REVENUE REFORMS COMMISSION

Document Sample
REVENUE REFORMS COMMISSION Powered By Docstoc
					   GOVERNMENT OF KARNATAKA
            Finance Department




REVENUE REFORMS COMMISSION
            FINAL REPORT




          # 371, 8th Main, 2nd Floor,
     Sadashivanagar, Bangalore 560 080
     Tel 080-23617634, Fax 080-23619028
            E-Mail – ctrc@kar.nic.in
           Web – nitpu3.kar.nic.in/rrc/

                February- 2004
REVENUE REFORMS COMMISSION
            FINAL REPORT




          # 371, 8th Main, 2nd Floor,
     Sadashivanagar, Bangalore 560 080
     Tel 080-23617634, Fax 080-23619028
            E-Mail – ctrc@kar.nic.in
           Web – nitpu3.kar.nic.in/rrc/

                February- 2004
          Staff of the Revenue Reforms Commission
                          Bangalore

     • Sri. Ahmed Hasan, the Revenue Reforms Commission
Chairman and Members of OSD to Chairman
                         Bangalore
     • Sri. H. Seshadri, Special Officer (Irrigation)

     • Sri. M. Muni Reddy, CCF
    Name & Designation
     • Sri. M. Shivanna, Accounts Superintendent

    • • Sri. M. VeerappaRao, P.A. to Chairman
         Sri. C.A. Vittal Moily
        Chairman
      • Sri. J.S. Girisha , P.A. to Chairman
    • • Dr. R.G. Nadadur
         Sri. Gregory Robert
        Member Secretary
      • Smt. T.R. Bharathi
    • Dr. M.Govinda Rao
      • Member
         Sri. Dinesh K Chitrapur

    • • Dr. R.V.Shankar Reddy
         Sri. B. Dadibhavi
        Member
      • Sri. M. Manjunath
    • • Dr. B.S. Shanthakumar
         Sri. D. Sreekantaradhya
        Member
      • Sri. M. Nagaraju
    • Dr. K.A. Kushalapa
      • Member Basavalingappa
         Sri. G.

     • Sri. N. Jayachandra Devadiga
    • Sri. K. Nazeer Hussain
     • Member Ananda
        Sri. H.
    • • Sri. B.C.Srinivasa
         Sri. N. Angadi
        Member
Chairman and Members of the Revenue Reforms Commission
                         Bangalore


    • Sri. M. Veerappa Moily
      Chairman

      Members :

    • Dr. M. Govinda Rao

    • Dr. R.V. Dadibhavi

    • Dr. B.S. Sreekantaradhya

    • Dr. K.A. Kushalapa

    • Sri. K. Nazeer Hussain

    • Sri. B.C. Angadi

    • Smt. Sobha Nambisan
      Member Secretary
                   CONTENTS



Sl. No.             Title                   Page Nos.


   1.     Preface by the Chairman              i   viii

   2.     Minor Irrigation                     3 - 51

   3.     Labour and Employment               55 - 90

   4.     Crop Husbandry                      93 - 116

   5.     Sericulture and Silk Filatures     119 – 137

   6.     Cooperative Audit                  141 - 152

   7.     Summary of Recommendations         155 - 168

   8.     Acknowledgements and References    171 - 173
                                        PREFACE


       Sri. S.M. Krishna government constituted the Tax Reforms Commission and
subsequently the Revenue Reforms Commission, under my Chairmanship in the year
2000 and 2002 respectively. The recommendations of Value Added Tax and reforms
in State Excise Duty, Motor Vehicle Tax, Stamps and Registrations have set a trend
not only in Karnataka, but also all over the country. Many other States have also
started implementing the recommendations of the said Commission. The pro-reformer
Chief Minister Sri. S.M. Krishna implemented 80 percent of the recommendations
and consequently the revenue in all the above sectors augmented by leaps and bounds.
The Report of Revenue Reforms Commission was also submitted to the State
government during November 2003 recommending the reforms in Irrigation, Health,
Education and Forest departments.


       The economic reforms still have a large unfinished agenda in the country. The
fiscal adjustment is far from complete. The physical infrastructure sector urgently
needs reforms, both in the management and tariff structures, which would enable us to
raise more resources for development of infrastructure. This in turn would enable both
the private and public sector to expand operations. There is a tremendous backlog in
education and health. We must ensure that development is not promoted on the backs
of the poorest people. We must put in place adequate social safety nets to ensure that
too much of a burden is not imposed on the weaker sections as we go along. And
finally, we should create an environment, which encourages sustainable growth and
poverty eradication.


       In 1992, the US Internal Revenue Service (IRS) formulated the Business
Vision Plan. The plan set forth how the US tax administration would operate in the
future and analyzed the changes, which would be needed in existing operations to
achieve its future goals. Gap, defined previously, is the difference between the taxes
actually paid and the taxes which should be paid according to the existing laws and
statutes includes taxes not paid due to tax evasion, tax arrears (taxes declared but not
paid), the shortfall in taxes due to tax payer's misunderstanding of the tax laws and
any other form of noncompliance.



                                           i
       The Government of Karnataka on 18th April 2000 notified the formation of
Tax Reforms Commission with me as its Chairman and subsequently appointed six
members and a Member Secretary to the Commission. The Commission undertook
an indepth analysis and submitted valuable recommendations to the government,
many of which were accepted. The Commission was therefore faced with a situation
of inadequate tax effort coupled with high tax rates.         It was realized by the
Commission that high tax rates contribute to high evasion. It was therefore felt that
radical reform ranging from change in tax structure, tax rates to improvement in tax
administration was the need of the hour.


       It was found that the sales tax system in the State was beset with multiple
objectives, among which rate differentiation was found to be done even for many non-
economic reasons including social and religious etc. In addition tax competition in the
shape of low taxes prevailing in Pondicherry and to a lesser extent in Goa, provided
for diversion of trade and reduction of taxes. Further multiple tax rates including five
general tax rates and another six special tax rates on selected items of consumption
and wide ranging exemptions not only for different products but also for different
uses reduced transparency and created difficulty in administration. Multiple levies in
addition to sales tax, levy of turnover tax, entry tax and infrastructure cess created
further difficulties in the matter of administration and assessment, while the consumer
gets loaded with distorted prices.


       Lack of information system also has contributed to improper assessment. It
was felt that there is need for proper information system to undertake assessment in
such a complicated tax frame. Databases of tax payers are required to be created in
order to increase transparency and avoid evasion. To begin with at least taxpayers
with more than Rs. 1 crore turnover could be kept under watch by computerized
systems.




                                           ii
The following principles were envisaged by the Commission:

   i.        A simple tax system, which should have only a few tax rates and very few
             exemptions, should be envisaged.
   ii.       Low marginal tax rate to minimize resource distortions and reduce
             incentives for evasion.
   iii.      To reduce the complexity therefore, the levy of entry tax in addition to
             sales tax, turnover tax and infrastructure cess required a rethinking since
             the combination of the three taxes and cess results in an infinite number of
             tax rates leading to improper assessment of tax. These should be
             rationalized by having a single tax system instead of several.
   iv.       In order to avoid multiplicity of rates the State government should improve
             revenue productivity and make a transition to a more rational system
             keeping in view the floor rates decided in the State Finance Ministers
             Committee.
   v.        It is important for Karnataka to adopt VAT, since all distortions in the tax
             including the cascading effects would be done away with. Further it was
             generally accepted that there should be a consumption type of VAT which
             allows input tax credit for both raw material and capital goods and that it
             should be on the destination based principle. The recommendations gave
             state's own road map for the introduction of VAT and the preparations to
             be made for a sound inter state VAT to be introduced. Further the ideas on
             the introduction of VAT on services along with VAT on goods have also
             been envisaged in the recommendations.

          Many of the recommendations were accepted and revenue receipts have
started increasing as can be seen from the following:-

          2002-03 April 2002 to October 2002                  : Rs.3500.00 crore
          2003-04 April 2003 to October 2003                  : Rs.4200.00 crore


          According to the present indicators, the excise revenue is likely to shoot up
19 percent. Karnataka which ended up with a revenue of Rs. 890 crore from excise
revenue as on 31st March 2000 is likely to reach the peak of Rs.2,300 crore by the end
of March 2004.

                                            iii
       During 2002-03, the Revenue from stamps and registration between April
2002 to October 2002 were Rs.662.68 crore and during 2003-04 from April 2003 to
October 2003 these were Rs.706.41 Crore, an increase of 7 percent, that too after
reducing the stamp duty for conveyance of immovable property, etc. This should be
considered a positive development since in 1998-99 compared to 1997-98 there was
about –10 percent growth. Further as a result of e-governance procedures
recommended, about 155 sub-registrars offices have been computerized and the
general public has been benefited by the transparency of the new system and also
documents of registration are being released within a day or two instead of a period of
couple of months, which was required earlier due to manual method of registration.


       These have largely been accepted by the government, as a result of which
increase in revenues has taken place as given here under:-


       Revenues from Motor Vehicles Tax
       From April 2002 to October 2002              :        Rs.373 Crore
       April 2003 - October 2003                    :        Rs.435.50 Crore


       State’s own Tax Revenue Impact will be as follows:


        Year                         Annual revenue
       2000-01                       Rs 9042.68 crore
       2005-06                (a)    Rs.18989.63 crore at 2000-01 price level
                              (b)    Rs. 25446.10 crore at 2005-06 price level


       Thus the annual state’s own revenue after 5 years will be higher by 210
percent at the price level of the base year 2000-01 and 281 percent at price level of
2005-06 if all the recommendations are implemented.




                                          iv
Revenue Reforms Commission


       After the final report of the Tax Reforms Commission was submitted to the
government, the government again referred non-tax issues also for study to the
Commission and the name of the Commission was changed as Revenue Reforms
Commission. I continued to be the Chairman along with six other Members and
Member-Secretary of the Tax Reforms Commission. Among the earlier set of six
members of the Tax Reforms Commission, two members were changed in order to
meet the requirement of non-tax subjects like irrigation and forest. However, it hardly
needs to be mentioned that the procedures of the work of this Commission were as
effective as they were of the earlier Commission, since the same guiding spirit of the
Chairman steered the work of this Commission. Broadly the Commission considered
and recommended regarding :-


   a. the manner in which quality of services could be improved so that service
       charges may be willingly paid and
   b. the scope for enhancement of revenues from certain sectors


       The basic philosophy behind the recommendations has been to ensure that in
these sectors arrangements are made by government to provide effective/efficient
services either through government or the private sector, which will naturally tend to
increase revenues.


       Recommendations regarding participatory approach to development as well as
effective implementation of the functions of various          departments      through
e-governance methods were made. An estimate is also made of expected revenue
increases from the recommendations in the four major departments. It was felt that the
present revenue Rs.214.66 crore in 2001-02 will increase to 1800 crore if the
recommendations are implemented i.e., an increase of 800 percent at a very
conservative estimate. This estimate split sectorwise will be as under:




                                           v
Statement of Expected Revenue Increases on implementation of the Revenue Reforms
Commission’s Recommendations
                                                   Rupees in Crore
                 Subject           2001 – 02        Expected
                                                 (Approximately)
             Education              31.77 Gross             50.00
                                    25.03 Net
             Health                 59.15 Gross            150.00
                                      50.98 Net
             Forest                      100.00          1500.00
             Irrigation                   23.74            100.00
                                          20.56
                                    (Major Irri)
             Total Revenue               214.66          1800.00

       Present State Revenue                   : 11 percent
       Future State Revenue                    : 25 percent
       Present State GDP                       : 2 percent
       Future State GDP                        : 5 percent


       The discipline of economics is located on the edge of history. It may not be
possible to keep its integrity if it has to come to terms every time with the political
complexes of those in power. We always find wealth, employment and resources in
the country, but they keep hidden in the well entrenched distorted administrative set
up. Our economic life is often all too tidy and messy. Common sense does not
always lead to correct answer to development economics. A strategy that sacrifices
economic growth or consumption in order to create more jobs requires faster, not
slower growth. Faster development will trigger off only when structural reforms take
off.


       The latest evidence comes from the World Bank’s Development Research
Group. An empirical study of eighty countries over forty years, entitled “Growth is
good for the poor”, shows that the income of the poor rises one –for- one with overall
growth-that is, the income of the poorest of the population rises at the same time and
at the same rate as everyone else’s. Thus, simple economic growth does more to
alleviate poverty than all the subsidies and poverty programs.




                                          vi
        The Commission has dealt with departments of Minor Irrigation, Labour and
Employment, Crop husbandry, Sericulture and Silk Filature and Co-operative Audit,
in this final report.


        The Members of the Commission including Member Secretary, who are
highly eminent and knowledgeable, made this Report monumental, rich and
resourceful. We acknowledge the willing co-operation of Sri B.K. Das, Additional
Chief Secretary and Principal Secretary, Finance Department in rendering this Report.
Former Member Secretary Dr. R.G. Nadadur and the present Member Secretary
Ms. Sobha Nambisan have put in their administrative and academic skill of
excellence. The Secretaries of Administrative Departments and heads of departments
of Minor Irrigation, Labour and Employment, Crop husbandry, Sericulture and Silk
Filature and Co-operative Audit extended their willing hand of co-operation to the
ever searching questions.


        I should also thank my personal staff and the personnel of the Commission for
their support.


Date : 26th February 2004
Place : Bangalore                                          M Veerappa Moily




                                         vii
           REVENUE REFORMS COMMISSION



CHAIRMAN
            Sri M. Veerappa Moily


MEMBERS


                       Dr. M. Govinda Rao
                       Sri B.C. Angadi
                       Sri K. Nazeer Hussain
                       Dr. K.A. Kushalapa
                       Dr. B.S. Sreekantaradhya
                       Dr. R.V. Dadibhavi


MEMBER – SECRETARY


             Dr. (Smt.) Renuka Viswanathan, IAS
                     from January 16, 2002 to December 13, 2002
             Sri L.V. Nagarajan, IAS
                     from January 29, 2003 to April 16, 2003
                      Dr. R.G. Nadadur, IAS
                     from April 16, 2003 to December 8, 2003
             Smt. Sobha Nambisan IAS
                     from December 8, 2003 to date




                               viii
   CHAPTER I
MINOR IRRIGATION
                                    CHAPTER 1

                       MINOR IRRIGATION SECTOR


Definition of minor irrigation


1.1    Minor irrigation projects include tanks, anicuts, bandharas, barrages, pickups,
       springs, feeders, voddus, vented dams, salt water exclusion dams and lift
       irrigation projects.


1.2    Prior to 1970, irrigation projects costing up to Rs. 25 lakhs in the plains and up
       to Rs. 30 lakhs in hilly regions were classified as minor irrigation projects.
       After 1970, irrigation projects are classified on the basis of the size of the
       ayacut. Projects having ayacuts of 2000 hectares and less are classified as
       minor irrigation projects.


       According to G.O. no. ID 2 IFY 87 of 3/8/92, minor irrigation projects
       irrigating areas less than 4 hectares have been placed under the management of
       taluk panchayats and those irrigating between 4 hectares and 40 hectares are
       managed by zilla panchayats. Those irrigating between 40 hectares and 2000
       hectares are under the jurisdiction of the Minor Irrigation department, in the
       State sector.


1.3    The net culturable area of Karnataka is 138.92 lakh hectares and the net sown
       area is 104.82 lakh hectares, according to the compilation of the department of
       Economics & Statistics. Nearly 75 percent of the State’s population lives in
       the rural areas and is mainly dependent on agriculture. Rain-fed agriculture is
       a gamble, as the rainfall of the South-West monsoon is very scanty in most
       parts of the State.    Three-fourths of the State’s geographical area lies in the
       rain shadow of the South-West monsoon, to the east of the Sahyadri mountain
       ranges, with rainfall as low as 38 cm., in the eastern and northern parts of the
       State.



                                            3
1.4    The rainfall is also erratic, with the coefficient of variability of rainfall being
       more than 30 percent in most parts of the State. According to the Irrigation
       Commission 1972, amongst all the Indian States, the largest extent of the
       drought-prone area of the country is situated in Karnataka.       The situation is
       even worse than that of Rajasthan.      The drought-affected culturable area in
       Karnataka is 82 lakh hectares, which constitutes 60 percent of the entire
       culturable area of the State.


                                        Table I
            Table showing Statewise percentage of drought prone areas
                                                                      in hectares
      Sl.         State           Geographical          Drought            % of
      No.                            Area              Prone Area        Drought
                                                                        Prone area

    1      Andhra Pradesh            27504500            12511303              45.49
    2      Bihar                     17387700             4338450              24.95
    3      Gujarat                   19602400            12123890              61.85
    4      Haryana                    4421200             1658785              37.52
    5      Jammu & Kashmir           22223600             1599930               7.20
    6      Karnataka                 19049836            15216333              79.87
    7      Madhya Pradesh            44344600             8721952              19.67
    8      Maharashtra               30771300            12376705              40.22
    9      Orissa                    15570700             2286241              14.68
    10     Rajasthan                 34223900            21895045              63.98
    11     Tamil Nadu                13005800             8409114              64.66
    12     Uttar Pradesh             29441100             4303310              14.62
    13     West Bengal                8875200             2672080              30.11
Source: Ministry of Water Resources, GOI, at website:
wrmin.nic.in/development/drought.htm

1.5    In this precarious scenario, the importance of providing irrigation facilities to
       as large an area as possible is indisputable.


1.6    The net irrigated area to net sown area in Karnataka for 1996-97 (according to
       the land use statistics of the Union Ministry of Agriculture, as quoted in the
       Annual Report of the Union Ministry of Water Resources for 2000-2001) is
       only 21.91 percent. This is the lowest for all major States except Maharashtra
       (which has a figure of only 14.36 percent). Even Rajasthan has a higher figure
       of 33.28 percent. More recent figures furnished by the Chief Engineer (Minor


                                           4
          Irrigation-South) for 1999-2000, based on data provided by the Directorate of
          Economics and Statistics, puts the percentage of net irrigated area to net sown
          area in the State at 24.8 percent.


1.7       In view of the modest water resources available to the State and the very
          extensive hard core drought affected culturable area of 82 lakh hectares,
          Karnataka has to spread its water resources thinly to provide the widest
          possible coverage of irrigation benefits. Thus, most of the irrigation projects
          of Karnataka provide protective irrigation, mostly of a single light irrigated
          crop.


1.8       There are seven river systems in Karnataka. These are Krishna, Cauvery,
          Godavari, North Pennar, South Pennar, Palar and the west flowing rivers. The
          ultimate irrigation potential in the State, from all sources (surface and ground
          water), is about 65 lakh hectares, of which the share of minor irrigation is
          26 lakh hectares [13 lakh hectares from surface irrigation and 13 lakh hectares
          from ground water resources].


Creation of irrigation potential

          The following table indicates the basin wise details of the ultimate irrigation
potential and the potential created up to 1/4/2001 under minor irrigation from surface
waters.
                                         TABLE-II
                                                                      in hectares
                  River basin        Ultimate           Potential       Balance
                                     irrigation       created up to   potential to
                                     potential          1/4/2001       be created
            Krishna :
            Under Scheme ‘A’         5,10,908         4,91,559         19,349
            Under Scheme ‘B’         2,96,800                0       2,96,800
             Total                   8,07,708         4,91,559       3,16,149
            Cauvery                  3,83,000         3,51,265         31,735
            Godavari                   26,350           23,125          3,225
            Other basins               79,742           69,000         10,742
            Total                   12,96,800        9,34,949*       3,61,851
          (*) This figure has been revised as 8,40,753 hectares in the Census on Minor
          Irrigation, 2000-2001. Corresponding basinwise figures have not been made
          available to the Commission.


                                                  5
1.9      According to the Minor Irrigation Census 2000-2001, a total irrigation
         potential of about 8.41 lakh hectares has been created under minor irrigation
         using surface waters. An additional potential of 9.10 lakh hectares has been
         created from ground water sources, bringing the total creation of irrigation
         potential under minor irrigation to 17.51 lakh hectares, as against the ultimate
         potential of 26 lakh hectares from surface and ground water sources.


Investment on minor irrigation


1.10     The total investment, up to end of March 2001, on minor irrigation using
         surface water, is Rs. 1013.41 crores. The following table gives the cumulative
         Planwise investment on minor irrigation (using surface water) and the creation
         of irrigation potential:


                                        Table III

  CUMULATIVE PLANWISE INVESTMENT ON MINOR IRRIGATION
AND CREATION OF IRRIGATION POTENTIAL USING SURFACE WATER

                         Period             Investment         Potential
                                            Rs. in crores       in ‘ 000
                                                               hectares
             Pre-Plan         Up to 1951          n.a.            455
             First             1951-56           4.15             462
             Second            1956-61            5.08            479
             Third             1961-66           20.87            534
             Fourth            1969-74           56.08            696
             Fifth             1974-78           93.29            808
             Sixth             1980-85          219.95            920
             Seventh           1985-90          379.78            959
             Eighth            1992-97          695.68            994
             Ninth            1997-2002         1013.41           841*
Note:
      1. The financial and potential status of minor irrigation schemes under
         the district sector is available up to end of 1996-97 only.
      2. * Progress indicated against Ninth Plan is up to end of March 2001,
         based on the Census 2000-2001 on Minor Irrigation works.




                                            6
Data on potential created


1.11   There has been considerable discrepancy in the figures of irrigation potential
       created as furnished by the minor irrigation authorities at different points of
       time and the department of Economics and Statistics [DES]. The DES figures
       regarding the potential created are as much as double those of the department
       of Minor Irrigation. Similar discrepancies in the data occur with regard to
       utilization of the potential. Despite some efforts no reconciliation has been
       effected with regard to these two sets of figures.

1.12   In 2000-01 the Census of minor irrigation works carried out by the
       Government of India disclosed a third set of figures. Since this data was
       obtained after a detailed survey of individual schemes conducted under the
       supervision of the minor irrigation authorities and officially communicated by
       the State government to the Government of India, the Commission has
       decided to accept the Census figures as the authentic statistics regarding both
       the creation of potential and utilization.


1.13   The comparative data regarding the potential created so far in minor irrigation
       and the utilization as furnished by the Minor Irrigation authorities, the
       department of Economics and Statistics and the Census 2000-01 is given in
       the Table below :
                                      Table IV


       Potential created and utilized during 2000-01under minor irrigation.
                                                                      in hectares
      Category of                                According to
      M.I. Scheme       M.I. Department            D.E.S.     Census 2000-2001
  A Potential created
  Tanks                    6,93,341                  -              4,04,281
  L.I. Schemes               94,282                  -              3,11,767*
  Others                   1,38,022                  -              1,24,705
         Total:            9,25,645                  -              8,40,753
  B. Potential Utilised
  Tanks                  Categorywise            3,03,837           2,32,562
  L.I. Schemes              break up             3,39,078           2,52,725
  Others                 not furnished           1,21,753             59,652
           Total:               3,15,215**        7,48,267 5,44,939
(*) Includes 2,07,726 hectares under private L.I. schemes.
(**) Comprises 1,28,898 hectares in the State sector and 1,86,317 hectares
        in the district sector.


                                          7
1.14   Although the Commission relies on the figures compiled in the Census, it
       strongly recommends that the reasons for such large variations need to be
       looked into seriously as this will have a bearing on not only the State’s
       interests in the disputes regarding the sharing of waters of the Krishna and
       Cauvery rivers, but also on the Master plans for irrigation projects in these two
       basins.


1.14 a What is surprising, from the information given by the Census, which is not
       forthcoming in the statistics furnished by the department of Minor Irrigation,
       is the large number of private lift irrigation schemes. It is probable that many
       of them are unauthorized. Even with regard to the authorized schemes, there
       is no information as to whether the meager annual levy is being collected or
       not.


1.15   Regarding private minor lift irrigation using surface waters, the Commission
       recommends the following :

       (a)       Regularisation of all cases of private lifts where permission has not
                 been obtained from Government for using surface waters, levying a
                 one time penalty of Rs. 100 per acre and continuous payment of the
                 annual levy at the rates recommended in sub-para (b) below.

       (b)       Increase of the annual levy on private lifts from the present meagre
                 rate of Rs. 4 per acre (or Rs. 10 per hectare) to at least Rs. 10 per
                 acre (or Rs. 25 per hectare).

