Gains and Political Costs, 0P» eft., p 59* Appendix Table V.

Note ^% Price Of land per acre refers to the period 1965-66 to 1968-69.

1 The price is based on a seven year sales statistics of land transactions, Frankel, op,cit,, p 59,

2 The whole argument is based on the assumption that the farmers are in a position to mortgage their land. Y/hile this may be true of large farms it is unlikely to be so in the case of small farms. Lata on the extent of land mortgaged shows that if anything the latter are mortgaged to the hilt, Studies in Agricultural Credit, op.cit,, p 166*

3 The price offered by the Land Mortgage Banks is very much lower than the market price of land being only a quarter of the latter. The Reserve Bank of India notes that the eligibility of farms for loans from LMBs can be increased considerably by a more realistic valuation of land, ibid., p 166.

104

K s tubewells cost Rs 10,000 and Land Mortgage Banks give loans amounting to only 50 per cent of the value of mortgaged land, Table- 11.10 shows that farms below 10 acres cannot invest, in tubewells. We can find corroboration of this by looking at the actual lending policies of Land Mortgage Banks in Andhra Pradesh* In the district of Ellore in the state

60 per Gent of the loans went to farmers .with to 15 acres bf land.'*' The Programme Evaluation Organisation also obsei'ved a similar phenomenon.

It noted that 43 per cent of farmers owning tubewells had land above 8 acres in size and such farms also accounted for 61 per cent of the ownership of pumpsets. 2 Another significant fact observed by the Programme Evaluation Commission was that 71 per cent of total expenditure on tubewells was financed by own funds. Taking expenditure on minor irrigation as a whole, 60 per cent was financed by own funds, ^{J O} per cent by cooperative and departmental agencies and the balance by private sources. ■ '

In West Godavary, especially in the prosperous Deltaic regions, the purchase of tubewells was financed by own funds on 10-acre farms.3

This brief digression on the consequences of security-based lending by Land Mortgage Banks will enable us to throw into greater relief the alternative basis for medium term lending namely, production potential on farms. Our aim is to show that increased gross income on farms after investment in tubewells/wells is sufficient to redeem annual capital charges and increased cultivation expenses. What is more, loans made on the basis of production potential will give all sizes of farms a comparable opportunity in having access to water supplies. Throughout, the relative merits of tube­

wells and wells will be borne in mind.

1 Frankel, India's Green Revolution - Economic Gains and Political Costs.

op.cit., pp 49-5°*

2 Government of India, Planning Commission, Report on the Evaluation of

Higher Yielding Varieties Programme, Kharif. 1968, p 59* Although detailed figures are given on the expenditure on tubewells and pumpsets according to size class of farms, they have to be used with great caution on account of several arithmetical errors.

3 Frankel, India's Green Revolution and Economic Gains and Political Costs, op.cit., p 59*

105 On page 102 we gave estimates of gross income after the

installation of tubewells/wells on our sample farms#'*' The costs of in­

vestment can be divided into current costs and capital costs. The latter is the cost of investment itself and the rate of interest. To determine the economic feasibility of investment in wells and tubewells, capital costs have to be converted into an annual charge. For calculating annual capital charges we take the price of a tubewell and a well to be Rs 10,000 and Rs 4*000 respectively. The rate of interest and the repayment period for loans not being available for West Godavary, those for the district in Krishna in Andhra Pradesh have been used. The rates of interest used are

1 2

&§■ per cent for loans for tubewells and 9 per cent for wells. The re­

payment period for these two types of loans are 10 years and 13 years respectively. 3 The equated annual capital charge for a tubewell works out to be Rs 1583.43 and that for a well is Rs 2,270. These charges are taken to be the same for both seasons.

1 We ignore, here, receipts from the sale of water.

2 Nothing is lost by this approximation as institutional credit is made available to agriculturists at rates ranging from 6-g- per cent to 12 per cent per annum, Kanvinde,D.J. 'Rural Markets for Bank Deposits - Main Features,' State Bank of India Monthly Review, VIII, 12, Dec*

1969? PP 409"422. The rates of interest on medium term loans given to individuals by Land Mortgage Banks is not recorded in the

Statistical Statements Relating to the Cooperative Movement in India, 1970-71, Part I, Credit Societies (Reserve Bank of India), see p 160,

3 Studies in Agricultural Credit, op.cit., p 193, see also, Varadachary,T.R.V.

'State Bank Assists Green Revolution,’ State Bank of India Monthly Review, VIII, 3, March 1969, P 94*

1.06