`Reforms cannot be a dogma'

Interview with Y.S. Rajasekhara Reddy, Chief Minister of Andhra Pradesh.

Congress workers from every section of society throng the Andhra Pradesh Secretariat eager to meet Chief Minister Y.S. Rajasekhara Reddy, popularly known as YSR. Having led the party from the front, he is clearly the hero of the Congress' spectacular electoral triumph. His master stroke was the 1,500 km-long padayatra that he undertook across Andhra Pradesh in May 2003, well before elections were announced. The medical doctor-turned-politician who hails from the Rayalaseema region was instrumental in focussing attention on the plight of farmers in the State. It is widely believed that the Congress campaign succeeded because it struck a chord with the mass of peasantry, which still remains mired in an unprecedented crisis, exemplified by the spate of suicides by farmers in the State.

Soon after assuming office, Rajasekhara Reddy got on with the task of implementing the electoral promises made by the Congress. His first act, soon after taking oath, was to waive the electricity dues of farmers and to provide free power to farmers in the State. Although he believes that his predecessor, N. Chandrababu Naidu, has ruined State finances, he said that his first priority is to provide support to farmers in distress. Speaking to V. Sridhar soon after attending a Cabinet sub-committee meeting to discuss the suicide by farmers, he listed the government's priorities, problems and tasks. Excerpts:

During your campaign you highlighted the extreme distress of large sections of the people. How do the issues, particularly those related to the agrarian crisis, fit into your priorities now?

Our priorities will be the following: Agriculture, rural development, irrigation, industry, power and employment. We are not against industry. Nor are we against IT [information technology] or biotechnology. Basically, it is a matter of fact that in 1993-94 agriculture contributed 26 per cent of the State's gross domestic product (GDP). And, 67 per cent of the people in the State depended on this sector for their livelihood. In 2003-04, agriculture contributed only 13 per cent of the State's GDP. This is the reason behind so many farmers' suicides in the State.

It appears that the government has to provide immediate relief to farmers. But long-term measures may also be needed to tackle the problem. What steps are you planning to prevent suicide by farmers?

On every front we are doing everything that is possible. Immediately after coming to power we kept our promise of providing free power to farmers. We also kept our promise to waive almost Rs.1,200 crores dues from farmers for power. We are planning some strong proactive measures. Most of the suicides are because of failed irrigation systems, mainly because of the non-completion of projects. In the next five years, we plan to spend Rs.36,000 crores on such projects. These will extend irrigation to 65 lakh acres. These measures will also stabilise another 20 lakh acres which are already under irrigation.

How do you plan to mobilise the funds for these projects, the power subsidies and other measures?

We will need about Rs.46,000 crores for these measures. We will definitely be able to mobilise the funds. We are already in the process of doing this. Last year, the State government spent just Rs.900 crores on major irrigation works. The average annual expenditure on the measures I mentioned works out to about Rs.9,200 crores over the next five years. Where is Rs.900 crores and where is Rs.9,200 crores? We have already started making efforts to mobilise these funds. I am sure we will be able to provide at least Rs.6,000 crores to Rs.7,000 crores this year for these measures.

We have almost finalised a loan of Rs.2,000 crores from the Life Insurance Corporation of India (LIC). Despite the serious debt burden, Andhra Pradesh has never failed in its (repayment) commitments. And, we are clear that all the money we borrow will only go to finance projects, mostly irrigation-related. This means that the impact will only be on the fiscal deficit, not the revenue deficit. We will try and correct the revenue deficit. The State has a revenue deficit of almost Rs.3,000 crores. Our objective is to substantially reduce this.

At least seven to eight districts are in the rain shadow area. These constitute almost 30 per cent of the State's area. We are planning to create extensive bio-diesel plants in these areas. This will change the ecology of the area. We are also planning extensive micro-irrigation (drip irrigation) systems in these areas. For all these we need money. We intend to make sure that every paisa that we borrow goes into activities that promote development. We intend to involve oil companies such as Indian Oil Corporation and Reliance Petroleum in these projects. We plan to bring about 40 to 50 lakh acres under such plants in the next three to four years.

In the run-up to the elections you promised to review several projects, particularly the power-related ones. How far will you go on this issue? The issue is significant because it has a bearing on how much the government will be able to save so that it can cover the deficit on account of providing free power to farmers...

Oh! Yes we will review these projects. In the next three to four weeks you will see the results.

How many power purchase agreements (PPAs) are under review?

Three PPAs are being reviewed. A review of these three will enable us to cut costs substantially. The Comptroller and Auditor-General (CAG) of India pointed out that the costs were too high. The CAG said that two PPAs signed by the government with Spectrum Power and the GVK Group were costlier by at least Rs.200 crores when compared to other power generation projects. Since I assumed office, some of these managements are ready to scale down fixed costs of the power plants, which will result in lower tariffs.

Since last May, when you went on a padayatra, and particularly during your election campaign in association with the Left, the World Bank's conditionalities figured prominently...

The Left's ideology is slightly different from ours. We are not against reforms. We are also not against the World Bank. But they have some conditionalities which are not pro-poor. Sometimes they work against farmers. We know that the agricultural sector gets attention from the government even in the U.S., Japan and Europe. But when we give some free power to farmers, there is a hue and cry. We have to tell the bank that this is not correct, that so many farmers are committing suicide. Is it not a fact that something has gone terribly wrong? We have to tell the Bank that such things have to be reviewed. Reforms cannot be a dogma.

What about industrial activity? So many units have closed down in Andhra Pradesh...

That will be a major thrust area. We will make every effort to revive small industrial units. Capital worth thousands of crores is lying idle. Industrial units in the State are not able to compete because of two major factors. One, the cost of power is too high here. Secondly, the cost of finance is high. We want to subsidise the interest cost of small units. We have promised interest rates of 3 to 5 per cent to small units. This interest rate will be related to prompt repayment by borrowers. The government will bear the burden arising out of the subsidy that it will offer these units.

In order to do many of the things that you have promised the electorate, you will need the support of the Centre.

The Centre is an immense help to us. Our leaders in Delhi regard Andhra [Pradesh] as a special case. They have said that the Andhra Pradesh farmer should be given free power.

There has been a spate of suicides by farmers in the State in recent weeks. How are you tackling the issue?

The farmer is not a beggar. But if he is in a bad shape, is it not the duty of the government to help him? Some of the deaths in recent days are not really suicides, but natural deaths. We have started helplines for farmers. In the past six years, Andhra Pradesh accounted for three out of four farmer suicides in the country. Chandrababu Naidu did not address the reasons for the distress.

Is there not an immediate need to intervene to prevent suicides by farmers? Will the government declare a moratorium on debt repayment by farmers?

In the past two weeks we have been monitoring this on an everyday basis. We have had half a dozen meetings on this subject. No, we have not decided to declare a moratorium on repayments.