       (c)       Non-payment of the prescribed levy on such users for a successive
                 period of three or more years should be treated as an offence under
                 the Irrigation Act, attracting deterrent punishment.
       (d)       Levy on such users should be collected by the Water Resources
                 department as it deals with the subject of according permission for
                 such private lifts using surface waters.


1.16   All the figures discussed so far pertain to minor irrigation using surface water.
       The Planning department does not include figures of minor irrigation potential
       created from ground water sources since the data provided is considered to be
       unreliable. Hence the data regarding the creation and utilization of minor
       irrigation using ground water resources is not discussed in the Report.




                                           8
Utilisation of irrigation potential

1.17    The utilisation of the irrigation potential created has been abysmally poor as
        can be seen from Table IV. If the potential created and utilization of minor
        irrigation tanks alone are considered and if the potential indicated by the
        department of Minor Irrigation is considered to be the original potential
        created and the potential indicated by the Census the actual potential now
        available, then it is evident that the potential has been reduced by 2.9 lakh
        hectares. The actual utilization is approximately 33 percent of the potential
        created.   The enormous wastage of public resources involved in the
        construction of minor irrigation works is due to the following reasons:


1.18.   Reasons for loss of potential and poor utilization

        a) Inadequacy of yield due to insufficient inflows
        b) Loss of storage due to silting of minor tanks as a result of deforestation
           and over-cultivation in the catchment
        c) Encroachment of water spread areas for cultivation and other purposes
        d) Denudation of vegetative cover and absence of soil conservation measures
           in the catchment areas
        e) Leakages through bund, waste weir and sluices
        f) Deteriorating condition of the tanks / head works and canal system due to
           poor maintenance and ageing
        g) Unsatisfactory distribution of available irrigation water amongst irrigators
        h) Poor and inefficient water management practices
        i) Want of adequate funds for proper and satisfactory O & M works
        j) Damage to lands due to water logging, salinisation and alkalinization.
        k) Absence of drainage works
        l) Lack of or inadequate conjunctive use of canal and ground water
        m) Poor participation by beneficiary farmers


1.19    In a nutshell the reasons for the massive under utilization of the minor
        irrigation schemes are due to very poor maintenance of the system, poor and
        inefficient water management, denudation of the catchment area leading to


                                            9
       soil erosion and silting of the tank and lack of involvement and poor
       participation by the water users.


Allocation of funds for Operation and Maintenance


1.20   The Commission has been unable to obtain information from the department
       of Minor Irrigation which could help them to present an analysis of (a) the
       budget allocations for O&M of minor irrigation works, (b) the expenditure
       presently being incurred (indicating separately the salary and works
       components) and (c) the minimum requirement for satisfactory O&M of the
       system.    However the department is of the opinion that the funds made
       available at present are not only inadequate but adhoc. It is not possible to
       separate the salary and works components in the budget provided. Because of
       the total non involvement of the water users in the construction and
       maintenance of the schemes, they do not take action to do basic repairs or
       minimum maintenance when the funding by the government is erratic or
       inadequate. This results in the silting up of the canal system and the tank bed,
       leading to encroachment of the tank bed and drastic reduction in the water
       holding capacity. Damages to the tank bunds, waste weirs and tank sluices are
       not repaired, leading to further damage.


1.21   The Commission had suggested, after a detailed study of existing allocation,
       the following scale of allocation of funds for O & M of major and medium
       irrigation projects :
                                                Rs. per hectare
       1) Fully lined canal system                     350
       2) Partially lined canal system                 400
       3) Unlined canal system                         450



1.22   The Commission recommends a similar approach for the funding of O & M
       for minor irrigation.




                                           10
Management of water


1.23   The irrigation system of the State is designed to provide only protective
       irrigation, mostly of a simple light irrigated crop. However there is flagrant
       violation of all rules and the owners of lands in the higher reaches grow water
       intensive crop such as sugarcane and paddy with the result that tail enders are
       deprived of water.


1.24   There is also much wastage of water. Not only is conjunctive use not made of
       ground and surface water but economic use is not made of water through drip
       and sprinkler irrigation.


Denudation of catchment areas


1.25   The catchment areas of the tanks are watersheds (generally micro watersheds).
       When rain falls, water flows from the ridgeline across the hills and uplands,
       down to the plains and into the tank. In addition, feeder channels such as
       brooks and streams carry heavy quantities of water from the upper levels down
       the slopes and into the tank. However, the feeder channels flowing in the
       catchments to feed water to the tanks have now been diverted, encroached,
       clogged, filled with sand and obstructed by vegetative growth. They have
       thereby been rendered incapable of conveying adequate quantities of water to
       the tanks. In this manner the water holding capacity of the tanks has been
       reduced.


1.26   In addition, the slopes of the ridges and hill tops, which were once full of
       vegetative growth are now denuded of vegetation, and are barren lands subject
       to a high degree of soil erosion due to ravages of wind and weather. The lands
       other than the hills and slopes, that is, the plain cultivable lands in the
       catchment are unprotected without contour bunds or vegetative bunds and
       their fertile top soil has been drained down to the feeder channels and tanks.
       Thus, both the uplands and plain lands are rich sources for the conveyance of
       silt to the tanks, caused by the velocity of winds and ferocity of rains.    The
       deposition of silt on the floor of the tank has further reduced the water holding
       capacity of the tank.




                                          11
Lack of involvement of water users

1.27    The persons whose lands are irrigated by the minor irrigation schemes
        constructed by the government as well as those who make use of the water in
        different ways have not been consulted while constructing the scheme or
        managing it. They have made no contribution even to the management of the
        scheme after it was constructed.          There is no democratic process of
        determining the equitable distribution or use of the water.              The people
        therefore feel that it is a government scheme in which they have no role to
        play except get what they can out of it. This makes them reluctant even to pay
        the water rates. The reluctance to pay the water rates is largely attributable to
        dissatisfaction with the inefficient and negligent management of the system,
        resulting in poor availability of water. In turn, the poor collection of water
        rate results in less investment in maintenance.

Irrigation water rates


1.28    A pre-requisite for fixing any water rate is that the water supply to each farmer
        should not only be adequate but also dependable and timely. It has been
        opined by experts that the irrigation water rates should be (a) on crop basis, (b)
        within the paying capacity of the farmer, irrespective of the capital investment,
        (c) differentiated with regard to the category of irrigation projects.

1.29.   Different authorities have suggested different criteria for fixing irrigation
        charges. These are indicated briefly below:

        (a) Irrigation Commission, 1972
        The water rate should range between five to twelve per cent of the gross
        income of the farmer, the upper limit being twelve per cent. It should be
        within the paying capacity of the farmer and should aim at full utilisation of
        the available supply

        (b) Vaidyanathan Committee 1992
        The level of cost recovery to be aimed at, in the first phase, should at least
        cover the O&M costs and one per cent interest on capital employed.



                                            12
       (c) National Commission for Integrated Water Resources Development
       Plan 1999
       The water rate should cover the operation and maintenance cost plus one per
       cent of the agricultural income.

       (d) 10th Finance Commission
       Irrigation water rate receipts should not only cover the operation and
       maintenance cost but should also cover one per cent per annum of the capital
       investment.

1.30   The latest set of rates notified on 13th July, 2000, may be seen in Table V.


                                    TABLE V

        STRUCTURE OF WATER RATES @                              Rs. per acre
 I. Normal rate:

  Flow Irrigation
 - sugarcane                                                         400
 -paddy                                                              100
 -cotton, wheat, groundnut, garden crops, sunflower                   60
 -jowar, ragi and other semi-dry crops                                35
 -manurial crops                                                      17

 For water users’ associations                               Rs. 12 per 1000 cum.

  Lift irrigation
 -sugarcane and paddy                                        thrice the normal rates
                                                             for flow irrigation.
 -other crops                                                twice the normal rate
                                                             for flow irrigation.

 II. Penal rates:
 -violation of cropping pattern                              five times normal rate
 -unauthorised irrigation                                    fifteen times normal rate

 III. Non-agricultural uses:
 -domestic purposes                                          Rs. 375 per mcft.
 -industrial use:
  * from natural sources                                     Rs. 1800 per mcft.
  * from irrigation works                                    Rs. 3200 per mcft.

(*50 percent of the rate if water is returned to the source unpolluted)




                                          13
1.31    The practice so far has been to fix water rates on the basis of crops. The
        evolution of crop-based water rates fixed by the Government of Karnataka and
        the percentage increase from 1976 to date are furnished in Table VI.


                                        Table VI

                        EVOLUTION OF WATER RATES
                                Water rate in rupees          Increase
                  Crop                per acre                  in Rs.
                                in 1978      in 2000          (as a %)
               Sugarcane          300            400        100        (33)
               Paddy               35            100         65       (186)
               Semidry             20             35         15        (75)
               Wheat              30             60         30        (100)
               Groundnut           20             60         40       (200)
               Sun flower           -             60          -          -
               Cotton              50             60        10         (20)
               Garden               -             60          -          -
               Manurial            9             15          6         (67)


1.32    Table VII gives details of the water rates for minor irrigation prevailing in
        some of the States.
                                     Table VII
                     Name of State              Water rate for minor
                                                     irrigation
                                                 ( Rs. per hectare )
               Andhra Pradesh                            250
               Punjab                               87.50 to 175
               Tamil Nadu                              150 to 175
               Maharashtra                          119    to 297
Note:

In Punjab, the rate varies with the crops. The rates are very low and are proposed to
be revised over the next few years. In Tamil Nadu, the rates are different for wet
crops and dry crops. The new rates have come into effect in July 2003 and are
proposed to be revised at regular intervals. In Maharashtra, the rates are for canal
flow water. They have been in force from July 2003. The rates vary with the crops.
The rate of Rs. 119 is for advance watering (in kharif season for rabi crops) and the
rate of Rs. 297 is for crops such as sugarcane, banana, and fruits.


                                           14
1.33.     During visits to the States of Punjab and Haryana, members of the
          Commission observed that the Irrigation Department is responsible for
          ensuring the quantity of water supplied at the head of each lateral/water
          course, to the Water Users Societies (WUS). The WUSs, on their part, are
          responsible for the equitable distribution of water to each of the
          farmers/members of WUSs.

Demand, collection and balance of minor irrigation water rates

1.34      According to the Irrigation Act the water rate demand is determined after a
          joint inspection of the farmer’s land by the representatives of the Minor
          Irrigation and Revenue departments. However this does not usually happen
          and the water rate demand is often raised on the basis of hearsay or by merely
          updating the previous year’s figures while sitting in the office. The water rate
          demand is raised by the department of Minor Irrigation every year. The
          demand is then communicated to the Revenue department. The Revenue
          department collects the water rate from farmers along with other dues such as
          the land revenue. The Revenue department does not however communicate to
          the department of Minor Irrigation how much water rate is collected. The
          water rates demands as per the Water Resources department and the demand,
          collection and balance figures, according to the Revenue department, for the
          years 1996-97 to 2000-01 are furnished in Table VIII below:

                                        Table VIII
                                                                            Rs. in crores
        Year        Demand as per WR Dept.              As per Revenue Department
                 Maj & Med    Minor
                 Irrigation Irrigation      Total    Demand      Collection      Balance

                                       Normal Rates
  1996-97           8.73          1.39     10.12     37.77          14.07         23.70
  1997-98           8.81          1.41     10.22     32.70          10.82         21.88
  1998-99           8.93          1.48     10.41     36.23          16.15         20.08
  1999-2000         8.80          1.29     10.09     40.74          10.84         29.90
  2000-01           17.93         2.11     20.04     31.08          13.03         18.05
                                        Penal Rates
  1996-97           45.11         1.82     46.93    232.91          0.15         232.76
  1997-98           51.52         2.28     53.80    251.23            0          251.23
  1998-99           51.82         2.26     54.08    259.60          0.45         259.15
  1999-2000         56.07         1.81     57.88    246.48          0.23         246.25
  2000-01           82.63         5.08     87.71    248.20          0.20         248.00


                                            15
1.35   The demand of the Revenue department includes that of major, medium and
       minor irrigation projects since categorywise figures are not available with the
       Revenue department. It also includes the arrears of previous years. Because
       of this there are substantial differences in the demand figures furnished by the
       two departments.


1.35a Table VIII shows how poor has been the collection of water rate by the
       Revenue department. In fact, no water rate is demanded or collected for most
       of the minor irrigation tanks since there has been no collection of water rates
       for tanks in the district sector for the last few years because of the misreading
       of a government order.


1.36   One of the reasons given by the Revenue department for the poor collection is
       that there is invariably delay on the part of the department of Minor Irrigation
       or the department of Water Resources in communicating the demand, resulting
       in accumulation of arrears. The Water Resources department, on its part,
       denies this.


1.37   In the department of Water Resources, including the Minor Irrigation sector,
       once the demand statements are finalized, there does not appear to be any
       compilation of this important data (of area irrigated and demand raised) at the
       highest (Chief Engineers’ or the Secretariat) level for monitoring as well as for
       ready reference whenever required. It is necessary that such data be compiled
       and computerized for easy monitoring.


Feasibility assessment while sanctioning new minor irrigation projects


1.38   There is no ceiling on the cost per hectare of land in the ayacut while
       considering the sanction of a new minor irrigation scheme. The cost benefit
       ratio is however fairly roughly computed. The project can be sanctioned if the
       ratio is 1:1 although there are no hard and fast rules. The problem of course is
       that the benefits are nowhere near what are envisaged while sanctioning the
       project, because, as already seen, the utilization of potential, as expressed in
       hectares, is a very small percentage of the potential created.         Even the
       potential created shrinks because of silting and encroachments both in the tank
       bed and in the field channels.



                                          16
1.39   On the other hand, the costs are often much higher than those calculated
       because of escalation of costs due to delay in executing the project. The main
       reason for delay is the non provision of adequate funds for completing the
       project in the stipulated time. The available funds are spread thinly over a
       large number of projects, leading to time over runs and escalated costs.


1.40   At present for investment clearance only the engineering infrastructure works
       of reservoir and canal network have been and are being considered to the
       exclusion of the development works in the irrigation command area.
       However without the field channels and command area development water
       will not reach the fields of farmers.


1.41   All this makes a mockery of the exercise of assessing the cost benefit rates
       while sanctioning new minor irrigation schemes.


1.42   The Commission recommends the following:


       1. While taking up the construction of a minor irrigation project, thorough
          field and geo-technical investigations have to be carried out and plans
          and estimates drawn up according due consideration to not merely the
          irrigation system but also to the command area development and at the
          same time keeping in view the benefit cost ratio aspect. All this should
          be completed within a period of one year.


       2.   The construction of a project should be completed within a period of one
             year to avoid cost and time over run and consequent delay in realising
             the intended benefits.


       3.   There should be continuous review of the progress of each component
            of work under execution to ensure that the physical and financial
            progress are in pace with the awarded contract.


       4. There should be a mid-term appraisal of the likely cost of the project as
            well as the benefit cost ratio.




                                           17
       5.     After a project is completed in all respects and is functioning
             satisfactorily for a few years, there should be a post-facto evaluation, to
             be carried out by an independent and reputable agency.

       6. No new schemes should be taken up in the district until the old schemes
           are completed in all respects, including the development works in the
           command area. This should be made a statutory requirement by
           amending the Irrigation Act.

1.43   To sum up, the minor irrigation sector presents a rather disturbing scenario.
       Reliable data is not available for ground water works.          Even for minor
       irrigation using surface water, there is considerably discrepancy in the data
       collected from different sources with regard to both potential created and
       utilized. Moreover, no data is available with regard to the district sector for
       most years. However, by any estimate, the actual utilization is only a fracture
       of the potential created at great public cost. The recovery of water rates is so
       poor that it can cover not even a small part of the cost of maintenance of the
       system.


1.44   The    Commission,     after   discussions   with   the   Director,   Watershed
       Development, the Executive Director of Jala Samvardhana Yojana Sangha
       (JSYS), the Secretary and other officers of the Minor Irrigation department
       and the Secretary, Rural Development and Panchayat Raj, came to the
       conclusion that the most important reason for the poor utilization of minor
       irrigation works is the almost total lack of involvement of the water users in
       the management of the schemes. The remedy therefore is in setting in place a
       system whereby the minor irrigation works are managed, in a democratic
       manner, by the persons using them. The Commission recommends that this
       may be done in the following manner :

1.     Minor Lift Irrigation Schemes (LIS)


1.45   As per the Census 2000-2001, there are 69,423 lift irrigation scheme using
       surface waters, with a total ayacut of 3,11,767 hectares. Of these, 462 LIS with
       a total ayacut of 94,282 hectares are in the State sector, under the control of



                                           18
        the Minor Irrigation department. The remaining 68,961 lift irrigation schemes,
        with a total ayacut of 2,17,485 hectares are reported to be private lift irrigation
        schemes, not all of which have the permission of the government, as required
        under the Irrigation Act.


        It is reported by the Minor Irrigation department [MI department] that nearly
        60 percent of the LIS in the department are sick and that even the remaining
        are not functioning to their full capacity, for reasons such as non-availability
        of adequate water from the source, reduction in the capacity of the intake
        structure due to silting and improper maintenance, rusty pipes and aging
        mechanical equipment and dilapidated distribution systems.


        Considering the condition of the existing government owned lift irrigation
        schemes as mentioned above and the mounting arrears of unpaid energy
        charges, the Commission recommends encouraging, wherever possible, the
        formation of societies of beneficiaries to operate and maintain entirely on
        their own, such of the State sector LIS which are in a reasonably
        satisfactory condition of operation.


        Those lift irrigation schemes for which societies are not formed, if any, in
        the State sector, should be transferred to the control of the concerned major
        irrigation zones, for operation and maintenance.


2.      M.I. Schemes other than Tanks and LIS


1.46    With regard to minor irrigation schemes, other than tanks and lift irrigation
        schemes, the Commission recommends the following:


       1.   Barrages across major streams / rivers including those under
            construction, presently under the control of the Minor Irrigation
            department, should be handed over to the control of the respective major
            irrigation zones in the department of Water Resources.




                                            19
        2.   All the remaining categories of minor irrigation schemes such as
             anicuts, pickups and bandharas including those under construction,
             should be handed over to the respective Z.P.Engineering Divisions under
             the control of the Chief Engineer, Rural Development Engineering
             Department (RDED), in the Rural Development and Panchayat Raj
             department [RD&PR].


3. Minor Irrigation (MI) Tanks


1.47.    There is already a direction from government that all MI tanks in the
        command areas of major irrigation projects, including those under
        construction, should be transferred to the administrative control of the
        respective Chief Engineers of Major Irrigation. The Commission recommends
        that transfer of all such tanks to the major zones be completed immediately,
        if not already done.


1.48    The Commission further recommends that action be taken, in the manner
        described in this Report, to transfer all the remaining functional tanks to the
        control of the Chief Engineer, RDED, under the RD & PR department.


1.49     Tanks are the most important source for minor irrigation using surface water.
        They are invaluable assets created to provide water to meet multifarious needs
        such as drinking water, cultivation, fish rearing, livestock breeding, etc., in
        rural areas. Very poor maintenance and repair, coupled with neglect of both
        the catchment and command areas, have resulted in reduction in the potential
        created and loss of valuable public assets. According to the MI Department,
        as on 31/3/2000, the number of tanks both under the State and ZP sectors were
        36,686, with a combined irrigation potential of 6.93 lakh hectares. This was
        probably the irrigation potential created when the tanks were first constructed.
        In the year 2000-01, the MI Census was carried out according to which only
        25,267 tanks were found to exist, with irrigation potential of 4.04 lakh
        hectares. The utilization of these tanks, according to the Census, was only
        2.32 lakh hectares. This lays bare the following facts:




                                           20
       a) (36686 – 25267) or 11419 tanks are in a state of total disrepair, are
          incapable of storing water and hence are non-functional.

       b) The irrigation potential created has gone down by (6.93 – 4.04 ) or 2.89 lakh
          hectares.

       c) The potential utilized is reduced by (6.93 – 2.32) or 4.61 lakh hectares.


1.50    The Commission has noted that the reason for the heavy loss of irrigation
        potential as well as its inadequate utilization has been the maintenance of
        tanks by government and the zilla panchayats without public participation or
        the involvement of tank users’ groups. Besides this, the government has failed
        to recognise the inter-dependency of tank systems, i.e., inter-dependency
        between up-stream and down-stream tank systems in a cascade as well as the
        inter-dependency between the catchment area and the command area with
        respect to a single tank. In view of this the Commission recommends for
        people’s participation in the construction and maintenance of M.I. tanks.

Tank Panchayat Regulation 1911


1.51a. The problem of enlisting the assistance of the community in the maintenance
        of tanks is not of recent origin. This is evident from the Tank Panchayat
        Regulation 1911.

         Normal maintenance of a tank involves the following:

           a)   Periodical removal of silt from the tank bed and canals
           b)   Periodical earth work to the bund wherever damages have occurred
           c)   Periodical repairs to the tank sluice and waste weir
           d)   Keeping the catchment area free from encroachment and checking silt
                coming into the tank




                                           21
Formerly, the maintenance of a tank or channel was primarily the
responsibility of the village community of which the beneficiaries were an
important part. However, with the passage of time, destruction by floods, wars
and visitation by famines, the Princely State of Mysore (now Karnataka) had
to meet the expenses of the British army. Since land was always the main
source of revenue, all efforts were made by the government to restore and
repair the irrigation works not only to increase food production but also as a
source of revenue. However, over a period of time, this led to the realization
that undue importance was being given to government’s responsibility in the
upkeep of tanks, altogether ignoring the farmers’ liability although
maintenance of tanks involved ordinary earthwork and repairs connected with
the tanks and their subsidiary components. Having realized that it was
impossible for the government to undertake repair and maintenance of
thousands of tanks in the State, it was considered necessary to hand over to the
villagers such tanks as were either already in a state of efficient repair or had
been restored to the required standard. Certain rules were promulgated in this
regard in 1873 AD, prescribing therein the various duties and responsibilities
of the concerned, from the Deputy Commissioners down to the village Patels.
In spite of this, it was observed that the maintenance work was neglected
mainly due to disappearance of the community spirit of the villagers and the
slackness of the concerned village officers.



It was decided that the remedy was to enlist the co-operation of the villagers
by giving them a voice in the measures necessary for maintenance of their
tanks, with powers to execute the works and control over funds that might be
set apart for the purpose. Accordingly, the Tank Panchayat Regulation Act
1911 was enacted, facilitating constitution of village level Tank Panchayats
(TPs), with the following provisions:




                                   22
a) TPs for any village if not less than two-thirds of the ryots holding not less
   than half the area of wet lands under the tank so desire


b) TPs to comprise the Patel as Chairman, the Shanbog and three or more
   members elected by the ryots. One fourth of the elected members to be
   from those ryots who are not holding wet or garden lands


c) Term of office of elected members of the TPs to be three years


d) TPs to control funds comprising (i) collection from ryots who do not do
   assigned duties or desire to commute labour into money payment, (ii)
   proceeds from sale of fish (in the tank)/trees/grazing rights in tank
   bed/cutting or removing grass on the tank bund, etc., (iii) rent/share of
   produce from temporary cultivation in tank bed, (iv) grant from
   government, from irrigation cess and (v) any other grant/loan from
   government to the TPs


e) Power to regulate issue of water from the tank, considering water available
   in the tank and the area to be cultivated with sugarcane/wet crop.



Though 127 such TPs were existing by 1934-35, only seven worked actively
and few were reported to have collected funds. These TPs failed to perform
and became defunct due to one or more reasons like (i) lack of co-operation
among the ryots, (ii) lack of enthusiasm in the Patel / Shanbog to enforce the
customary obligations, (iii) the Patel / Village Head was reduced to a mere
titular head, (iv) the Patel was no longer residing in the village, (v)
development of social or economic groups / factions in the village, (vi) land
holders migrating to urban centers. All these developments and the failure of
subsequent measures led to the government ultimately taking over the entire
management of the minor irrigation tanks and inclusion of a necessary clause
in the Mysore Irrigation Act 1932, during 1952.




                                  23
Community Participation


1.52   The need to secure people’s participation in minor irrigation tanks from the
       construction stage itself is borne out by the project appraisal report of the
       World Bank aided Community Based Tank Management Project [CBTMP]
       under the JSYS released in March 2002. In the said appraisal report, it is stated
       that the unsustainability of the World Bank financed Karnataka Tank
       Irrigation Projects (1981-89) was mainly due to the lack of involvement of
       tank users in the project. The main project component of this consisted of
       construction of 120 to 160 MI tanks, which was revised to 78. Finally 34
       tanks were completed to irrigate a command of 25,000 hectares.                The
       increased cost, initial delays, etc., reduced the rate of return from 20 percent at
       the appraisal stage to 4 percent on completion. Minimal farmer (and village)
       involvement in planning and implementation of the project contributed to the
       failure of the project. This was the crucial lesson which emerged from the
       project. After the project was completed, the limited farmer interest that did
       exist declined with the result that many tanks are now in a state of disrepair.
       Keeping these hard realities in view, the Government of Karnataka (GOK) has
       issued a State Water Policy which emphasises community participation in
       water management. GOK has also approved a vision statement describing the
       State‘s long-term strategy for the development of MI tanks. The State
       government is committed to ‘community based’ and ‘demand driven’
       approaches for tank development and initiating a process of transfer of
       management of all minor irrigation tanks to village level user groups (vide the
       appraisal report for Karnataka CBTMP - March 2002).


1.53   In fact, legal enactments for the formation of Water Users Societies (WUS),
       which are empowered to (a) improve the irrigation infrastructure (b) receive
       and distribute water (c) collect water rates have already been passed. The Jala
       Samvardhane Yojane financed by the World Bank, commenced from
       31/08/2002 and will end by 31/01/2009. This project will cover 2000 tanks
       with an ayacut of 72,000 hectares. The project aims to demonstrate the
       viability of a community-based approach to tank improvement and
       management, by entrusting the main responsibility of tank development to


                                           24
       village level user groups. If successful, the project would provide a useful
       model for adopting this pragmatic approach Statewide.


1.54   However, in view of the dismal scenario in respect of the upkeep of minor
       irrigation tanks, the Commission considers that it is not desirable to await the
       outcome of the JSYS project before taking action to involve in an organized
       manner tank users in the maintenance of tank systems.


1.55   At present, out of 36,686 MI tanks, 33,364 tanks with an ayacut area of less
       than 40 hectares are with the zilla panchayats and the taluk panchayats. Only
       3,322 tanks are under the control of the department of Minor Irrigation. These
       are the major tanks, with an ayacut of 3. 91 lakh hectares.


       The Commission is of the opinion that in order to improve the maintenance
       and make optimum use of these valuable assets, all the tanks, including the
       larger ones, should be under the control and supervision of the persons
       actually benefiting from them. In order to do so it will not be sufficient to
       hand them over to the zilla panchayats or the taluk panchayats. The ongoing
       debate is whether the tanks should be managed by tank user groups (which
       would include not only the people using the water for the purpose of irrigation
       but those who use it to grow fish, for drinking water purposes for themselves
       or their cattle and to wash clothes) or by the gram panchayat. According to
       JSYS, which is a World Bank assisted project, the beneficiaries or stake
       holders for an irrigation tank comprise of all the people in the village in the
       boundaries of which the tank and its ayacut falls since they are all in one way
       or another affected by the tank. In the JSYS after a period of social awareness
       raising and conscientisation with the help of NGOs (this has taken about two
       years in the initial period but may take less time hereafter) the grama sabha
       (that is, the community of all the adults in the village – this will include a man
       and a woman from every family) selects its representatives to form the
       executive committee for the management of the tank. For major decisions,
       however, such as whether any water should be released at all for irrigation in
       years when the water level is very low, the executive committee has to seek
       the orders of the gram sabha. All interests are represented on the executive


                                          25
committee and not only those of the owners of irrigated lands. Although
under the World Bank assisted scheme, substantial assistance is given to each
tank under the Integrated Tank Development Plan (ITDP), it is mandatory that
10 percent of the total amount should be contributed by the village
community. The Appendix gives information with regard to 68 tanks taken
up in the first and second phase of the JSYS (the project covers 2000 tanks)
with details of total cost of the project and the community contribution. The
community contribution has been forthcoming in all these cases, since it is
only thereafter that the JSYS releases money for the project. Obviously the
stake holders will take an interest in the proper execution of the project and
play an active role since they have contributed to the cost of the project.


This concept, that the best way to ensure proper use of a public asset, is to
hand it over to user groups, has been accorded formal acceptance through
enactments in various States. Andhra Pradesh, for instance, has taken several
major steps towards economic reform in the irrigation sector. The State has
10292 water users associations and 174 distributory committees. The Andhra
Pradesh Farmers Management of Irrigation Systems Act, 1997 creates ‘Water
Users Association’ (WUA) in all irrigation projects in the State, gives water
rights to the WUAs, provides them functional and administrative autonomy,
enables them to resolve conflicts themselves and enables improvement of the
irrigation systems by the WUAs based on resources raised by the WUAs
themselves.


There have been arguments in favour of handing over minor irrigation tanks to
the gram panchayats instead of waterusers associations. The argument is that
the panchayat is the elected body at the “grass root” level and it is not a
healthy trend to create new bodies and associations which bypass the
panchayat.    This also sows the seeds of potential conflict between the
panchayat and the waterusers associations. As a public asset the tank should
belong to the gram panchayat and not to a private group of individuals. It is
also possible that the waterusers associations will fall apart and disappear once
the external funding stops in a project such as the JSYS. At the same time
the JSYS and NGOs argue that the panchayat consists of six or seven villages


                                   26
whereas the tank and its ayacut may fall within the boundaries of just one or
two villages. If decisions regarding the tank are taken by the panchayat it
would mean that persons who are not stakeholders would be taking the
decisions. It is also possible that the revenue from the tank will be used for
other purposes by the panchayat.


The Commission, after detailed discussions, has come to the conclusion that a
via media is possible. The gram sabha should elect the persons who will
represent different interest groups. These persons, along with the panchayat
members who live in and represent the villages within the ayacut of the tank,
will form a sub committee of the panchayat (GPS) which should manage the
affairs of the tank. The panchayat subcommittee will be constituted under
Section 61 (A) of the Karnataka Panchayat Act 1993. Women, who are an
important interest group, either as persons who work on the land, whether or
not they own it, or as persons who depend on the tank in different ways,
should constitute at least 33 percent of the composition of the subcommittee.
The owners of lands at the tail end of the irrigation channels should also be
represented in the subcommittee.


The panchayat subcommittee should attend to work relating to maintenance
and repair of tanks as well as distribution of water. Water rates should be
levied and collected by the panchayat subcommittee. The water rates should
meet some portion at least of the annual O & M charges and should be
approximately 25 percent of the water rates for major and medium irrigation
schemes.


It is quite possible that the panchayat will succeed in collecting the water rates
where the village accountant failed. Poor service is one of the main reasons
for poor collection of water rates. If the farmers are certain that the money
collected will be utilized to improve services, they will be willing to pay the
charges.




                                   27
       The Commission therefore recommends that the panchayat subcommittee be
       permitted to utilize 90 percent of the water rate collected for the maintenance
       and improvement of the tank and remit 10 percent to government.


       Similarly, fishing rights may also be given to the panchayat subcommittee and
       the revenue from this should also be utilized towards the maintenance of the
       tank.


       Government funds for maintenance should also be routed through the
       subcommittee.


       The accounts of the subcommittee should be audited every year and there
       should be total transparency in its functioning. When important decisions
       have to be taken the subcommittee should revert to the gram sabha.


       The services of NGOs as well as experts in various fields such as in
       agriculture or in the economic use of water should be utilized by the panchayat
       subcommittee.


       In the case of large tanks where the ayacut is spread over the area of several
       panchayats, a federation of panchayat subcommittee should be formed. Such
       cases may not be many. Even in the case of tanks with ayacuts of 1000
       hectares and above, not more than four or five panchayats will be involved.
       Although there is some difficulty of co-ordination in such cases, it is not
       insuperable.


Recommendation


1.56   The Commission recommends that all minor irrigation tanks, including
       those with ayacuts of between 40 and 2000 hectares which are presently in
       the State sector, should be handed over to gram panchayat subcommittees
       constituted under Section 61 (A) of the Karnataka Panchayat Raj Act, 1993.
       The subcommittees will be responsible for maintenance and repair of the
       tanks. Government funds which are budgeted for O & M should be given to


                                         28
       the subcommittees. They will levy and collect water rates which they should
       use for the improvement of the tank. Technical assistance should be given to
       the subcommittees by the engineers of the Irrigation department.           The
       Irrigation Act should be amended accordingly.


1.57   Administrative reorganization is required to give technical support to the GPS
       in repairing and maintenance of the tanks.


Administrative Reorganisation


1.58   At present tanks and other minor irrigation works with ayacuts up to 4
       hectares are being maintained by taluk panchayat samithies and those between
       4 hectares to 40 hectares are being maintained by the zilla panchayats. The
       Minor Irrigation department is responsible for the maintenance of all MI
       works with ayacuts of between 40 and 2000 hectares. In the zilla panchayat set
       up there are one or two executive engineers at the district level (there are 38
       executive engineers in the zilla panchayats with two each in Bangalore Rural,
       Belguam, Bellary, Gulbarga, Hassan, Kolar, Mandya, Mysore, Shimoga,
       Tumkur and Uttar Kannada districts and one in each of the remaining districts)
       and one assistant executive engineer for each taluk. These executive engineers
       and asst. executive engineers of the zilla panchayat are in overall charge of
       the maintenance of the minor irrigation works, roads, buildings and drinking
       water supply in their respective jurisdictions. For the entire State there is a
       chief engineer Rural Development Engineering Department (RDED) who is in
       overall charge of the minor irrigation works as well as works related to roads
       and buildings of all the zilla panchayats. The chief engineer, Minor Irrigation
       (South), Bangalore and the chief engineer, Minor Irrigation (North), Bijapur
       are responsible for the maintenance of minor irrigation works in the State
       sector, that is for works with ayacuts of between 40 and 2000 hectares in their
       respective jurisdictions. These two chief engineers are supported by 4
       jurisdictional superintending engineers, 16 executive engineers and 46
       assistant executive engineers.




                                         29
1.59   Despite such high level supervision through three chief engineers’ zones to
       take care of the maintenance of minor irrigation works, there has been
       unsatisfactory maintenance of tanks and heavy reduction in the irrigation
       potential.


Recommendation


1.60   Complete administrative reorganization is required to ensure better
       supervision of minor irrigation works. This is also required because it is
       proposed to transfer all minor irrigation tanks, bandharas, anicuts and pickups
       to the gram panchayat samithis.


       The Commission recommends as follows :


       With the transfer of all minor irrigation schemes either to the Major and
       Medium Irrigation zones or to the gram panchayats, the department of Minor
       Irrigation should be abolished.


       At the same time the zilla panchayat engineering divisions need to be
       strengthened and a separate minor irrigation sector created within it. This can
       be done by transferring the 46 sub divisions of the Minor Irrigation department
       to the zilla panchayat sub divisions. The 46 assistant executive engineers will
       supervise works pertaining only to minor irrigation in the district sector, since
       this requires specialized knowledge. They will, if necessary, be assisted by
       some assistant executive engineers in the zilla panchayat sub divisions, who
       should specialize in minor irrigation. Some of the superintendent engineers
       and one chief engineer from the department of Minor Irrigation should be
       transferred to the department of Rural Development and Panchayat Raj to
       supervise, monitor and give technical assistance for the constructions, repair
       and maintenance of minor irrigation works.




                                          30
The administrative set up should be as follows :

4000 hectares of contiguous irrigated land should have one irrigation sub-
division in the zilla panchayat.


Every 20000 hectares of irrigated land should have one irrigation division.


There should be one superintending engineer for every 5 divisions.


There should be one chief engineer (minor irrigation) in the department of
Rural Development and Panchayat Raj to look after only minor irrigation
works (this will be in addition to the present chief engineer RD & PR).


There should be a technical design and research cell in each superintending
engineer’s office as well as in the office of the chief engineer (minor
irrigation) RD & PR.


In other words there should be a separate establishment for minor irrigation
in the RD & PR department to supervise minor irrigation works in the
district sector.


Minor irrigation through the use of ground water is at present being dealt by
the department of Mines and Geology. This subject should be handed over to
the department of Rural Development and Panchayat Raj. The entire work
relating to minor irrigation, whether of surface or ground water, should be
dealt with by the minor irrigation engineers of the department of Rural
Development and Panchayat Raj.


As already described in the report, there is much confusion in the data
regarding minor irrigation which is collected by different agencies.          The
Commission recommends that all data regarding minor irrigation should be
collected, updated and consolidated only by the minor irrigation sub
divisions and divisions of the RD & PR.            The chief engineer (minor
irrigation) RD & PR should have the consolidated information relating to
both surface water and ground water minor irrigation for the entire State.



                                   31
Taluk level and District level facilitation teams

1.61   Since heavy responsibilities are sought to be vested with the GPS / Panchayats
       as mentioned above, the Commission considers it necessary that there should
       be guidance provided to them through a taluk level facilitation team consisting
       of engineers (AEE of the ZP Engineering Division, working in the taluk) and
       experts from the Agricultural, Horticultural, Animal Husbandry, Forest and
       Fisheries departments who are already working as taluk level representatives
       of those departments.      A representative to be nominated by an NGO
       recognized at the district level for providing guidance and motivation should
       also be a member of the taluk level facilitation team.

1.62   To oversee and assist the working of the GPS / Panchayats and the taluk level
       facilitation teams, there should be a district level facilitation team to be
       chaired by the CEO, ZP and comprising of district officers of the departments
       of Agriculture, Horticulture, Fisheries and Forest along with the Executive
       Engineers of the ZP Divisions and an NGO.

1.63   The taluk level facilitation team should assist the GPS to formulate one time
       restoration plans and subsequently the annual action plans for maintenance of
       minor irrigation works. The progress of the work should be monitored by the
       facilitation teams at taluk and district levels on monthly and quarterly basis
       respectively.

Release of funds

1.64   Once the tanks are handed over to the concerned GPS, basic repairs have to be
       carried out with financial assistance from government as described hereafter.
       After the basic repairs are carried out, the GPS will be responsible for annual
       repairs and maintenance. The corpus of funds for closing this will consist of :

       1. Retention of 90 percent of water rates collected.
       2. The contribution made in cash and kind by the gram sabha of the village
          panchayat which is served by the tank

       3. The O & M fund to be released by the zilla panchayat directly to the GPS.
       4. Other funds such as earnings of the GPS from fisheries.


                                          32
1.65   Note : This GPS should have its own bank account and it should be operated
       under the signature of one member of the subcommittee and the secretary of
       the gram panchayat who should be concurrently designated as member
       secretary of the subcommittee. If the ayacut falls in the jurisdiction of more
       than one gram panchayat, the subcommittee will consists of members from all
       those panchayats as in the case of watershed subcommittees of similar type
       mentioned earlier.

Legal issues

1.66   The State has already taken legal action to empower the tank users group to
       take care of maintenance of tanks and to collect water rates, including
       retention of 90 percent of the water rate collected for expenditure towards
       maintenance.

       The Commission recommends that this law should be further amended to
       transfer the power of WUS to the GPS / consortium of gram panchayats in
       case of MI tank ayacut areas. Similarly, there should be amendments of the
       Karnataka Panchayat Raj Act 1993 to provide for powers to be given to the
       GPS / consortium of gram panchayats to undertake all the activities sought to
       be entrusted as per recommendations given in this report and also to control
       the corpus of funds which they will be raising.


Basic repairs to be first carried out


1.67   GPS cannot be expected to begin the task of maintaining and repairing the
       tanks in the extremely bad state in which they are now. So the first thing to be
       done should be to identify the 11419 tanks which are non functional and
       determine from among them those which it is not economically feasible to
       repair and those which can be revived and restored by affecting some basic
       repairs. This will have to be done by the engineers of the zilla panchayat.
       Besides this, the basic repairs required to be done in the case of other tanks,
       which are in use but where the potential and utilization have been reduced,
       should also be identified. The repairs which may be required are described
       below :


                                         33
Tank structure rehabilitation


1.68   The tank structure consists of tank bund, waste weir and sluices.

       a) Tank Bund The tank bunds are often damaged and eroded. According to
       the Appraisal Report of the Karnataka Community Based Tank Management
       Project March 2002 (CBTMP), in some cases the top width of the bund is
       reduced to one metre. Seepage through the tank bund and vegetative growth
       on it are also common problems. The remedial measures suggested are bund
       cross-section, rehabilitation and improvement (increase of top width of the
       bund to at least 2.5 metres). The vegetative growth has to be removed and the
       bunds repaired.

       b) Tank Sluices In some places, tank sluices are inoperable or are damaged,
       with lack of water controlling arrangement, excessive seepage or blockage due
       to siltation. These need to be repaired and provision of control devices made.

       c) Waste weir     Major damages in the waste weirs are noticed, which are
       causing scouring and foundation failures. The damage to the waste weir wall
       needs immediate repairs.

       d) Canals Canals should be resectioned and redesigned and fully lined so as
       to prevent transmission losses.

       f) Tank bed The tank beds are silted up and their holding capacity has been
          reduced. In some places cultivation has been taken up on the tank bed.
          Encroachments will have to be removed.

Recommendations



       The GPS be given one time assistance by the government for the restoration
       of the tank structure by repair and restoration of tank bund, sluices and
       waste weir and main canal. A rough estimate is that these basic repairs will
       require approximately Rs.15,000 per hectare. This will require a huge one
       time investment of approximately Rs.600 crores.



                                         34
Desilting of tanks


1.69   Restoration of tanks through desilting cannot be taken up as part of the basic
       repairs as it is too expensive. It can be done as a separate project provided
       careful calculations are done to examine whether it is cost effective. Capacity
       survey should be done for each tank. The yield should also be determined by
       deciding whether desilting is required.    One of the models for desiltation is
       briefly described below.


1.70   Silted capacities of minor tanks can be restored through the ‘AMRIT’
       (A Model for Rejuvenation of Irrigation Tanks) Model, which is a new
       concept suggested by Sri. B.C.Angadi, Retd. Special Secretary to Government
       of Karnataka, Public Works and Electricity Department.


1.71   This concept involves (a) excavating a small fraction (about 15 percent) of the
       accumulated silt (b) raising the full tank level (FTL) by a small height
       (between 0.30 mtr. and 0.50 mtr. in most cases) depending on the capacity lost
       due to silting (c) using the excavated silt for filling up the land on the
       periphery of the tank i.e., between the existing and new FTLs in order to avoid
       additional submergence and also to raise the tank bund and its waste weir.


1.72   The advantages of this concept are reported to be manifold, important among
       them being as follows:

       i)     Fresh submersion of agricultural lands will be avoided
       ii)    The cost will be only about a sixth of the cost of totally desilting the
              tanks
       iii)   Justifies the investment criteria, the benefit : cost ratio being more than
              1.3
       iv)    Provides fresh irrigation potential in the shortest gestation period
       v)     Prevents a good portion of the existing tank bed from submersion
              thereby releasing it for cultivation




                                          35
1.73   All tanks will not benefit from the ‘AMRIT’ model. The World Bank aided
       Karnataka CBTMP March 2002 (under the Jala Samvardhane Yojane)
       Appraisal Report has cautioned against taking up desilting without a careful
       study and without ensuring watershed treatment of the catchment area.

       “Desiltation of tanks without integrating the treatment of catchment areas
       would not be sustainable, as the degraded catchment area would continue to
       erode and refill the tank with silt.


       Desiltation is expensive and needs to be done sparingly and in accordance
       with the expected benefits. Investments on other components of tank
       maintenance may be more efficient for additional capture and use of water.


       There should be complete community involvement in the management of
       desiltation, otherwise this will not succeed.”


Command Area


1.74   Improvement of the distribution system in the command area of the tank, on
       farm development to ensure smooth flow of water and prevention of water
       logging and the economic use of water in the command area by use of
       sprinklers and drip irrigation systems are other measures to be taken up to
       improve the utilization of the irrigation potential created and to increase the
       ayacut. However, except for repair and desilting of the canals, these do not
       fall under the definition of ‘basic repairs’ and are to be carried out by the GPS
       with the funds they have collected through water rates and other revenues and
       the funds given to them by the zilla panchayats for O & M.

1.75   The tank system consists of –


       a)     catchment area which includes foreshore area and the natural feeder
              channels conveying water from the catchment to the tank

       b)     tank structure which includes the tank bund, the waste weir and
              sluices and the tank bed (reservoir)

       c)     command area, including main canal and field channels




                                          36
1.76   In the long run no improvement of the tank structure or the distribution system
       will be effective unless care is taken to prevent erosion in the catchment area
       which will result in silting of the feeder channels, the distribution canals as
       well as the tank used itself. Denudation of the catchment area and consequent
       soil erosion are the prime causes for the loss of irrigation potential.

Funding


1.77   As already indicated, the amount required for basic repairs to the minor
       irrigation tanks will be approximately Rs. 600 crores. The basic repairs should
       be completed within two years.


       The amount required for capacity restoration through desilting should be
       estimated after a careful assessment of which tanks will benefit from this
       process and to what extent the desilting should be carried out.


       New tanks will also have to be constructed. It is desirable to construct many
       small tanks with ayacuts of between 20 and 40 ayacuts rather than a few large
       tanks.


       The State government should make a strong case to the Central government
       for at least 50 percent financial assistance to complete basic repairs and
       restoration of minor irrigation tanks as well as to make new tanks in the
       drought prone areas of the State. The fact that Karnataka has a larger
       drought affected area than any other State is an irrefutable argument.


       The Commission however reiterates that incurring expenditure on
       restoration of tanks or on new tanks is a waste of public money if adequate
       funds are not provided every year for the maintenance of the tanks.


1.78   Catchment area treatment


       a) Watershed technology is required to be applied to the barren slopes of the
       catchment area. Grass may be grown as a first crop since it will bind the soil.
       The hilltops, slopes and common lands can be covered by vegetative growth


                                           37
of forest and horticultural species such as tamarind, mango and pogamia
(honge). Once the trees are ready tree pattas can be given to landless labourers
and marginal farmers to enjoy the benefits of the usufruct from government
and common lands. Needless to say, private lands will benefit the landowners
by such vegetative growth.


b) In a similar manner it is necessary to remove encroachments from the
feeder channels, strengthen their banks and grow trees along their banks. The
feeder channels should be intercepted at various points by constructing check-
dams, nala bunds, gully plugs and vegetative checks to prevent soil flow to the
tanks and conserve some water in situ (for extending moisture in adjoining
lands) and to allow excess water in the rainy season to flow without silt or a
much reduced silt to the tanks. These activities will provide employment
opportunities to landless labourers and marginal farmers residing in the
catchment of the tank command. The de-weeding and de-silting of the feeder
channels should be carried out simultaneously. The silt can be spread over in
the cultivators’ fields in the catchment area.


c) The foreshore areas of the tanks which lie in the catchment should be
protected by planting of trees in addition to contour bunding treatment.      If
foreshores of tanks on the tank beds are encroached for cultivation, such
encroachments should be removed.


d) Construction of small water harvesting structures such as low cost farm
ponds, sunken ponds, mini percolation tanks and recharging of dried up open
wells by collection of surplus rain water as sources of water storage in the
cultivators’ fields can also be carried out as per existing practices of the
Watershed Department. All such treatments in these watersheds, besides
creating employment opportunities, will conserve soil and water in the
catchment and reduce soil flow to the tank to minimal levels.




                                    38
Organisational arrangement for catchment area treatment


1.79   People’s involvement and participation is essential for effective watershed
       development.   However different models are used in different watershed
       projects. In the Sujala World Bank project the implementation is through area
       groups and self help groups. However, according to Hariyali guidelines of the
       Ministry of Rural Development, Government of India (GOI), the gram
       panchayats are to be made responsible for the implementation of the projects
       at field level. In such a situation, the people’s group will have only an
       informal relationship to the executive body, namely the gram panchayat.
       Subsequent modifications of the Hariyali guidelines have suggested gram
       panchayat subcommittees (GPS) as the executive body. The GPS will include
       representatives of the area groups and self help groups besides the gram
       panchayat members of that area.


Recommendations


1.80   The Commission recommends formation of watershed Gram Panchayath
       Subcommittee (GPSs) under Section 61(A) of the Karnataka Panchayat Raj
       Act 1993, with the co-option of representatives of people’s groups such as
       area groups and self help groups. The whole gram sabha, which is a PRI,
       shall be the general body and the GPS to be constituted as recommended
       above shall be the executive committee of the gram sabha and self help groups
       with assistance, training and monitoring provided by NGOs.


1.81   Watershed development teams at the district and taluk level, consisting of
       officers from the Agriculture, Horticulture, Forest and Animal Husbandry
       departments will assist the GPS in formulating and implementing the plans for
       the watershed development of the catchment area.




                                         39
Tanks in series


1.82   In some parts of the State, there are tanks in series, that is, tanks from higher
       levels down to the lower levels, extending over a distance of several
       kilometers from each other. In such cases, the catchment areas of the tanks
       will also lie in series. That is, catchments of individual tanks will be micro
       watersheds which, along with catchments of other tanks in the series, as a
       whole, will tend to form a macro watershed. In that event, all the catchments
       will have to be treated as micro watersheds, including the irrigated and un-
       irrigated lands of the tanks in upper as well as lower reaches. Thus, all the
       micro watershed will be treated and this will lead to the treatment of the entire
       watershed.



Release of funds


1.83   These GPSs should have their own bank account, which can be operated under
       the signature of two members of the subcommittees, one of them being the
       Panchayat Secretary. The records, files, maintenance of accounts, etc., will be
       processed and maintained by the Secretary of the subcommittee. Similarly, for
       the GPS / consortium of panchayats in case the watershed area extends to
       more than one panchayat, the funds will be released to the subcommittee of
       the consortium of the panchayats and the secretary of the panchayat in whose
       jurisdiction the major portion of the watershed falls, will be the secretary of
       the consortium of GPSs.




                                          40
                                       ‘e governance’


1.84   The Chief Engineer’s office, the offices of the Executive Engineers of each
       Division and the offices of the Assistant Executive Engineers of each Sub-
       Division should maintain, on their respective computers, the profiles of all the
       existing minor irrigation schemes.

       Information profiles to be maintained for various types of schemes are
       indicated below, categorywise:

I.     Minor Irrigation Tank

                      1.   Name of the tank
                      2.   Location
                            a) Name of the village
                            b) Taluk
                            c) District

                      3.   Name of the stream
                      4.   Sub-basin
                      5.   River basin
                      6.   Catchment area, in sq. km.
                            a) Independent
                            b) Intercepted

                      7.   Average annual yield, in Mcum
                      8.   Full Tank Level, in mtrs
                      9.   Water spread area, in hectares
                      10. Storage capacity, in Mcum
                           a) Live storage
                           b) Dead storage

                      11. Utilisation, in Mcum
                      12. Annual evaporation loss, in Mcum
                      13. Bund
                           a) Length, in mtrs
                           b) Maximum height, in mtrs
                           c) Top width, in mtrs
                           d) Free board, in mtrs




                                            41
                     14. Waste weir details
                          a) Type
                          b) Length, in mtrs
                          c) Spillage, in mtrs
                          d) Maximum flood discharge, in cumecs

                     15. Registered ayacut, in hect
                     16. Cropping pattern, in hect
                          a) Garden
                          b) Wet
                          c) Semidry
                          d) Total

                     17. Canals
                           a) Left Bank Canal
                             i) Length, in kms
                             ii) Ayacut, in hectares
                           b) Right Bank Canal
                             i) Length, in kms
                             ii) Ayacut, in hectares

                     18. Year of construction
                     19. Cost, in Rs. lakhs

Note: Each tank’s profile should be accompanied by a digitized map of the catchment,
tank structure and command area, showing all the essential features of each of the
above components.


II.    Minor Lift Irrigation Scheme
                     1.    Name of the scheme
                     2.    Location
                           a) Name of the village
                           b) Taluk
                           c) District
                     3.    Name of the stream
                     4.    Sub-basin
                     5.    River basin
                     6.    Storage capacity of intake, in Mcum
                     7.    Utilisation, in Mcum
                     8.    Lift involved, in mtrs
                     9.    Lifting devise details


                                         42
          Type of pump* Make H.P. Lift, in mtrs.            Discharging
                                                            Capacity, in
                                                              cumecs



         (*) Electrical / Deisel


                      10.   Registered ayacut, in hect
                      11.   Cropping pattern, in hect

                            a) Garden
                            b) Wet
                            c) Semidry
                            d) Total
                      12.   Canals
                            a) Left Bank Canal
                              i) Length, in kms (ii) Ayacut, in hectares
                            b) Right Bank Canal
                              i) Length, in kms (ii) Ayacut, in hectares

                      13. Year of construction
                      14. Cost, in Rs. lakhs

Note: Scheme profile should be accompanied by a digitized map showing the location
of the scheme, command and all the essential features of each of the above
components.


III.   Other Minor Irrigation Works
                      1.    Name of the scheme
                      2.    Type (Bandhara / Anicut / Pickup / etc.)
                            a) Length, in mtrs
                            b) Maximum height, in mtrs

                      3.    Location
                            a) Name of the village
                            b) Taluk
                            c) District

                      4.    Name of the stream
                      5.    Sub-basin



                                          43
                         6.    River basin
                         7.    Catchment area, in sq. km.
                               a) Independent
                               b) Intercepted

                         8.    Average annual yield, in Mcum
,                        9.    Utilisation, in Mcum
                         10.   Registered ayacut, in hect
                         11.   Cropping pattern, in hect
                               a) Garden
                               b) Wet
                               c) Semidry
                               d) Total
                         12.   Canals
                               a) Left Bank Canal
                                 (i) Length, in kms (ii) Ayacut, in hectares
                               b) Right Bank Canal
                                 (i) Length, in kms (ii) Ayacut, in hectares

                         13.   Year of construction
                         14.   Cost, in Rs. lakhs     Name of the work

    Note: Each scheme’s profile should be accompanied by a digitized map of the
    catchment, scheme structure and command area, showing all the essential features of
    each of the above components.




                                             44
Monitoring and Review of Progress of Catchment Area Treatment

1.85   As has already been mentioned in this Report, a comprehensive plan of
       treatment for the entire catchment area by the application of watershed
       technology shall have to be formulated by the GPSs under guidance from the
       Taluk Watershed Development Team (WDT) and the District Watershed
       Development Team with final approval by the ZP.         A project profile of the
       above referred comprehensive plan indicating, in quantitative terms, the
       various treatment inputs for the whole duration of the project will be available.
       This project plan will have to be programmed for implementation for each
       year and also for each month of every year. This plan will be available on
       computer at the taluk and district level. A monthly progress report will have
       to be prescribed, in which physical targets for works to be completed each
       month should be indicated in the target columns.         The monthly progress
       report form for each tank’s catchment area, indicating all the targets, should be
       printed well in advance in a format which is computer-worthy. The GPSs only
       need to fill up the columns apportioned for reporting progress against
       respective targets, and send these forms duly filled up within a week after the
       close of the month to the Taluk WDT where the progress should be reviewed.
       The consolidated progress report should be transmitted to the zilla panchayat
       computer where they will be reviewed in detail each quarter. These outputs
       should thereafter be sent to the Commissioner, Watershed Department.

Monitoring and review of restoration and maintenance of MI tanks


1.86   A similar exercise of monitoring the repairs and maintenance works carried
       out by the GPS for minor irrigation tanks at the taluk and district level is
       necessary. Besides this, training programmes not only in carrying out repair
       works and economic use of water but also in such matters as conflict
       resolution should be given to the members of the GPS.




                                          45
         Main Recommendations of the Commission


1. Utilisation of potential under minor irrigation:
An indepth study is to be carried out to identify the reasons for the abysmally
poor utilization of the potential created and initiation of immediate action to
improve the utilisation to acceptable levels.


2. The Commission recommends that all minor irrigation tanks, including
those with ayacuts of between 40 and 2000 hectares which are presently in
the State sector, should be handed over to gram panchayat subcommittees
constituted under Section 61 (A) of the Karnataka Panchayat Raj Act, 1993.

3. Complete administrative reorganization is required to ensure better
 supervision of minor irrigation. The department of Minor Irrigation should
 be abolished and most of the engineers of the department transferred to the
 zilla panchayat divisions and sub-divisions.


4. The gram panchayat subcommittees should be given one time assistance by
the government for the restoration of the tank structure by repair and
restoration of tank bund, sluices, waste weir and main canal. A rough
estimate is that these basic repairs will require approximately Rs. 15, 000 per
hectare. This will require a huge one time investment of approximately Rs.
600 crores.


5. Restoration of tanks should be taken up only after capacity survey,
determination of yield and assessment of costs and benefits.


6. The water rates for minor irrigation should be 25 percent of the rates for
medium and major irrigation.


7. The State government should make a strong case to the Central
government for at least 50 percent financial assistance to complete basic
repairs and restoration of minor irrigation tanks as well as to construct new
tanks in the drought prone areas of the State. The Commission however


                                    46
reiterates that incurring expenditure on restoration of tanks or on new tanks
is a waste of public money if adequate funds are not provided every year for
the maintenance of the tanks.


8. Watershed development is an integral part of the development and
maintenance of minor irrigation.


 9. People’s involvement and participation is essential for effective watershed
development.


 10. The Commission recommends formation of watershed Gram Panchayat
Subcommittees (GPSs) under Section 61 (A) of the Karnataka Panchayat Raj
Act 1993, with the co-option of representatives of people’s groups such as
 area groups and self help groups.


11. The Irrigation Act should be amended to transfer the power of water
users’ societies to the gram panchayat subcommittees / consortium of gram
panchayats in case of minor irrigation tank ayacut areas. Similarly, there
should be amendments of Karnataka Panchayat Raj Act 1993 to provide for
powers to be given to gram panchayat subcommittees / consortium of gram
panchayats to undertake all the activities to be entrusted as per
recommendations given in this report.


12. Close monitoring with the help of computers is essential with regard to the
works to be carried out by the gram panchayat subcommittees in the case of
both minor irrigation tanks and watershed development.


13.While constructing new tanks, thorough field and geo-technical
investigations have to be carried out and plans and estimates drawn up
according due consideration to not merely the irrigation system but also to
the command area development. All this should be completed within a period
of one year. The construction of a project should be completed within a
period of one year to avoid cost and time over run and consequent delay in
realising the intended benefits.


                                     47
14. Private minor lift irrigation using surface waters:


a) Regularization of all cases of private lifts where permission has not been
obtained from government for using surface waters, levying a one time
penalty of Rs. 100 per acre and continuous payment of the annual levy at the
rates recommended in sub-para (b) below.
b) Increase the annual levy on private lifts from the present meager rate of
Rs. 4 per acre (or Rs. 10 per hectare) to at least Rs. 10 per acre ( or Rs. 25 per
hectare).
c) Non-payment of the prescribed levy on such users for a successive period of
three or more years should be treated as an offence under the Irrigation Act,
attracting deterrent punishment.
d) Levy on such users should be collected by the Water Resources department
as it deals with the subject of according permission for such private lifts
using surface waters.




                                    48
      CHAPTER II
LABOUR AND EMPLOYMENT
                                   CHAPTER 2

                      LABOUR AND EMPLOYMENT


2.1   The terms of reference given to the Commission were to study fees under various
      labour laws and make recommendations for enhancement of these revenues. The
      receipts under the head of accounts Labour and Employment covers three
      departments, department of Labour, department of Factories and Boilers and the
      department of Employment and Training. In the first two, Labour department and
      department of Factories and Boilers, some revenues are received by way of fee
      etc. but in respect of department of Employment and Training the receipts are
      largely for the training activities as fees for ITI courses run by the department.
      However the training component of the department of Employment and Training
      has already been discussed and recommendations made under the chapter
      pertaining to Education in the First Report of the Revenue Reforms Commission.
      The fee receipts of the departments of Labour and Factories and Boilers are not
      substantial. However the contribution of these three departments to the State’s
      economy is substantial. The maintenance of peace and harmony in the industrial
      sector, the creation of an accident free and non polluting atmosphere in industry
      and lastly the securing of jobs to the unemployed are not insignificant
      contributions to the State Domestic Product which in turn lead to higher potential
      for tax collection. In view of this the Report discusses the quality of service
      rendered by these departments and recommendations are made for the
      improvement of these services. Suggestions are also made with regard to
      increasing the revenues by way of fees.




                                          55
EMPLOYMENT


2.2     The details regarding the total population and working population according to
        the population Census of 2001 are given below:
                                             Table
         Particulars           India           As % of          Karnataka         As % of
                             in crores           total           In crores          total
                                              population                         population
      Total population             102.52                               5.27
      a) Main workers               31.32              30.50            1.94          36.80
      b) Marginal                     8.93              8.70            0.42           8.00
         workers
      c) Total workers
                                    40.25               39.3            2.36          44.80


2.3     Thus while at the all India level the participation of people in the workforce was
        39.3 percent, in Karnataka it was 44. 8 percent. The percentage of main workers
        was 36.8 percent in Karnataka while at the all India level it was only 30.6 percent.


2.4     Unemployment rates in Karnataka are also lower than at the all India level as can
        be seen from the following:
                                             Table I

                     Unemployment rates Karnataka and All India
                               (Current daily status basis)

                                                           (Percentage to labour force)
          Year           1987-88                 1993-94               1999-2000
       Karnataka           5.06                     4.89                  4.61
          India            6.09                     6.03                  7.32

Source: Report of the Taskforce on Employment Opportunities, Planning Commission
        Government of India, July-2001




                                               56
2.5    There is however no reason for complacency. If the live register of the
       employment exchange is any indication there are 18.5 lakh people seeking jobs.
       Besides this, as per the Census of 2001 there are 42 lakh people in Karnataka who
       were doing marginal work. Employment in the organized sector has also not
       shown any notable improvement.


                           Employment in organized sector
         Year             Public Sector         Private Sector            Total
      March 1997                 10.84                7.32                18.16
      March 1998                 10.86                7.57                18.43
      March 1999                 10.92                7.57                18.49
      March 2000                 11.14                7.57                18.64
      March 2001                 11.13                7.67                18.80
      March 2002                 10.90                7.66                18.56


2.6    It is seen that employment in the organised sector has marginally risen over the
       five year period by about 2 percent from 18.16 lakhs in March 1997 to 18.56
       lakhs in March 2002. The organised sector represents about 8 percent of the total
       workforce of the State.


2.7    There is therefore need to evolve strategies for employment and self employment
       in the changed environment.


Strategies and Policies for Employment Generation


1.     Agriculture


2.8    The most important consideration in agriculture has been to increase productivity.
       Employment was an incidental objective. However, if along with agricultural
       production, appropriate linkages are forged with processing, distribution, trade,
       financial and commercial activities, we have a very large potential both for


                                           57
       creating the demand for workers and for improving the terms and quality of work
       particularly with reference to incomes and wages. In fact in Punjab when Pepsi
       established its units, not only did the farmers growing tomatoes start securing a
       better income, but employment was created in transport, storage, marketing and in
       financing these activities.


2.9    Agro processing is a huge global industry today. In order to give impetus to this
       sector, the State budget of 2003-04 announced establishment of Food Karnataka
       Limited, as a special purpose vehicle which will build partnerships between
       farmers and the private sector. As a consequence of this contract farming has
       received an impetus. Getting farmers and modern industries together in this
       manner will generate jobs and improve incomes.      Therefore linking farmers to
       big business via Food Karnataka Limited is a very progressive step.


2.10   The Commission recommends that the inter linkage between farmers and agro
       food industry and big business on contract basis should be expanded
       qualitatively and quantitatively throughout the State, so that the dormant
       employment and income generating potential of this sector could be fully
       tapped. It is also recommended that all regulations and bottlenecks which come
       in the way of such linkage between the farm and industry be removed.


2.11   The Tenth Five Year Plan accords importance to the regeneration of degraded
       forest and watershed development which are highly labour intensive activities. In
       Karnataka there is a programme for comprehensive development of dry lands on
       watershed basis. This takes care of degraded forests, wasteland and dry lands.
       The Secretary to Government, Forest department has proposed for the treatment
       of reserve forest areas of degraded of 12.80 lakh under the watershed technology.
       One of the many benefits which watershed development in any arid area provides
       is reduction of the migration of labour, which will be minimized due to creation
       of local employment opportunities. The department of Watershed Development
       has already covered 29.10 lakh hectares under watershed development. This



                                          58
       leaves a balance of 65.88 lakh hectares remaining to be developed, or 78.69 lakh
       hectares, if degraded forests are included.         The department of Watershed
       Development has formulated a profile of “Comprehensive Development of Dry
       Land on Watershed basis in Karnataka” for the lands at a cost of Rs.5970 crores.
       This can be completed in the next 10 years, in which case the cost per annum will
       be Rs.597 crores, of which Rs. 287 crores are received annually under various
       schemes of the government of India in the Ministry of Rural Development and the
       Ministry of Agriculture and Cooperation. The remaining amount of Rs.310 crores
       should be requested from government of India as a special assistance.
       Alternatively the State government should budget for this amount.


       Sl.no.                    Item                       Rs. crores per annum
       1.       Availability from existing schemes from                      120
                Government of India (Ministry of Rural
                Development and Ministry of Agriculture
                and Cooperation)
       2.       Additionality that can be mobilized by
                the State from
                    1. SGRY allocation                                        82
                    2. Jal Rakshana Scheme                                    40
                    3. Allocation from other                                  45
                        departments
                                                                             167
                    4. Sub Total (1+2+3)
       3.       Special assistance that should be
                demanded from Government of India
                under:
                Additional food grains for Jal Rakshana,
                additional allocation of SGRY and other                      310
                schemes
                Total (1+2 (4)+3)                                            597




2.12   Thus a provision of Rs. 597 crores should be made annually which in ten years
       will be equal to Rs. 5970 crores which is the amount required to fully bring
       drought proofing to the State through watershed treatment.




                                           59
2.13   The Commission strongly recommends that comprehensive development of
       Karnataka’s dry land treatment by watershed technology needs to be supported
       fully and suggests that the proposal of full coverage should be considered on
       top priority. In addition to the manifold benefits of watershed development, it
       will also generate employment and increase the income of the poorest families.


2.14   The other areas in which there is considerable scope for employment is the full
       exploitation of the irrigation potential created by major, medium and minor
       irrigation works.


2.15   The Commission has already recommended separately for the full exploitation
       of the potential under major, medium and minor irrigation projects and
       reiterates that these recommendations should be accepted in toto in the interest
       of employment and higher income and wage which will accrue in greater
       measure to the people of Karnataka.


Animal Husbandry


2.16   In south Karnataka the Karnataka Milk Federation (KMF) has made considerable
       impact and has created employment opportunity and increased the income of the
       poor in rural areas. The KMF should now extend its activities in north Karnataka
       with the same degree of intensity. Processing units should be established to
       process the excess milk produced.


2.17   There is considerable untapped potential for sheep rearing in the State. This sector
       has also the potential to generate considerable increase in employment, if the
       quality and quantity of wool and mutton produced is increased by cross breeding
       with exotic rams.


2.18   The Commission recommends that the Animal Husbandry sector which has
       considerable employment generation potential should be encouraged in greater
       measure. KMF activities should be extended to north Karnataka with the same
       intensity as it is done in the south and milk processing units producing export
       quality products should be established in areas of excess production of milk.


                                           60
Non-farm activities


2.19   Small and medium industries and the service sector generate employment. The
       service sector is the fastest growing sector in the economy.


2.20   The main problem faced by low income groups is the difficulty in obtaining
       credit for small business activities. A study on micro finance conducted by Price
       Waterhouse Coopers, a firm of chartered accountants, reveals among other things
       the following:-
       a.      63 percent of the total credit availed by the rural poor is used for
               consumption purposes.
       b.      Only 37 percent of credit availed by the rural poor is for productive use.
       c.      The overall share of organized sector (banks etc.) in credit flow to the
               rural poor is around 16 percent.

2.21   This non-availability of credit from the organized sector such as commercial
       banks, and developmental banks limits the credit flow to the unorganized sector
       and accordingly limits the productivity improvements in this sector.
       (Source: Planning Commission (2002) Report of special group on targeting ten
       million employment opportunities per year)

       The above study speaks of the rural poor but the condition of the urban poor is not
       different.


2.22   A major problem in all developing countries is that the formal banking system is
       ill suited to meeting the credit needs of the informal sector. Another important
       mechanism through which banks can meet credit needs of the informal sector is
       through the Self Help Groups (SHGs) which provide micro credit for informal
       sector activities. The recovery rates of SHGs are very high (over 90 percent)
       reflecting the impact of peer pressure on recovery. Impact studies of micro credit
       extended by SHGs show very positive outcomes in terms of loans reaching the
       poor and in improving their income levels. (Vide Micro Finance for Rural People.
       An Impact Evaluation NABARD Mumbai 2000). An important aspect of the


                                            61
       programme is that it envisages a process whereby families can begin informal
       sector activities through micro credit extended by SHGs, but can in due course,
       access larger amount of loans directly from banks. Thus this is an important
       mechanism for expanding credit to the informal sector.


2.23   The Commission recommends innovative methods of expanding cottage
       industries, artisan units and small service centers in rural and urban areas by
       organizing self help groups, who will be financed under various programmes of
       government administered by various development corporations as well as by
       banks directly. At the same time the Commission recommends that consumption
       credit needs of self employed in the weaker sections be met through the working
       out of appropriate insurance products for consumption needs like expenses on
       health, education, death and marriage. Government should also arrange for
       skill development according to changing market trends.

Tourism


2.24   Karnataka has a very rich potential in this sector. What is required is to create the
       required infrastructure to make this sector a vibrant part of Karnataka’s economy.


Large and Medium Enterprises


2.25   Karnataka is leading in the sector of information technology. Manufacturing
       industries are also prospering in the country in both the domestic and export
       markets. What is required in Karnataka is to improve the infrastructure with
       regard to power and water. For instance in the Hubli Dharwad region, although
       considerable land has been earmarked for industry since a long time the terrible
       situation with regard to drinking water in the twin cities has discouraged the
       establishment of industries. The development of Karwar port along with the
       establishment of the Hubli Karwar railway line will open up the whole of north
       Karnataka as well as adjoining areas of Andhra Pradesh to the high seas for export
       of products.



                                            62
2.26   In respect of large medium industries the Commission recommends that
       Karnataka should look beyond IT sector. Now that India is picking up in the
       manufacturing industry, efforts should be made to establish manufacturing
       industries in the State. In order that wide spread development takes place the
       infrastructure needs such as drinking water transport and power need to be
       taken care of in the already identified growth centers. The development of
       Karwar port along with the Hubli-Karwar railway line will greatly help in the
       expansion of industries in northern Karnataka as well as in adjoining areas of
       Andhra Pradesh.


Co-ordination for generation of employment


2.27   Several regulatory measures and policies of government adversely affect the
       attraction of investment and hence development and employment. For example
       McKinsey’s Report of Economic Performance of India has come out with the
       finding that there are three main barriers to faster growth in India. These are
       multiplicity of regulations governing product mark etc. (ie. regulations that affect
       either price or output in a sector), distortion in land markets and widespread
       government ownership of businesses. The Report has estimated that these factors
       inhibit GDP growth by around 4 percent. The Report further states that in contrast
       to popular belief the labour laws and poor transport infrastructure constrain
       India’s performance by less than 0.5 percent of GDP a year. Removing the main
       barriers to growth would make India’s economy grow as fast of China at
       10 percent a year (vide Appendix for extracts of McKinsey’s Report of Economic
       Performance of India- McKinsey’ Global Institute in collaboration with
       McKinsey’s India’s office- August 2001). Thus there is need to evolve
       institutional mechanisms to remove policies and regulations which adversely
       affect growth and also to identify job opportunities which are being created and to
       link these with training in the required skills.


2.28   It is recommended that a high power committee be set up under the chairmanship
       of Secretary to government, Labour department and with representatives from
       CII, FICCI, NASCOM, etc. which will identify measures and areas to improve
       employment opportunities and enhancement of skills.


                                             63
                               Appendix


McKinsey’s Report on Economic Performance of India- McKinsey Global
Institute in collaboration with McKinsey’s India office (August 2001)

A decade ago, India and China had roughly the same GDP per capita. But at US $
440, India’ current GDP per capita is now only half that of China. Further India’s
GDP is growing at a mere six percent compared to China’s ten percent. India’s
working age population, however, is expanding ever faster. Unless GDP grows at
closer to ten percent a year, India could face unemployment as high as 16 percent
by 2010.

Our work revealed that there are three main barriers to faster growth. The
multiplicity of regulations governing product mark etc. (ie regulations that affect
either price or output in a sector), distortions in land markets; and wide spread
government ownership of businesses. We estimated that together, these inhibit
GDP growth by around four percent a year. In contrast we found that the factors
more generally believed to retard growth- inflexible. Labour laws and poor
transport infrastructure while important, constrain India’s economic performance
by less than 0.5 percent of GDP a year. Therefore it would be a mistake to focus
growth policies exclusively on these familiar problems. To raise India’s growth
trajectory a broader reform agenda is required.


Removing the main barriers to growth would enable India’s economy to grow as
fast as China’s at 10 percent a year. Annual growth in labour productivity would
double 8 percent. Some 75 million new jobs would be created, sufficient not only
to ward off the crisis in employment, but also to reabsorb any workers that might
be displaced by productivity improvements. Higher productivity means faster
growth with less investment.



                                    64
       Many policy makers and commentators believe it would take investment
       equivalent to more than 35 percent of GDP, an unattainable amount, to achieve a
       10 percent GDP growth rate in India. Our analyses, however, suggest that, at
       higher levels of labour and capital productivity, India can achieve this rate of
       GDP growth with investment equivalent to only 30 percent of GDP a year for a
       decade, less than China invested between 1988 and 1998. Although still a
       challenge, this rate is certainly achievable, since removing the barriers that hinder
       productivity will unleash extra funds for investment equivalent to the consequent
       drop in public deficit and increase the FDI. These sources by themselves would be
       sufficient to increase investment from its current level of 24.5 percent of GDP to
       30.2 percent.


India will enjoy job-creating growth.


       Productivity growth and increased investment will create more than seventy five
       million new jobs outside agriculture in the next ten years compared to twenty one
       million projected as a result of current policies. But while most of the
       productivity, gains and thirty two million new jobs will, indeed appear in the
       modern sectors, forty three million new jobs will be created in the transitional
       sectors, making the move to town worth while for the low paid and under
       employed agricultural workers. Agricultural wages will therefore rise. Although
       there will be job losses in government dominated sectors like steel, retail banking
       and power these will be more than offset by new jobs in transitional and modern
       sectors such as food processing retail trade, construction, apparel and software.
       More workers with more disposable income will stimulate more demand for
       goods and services. Greater demand will create opportunities for further
       investment, in turn creating more jobs.




                                            65
Threat from redtape/ harassment:


      Excessive red tape and regulatory harassment increase costs through the time and
      other investments needed in negotiating complex procedures, limiting the
      incentives of firms to optimize operations. This threat should be liquidated and
      ultimately eliminated through processes like e-governance, transparency and
      accountability.

      Then India will be a very different country in ten years time if these reforms are
      undertaken. With a GDP of around US $ 1100 billion, individual Indians will be
      more than twice as rich, and probably live in the fastest growing economy in the
      world. But of all this is no pipe dream but an achievable goal – if India’s
      government and its people act decisively and quickly.




                                          66
                          Department of Factories and Boilers


2.29   The main function of the department is the enforcement of legislation pertaining

       to safety and health and environment in the registered factories and registered

       boilers. Efficient functioning of the department will ensure control of industrial

       accidents occupation based diseases and minimize property loss. This will help in

       achieving higher productivity in addition to prevention of environmental

       degradation. All these components are directly related and have an influence on

       the national economy.


2.30   The objective of the department could briefly be described as


       (i)    Maintenance of an environment in factories where workmen’s safety and
              health are taken care off

       (ii)   Particular care is taken of safety systems in hazardous processes, to
              eliminate accidents and risk to health of workmen and to the neighbourhood.

       (iii) To ensure standard design, manufacture, operation and maintenance of
              boilers in accordance with regulations in force.

       (iv) To take steps towards social security such as ensuring timely payment of
              earned wages and securing of maternity benefits to workers in registered
              factories

       (v)    To collect information including statistics required for policy formulation
              and fixing of indices like consumer price index.

       (vi) To impart training in safety and creation of awareness of environment that
              will take care of workmen’s health.



                                             67
Administration

Head Office


2.31   The Chief Inspector of Factories and Boilers who is also designated as Director of
       Factories and Boilers, is the Administrative head of the department. There are
       two Joint Chief Inspectors of Factories and one Joint Chief Inspector of Boilers
       with a headquarter’s assistant assisting him in the head-quarters. Three Deputy
       Chief Inspector of Factories, two Deputy Chief Inspector of Boilers, one medical
       inspector of factories, one occupational health specialist, one senior inspector of
       boilers (Boiler Testing and Training Cell), one senior Inspector of Factories
       (Women and Child Labour) and one Inspector of Factories (Non Technical) are
       directly working under the administrative control of the Chief Inspector of
       Factories and Boilers.

Regional and Divisional Offices


2.32   The Inspectorate of Factories operates in eight regions and the Inspectorate of
       Boilers operates in two administrative regions in the State. Three offices of the
       Deputy Chief Inspector of Factories and two offices of the Deputy Chief Inspector
       of Boilers are located in Bangalore, while one office of the Deputy Chief
       Inspector of Factories each is located at Mysore, Mangalore, Hubli, Belgaum and
       Gulbarga. 31 divisional offices in the factory wing and nine divisional offices in
       the boiler wing are located across the State with offices at Bangalore, Kolar,
       Doddaballapur and Mysore, Mangalore, Udupi, Shimaoga, Hubli, Gadag,
       Belgaum, Gokak, Bijapur, Gulbarga, Raichur, Bellary, Davangere and Tumkur.



2.33   The Chief Inspector of Factories and Boilers has delegated some of his powers to
       the regional and the divisional officers for effective administrative control and
       efficient enforcement of legislations. The two Deputy Chief Inspector of Boilers
       are vested with original jurisdiction for administration of the legislations.



                                             68
2.34   Legislations enforced by the department:

       The Factories Act, 1948;
       1. The Karnataka Factories Rules 1969
       The Payment of Wages Act 1936;
       1. The Karnataka Payment of Wages Rule 1963
       The Maternity Benefit Act, 1961
       The Karnataka Maternity Benefit Rules, 1963
       The Child Labour (Prohibition and Regulation) Act 1986;
       The Environment (Protection) Act, 1986 and rules made there under
       The Control of Industrial Major Accidents Hazards Rules 1994.
       The Chemical Accident (Emergency Planning Preparedness and Response) Rules
       1996;
       The Indian Boilers Act, 1923;
       1. The Karnataka Boiler Rules 1982
       2. The Karnataka Economizer Rules 1959
       3. The Karnataka Boilers Attendants Rules, 1962
       4. The Karnataka Boiler Operation Engineers Rules, 1959


Major functions of the Inspectorate of Factories


2.35   These are as follows :


       1. To register the factories coming under the purview of the Act and approve
          their locations, building, place and layout, keeping in view the requirement of
          lighting, space, ventilation, and activities around factories and the habitation.


       2. To spread knowledge by extension activities such as knowledge of relevant
          laws, guiding principles in safety policy, on site emergency plans, and
          assessment of measures established for monitoring work environment.




                                            69
      3. To oversee the safety, health and welfare of workers employed in registered
           factories and ensure timely payment of earned wages by the management to
           the workers.


      4. To recognize competent persons to carry out tests and examinations wherever
           required.


      5. To prescribe the methods to be adopted for compulsory disclosure of
           information about hazardous processes.


      6. To assist the district administration in preparation and implementation of
           onsite emergency plans and also disaster management control plans.


      7. To investigate accidents and enquire into complaints from trade unions.


      8. To bring under the purview of the Act the unregistered factories.


Major Functions of the Inspectorate of Boilers

      1. To register all the boilers / economizers steam lines coming under the purview
           of the Act.


      2.   To approve the design and drawing of boilers/ economizers/ steam lines/
           mountings and fittings as per approved drawings.


      3. To periodically inspect and issue certificate of fitness to run such boilers/
           economizers/ streamlines/ annually or bi annually.


      4.   To suggest repairs/ alteration for such boilers/ economizers/ steam lines
           which are not fit for safe working/ operations, and also to supervise such




                                           70
            repairs being undertaken by the owner of the boiler/ economizer/ steam line
            through authorized repairers after getting approval from the department.


       5. To conduct welder’s examination as per Indian Boilers Act 1950 and issue
            certificate.


       6. To enforce Boiler Operation Engineers Rules and Boiler Attendant Rules and
            to conduct Boiler Operation Engineers and Attendants examinations and also
            to impart training to boiler attendants and operation engineer to run boilers
            safely and efficiently.


       7. To conduct stage inspection during the manufacture of boilers / economizers /
            steam lines / mountings / fittings.


Coverage


2.36   The factories, which come under the purview of the Act, are those, which employ


       a)       10 workers with power
       b)       20 workers without power and
       c)       those which are notified by the government under the Act irrespective of
                Horsepower or strength of workers


2.37   In Karnataka there are approximately 9500 registered factories and 2500
       registered boilers in which about 10 lakh workmen are directly employed. This
       large community is required to be protected from industrial accidents and
       occupational diseases. The department of Factories and Boilers is responsible for
       the enforcement of various legislations so as to ensure the achievement of the
       objectives of the department.




                                              71
Supporting activities

2.38   In order to carryout the functions effectively, certain supporting activities are also
       institutionalized. These are

A.     Karnataka State Safety Institute

2.39   The objective of the Institute is to conduct training programmes in different
       modules catering to the needs of employees at the shop floor level as well as at
       the supervisory levels.

2.40   In 2001-02 the target of the programmes to be conducted was 64 as against which
       only 30 programmes could be conducted.            Training was imparted to 1500
       employees at the rate of about 50 workers per programme. This number is very
       small when we consider that there are 10 lakh workmen to be trained. The
       institute will be able to conduct more programmes if they can prepare modules of
       their programmes with the help of their departmental officers and in consultation
       with experts in the concerned field. The conduct of the programmes can be
       entrusted to engineering colleges, on the basis of the modules evolved by the
       department. This will generate some revenue to both the department and the
       college since the factories should pay for the training imparted. This will also be
       a test of the value of the training since the factories will be willing to pay only if
       the training is practical and useful.

2.41   The Commission recommends that the State's Safety Institute may confine its
       work to formulating course material with the help of departmental officers,
       experts and industry managers for different modules and arranging
       programmes utilizing engineering colleges in the districts. The Commission
       also recommends that the course material prepared for different modules
       should be made utilitarian to the industry so that the managements will be
       interested in sending their employees for training by paying the course fee,
       which should be adequate to meet the cost of conducting programmes as well as
       preparing the course material.


                                               72
B.     Activities of Pressure Vessels and Plant Safety Monitoring Cell


2.42   This cell is created to oversee the safe working of pressure vessels, lifting tackles,
       hoists and related equipment and machinery used in registered factories. The
       department makes its schedule of visits and targets regarding inspections are
       given to regional and field officers.


2.43   The cell recognizes competent persons to test pressure vessels, lifts, hoists,
       presses etc., by issuing competency certificates. During the year 2002-03 the cell
       has issued sixty two competency certificates to forty two individuals and twenty
       organizations. A special workshop has also been conducted for these persons to
       create awareness and to advise them on the subject. These competent persons
       carry out examinations and tests wherever required.

C.     Central Safety Monitoring Cell


2.44   This cell was established on the backdrop of the Bhopal tragedy to monitor the
       safety aspects in hazardous and highly hazardous industries. The objective is to
       prevent major accidents and disasters that are likely to occur in an industry.

2.45   The Central Safety Monitoring Cell needs to continuously update its knowledge
       with regard to modern manufacturing processes.                    The Commission
       recommends the conducting of workshops jointly by the department and the
       Indian Institute of Science or other expert body each year on various modules
       of knowledge needed to run this cell efficiently. The cell should also be enabled
       to access the latest information available in the field by providing it access to
       relevant scientific journals.

D.     Activities of Boiler Testing, Training and Examination Cell


2.46   The rate of manufacturing boilers, economizers, mounting, fittings and other
       pressure parts has considerably increased. To ensure safe design, to conduct



                                               73
       training and examination to suitable persons who are engaged in boiler
       manufacturing operation and to conduct examinations for welders who are
       required in the manufacture of boilers, a separate boiler testing training and
       examination cell has been constituted.     This cell is giving training to boiler
       attendants, welders and boiler operation engineers.

2.47   The cell also advises manufacturers in adopting international standards in design,
       material and manufacturing technology.

2.48   The Commission considers that all this fund of knowledge on boilers as well as on
       safety technology could be made a specialized optional subject in BE Mechanical
       course in the Technical University. Such BE Mechanical students after
       completion of their course could be placed by the department of Factories and
       Boilers as apprentices with factories for a year. They can thereafter be given
       competency certificates, which will help them to get employment.

2.49   The Commission recommends an optional on boiler manufacture and
       management as well as factory safety technology as a paper in BE Mechanical
       course.

E.     Industrial Hygiene Laboratory- Health Survey of Workers Working in
       Hazardous Industries

2.50   There is an Industrial Hygiene Laboratory in the department. This laboratory is
       having sophisticated instruments which are very useful in health survey of
       workers working in hazardous units. The medical inspector of factories who
       undertakes these surveys and checks has visited many factories and reviewed
       whether the health checkups of workers engaged in hazardous manufacturing
       processes have been conducted according to the law and whether records have
       been maintained. During the period 2003- 2004 a massive special health camp
       has been conducted to observe the National Safety Day on 4th March 2003. 600
       workers have been benefited by this camp. The laboratory proposes to maintain a
       database regarding health of workers in hazardous process units.



                                           74
Inspection process


2.51   As already mentioned the State has 9500 factories and 2500 boilers registered
       with the department. The industry employs around ten lakh workmen. The present
       strength of the departmental officers excluding the director is sixty six amongst
       whom fifty two are field officers. Twenty two posts are kept vacant due to
       various government policies. The present strength does not enable the department
       to adhere to the norm of inspecting one hundred and fifty units per officer per
       year as suggested by First Labour Commission and the Central Boilers Board
       respectively. In view of excessive workload the department is able to cover only
       40 percent of the units. The units are selected for inspection at random. Self-
       certification / certification by recognized competent persons is also accepted.
       Hazardous factories, which are 800 in number, and major hazardous accident
       units, which number 70, are inspected twice a year.


Contents of Inspection Reports


2.52   The inspecting officers are enjoined upon to inspect and send an inspection report
       to factories for rectification of defects noticed. There is no prescribed inspection
       proforma.


2.53   The Commission recommends that inspection report proforma should be
       prepared in which information to be secured on all the key components of a
       factory are indicated.   The compliance of observations made by the inspecting
       officer should be watched for implementation.




                                           75
Mobility of Inspecting Officers

2.54   It was represented that in the department the entry level officer is a Class ‘B’
       gazetted officer with a technical degree as qualification; the next higher grade is
       Class ‘A’. These officers undertake inspections of factories, some of which are
       highly capital-intensive units. In the absence of departmental conveyance these
       officers, when they go for inspection, have to depend upon public conveyance.
       The department has requested the government on several occasions to provide
       vehicles to at least the senior class ‘A’ grade officers. The Commission has
       considered this plea and recognizes the need.

2.55   The Commission recommends that all Class I officers of the department should
       be permitted to purchase vehicles on bank loan, for which some interest subsidy
       may be given by government as also reimbursement of petrol expenses at a
       reasonable level.


Inspection Kit


2.56   The inspecting officers of the department are undertaking inspections without
       using essential tools and equipments, since these are not available with them.
       However qualified and experienced an engineer might be, undertaking inspections
       of machinery without the necessary tools and equipment will not be productive.
       In view of this therefore the Chief Inspector of Factories and Boilers was
       requested to prepare a list of tools and equipments required by inspecting officers
       at various levels. The same is indicated below.




                                           76
                           Kit required by inspecting officers


Sl.no.        Name of           Applicability                       Advantage
           equipment/
            instrument
  1.     Sound level meter To measure the noise          Provides prevailing noise levels at
                           level in industry and        any workplace, as the instrument
                           work environment             will be portable. Provides
                           monitoring                   instantaneous understanding and
                                                        helps in taking corrective
                                                        measures

  2.     Lux meter           To measure the light       Provides availability of light at
                             intensity in the work      work place and helps in taking
                             environment                corrective measures.

  3.     Humidity and      To measure the               Provides understanding and helps
         temperature meter humidity and                 in taking corrective measures
                           temperature at
                           workplace
  4.     Earth ground      To measure the current       Helps in protecting the workers
         resistance tester resistance and               being exposed to electrical
         kit               amperage in the              hazards. And this understanding
                           workplace                    helps taking of corrective
                                                        measures
  5.     Ph test strips      To measure the ph          Helps in identifying the acidity
                             value of water             and alkalinity of water/ liquid.
                                                        Helps in suggesting corrective
                                                        measures to overcome scaling and
                                                        corrosion problem.
  6.     Portable            To measure the             Helps in detecting the contents of
         combustion gas      contents of the flue       the flue gas and thereby in
         analyzer            gases of a boiler and      detecting whether the proper
                             furnace                    combustion is taking place in the
                                                        boiler/ furnace.

  7.     Programmable        To measure the             Helps in identifying the thickness
         thickness guage     thickness of a shell of    of vessels at the time of
                             any boiler, pressure       manufacturing before
                             vessel, storage vessel     commissioning and after usage.
                             and any other              Helps in taking corrective
                             equipment in which the     measures
                             thickness of the metal
                             is a critical component.


                                           77
8.    Flaw detectors     To identify the flaw in     Identifies the flaws, provides
                         the metal used in any       instantaneous understanding and
                         pressure vessels,           helps taking corrective measures.
                         storage vessels and         Helps in prevention of accidents.
                         reaction vessels which
                         are highly critical when
                         they are in process.
9.    Screw guage ISI    To measure the              Identifies the ware and tear of any
      Standard           thickness of any small      component. Helps in visual and
                         critical components         direct physical examination of the
                         used in various             component to measure the inner
                         processes.                  diameter and outer diameter
                                                     including the thickness.
10.   Digital Camera     To photograph any           Helps in obtaining the photographs
      make (Sony)        workplace, work             of the workplace, scene of
                         environment,                accident in an industry, prevailing
                         equipment, method of        work conditions etc.
                         work etc.

11.   Handy video        To videograph any           Helps in understanding the
      camera – make      process which is            workplace, the process and work
      Sony               critical in nature,         environment (fumy, dusty etc.) It
                         workplace, work             also helps to review of critical
                         environment, the place      analysis of the problems and take
                         of accident and the         corrective measures
                         surrounding of an
                         industry
12.   A Hammer- ISI      In industries to test for   Helps in physical identification of
      standard           soundness of a material     the soundness of the material vis-
                         particularly used for a     a vis corrosion metal erosion etc.
                         boiler, economizer and      and taking of corrective measures
                         related equipment
13.   Torch- ISI         To conduct visual           Helps in conducting better visual
      Standard           inspections in confined     inspections of confined spaces
                         spaces                      with poor lighting.
14.   Safety goggles –   To conduct inspections      Helps in protecting officers against
      ISI standard       in hazardous                any harmful substances likely to
                         workplaces                  cause injury to the eyes.
15.   Hand gloves- ISI   To conduct inspections      Helps in protecting officers against
      standard           in hazardous                any harmful substances likely to
                         workplaces                  cause injury to the hands.
16.   Ear plugs- ISI     To conduct inspections      Helps in protecting an officer in
      standard           in high noise places        harmful effects of noise whenever
                                                     he visits noise level zones for
                                                     inspection.



                                        78
 17.     Respirators- ISI       To conduct inspections      Helps in protecting an officer
         standard               in hazardous                against any harmful substances
                                workplaces                  likely to cause bodily injuries.
 18.     Vernier Callipers      To measure the critical     Identifies the ware and tear of any
         –ISI standard          dimensions of a             component. Helps in visual and
                                components of various       direct physical examination of
                                equipments and              components, to measures the inner
                                instruments.                diameter and outer diameter
                                                            including the thickness.
 19.     Helmet-ISI             To wear it during the       To protect against any falling
         standard               course of inspection        objects likely to cause head injury.
 20.     Apron-ISI              To wear it during the       Prevents any bodily injury likely
                                course of inspection of     to be caused to the inspecting
                                hazardous areas where       officer under hazardous area of
                                in acid, alkaline and       inspection. Prevent cloth soiling.
                                other harmful
                                substances are likely to
                                be present, entry to any
                                confined space
                                including a boiler.



Sl.no.   Level of office     Particulars of items with serial      No. of        Total cost
                               numbers from the above               sets
                             tabulated list plus extra items      required       Rs. lakhs
1.       Head office        Sl.nos. 1,2,4,6,7,8,10,11, plus           1             8.59
                            gas detectors and dead weight
                            pressure gauge tester plus
                            ultrasonic thickness gauge
2.       Regional           Items against all serial nos.             8            16.34
         offices            except serial nos. 6, 7 and 8 plus
         (Factory           gas detector plus ultrasonic
         wing)              thickness gauge
3.       Regional           Items against serial nos. 5, 9, 10,       2             2.40
         offices            11, 13, 18, 19 plus ball peen
         (Boiler wing)      hammer plus ultrasonic
                            thickness gauge
4.       Divisional         Items against serial nos. 1 to 5,        31            46.27
         level              9, 10, 12 to 20 plus gas detector
         (Factories)        plus ultrasonic thickness gauge
5.       Divisional         Items against serial nos. 5, 9, 10,      11             6.62
         level              13, 18, 19, plus ball peen
         (Boilers)          hammer plus ultrasonic
                            thickness gauge
Total cost                                                                         80.22



                                               79
       The inspection kits required to give credibility to the inspectors of the department
       and make the inspections effective cost only Rs.80.22 lakhs.


2.57   The Commission takes serious note of the fact that such essential items of
       inspection kit have not been provided to the inspecting officers, thereby forcing
       them to carry out inspections without tools.      This effects the credibility of the
       inspections.    The Commission recommends that the department should
       purchase all the inspection tools and equipment required by inspecting officers
       at all levels as indicated in this report very expeditiously.


Establishment of work environment monitoring center and testing laboratory


2.58   The department has proposed that this laboratory should be established since it
       will help the departmental officers to gain technical knowledge inputs as well as
       provide basic infrastructural facilities needed for the effective implementation of
       law. In the absence of such a laboratory the measurements, testing and
       examination of any equipment are being totally done by a third party, mostly
       private entrepreneurs. The department is therefore constrained to take cognizance
       of these documents given by private parties and issue necessary guidance and
       orders without having any facilities for reference in the department. It is also
       reported that sometimes the quality and reliability of the documents issued by the
       private parties may fail to stand the test of law. This laboratory has also been
       proposed as “ Industrial occupational safety, health and environment centre’ in
       the Tenth Five Year Plan at a cost of Rs. 135 lakhs. The present proposal has
       stated that the cost would be Rs. 200 lakhs.


2.59   Since it is a Tenth Five Year Plan scheme of the department the Commission
       recommends that government may examine the merits of the proposal for
       establishment of a work environment center and testing laboratory.




                                             80
1.       Inadequate knowledge input


2.60     The officers in both factory and boiler wings are required to deliver specialized
         knowledge to improve the safety skills of the factories and boilers they inspect.


2.61     Therefore the Commission recommends that the inspection officers be assisted
         to continually upgrade their skills through workshops, training programmes
         and library facilities.


E-governance


2.62     The department considers that the adoption of e-governance will enable it to be
         more effective, efficient and responsive. At the same time the department
         considers that e-governance would save time and cost in the discharge of its
         duties. The cost of computerization proposed is as under:


                                            Table
                                    Computer requirements


 Sl. No.        Details of office       No required     No. in position    Shortfall (No.)
 1.         Head office                      15                5                  10
 2.         Regional level offices           10                5                  5
 3.         Divisional level offices         42                6                  36
 Total                                       67                16                 51


Note: all these computers should be networked


2.63     The cost of computerization as estimated by the Director of Factories and Boilers
         is as given below:




                                              81
                                         Table
                                Cost of Computerisation
        Sl. no.                 Items                            Cost
                                                               Rs. lakhs
        1.        Cost of 51 computers           with           30.00
                  accessories
        2.        Software development                           25.00
        3.        Area networking                                10.00
        4.        Recurring / maintenance                         1.00
        Total cost                                               66.00


2.64   The provision of computers will help the department to create a useful database,
       standardized procedures and monitor inspections and the remedial action taken
       after the inspection.

Database for the industrial hygiene laboratory


2.65   The above mentioned laboratory proposes to have a database of health workers
       working in hazardous process units. This can easily be developed by prescribing
       forms in which the health checkup reports of each worker will be contained. The
       periodicity of receipt of these forms from each such hazardous unit, should be the
       same as the prescribed periodicity for the health checkups of the workers. Each
       time the checkup is carried out a copy of this form indicating for each worker the
       health status for all the parameters prescribed in the form should be sent to the
       divisional office concerned where it should be scanned into the computer. This
       will enable the department to ensure that the units take adequate action to improve
       the health of the labour force.


2.66   The Commission recommends the acceptance of the proposal of e-governance
       as suggested by the department with the condition that suitable systems should
       be evolved which will enable the department to function effectively.




                                            82
Revenue matters


2.67     The tariff of fee payable for licence and annual renewal of the same by factory
         and boiler units was fixed in 1993 and was revised by 100 percent in the year
         1999 (ie after a period of six years). It is therefore four years after the last
         revision. It is recommended that the tariff across the board may be increased by
         50 percent. The additional revenue should be utilized to provide inspection kits to
         the inspecting officers. This increment in tariff is considered essential since all the
         inspecting officers will have to be provided with inspection kits required for
         carrying out inspections properly, help in the mobility of the inspecting officers,
         and provide funds for the purchase of computers.


2.68     According to budget document the receipts budgeted for the year 2003-04 from
         the factories and boilers along with other details are given here under:

                                             Statement I


                         Increase noticed by upward revision of tariff


                                                                                      Rs. lakhs
       Revenue head of account           Budget     Anticipated    Addition by    Annual receipt
                                        estimate    now by the      revision of   after revision of
                                        2003-04     department    tariff by 50%         tariff
 0230-00-103-0-00                          100          64               32               96
 -fee for inspection of steam boilers
 0230-00-104-0-00                         300           305          152.50            457.50
 -fee realized under Factories Act
 Total                                    400           369          184.50            553.50




                                                   83
2.69   Besides this, by levying fees on some new sources such as site emergency plan
       approval of hazardous and other than major hazardous units, endorsement of
       material certificates of pressure parts, calibration of testing machines, giving of
       technical knowledge in the design of boilers, economizers, feed water heaters,
       steam accumulators, de-aerators, flexibility analysis of steamlines etc, an
       additional Rs. 7.85 lakhs is expected to accrue. Thus in all Rs. 184 + 7.85 =
       191.85 lakhs will be the additional accrual of funds.


2.70   Such an annual increase will in one year recover the cost of investment on the
       purchase of inspection kits of Rs. 80.22 lakhs and investment on e-governance of
       Rs. 66 lakhs. Even the marginal cost of increasing the mobility of inspecting
       officers by providing some interest subsidy for purchase of cars for undertaking
       inspections in self driven cars will easily be recovered in the first year itself.


2.71   The Commission recommends that the inspection fee across the board be raised
       by 50 percent for all items for which fee is charged.




                                             84
                                        Labour

2.72   The main objective of the Labour Department is to promote harmonious
       relationship between employees and employers in industry, trade, plantations etc,
       keeping in view the legitimate interest of workers. The prevention of strikes,
       lockouts, work stoppages and the settlement of industrial disputes through
       effective intervention and conciliation are important functions of the department.
       Extending the benefits of various labour enactments to the workers, fixing the
       minimum wages for various occupations under advice from the Minimum Wages
       Advisory Board and committees, and ensuring their implementation are also
       important functions. In order to achieve these objectives several Central and
       State laws and the International Labour Orginisation’s recommendations and
       conventions notified by the Government of India are implemented. This also leads
       to bringing about improvement in socio-economic conditions of workers.

2.73   Unfortunately, the practice of child labour still persists in our economy, which in
       the context of the rights of the child, including the child’s right to education,
       needs immediate remedial legal and administrative measures.


2.74   India has the largest number of persons working in the informal sector, which
       provides livelihood to about 90 percent of the population. Though the contribution
       of this sector to the economy is enormous, a large proportion of the workforce in
       rural and urban informal sectors is illiterate, vulnerable, isolated and poor. In
       addition, accessibility of the informal sector to welfare benefits such as health
       care, old age pension, maternity benefits and insurance has been poor or non
       existent. Hence the task to design social security tools to meet the challenge of the
       present predicament of unorganized labour is a major problem.

2.75   The only way the poor and unorganized can benefit from increases in the State’s
       wealth is by greater participation of these sections in the activities which lead to
       growth. The impact of increased wage and income to the unorganized sector is




                                            85
       perceptible in growth centers like the metropolis of Bangalore, or areas
       surrounding industrial projects.

2.76   A pragmatic solution to the social security problems of the unorganized sector
       would be to assist them in taking insurance policies for health, education,
       unemployment, etc. The premium could be paid through the post offices which
       are in any case now seeking additional sources of revenue.


2.77   The Commission therefore recommends that the Labour department should
       negotiate with insurance companies and the postal department for taking up
       multi benefit insurance policies for the unorganized sector which will provide
       along with life insurance some essential benefits such as health care, accident
       relief, education fund, housing loan and temporary unemployment dole for
       which the premium could be paid at the nearest post office. The premium could
       be as low as Rs. 50 per month (with options to subscribe higher premium,) in
       order that a wide segment of the unorganized sector both from rural and urban
       areas is covered.


Revenues


2.78   The Labour department administers laws, which aim at the welfare of the
       workers. This is not essentially a revenue earning department, but in the process
       of implementation of the laws some revenues from fees accrue to the department.
       These revenues vary from year to year because the Karnataka Shops and
       Commercial Establishment Act 1961 empowers the department to collect the fees
       once in five years. Therefore different establishments will have different years in
       which they have to make payment of their fees. In the years 2001-02 the revenue
       from fees was Rs. 59.53 lakhs, in the year 1998-99 it was Rs. 178.34 lakhs while
       in other years from 1996-97 to 2001-02 it has fluctuated between these two
       figures. The Department of Labour has informed the Commission that revenue
       accrual from the department could be taken to be approximately Rs. 1 crore on an
       average per annum.


                                           86
2.79   At present the fee is charged to the establishment on the basis of slabs (ranges) of
       employees strength within which the establishment of the employer falls i.e., the
       employers are classified as having up to five workers, between six to twenty five
       workers, etc. This gives a scope to the employer to suppress the strength of
       employees in the information given to the department. For example, the Motor
       Transport Workers Act 1961 the establishment which employs five persons is
       charged Rs. 100 per annum. But if the employees strength is six to twenty five the
       fees is Rs. 200 per annum. Therefore the department has recommended that the
       employee slab system for levying fees under various Acts should be replaced by a
       formula in which a certain minimum fee is collected along with certain amount
       multiplied by the number of employees in the establishment. The department’s
       proposals to increase revenues in respect of certain important revenue yielding
       Acts are given Actwise hereunder:

1.     Motor Transport Act 1961

2.80   The fee is prescribed under this Act on the basis of the number of workers
       employed according to the slabs range of workers in which it falls. There are ten
       slabs of worker’s strength starting from up to 5 workers with Rs. 100 as fee for
       the establishment and ending with employees’ strength of 1500 and above for
       which Rs. 5500 is charged annually. The department recommends that instead of
       having ten slab systems, a formulae may be adopted. The formula suggested is
       Rs. 200 + 20n where ‘n’ is the number of workers. In order to avoid evasion there
       is a further suggestion that there should be lesser fees at higher ranges.

2.     The Trade Unions Act 1926

2.81   The fee which is Rs. 10/- is paid only once at the time of registration. This has
       encouraged the registration of many non-serious rival trade unions. The
       department is of the opinion that there is need to have a slab based on the total
       number of workers in the establishment and the nature of the industry. The slab is
       given hereunder



                                            87
                       Unorganised Sector                           Rs. 500
 Organised sector up to 500 workers                                 (Rs. 1000 + 5n) *
 Organised sector 500 and above                                     (Rs. 1000 + 10n) *
 * Where ‘n’ is the number of workers in the establishment




3.     The Plantation Labour Act 1951


2.82   There are eight slabs with regard to the number of employees. The first slab is up
       to 4 employees for which the present fee is nil. In the slab of 5 to 10 employees
       the fee is Rs. 150 and in the last slab of 151 and above employees the fee is Rs.
       3000. The department has recommended that a formula : Rs. 150 + 20 n may be
       fixed.


4.     Karnataka Shops and Commercial Establishment Act 1961


2.83   There are six slabs of with regard to the number of employees in which the
       establishments are to be classified as per the present dispensation. The
       recommendation is that for Bangalore city the formula should be Rs. 250 + 250 n
       and for other cities 150 + 200 n, where ‘n’ is the number of employees. It needs
       to be noted that the Act is not applicable to rural areas.


5.     The Contract Labour (Regulation and Abolition) Act 1970


2.84   There are six slabs prescribing different fee for each slab. The recommendation
       of the department is that a simple formula viz 200 + 20 n may be applied where
       ‘n’ is the number of employees.




                                             88
6.     Inter State Migrant Workmen (Regulation of Employment and Condition of
       Service) Act 1979

2.85   As there is hardly any registration in Karnataka the rate system need not change.


7.     The Beedi and Cigar (Conditions of Employment) Act 1996

2.86   There are seven slabs prescribing different rates ranging from Rs. 30 to Rs. 3000.
       The rationalized formula suggested is 50 + 20 n for units using power and
       machinery and 30 + 10 n for units not using power and machinery where ‘n’ is the
       number of workers.

2.87   The department was requested to give the impact of the application of such a
       formula in comparison with the present receipts. The department has provided
       information in respect of two Acts, which are tabulated below:

               Items              Motor Transport         The Karnataka Shops and
                                  Workers Act 1961       Commercial Establishment
                                                                  Act 1961
       Declared number of        0.30 lakhs              4.36 lakhs
       workers
       Expected number of        1.50 lakhs              7.00 lakhs
       workers
       Revenue realized          Rs. 1.36 lakhs          Rs. 495.24 lakhs *
       Additional revenue        Rs. 30.00 lakhs         Rs. 1090 lakhs *
       expected as per
       declared number of
       workers if formula
       applied.
       Expected as per           Rs. 150 lakhs           Rs. 1750 lakhs *
       estimated number of
       employees if formula is
       applied
       Additionality over and    Rs. 28.64 lakhs         Rs. 594.76 lakhs *
       above present revenue
       (Basis of declared
       number of workers)
       Additionality over and    Rs. 148.64 lakhs        Rs. 1254.76 lakhs *
       above present revenue
       (Basis of estimated
       number of workers)


                                              89
       * This is for a block period of five years 1997-2002 since this fee is collected
       once in five years from each payee. But the strength of workers is for the year
       2002, whereas in respect of Motor Transport Workers Act it is for the year 2002.


       Note: The department has worked out the above table as an illustrative model of
       the additional revenue that can accrue if the present system is replaced by the
       formula model.


2.88   The Commission recommends that instead of having a slab system for
       assessment of fee payable by each establishment, the system proposed by the
       department in which assessment is made on the basis of a formula be accepted.
       The additional revenue generated should be given to the department of Women
       and Child Development to run residential ‘bridge’ courses for child labourers
       so as to enable them to join normal schools thereafter.




                                          90
  CHAPTER III
CROP HUSBANDRY
                                   CHAPTER 3

                              CROP HUSBANDRY

I.    Agriculture Farms

Introduction


3.1   Agriculture continues to be the single largest occupation in the country despite the
      fact that each succeeding census shows an increase in urbanization. Agriculture
      gives livelihood support to about two thirds of the country's population and
      contributes 24.2 percent to the gross domestic product. Besides providing the
      most basic of all requirements, food grains, it accounts for nearly 15 percent of
      the total export earnings and provides raw material for many diverse industries.
      Improvement in this sector continues to be the most important contributory factor
      to economic growth and prosperity. In Karnataka, according to the 2001 census,
      131 lakhs of men and women, or 55 percent of the work force are engaged in
      agriculture.


3.2   One of the country’s greatest successes since Independence has been the
      achievement of food security through increased agricultural production. A number
      of measures, such as expansion of net sown area, heavy investment in irrigation,
      development of rural infrastructure, land reforms and minimum support prices
      have contributed to the increase in agricultural production. However the single
      most important factor which ushered in the Green Revolution has undoubtedly
      been the use of high yielding hybrid seeds, along with agricultural inputs such as
      fertilizers and pesticides and improved crop production technologies.            In
      Karnataka also, agricultural production has increased, reaching an all time high in
      2000-01 with the production of 109.60 lakh tones of food grains.




                                          93
3.3   However, it is a matter of concern that during the 1990s the growth of agriculture
      decelerated as compared to the 1980s.The overall growth rate of crop production
      declined from 3.72 percent per annum to 2.29 percent per annum and productivity
      from 2.99 percent per annum to 1.21 percent. The deceleration in the growth rate
      of production of food grains was particularly steep.


3.4   In Karnataka also there was a steep decrease in agricultural production during the
      year 2002-03 when there was drought, emphasizing once again the dependence of
      Indian agriculture on the vagaries of the monsoon.


3.5   Besides this, the per unit area productivity of our crop commodities is much lower
      than those of other major crop producing countries. For instance the yield of
      paddy, in kilograms per hectare, in India is 2929 and wheat is 2583 whereas it is
      6321 and 3969 respectively in China. With continued neglect of natural resources
      like land and water, non maintenance of assets built at great public cost such as
      tank and lift irrigation schemes and unsustainable practices like excessive use of
      water together with unbalanced use of fertilizers, it is possible that the growth rate
      of agricultural production will decrease still further if correctional steps are not
      taken soon.


3.6   One important factor in the increase of agricultural production is the use of good
      seeds. Except in the case of hybrid crops, most farmers still follow the time
      honoured practice of keeping aside goods seeds at the time of each harvest to use
      during the next sowing season. However, the productivity can be increased by
      about 20 percent by use of certified or quality seeds which are generated from
      scientifically produced breeder seeds and raised under controlled conditions. In
      the case of hybrid crops the seeds sown are invariably certified seeds. In the case
      of other crops the usage is much less.


3.7   In the 1950s and 1960s, as part of the efforts of government to increase
      agricultural production, a large number of government agricultural seed farms



                                           94
       were established where government officials were directly involved in the process
       of producing foundation seeds. The foundation seeds were raised from breeder
       seeds which were produced by scientists of the Agriculture Universities and
       government research stations. The foundation seeds raised on the government
       farms were then given to government organizations such as seeds corporations to
       raise certified seeds which these corporations and agencies then sold to the
       farmers. In the absence of private seed companies it was necessary, at that time,
       for government to initiate such measures and to engage directly in the production
       of certified or quality seeds.


3.8    In Karnataka there are forty nine seed farms established by the government, of
       which thirty six are in the State sector under the control of the department of
       Agriculture and thirteen are with the zilla panchayats. In addition to these seed
       farms there are fourteen agricultural school farms, two agricultural farms in
       Kudige and Bagalkot, three farms which are designated as Rural Development
       Training Centre Farms, four Agricultural Development Centres and one Indo
       Japanese Agricultural Training and Education Centre in Mandya. However after
       the rationalization of training centers, only one center in each district is now
       functioning as a District Agricultural Training Centre. The forty nine seed farms
       however are still being utilized for the purpose of raising foundation seeds from
       breeder seeds, which are supplied by the two Universities of Agriculture Sciences
       in Bangalore and Dharwad.


Terms of reference


3.9    The terms of reference given to the Commission are with regard to increasing
       the revenues from agricultural and horticultural farms.


3.10   As per Government of India seed replacement norms, Karnataka requires annually
       approximately 7 lakh quintals of certified / quality seeds of various agricultural
       crops. These certified seeds are to be raised from foundation seeds of which the
       quantity required is approximately 16,000 quintals (excluding groundnut seeds).


                                           95
       The foundation seeds raised in the government seed farms are given to the
       Karnataka State Seeds Corporation, the National Seeds Corporation, the
       Karnataka Oil Federation and a number of private seed companies for the
       production of certified seeds. The seed companies indent for breeder seeds
       through the Seeds Association and the State department of Agriculture to the
       Government of India eighteen months in advance of requirement. The breeder
       seeds are supplied by the University of Agricultural Sciences and other
       government institutions. There is sometimes a deficit of 30 – 40 percent in the
       supply of breeder seeds. The Agriculture department uses the breeder seeds
       supplied by the University of Agriculture Sciences in the Government seed farms
       to raise foundation seeds which are then given to the Karnataka State Seeds
       Corporation, the National Seeds Corporation, the Karnataka Oil Federation, and
       private seed companies for raising certified seeds. These agencies are also
       responsible for the marketing of the certified seeds.


3.11   The government has established the Karnataka Seed Certification Agency which
       certifies the seeds produced by government and private agencies. However,
       certification is not mandatory. Certified seeds are slightly more expensive than
       non-certified seeds.


3.12   Almost all the government agricultural farms in Karnataka were established in the
       first two decades after Independence. This was a time when the development of
       agriculture was entirely in the hands of the government and it was necessary for
       the department of Agriculture to establish their own farms in order to ensure that
       seeds of good quality were available to farmers. The total area of the seed farms
       in Karnataka is 952.67 hectares, of which only 170 hectares are irrigated. Most of
       the seed production is limited to the irrigated area. Approximately 132 hectares
       are occupied by roads and buildings. Other government farms which are used
       primarily for training occupy approximately 275 hectares.


       The details of the government seed farms and other farms are given in Annexure 1



                                            96
3.13   With the passage of time the role of the government in agricultural production has
       altered considerably. Not only have farmers become more knowledgeable and
       enterprising but their requirements are being met to a much greater extent by
       private agencies then by the government department. Thus while only 25 percent
       of the seeds utilized for various crops every year are certified seeds, only 25
       percent of these seeds are supplied by the Agriculture department through the
       government seed farms. 75 percent of the certified seeds are therefore supplied by
       private seed companies. There are more then 150 registered seed companies in the
       State and an equal number of unregistered companies. Most of them raise the
       certified seeds by entering into contract with farmers to raise the seeds.


3.14   The share of the government in supplying certified seeds is not only small, but it
       is dwindling. The details of the quantity of certified seeds produced from
       departmental farms in the years from 1998 –99 to 2002-03 can be seen in
       Annexure 2. As against 9449 quintals of certified seeds produced by the
       departmental farms in 1998-99, the quantity produced in 2002-2003 was only
       4080 quintals.


3.15   The fact is that it is no longer necessary for the government to be involved in the
       production of certified seeds when there are sufficient number of private agencies
       doing this task. On the other hand, continuation of these farms even at a minimal
       level of operation would mean continuously increasing expenditure, since the
       salaries of the government staff working on the farms can only increase. The
       degradation of the land as well as decrease in the water table demand increased
       expenditure if at least some of the area is to remain under cultivation. At the same
       time the farms are becoming increasingly inefficient with vacancies of the staff
       remaining unfilled and the increasing reluctance on the part of the government to
       incur expenditure on the farms.


3.16   The farms were set up with the sole objective of producing foundation and
       certified seeds and there was never any intention that they should be self



                                            97
       sustaining .The activities in the farms depended entirely on the availability of
       grants from the government. The programmes were not based on any perspective
       or long term plans. When there were less grants than required, the maintenance of
       infrastructure like the building, was given up and they deteriorated. Once
       neglected, it required more money to repair and maintain them. Besides, as the
       climate became drier, borewells and streams yielded less water. There are several
       instances of farms which had copious water at the time of establishment now
       facing acute water problems. Large tracts of farm land have remained
       uncultivated.


3.17   The statement at Annexure 3 shows the expenditure incurred on the farms and
       the income derived from them for the three years 1999-2000 to 2001-2002. It
       may be seen that all the farms are incurring heavy losses. Not only is the income
       less than 25 percent of the expenditure, but the income is steadily declining
       whereas the expenditure is increasing even with no increase in the scale of
       development activities.


3.18   During 2001-02 the state sector farms have incurred an expenditure of
       Rs.155.42 lakhs as against their income of Rs. 46.78 lakhs and the district sector
       (ZP) farms have incurred an expenditure of Rs. 50.64 lakhs as against their
       income of Rs. 11.51 lakhs.


3.19   The members of the Commission visited two agricultural farms in order to gain
       first hand information.


3.20   (1) Kudige farm: This farm was established in 1942 in 190 hectares but
       developed as a complex which includes an agriculture farm for production of
       foundation seeds, a horticultural farm, a rural training center, an animal husbandry
       wing with piggery, poultry and hybrid cows and a sericulture farm which is not
       operative. Some part of the land has been given to other departments to establish a
       sports centre of the department of Youth Services and some government schools.



                                           98
       The farm area is not fenced, with the result that portions of the farm are
       encroached and cattle from adjoining villages graze on the land. A lift irrigation
       scheme has been provided for the cultivation of paddy as the rainfall has
       decreased considerably over the years. There is practically no activity in the
       horticulture farm except for the production of about six thousand cuttings or grafts
       from fruit trees. The paddy cultivation is also not profitable. Large areas are lying
       vacant and most of the fruit yielding trees are old, requiring replacement. It is a
       potentially viable farm where with a little investment, several agro-based
       activities could be taken up. Training in farming practices is conducted regularly
       though many sanctioned posts are not filled up. The training programmes depend
       on annual grants.


3.21   (2) Ratnapura farm: The farm was established in 1958 in 12.70 hectares in order
       to produce foundation seeds of ragi. Paddy is grown in 7.20 hectares of low lying
       irrigated land. With the failure of rainfall and inadequacy of water facilities, the
       farm is almost abandoned. A watchman and a cart man look after the property.
       The godown, office and staff quarters are in disuse. A few tamarind trees fetch
       revenue of about Rs. 7000/- annually against the annual expenditure on the farm
       of Rs. 3.00 lakhs.

3.22   The agricultural seed farms of the government occupy nearly 1000 hectares and
       much money and effort have been invested in them for the last forty years.
       However government has now begun to consider these farms as more of a liability
       and a burden than an asset. Not only is the income from the farms steadily
       decreasing but an increasing amount of expenditure is required to retain the farms
       at their present level of development. Another problem is that of encroachment
       since most of the farms are not fenced. The government is therefore
       contemplating steps to divest itself of the farms. A proposal to establish a farm
       agency which could borrow money in order to increase the investment in the land
       and put it to optimum use was shelved because of reluctance to incur any more
       expenditure on the farms. Two of the farms have been transferred to the
       University of Agriculture Sciences, Dharwad, for the production of breeder seeds.



                                            99
       Recently the Bylekoppa farm, with two hundred acres of good black cotton soil,
       with irrigation facilities and situated by the side of the high way, was handed to
       the Forest department for raising social forestry. Government is also taking action
       to lease twelve farms to unemployed agriculture graduates.


3.23   It is true that it is no longer necessary for government to involve itself in the
       production of certified seeds. There was a need for this at one time but the farms
       have outlived the purpose for which they were conceived with the advent of
       private agencies into the field. It is not necessary for government to duplicate
       efforts in the private sector at a much higher cost. Government departments have
       also poor managerial skills in production activities. Besides this, it is a waste of
       human resources to deploy staff in these farms instead of concentrating efforts on
       improvement of extension services. With liberalization and the coming of the
       market economy, government is deliberately withdrawing from many sectors
       which was at one time exclusively the purview of the government. In the case of
       agriculture, even the regulatory role of certifying seeds is no longer exclusively
       the duty of government since the new Seed Policy permits seed companies to
       certify their seeds themselves. It is expected that market forces will help private
       seed companies producing good seeds to flourish while the rest will be forced out
       of the market.


3.24   In addition to the production of certified seeds, some private companies are also
       involved in research and in the production of breeder seeds.


3.25   At the same time there is certainly need to increase the supply of seeds of good
       quality raised under controlled scientific methods. This will substantially increase
       agricultural production and improve productivity. As already indicated, only
       about 25 percent of the seeds used by our farmers are certified or quality seeds.
       Discussions were held by the Commission with the representatives of the Seeds
       Association and individual seed companies in order to gauge the scope for further
       expansion of the production of certified seeds. The seed companies revealed that



                                           100
       they would be able to expand their activities and increase substantially the
       production of good seeds if they had the use of tracts of land instead of depending
       almost entirely on contract farmers as they are doing at present. There is thus a
       demand for land from private seed companies while at the same time government
       has more than 1000 hectares of land which they would like to dispose off.


3.26   The Commission is vehemently of the opinion that it is not desirable to lease
       government farms to individuals as is now being proposed. It will be difficult to
       identify the persons to whom this benefit is to be given. It will also be impossible
       to ensure that these unemployed agriculture graduates will use the lands for
       agricultural operations. It will be very difficult to get back the land in case the
       leases do not abide by the conditions under which it was given.


3.27   The government agriculture farms should not be considered to be liabilities. They
       are valuable government assets and should be treated as such. They should not be
       used to benefit individuals but to help the community of farmers. There is also no
       reason to thrust them on other departments merely because the department of
       Agriculture finds it difficult to protect or preserve them.



University Farms

3.28   There are two Universities of Agriculture Sciences in Karnataka which carry out
       research and teaching activities. The University of Agriculture Sciences,
       Bangalore has twenty three research stations spread over six agro-climate zones
       of the fifteen southern districts covering an area of 2820 hectares. However less
       than 100 hectares in six research stations are used to produce breeder seeds.
       During 2003-04 a target has been set to produce 60000 kgs. of breeder seeds in
       10 crops. A few research stations such as Konehally (Tumkur district) and
       Nagamangala (Mandya district) are not viable due to lack of irrigation facilities
       and non filling up of technical posts. The University has proposed to transfer
       these two farms to the University of Animal Sciences research stations.



                                            101
3.29   Since the production of breeder seeds is only one of the several activities of the
       research stations of the University, it is difficult to compute separately the income
       and expenditure involved in the process of production of breeder seeds. However
       during the year 2002- 03 an amount of Rs. 1190.51 lakhs has been spent towards
       salary and Rs. 134.63 lakhs towards production of seeds / crops in twenty three
       research stations. The revenue receipts for the year were Rs. 140.90 lakhs. The
       receipts for the year 2003-04 are expected to be Rs. 167.98 lakhs against a
       budgeted amount of Rs. 1204.55 lakhs for salary and Rs. 141.85 lakhs for
       production of seeds / crops.


3.30   The University of Agriculture Sciences, Dharwad has nine farms in the districts of
       Bijapur, Bagalkot, Belgaum, Gulburga, Uttar Kannada and Dharwad occupying
       an area of 463 hectares. 1338 quintals of breeder seeds were produced in these
       farms during the year 2002-03. An expenditure of Rs. 85 lakhs was incurred
       towards salary and Rs. 145 lakhs towards development costs.

3.31   The details of the farms of the Universities of Agriculture Sciences are given in
       Annexures 4 and 5


3.32   In the case of these farms a very small portion of the land is used for raising
       breeder seeds. However the Universities are of the opinion that the remaining land
       is required for training and research since each agriculture college affiliated to the
       University is given some hectares of land for practical work and demonstration. It
       is a fact that the Universities also feel the constraint of funds because of which
       they are unable to make optimal use of the land in the University farms. Under the
       circumstances the Universities may examine whether there is scope for private
       participation in the utilization of the land in the University farms.




                                            102
The recommendation of the Commission is as follows:


Recommendation


      The Agriculture department has graded the farms into categories B, C, D and E
      in terms of reducing viability. Only two farms are graded as ‘B’, seven as ‘C’
      and the rest of the forty are ‘E’. The Agriculture department should study the
      farms in detail and determine whether they would like to retain any with the
      department. This may not be more than one in each agro –climatic zone.

      The remaining farms should be given on 15 years' lease to private seed
      companies on the basis of open tenders. Only those companies which are
      registered with the government as seed companies will be eligible to participate
      in the tender. The tender document should indicate details of each farm such as
      the area, type of soil, irrigation facilities, buildings etc. The lowest amount
      acceptable for tender should be specified in the tender document. The lease
      deed should be a carefully drafted legal document which should specify the
      conditions of the lease. One of the conditions should be that the land should be
      utilized only for seed production and research activities. Another condition
      should be that the company should make maximum use of the irrigation
      potential in the land and also make economic use of water through the use of
      sprinkler and drip irrigation techniques.

      Those farms for which there are no takers at all and which are totally unviable
      may be handed over to the Forest department for raising social forestry.




                                         103
II.    Horticulture Farms


3.33   Horticulture has in recent years become a more profitable activity in Karnataka
       than agriculture. Farmers are now keeping aside good land for horticulture and
       cash crops. There is considerable technical advancement in horticulture and the
       returns are extremely encouraging. For example, a quarter hectare of floriculture
       can generate an income of Rs. 7500 a day.


3.34   The department of Horticulture was established in the 1970s at a time when there
       was very little knowledge about horticulture or much extension work by the
       department. Dr. Mari Gowda, the legendary director of Horticulture, decided that
       the best way to popularize the growing of vegetables and fruits would be for the
       government to establish a large number of horticulture farms. In those days there
       was plenty of wasteland available and he was able to easily persuade the Deputy
       Commissioners of the districts to donate government land or wasteland to the
       department. In most of the cases there was no budgetary allocation but this did
       not deter him from establishing the farms. His vision was that by growing fruit
       trees everywhere in the State on these farms, the growing and eating of fruits
       would be popularized. He did not even believe in fencing the farms since his
       philosophy was that there was no harm done if poor people entered the farms and
       ate the fruits. Dr. Mari Gowda’s efforts resulted in the establishment of no less
       than 415 horticulture farms and nurseries spread all over the State, of which 244
       farms are under the direct control of the Horticulture department (State sector)
       and 171 are under the zilla panchayats (district sector). It is to be noted that
       Karnataka is one of the few States in the country – perhaps the only State – which
       has government horticulture farms.


3.35   Because of the efforts of Dr. Mari Gowda and the department of Horticulture,
       horticulture activities have now spread throughout the State and horticulture has
       become big business. The government horticulture farms have helped in the
       popularization of horticulture by supplying planting material and vegetable seeds.


                                          104
       The farms are also used for demonstration and training, as well as for collection
       and preservation of germ plasm and for research.


3.36   However of late most of the farms have not been in a good shape and their
       importance is diminishing. Most of them are incurring considerable financial loss.
       According to the department of Horticulture, out of 415 farms, only 193 are
       making a profit. However it is to be noted that even in the case of the farms
       which are considered to be making a profit, the amount of income over
       expenditure is marginal. Moreover, while computing these statistics, the
       expenditure incurred on salaries has not been considered. If the expenditure on
       salaries is also taken into account then all the farms will have to be considered to
       be working under loss.


3.37   Annexure 6 gives the details of the expenditure and income on horticulture farms
       during 2002-03. It may be seen that the total expenditure on development
       activities during the year was Rs.524.76 lakhs and on salaries Rs. 1589.93 lakhs
       whereas the income was only Rs. 741.91 lakhs.


3.38   The problem is that the farms not only need continuous maintenance but
       additional expenditure is required to replace old fruit trees as well as to improve
       irrigation facilities and soil conservation. Without this the farms deteriorate and
       the income decreases. According to the department an amount of at least
       Rs.62,500 has to be spent annually on every hectare in order to exploit the full
       potential of the land. As against this, the government is budgeting an average
       Rs. 2500 to 5000 per hectare on horticulture farms. In addition, the staff salaries
       keep increasing. This increases the expenditure on the farms without necessarily
       improving the maintenance or profitability.


3.39   The members of the Commission visited the Kudige horticulture farm in Kodagu
       district and the Yelachanahally horticulture farm near Yelwal (Mysore district)




                                           105
3.40   The Kudige horticulture farm occupies an area of       4 hectares and is part of an
       agriculture farm complex of 200 hectares. It is not fenced. There are a few old
       trees of sapota, coconut, mango and guava which fetch some revenue. The farm
       supplies grafted fruit seedlings on indent. It is under the zilla panchayat and the
       buildings are in a dilapidated condition requiring repairs and maintenance. The
       annual allotment of budget to the farm has been reduced. The farm is irrigated by
       means of borewells. The farm is located some distance from the town making it
       difficult to market the produce. The staff comprise of a horticulture assistant,
       head gardener, gardener and three regular daily wage labourers. The expenditure
       on the staff is considerably in excess of the income derived from the farm. About
       6000 grafts are being produced annually which are supplied to the Social Welfare
       department for supply to persons belonging to the scheduled castes and scheduled
       tribes under various government schemes.


3.41   The Yelachanahally horticulture farm is near Yelwal (Mysore district). It was
       established in 1971. The area of the farm is about 190 hectares. This farm is also
       not fenced. The annual expenditure incurred on the farm is approximately Rs.
       14.5 lakhs as against the income of Rs. 8.00 lakhs. The farm has 150 hectares of
       old cashew trees which have very poor yield. There are also a few coconut
       grooves and some sapota and mango trees. The farm supplies 35000 mango
       grafts to the public and to the Social Welfare department. A tank and a stream
       which earlier provided water to the farm have dried up due to the long drought.
       The yield of the water in the two borewells is also much reduced. There are 12
       permanent daily wage labourers on the farm.


3.42   Just as in the case of the agriculture farms, the government has begun to consider
       the horticulture farms as more of liabilities than as assets. They have begun to
       discuss ways of disposing off the horticulture farms as they are unwilling to invest
       more money on them. Leasing the farms to unemployed graduates has been
       mooted in the case of the horticulture farms also. The Commission is of the
       opinion that the horticulture farms should be considered as valuable assets and



                                           106
       that they should not be disposed off without due care. It is not desirable to lease
       them to individuals since this will result in land grabbing.


3.43   The department of Horticulture is interested in retaining some of the farms which
       they would like to convert into biotechnologies centers, model floriculture
       centers, seed production units and centers for preservation of valuable germ
       plasm.


Recommendation


       The department of Horticulture should study the matter carefully and decide
       which of the farms they need to retain.


       The government should provide enough funds for these limited number of
       farms so that they may realize fully the purpose for which they were set up. The
       farms could be permitted to retain a part of the income generated by them so as
       to encourage them to become self sufficient. The remaining farms should be
       leased to horticulture companies on the basis of open tender on a national basis
       for the setting up of horticulture based businesses. This will not only bring
       investment into the State, but it will help our farmers by training them in the
       use of improved technology in the growing of fruits and vegetables and by
       purchasing the crops from them. The lease should be given for a maximum
       period of 15 years. The department may determine the lowest tender which is
       acceptable for each farm. It is suggested that many of the farms which are
       making nominal profits may also be given on lease.


       In addition to leasing the farms on the basis of open tender, the department may
       also decide to enter into joint ventures with private companies in improving
       certain farms. The land could be the government’s share in the enterprise and
       the profits could be shared on an agreed basis.




                                            107
                                                                    Annexure I
                                                        PARTICULARS OF DEPARTMENTAL FARMS
                                                                                                                                     Area in hectares
                             I. SEED FARMS UNDER THE CONTROL OF DEPARTMENT OF AGRICULTURE
Sl.no. Name of the farm       Taluk          District       Year of      Total area         Area under cultivation        Uncultivable     Area under
                                                         establishment                                                       area          roads and
                                                                                                                                            buildings
                                                                                         Wet     Dry   Garden    Total
  1               2             3                 4            5             6            7       8      9        10          11              12
   1   Chikkanahalli      Sira            Tumkur             1965                25.59    6.51    4.36    3.30    14.17             0.95           10.47
   2   Nelamakanahalli    Chickballapur   Kolar              1973                28.60           20.40            20.40             6.20            2.00
   3   Burudagunte        Chintamani      Kolar              1958                24.00    4.00   12.80            16.80             4.80            2.40
   4   Bylakuppe          Periyapatna     Mysore             1961                84.25   10.00   48.00            58.00            18.00            8.25
   5   Nugu               H.D. Kote       Mysore             1958                14.52    5.40    2.40             7.80             3.20            3.52
   6   Haradanahalli      C. Nagara       C.Nagara           1954                11.06    2.00    7.80             9.80                             1.26
   7   Shivalli           Mandya          Mandya             1965                 8.80    8.00                     8.00                             0.80
   8   Lingadahalli       Tarikere        Chickmagalur       1958                40.20           35.40            35.40                             4.80
   9   Koteswara          Kundapur        Udupi              1963                11.02            6.53    0.80     7.33                             3.69
  10   Belthangadi        Belthangadi     D.Kannada          1958                 9.91    2.30            2.66     4.96             0.95            4.00
  11   Hallikere          Bhadravathi     Shimoga            1958                21.92   14.00    1.60            15.60                             6.32
  12   Kutrahalli         Shikaripura     Shimoga            1962                14.49    3.20    7.60            10.80             1.20            2.49
  13   Gunderi            Holalkere       Chitradurga        1958                27.22    2.40   14.40    6.00    22.80             1.20            3.22
  14   Hombai             Gadag           Gadag              1964                20.97           20.00            20.00                             0.97
  15   Rattihalli         Hirekerur       Haveri             1962                18.34    2.00   13.60            15.60                             2.74
  16   Havanagi           Hangal          Haveri             1959                10.30    9.00                     9.00             0.30            1.00
  17   Haliyal            Haliyala        U.Kannada          1958                12.23    1.20    7.20             8.40                             3.83
  18   Soundalaga         Chikkodi        Belgaum            1961                 9.55    1.30    5.16             6.46             0.05            3.04
  19   Zadshapur          Belgaum         Belgaum            1961                 9.67    3.80    4.20    0.78     8.78             0.07            0.82
  20   K. Chandargi       Ramdurga        Belgaum            1960                10.19    1.00    6.20    0.65     7.85             0.98            1.36
  21   Hukkeri            Hukkeri         Belgaum            1968                21.81    1.00   15.40            16.40                             5.41
  22   Soundatti          Soundatti       Belgaum            1955                20.63           13.60            13.60             4.80            2.23
  23   Mudhol             Mudhol          Bagalkot           1958                25.47    6.00   18.30            24.30                             1.17
  24   Indi               Indi            Bijapur            1964                22.64    2.00   18.00            20.00                             2.64
  25   Almel              Sindagi         Bijapur            1964                33.03           25.80    3.00    28.80                             4.23
  26   Muddhebihal        Muddhebihal     Bijapur            1967                20.84           19.10            19.10                             1.74
  27   Gangavathi         Gangavathi      Koppal             1956                22.00   18.94            0.26    19.20                             2.80
  28   Byrapura           Harapanahalli   Davanagere         1964                23.29    5.00   14.40            19.40             0.57            3.32
  29   Kotnur             Gulbarga        Gulbarga           1958                25.80    1.50   14.60    2.60    18.70                             7.10
  30   Aland              Aland           Gulbarga           1959                10.70    1.60    7.20             8.80                             1.90




                                                                 108
Sl.no. Name of the farm         Taluk          District         Year of        Total area         Area under cultivation        Uncultivable     Area under
                                                             establishment                                                         area          roads and
                                                                                                                                                  buildings
                                                                                            Wet       Dry   Garden     Total
  1              2                 3              4                5               6         7         8       9        10          11              12
   31   Sedam               Sedam           Gulbarga             1959                5.60              3.60              3.60                              2.00
   32   Reddiwadgi          Jewargi         Gulbarga             1964               21.01             16.87             16.87             1.30             2.84
   33   Hattigudur          Shahpur         Gulbarga             1964               19.66   2.00      15.66             17.66             1.00             1.00
   34   Chattapur           Chittapur       Gulbarga             1965               22.72             21.00             21.00             0.40             1.32
   35   Chandapur           Chincholi       Gulbarga             1961               16.52   1.00      13.00             14.00             2.22             0.30
   36   Bhalki              Bhalki          Bidar                1958                7.51   3.18       2.80              5.98             0.73             0.80
        Total                                                                      732.06 118.33     436.98   20.05    575.36            48.92           107.78

                            II. SEED FARMS UNDER THE CONTROL OF DEPARTMENT OF ZILLA PANCHAYATS

   1    Chandurayanahalli   Magadi          B'lore Rural                1958        13.36   1.80   7.05                  8.85             1.61             2.90
   2    Varadahalli         Chickballapur   Kolar                       1958        20.04         16.40                 16.40             2.84             0.80
   3    Hirehalli           Tumkur          Tumkur                      1958         9.96          6.40                  6.40             2.76             0.80
   4    Rathnapura          Hunsur          Mysore                      1958        12.70   7.20   3.20                 10.40             1.60             0.70
   5    Sanoor              Karkala         Udupi                       1958        15.10   2.54   2.50         4.64     9.68             3.66             1.76
   6    Haralahalli         Honnali         Davanagere                  1958        12.87   6.97   2.80         0.30    10.07             0.40             2.40
   7    Chickbantanahalli   Jagalur         Davanagere                  1958        23.43   5.30   9.90                 15.20             6.23             2.00
   8    Athani              Athani          Belgaum                     1961        10.50          8.52                  8.52                              1.98
   9    Madarkandi          Jamkhandi       Bagalkot                    1958        14.18 10.39    1.20                 11.59                              2.59
  10    Guladahalli         Koppal          Koppal                      1969        22.84   9.60   5.60                 15.20             4.80             2.84
  11    Gundinahole         Kudligi         Bellary                     1969        40.00   6.00 13.00          4.00    23.00            14.00             3.00
  12    Yadgir              Yadgir          Gulbarga                    1958        14.20         12.20                 12.20             1.00             1.00
  13    Hudgi               Humnabad        Bidar                       1961        11.43   2.00   7.43                  9.43                              2.00
        Total                                                                      220.61 51.80 96.20           8.94   156.94            38.90            24.77
        Seed farms total                                                           952.67 170.13 533.18        28.99   732.30            87.82           132.55
                                                           III. AGRICULTURAL SCHOOL FARMS
   1    R.K. Shala          Anekal          B'lore Urban                1927        34.50    2.00     21.00             23.00             0.50            11.00
   2    Bhuvanahalli        Malur           Kolar                       1982        24.80             16.00             16.00             4.80             4.00
   3    Irabanahalli        Malur           Kolar                       1987        15.09             13.00             13.00             0.20             1.89
   4    Kagathi             Chintamani      L                           1976        22.26    3.00     13.00     0.30    16.30             0.80             5.16
   5    Somanahalli         Maddur          Mandya                      1939        15.14    7.26      0.62              7.88             0.26             7.00
   6    Kudige              Somwarpet       Kodagu                      1961         6.20    5.20      0.80              6.00                              0.20
   7    Arakalagud          Arakalgud       Hassan                      1975        18.43    2.30      5.00              7.30             6.20             4.93
   8    Thyavanagi          Channagiri      Davanagere                  1979        15.92    9.60                        9.60                              6.32
   9    Kadajji             Davanagere      Davanagere                  1980        88.80   12.00  48.00                60.00            20.80             8.00
  10    Devihosur           Haveri          Haveri                      1924        34.84          26.00        0.64    26.64                              8.20
  11    Malagi              mundagod        U.Kannada                   1971        12.40    3.48   4.28                 7.76             1.64             3.00
  12    Kumta               Kumta           U.Kannada                   1919        37.51           6.00       16.74    22.74             9.07             5.70
  13    Kampli              Hospet          Bellery                     1971        53.80   35.70   4.80                40.50             1.80            11.50
  14    Kotnur              Gulbarga        Gulbarga                    1970         9.68           7.20                 7.20             1.55             0.93
  15    Aurad               Aurad           Bidar                       1984         8.17           5.60                 5.60             2.57
        Total                                                                      397.54   80.54 171.30       17.68   269.52            50.19            77.83



                                                                     109
Sl.no. Name of the farm          Taluk       District      Year of       Total area            Area under cultivation           Uncultivable     Area under
                                                        establishment                                                              area          roads and
                                                                                                                                                  buildings
                                                                                         Wet       Dry     Garden   Total
  1                2               3            4            5               6            7         8        9       10             11              12

                                                IV. AGRICULTURAL FARMS - STATE SECTOR
      1 Kudige               Somwarpet    Kodagu                  1942       190.00      10.00     10.00     6.00       26.00            68.40            95.60
      2 Bagalkot             Bagalkot     Bagalkot                1948        30.06                15.00                15.00             9.00             6.06
        Total                                                                220.06      10.00     25.00     6.00       41.00            77.40           101.66

                                           V. RURAL DEVELOPMENT TRAINING CENTRE FARMS
      1 V.C. Farm            Mandya       Mandya                  1955           30.95    4.00      2.00     2.46        8.46            11.64            10.85
      2 Dharwad              Dharwad      Dharwad                 1952           18.00             11.00                11.00                              7.00
      3 Oddarahatti          Gangavahi    Koppal                  1958           25.00   10.40               0.80       11.20             2.80            11.00
        Total                                                                    73.95   14.40     13.00     3.26       30.66            14.44            28.85

                                                             VI. I.J.A.E.T.C. FARM
        I.J.A.E.T.C.,
      1 VC Farm              Mandya       Mandya                  1965            6.00    4.25      1.25                 5.50                              0.50

                                               VII. AGRICULTURAL DEVELOPMENT CENTRES
      1   ADC, Thyavanagi    Channagiri   Davanagere              1975        82.38 48.00                           48.00                                 34.38
      2   ADC, Dharwad       Dharwad      Dharwad                 1976        29.74   2.00 14.00                    16.00               9.97               3.77
      3   ADC, Konnur        Naragund     Gadag                   1971        38.74 23.89    5.78                   39.67               1.00               8.07
      4   TADC, Dhadesugur   Sindhanoor   Raichur                 1965       124.04 10.20 52.84                     63.04              36.00              25.00
          Total                                                              274.90 84.09 72.62              0.00 166.71               46.97              71.22
          GRAND TOTAL                                                       1925.12 363.41 816.35           55.93 1235.69             276.82             412.61




                                                                 110
                                    Annexure 2
 DETAILS OF CERTIFIED / QUALITY SEEDS PRODUCED ON DEPARTMENTAL FARMS
                                    (Good seed )
                                                                       Qty. in quintals
Sl.no.           Crop        1998-99     1999-00     2000-01     2001-02     2002-03
  1               2             3           4           5           6           7
      1    Paddy                  5138        4120        3767        3593        2349
      2    Jowar                   598         546         736         701          45
      3    Ragi                    907         977        1069        1079         394
      4    Bajra                   184         318         158         189          60
      5    Wheat                   234         524         400         291           0
      6    Maize                  1257        1111         440         266         718
           Total cereals          8318        7596        6570        6119        3566
       7   Redrgam                 250         405         306         329          42
       8   Greengram               109          62         107          36          41
       9   Blackgram                32          18          15          21          42
      10   Cowpea                  126          65          54          28           2
      11   Gram                    272         212         162         248           5
      12   Green Manure              0           0           0          56          21
           Total pulses            789         762         644         718         153
      13   Groundnut                44          36           6           0          50
      14   Soyabean                129         139         156          55         246
      15   Sunflower                16           8           6           0           0
      16   Sesamum                   1           6           1           0           0
      17   Safflower               134         103          68          76           0
      18   Castor                    0           0           0           0           0
           Total oil seeds         324         292         237         131         296
      19   Cotton                   18          14           7          30           3
           Total C.Crop             18          14           7          30           3
           Grand Total            9449        8664        7458        6998        4018




                                         111
                                                                                         Annexure 3
                    CATEGORYWISE DETAILS OF INCOME AND EXPENDITURE FOR THE YEAR (1999-2000, 2000-2001 and 2001-2002)
                                                                                                                                                                              (Rs. in lakhs)
                                     1999 - 2000                                                     2000 - 2001                                            2001 -2002
          Seed production   Salary    Other    Exp. on Total Exp- Total    Cate-   Salary    Other   Exp. on Total Exp- Total   Cate-   Salary    Other    Exp. on Total Exp-  Total   Cate-
Sl.no.        centre                 expen-   seed prod- enditure Income   gory             expen-    seed    enditure Income   gory             expen-   seed prod- enditure Income   gory
                                     diture     uction                                      diture    prod-                                      diture     uction
                                                                                                     uction
  1             2             3        4         5         6        7       8        9       10       11       12       13       14      15       16         17       18       19       20
                             SEED PRODUCTION CENTRES UNDER THE CONTROL OF THE DEPARTMENT OF AGRICULTURE
    1    Chikkanahalli        6.28     0.62       2.96     9.86     2.57    E       3.59      1.21     2.58     7.38     0.56    E       2.86      0.77       2.41     6.04     1.69    E
    2    Nelamakanahalli      0.47     0.13       0.58     1.17     0.09    E       0.43      0.15     0.75     1.33     0.65    E       0.48      0.11       0.71     1.30     0.23    E
    3    Burudagunte          1.21     0.17       0.15     1.54     0.29    E       1.09      0.31     0.72     2.12     0.29    E       0.56      0.24       0.94     1.74     0.77    E
    4    Bylakuppe            1.89     0.19       1.57     3.65     0.46    E       0.42      0.12     1.71     2.24     1.01    E       0.92      0.01       0.54     1.47     0.00    E
    5    Nugu                 2.26     0.14       1.98     4.38     0.85    E       2.10      0.29     1.94     4.33     1.75    E       1.47      1.93       0.89     4.29     0.57    E
    6    Haradanahalli        1.91     0.16       0.82     2.88     0.21    E       2.02      0.23     0.79     3.04     0.50    E       2.85      0.27       1.26     4.39     1.45    D
    7    Shivalli             4.28     0.23       2.52     7.03     0.17    E       2.97      0.52     4.36     7.84     1.54    E       3.13      0.48       3.74     7.35     1.47    E
    8    Lingadahalli         2.98     0.33       1.23     4.54     1.27    D       1.69      0.30     0.97     2.96     0.81    E       1.24      0.14       1.04     2.42     0.44    E
    9    Koteswara            0.44     0.22       1.66     2.32     1.43    E       0.59      0.12     0.77     1.49     1.32    B       0.50      0.23       1.44     2.17     0.92    E
   10    Belthangadi          1.54     0.31       1.51     3.36     1.25    E       1.48      0.99     0.38     2.85     1.01    D       0.98      0.15       0.89     2.02     0.74    E
   11    Hallikere            3.39     0.68       5.22     9.29     5.19    E       2.53      0.76     6.17     9.45     6.08    E       3.13      1.24       5.40     9.77     5.59    D
   12    Kutrahalli           1.95     0.80       1.87     4.61     2.10    D       2.29      0.60     1.36     4.25     1.07    E       2.85      0.44       1.49     4.78     0.54    E
   13    Gunderi              3.58     0.52       1.80     5.89     0.56    E       2.48      0.58     2.40     5.46     1.34    E       2.18      0.56       1.92     4.66     1.66    E
   14    Hombala              3.74     0.36       1.34     5.43     0.44    E       3.07      0.55     1.71     5.33     2.77    C       2.68      0.46       1.56     4.69     2.47    C
   15    Rattihalli           3.83     0.32       1.80     5.95     0.66    E       2.80      0.39     1.47     4.66     1.11    E       1.86      0.28       1.37     3.52     0.48    E
   16    Havanagi             3.33     0.05       1.73     5.11     2.03    C       2.39      0.17     0.44     3.00     1.93    B       1.84      0.32       2.20     4.36     0.96    E
   17    Haliyal              3.09     0.17       1.91     5.16     0.29    E       2.93      0.29     1.41     4.63     0.64    E       2.39      0.13       0.83     3.35     0.59    E
   18    Soundalaga           2.37     0.06       1.52     3.96     1.34    E       2.76      0.14     1.46     4.36     0.97    E       2.15      0.21       0.91     3.27     1.22    C
   19    Zadshapur            7.72     0.17       0.74     8.63     2.65    C       5.24      0.21     0.99     6.44     0.33    E       4.30      0.29       3.19     7.79     0.51    E
   20    K. Chandargi         3.44     0.32       1.63     5.38     1.78    D       2.87      0.25     2.37     5.49     2.08    E       3.04      0.29       1.17     4.50     0.61    E
   21    Hukkeri              3.17     0.10       0.94     4.21     0.85    E       3.02      0.14     1.32     4.48     1.57    C       4.10      0.19       1.68     5.97     1.01    E
   22    Soundatti            5.02     0.10       1.50     6.61     1.13    E       3.57      0.16     1.96     5.69     1.54    E       4.25      0.22       1.89     6.35     1.35    E
   23    Mudhol               5.58     0.49       2.47     8.54     1.88    E       4.37      0.53     2.15     7.05     2.52    D       3.53      0.78       2.84     7.15     0.92    E
   24    Muddhebihal          3.37     0.11       0.83     4.32     1.24    C       2.82      0.22     1.24     4.28     0.44    E       0.00      0.00       0.00     0.00     0.00
   25    Indi                 3.02     0.05       1.37     4.44     0.72    E       1.73      0.30     2.73     4.75     0.74    E       1.79      0.21       2.67     4.67     0.00
   26    Almel                3.14     0.46       2.03     5.63     0.59    E       2.55      0.36     2.89     5.80     0.11    E       2.11      0.43       3.15     5.69     0.00
   27    Gangavathi           9.37     0.55       4.01    13.93     6.40    C      13.06      1.82     4.49    19.37     6.17    C       5.67      1.43       5.64    12.75     9.58    C
   28    Byrapura             1.86     0.11       1.39     3.36     0.56    E       2.18      0.17     2.22     4.58     0.94    E       0.88      0.56       1.99     3.43     1.22    E
   29    Kotnur               4.15     0.26       1.73     6.14     1.26    E       3.23      0.33     1.89     5.46     2.68    C       2.48      0.14       1.69     4.31     2.15    C
   30    Aland                2.52     0.46       1.51     4.49     2.19    C       2.81      0.27     1.51     4.60     2.71    C       1.62      0.15       1.36     3.14     2.31    C
   31    Sedam                0.00     0.00       0.00     0.00     0.00            0.00      0.00     0.00     0.00     0.00            0.00      0.00       0.00     0.00     0.00
   32    Reddiwadgi           3.15     0.22       1.47     4.84     2.04    C       1.93      0.29     1.68     3.91     2.37    C       1.21      0.28       1.52     3.02     2.58    B
   33    Hattigudur           4.54     0.25       1.14     5.93     0.73    E       2.26      0.13     0.72     3.12     0.39    E       1.99      0.24       0.94     3.18     0.28    E
   34    Chattapur            3.20     0.12       2.03     5.34     3.39    C       2.95      0.32     2.29     5.55     2.69    C       2.38      0.14       1.14     3.66     2.31    C
   35    Chandapur            2.07     0.18       1.77     4.03     2.25    C       1.60      0.25     2.27     4.12     1.63    E       0.56      0.14       1.81     2.51     1.20    E
   36    Bhalki               5.09     0.18       0.62     5.88     1.73    C       3.42      0.13     1.30     4.85     1.05    E       2.50      0.84       2.43     5.77     1.98    E

                                                                                               112
                     CATEGORYWISE DETAILS OF INCOME AND EXPENDITURE FOR THE YEAR (1999-2000, 2000-2001 and 2001-2002)
                                                                                                                                                                              (Rs. in lakhs)
                                     1999 - 2000                                                     2000 - 2001                                            2001 -2002
          Seed production   Salary    Other    Exp. on Total Exp- Total    Cate-   Salary    Other   Exp. on Total Exp- Total   Cate-   Salary    Other    Exp. on Total Exp-  Total   Cate-
Sl.no.        centre                 expen-   seed prod- enditure Income   gory             expen-    seed    enditure Income   gory             expen-   seed prod- enditure Income   gory
                                     diture     uction                                      diture    prod-                                      diture     uction
                                                                                                     uction
  1              2            3        4         5         6        7       8       9        10       11       12       13       14      15       16        17        18       19       20
         TOTAL              118.94     9.58     59.33    187.85    52.60    E      97.22    13.58     65.42   176.23    55.28           76.46     14.30     64.66    155.43    49.80    E




                                                                                               113
                    CATEGORYWISE DETAILS OF INCOME AND EXPENDITURE FOR THE YEAR (1999-2000, 2000-2001 and 2001-2002)
                                                                                                                                                                              (Rs. in lakhs)
                                     1999 - 2000                                                     2000 - 2001                                            2001 -2002
          Seed production   Salary    Other    Exp. on Total Exp- Total    Cate-   Salary    Other   Exp. on Total Exp- Total   Cate-   Salary    Other    Exp. on Total Exp-  Total   Cate-
Sl.no.        centre                 expen-   seed prod- enditure Income   gory             expen-    seed    enditure Income   gory             expen-   seed prod- enditure Income   gory
                                     diture     uction                                      diture    prod-                                      diture     uction
                                                                                                     uction
  1             2             3        4         5         6        7       8        9       10       11       12       13       14      15       16         17       18       19       20
                             SEED PRODUCTION CENTRES UNDER THE CONTROL OF THE DEPARTMENT OF AGRICULTURE
    1    Chandurayanahal 2.06          0.49      1.14      3.69     1.08    E       2.15      0.96     0.50     3.61     1.42    D       2.69      1.17      0.85      4.71     1.20    D
    2    Varadahalli        2.66       0.45      1.12      4.23     0.17    E       2.19      0.89     1.08     4.15     0.81    E       1.65      0.43      1.15      3.23     0.38    E
    3    Hirehalli          3.14       0.20      0.30      3.63     0.61    C       2.84      0.31     0.29     3.44     0.31    D       2.58      0.60      0.35      3.53     0.42    D
    4    Rathnapura         1.04       0.45      1.87      3.36     0.91    E       1.35      0.15     2.04     3.54     1.15    E       1.17      0.12      1.80      3.09     0.93    E
    5    Sanoor             3.41       0.15      1.76      5.32     2.00    C       2.46      0.27     1.65     4.38     2.10    C       2.00      0.21      1.77      3.98     0.12    E
    6    Haralahalli        2.70       0.77      1.91      5.38     2.18    D       1.38      0.80     2.62     4.80     2.18    E       1.97      0.33      2.18      4.48     3.50    B
    7    Chickbantanahalli 2.73        0.40      0.65      3.78     0.66    D       0.74      0.26     0.64     1.64     0.41    E       1.62      0.27      0.70      2.59     0.61    E
    8    Athani             3.18       0.61      0.29      4.08     0.86    D       3.04      0.26     0.36     3.66     1.03    C       1.73      0.17      0.32      2.21     0.66    C
    9    Madarkandi         2.94       0.07      1.15      4.15     2.49    C       2.97      1.30     0.72     4.99     1.11    D       2.50      0.50      1.25      4.25     0.20    E
   10    Guladahalli        5.09       0.43      0.00      5.52     1.91    C      15.39      0.46     1.52    17.37     1.49    E       3.88      0.30      2.49      6.67     1.15    E
   11    Gundinahole        3.31       0.54      2.12      5.96     1.68    E       2.73      0.35     1.69     4.77     0.39    E       2.89      0.14      1.61      4.64     0.08    E
   12    Yadgir             1.55       0.12      1.77      3.43     0.63    E       2.86      0.12     1.02     3.99     0.49    E       2.48      0.00      1.41      3.89     0.88    E
   13    Hudgi              2.83       0.35      1.72      4.90     0.00            2.66      0.16     1.89     4.71     1.68    E       1.74      1.74      1.64      3.33     1.38    E
         TOTAL             36.63       5.02     15.79     57.44    15.18           42.77      6.27    16.02    65.05    14.58           28.88      5.98     17.53     50.60    11.52




                                                                                               114
                                          Annexure 4
     AREA DETAILS OF RESEARCH STATIONS OF UAS, BANGALORE FOR THE YEAR 2002 - 03


Name of the Zone &                                             Area used for     Teaching Research
                                   Cultivated area (ha)
 Research Station Area of the                                    seed (ha)       purpose purpose
                   farm (ha)                                                       (ha)     (ha)
                                Rainfed Irrigated   Total     2001-02 2002-03
ZONE-4
ZARS, Tiptur           626.00     45.00      2.00     47.00      1.00                         16.70
ARS, Arasikere          82.50     45.20      6.20     51.40      7.40     3.00                10.60
ARS, Hiriyur            71.00     25.90     32.80     58.70      1.60     3.00                13.00
Zone-5
ZARS, GKVK             538.00    175.50     12.00   187.50      23.50    13.40      63.70     46.40
MRS, Hebbal            115.70     24.50      8.20     32.70      2.70     2.00       4.10     16.00
ARS, Chintamani         74.10     63.50               63.50      4.30     1.50       7.90     35.60
ARS, Balajigapade       38.40     26.00      2.00     28.00     14.60     8.00                 2.70
FRS, Hessaraghatta       4.00      0.70      0.70      1.40                                    0.50
Zone-6
ZARS, mandya           243.50              164.30   164.30      33.90    34.20      17.70     39.50
ARS, Nagenahalli,       25.20      2.00     16.40     18.40     10.00     3.50                51.00
ARS, Nagamangala        47.00     14.50               14.50      2.00                          2.00
ARS, Madenur            42.00     23.50      1.50     25.00      7.40     2.50                 1.50
Zone-7
ZARS, Navile            78.00     56.50      1.50     58.00      6.30     9.00      10.00      8.00
ARS, Honnavile          50.20      7.40     14.00     21.40      7.30     6.50                 2.00
ARS, Gunjevu           141.00     56.00      2.00     58.00      5.80     4.00                 0.10
ARS, Kathalagere       124.90      2.70     63.70     66.40     29.60    12.10                 6.00
ARS, Bhavikere         152.80     47.50      9.70     57.20     14.00    12.70                 3.70
Zone-9
ARS, Mudigere          181.30     57.90     12.60     70.50      8.00    11.00      46.80     29.50
ARS, Madikere            7.00      4.30      0.70      5.00      3.00     0.40                 0.40
ARS, Ponnampet          22.90      8.90                8.90      3.00     0.40       3.20      1.40
Zone-10
ZARS, Brahmavara       115.00     30.80      6.70     37.50     10.70     6.00                21.10
ARS, Kankanady          26.00      3.00      2.70      5.70      7.30     3.00       9.00      1.30
ARS, Ullal              14.10     11.80               11.80      1.70     0.60                 4.40
          Total       2820.60    733.10    359.70 1092.80      205.10   136.80     162.40    267.50




                                                114
                                                                         Annexure 5

                                        PARTICULARS OF UAS DHARWAD FARMS UNDER SEED UNIT


                                                                                                                        Qty. of
                                                        Total area under cultivation                                               Financial expenditure
                                                                                                                    breeders seed
                                                                                                             Area                    year (Rs. in lakhs)
                                                                                                                     produced &
Sl.    Name of                           Year of                                             Uncultivable   under
                    Taluk     District                                                                              distributed to
No.    the Farm                          Estbt.                                                 area       roads &
                                                                                                                     progressive
                                                   Area                                                   buildings                         Development
                                                            Wet     Dry     Garden Total                              farmers in Salary
                                                   (ha)                                                                                        Activity
                                                                                                                       quarters

1           2         3          4         5        6        7       8        9        10        11           12          13           14       15
    1 Almel       Sindagi    Bijapur       2002    42.00    38.00    1.00            39.20                     2.80         241.00                   17.90
    2 Bagalkot    Bagalkot   Bagalkot      1951    29.30     4.14 24.16              28.30                     1.00         168.00     10.09          5.68
    3 Baithongal Baithongal Belgaum        1947    29.99    15.00 12.20       0.27   27.20                     2.79         155.30     10.68         10.09
    4 Kalloli     Gokak      Belgaum       1986    41.05    39.65    1.90            41.55             3.95    5.55         118.00     14.25         16.25
    5 Malnoor     Sharapur   Gulbarge      1991 146.23      75.00 14.00       1.00   90.00            50.00    6.23            20.00   10.55         18.30
    6 Mundagod Mundagod Karwar             1987     4.00            15.60     2.40   16.60            20.00    3.40            19.50    8.80          3.30
    7 Nippani     Chokkodi   Belgaum       1938    22.50     2.00 17.90       0.60   19.90                     2.60         162.50      8.85         25.85
    8 Seed Unit   Dharwad    Dharwad               72.00    10.00 61.00              71.00                     1.00       3304.00      22.69         29.90
    9 Walmi       Dharwad    Dharwad               40.00    25.00 15.00                                                     112.00                    8.00




                                                                            115
                                                                  Annexure 6
      STATEMENT SHOWING THE NUMBER OF FARMS / NURSERIES DISTRICTWISE, EXTENT, INCOME AND EXPENDITURE DETAILS
                                                                                                   Area in acres
Year 2002-03                                                                                      Rs. in lakhs
Sl.no. Name of the No. of farms Total extent     Area       Source of         Income            Expenditure on       Expenditure on salary
         district     in the                   developed    irrigation   ZP            SS       ZP         SS            ZP            SS
             1          2            3            4            5         6             7        8           9            10           11
   1   Bangalore (            7        164          162    Bore wells     3.68         19.60     1.68       16.00          4.18         9.00
   2   Bangalore (           16        445          367    Bore wells    17.84         65.02     2.72       36.80         23.87        65.02
   3   Kolar                 33       1137         1094    Bore wells     1.01         44.41     3.41       10.46         22.45        96.36
   4   Chitradurga           16        489          348    Bore wells     9.44         19.69     3.09       14.33          8.82        26.77
   5   Davanagere            10        142          125    Bore wells    10.07              0    1.96            0         7.40             0
   6   Tumkur                20       3860         1814    Bore wells     5.44         65.63     1.94       39.90         19.62       143.69
   7   Shimoga               15        489           310   Bore wells    11.52         43.43     2.03       25.03          7.92        44.41
   8   Mysore                25        968           495   Bore wells     3.18         34.65     3.22       34.50         17.22       163.89
   9   Chamaraja             10        474           374   Bore wells     4.99              0    1.87            0        15.30             0
  10   Mandya                27       1895         1323    Bore wells    12.91         43.88     2.76       13.68         26.28       205.75
  11   Hassan                17        974           607   Bore wells    13.50         29.22    10.28       50.43          2.18        19.43
  12   Kodagu                10        575          443    Bore wells     6.87         12.94     3.70       20.96          7.74        40.95
  13   Chickmaga             15        292           211   Bore wells    12.13           8.32    2.45         4.90         6.20        12.28
  14   Dakshina K            14        427          334    Bore wells     4.68         21.43     1.08       25.64         11.25        61.26
  15   Udupi                  9        190          176    Bore wells     4.03              0    0.66            0         5.30             0
  16   Belgaum               27        483           350   Bore wells     6.38         38.92     4.04       32.68         23.83        48.81
  17   Bijapur                9        248           201   Bore wells     2.07         16.50     0.65         2.12         7.40        32.32
  18   Bagalkot               7          79           54   Bore wells     4.56              0    1.34            0         6.24             0
  19   Dharwad                8          43           43   Bore wells     3.78         10.01     0.98       10.87          8.73        27.94
  20   Gadag                  9          81           75   Bore wells     7.20              0    3.48            0        15.84             0
  21   Haveri                16        167           128   Bore wells     9.88              0    1.36            0        11.54             0
  22   Uttara Kann           17        362          250    Bore wells     2.94         19.28     0.71       30.01          8.94        29.83
  23   Gulbarga              18        339           192   Bore wells     2.37         24.20     4.09         4.79        17.47        82.35
  24   Bellary               21        622           234   Bore wells     9.33         12.49     3.55         6.40        11.37        27.74
  25   Raichur               13        189           106   Bore wells     3.95         18.05     5.60       57.86         12.69       105.67
  26   Koppal                13        267           229   Bore wells     5.48              0    2.43            0         6.43             0
  27   Bidar                 13        500           151   Bore wells     3.65         11.36     1.97       14.35          4.80        24.95
       Total                415       15901        10196                 182.88        559.03    73.05      451.71       321.01       1268.42
         CHAPTER IV
SERICLTURE AND SILK FILATURES
                                   CHAPTER 4

                 SERICULTURE AND SILK FILATURES

Introduction


4.1   Karnataka occupies a pre-eminent position in sericulture industry, being the
      largest mulberry silk producing State in the country.          The importance of
      sericulture for the State lies in the fact that in addition to producing silk, it
      provides employment to as many as 2.55 lakh people. Mulberry cultivation is
      taken up in the State in 88,903 lakh hectares in 15,448 villages. It is concentrated
      mainly in the eight districts of Bangalore [Urban], Bangalore [Rural], Kolar,
      Tumkur, Chamarajnagar, Mysore, Mandya and Kodagu which account for 90.3
      percent of cocoon production in the State. Mulberry is grown in an area of 76,716
      hectares in these districts. Government is now encouraging the development of
      sericulture in the remaining districts of the State with the result that mulberry is
      cultivated in 12,187 hectares of the districts of North Karnataka, producing 9.7
      percent of the total cocoon production in the State. Silk production in Karnataka
      increased from 3274 metric tons in the period 1951-52 to 1955-56 to 42,829
      metric tons in the period 1996-97 to 2001-02.


4.2   Government has played a very important role both as promoter and as regulator in
      the development of sericulture. Huge investments in the development of
      sericulture have been made under two World Bank projects. In the first project,
      which was completed in 1986, the total expenditure incurred was Rs.8864 lakhs.
      The expenditure incurred on the second project, which was completed in 1996,
      was Rs. 6000 lakhs. In addition, Seri-2000, a Swiss Development Corporation
      assisted project, is being implemented at a cost of Rs. 320.23 lakhs to develop a
      new bivoltine race.



                                          119
4.3   Some of the major schemes of the department of Sericulture are maintenance of
      sericulture farms and grainages, training schemes, subsidy for construction of
      rearing/reeling sheds, disease control programmes and extension services. The
      government has also set up regulated cocoon markets and the Karnataka Silk
      Exchange in order to provide facilities for sale of cocoons and raw silk. The
      government has enacted the Karnataka Silkworm Seed, Cocoon and Silk Yarn
      [Regulation of Production, Supply, Distribution and Sale] Act 1959 [hereinafter
      indicated as ‘Act’] under which the government discharges several regulatory
      functions.


4.4   Sericulture has until now been viewed as a subsistence activity of small and
      marginal farmers. Government’s role has been that of production, development
      and regulation. Thus government is the sole agency for the production of seed at
      different levels from the breeder stock [P-4] to the commercial parent [P-1].
      Government has taken on this responsibility in order to ensure that the seed is
      produced under optimal conditions and to safeguard against diseases.           Seed
      cocoons are prepared in the seed areas under the supervision of the department.
      In order to overcome malpractices and irregularities in marketing, to ensure stable
      prices for farmers and to prevent speculation, government established regulated
      markets for the buying and selling of cocoons under the Karnataka Silkworm
      Seed, Cocoon and Silk Yarn [Regulation of Production, Supply, Distribution and
      Sale] Act 1959. Under section 7 of this Act, no rearer can sell or agree to sell and
      no person shall purchase or agree to purchase silkworm cocoons except in the
      regulated cocoon markets established by the government under the Act.
      Similarly, after government established the Silk Exchange in 1979 by amending
      the provisions of the Act, silk yarn cannot be marketed anywhere except in the
      silk exchanges.




                                          120
4.5   In addition to government control over the buying and selling of silk cocoons and
      yarn, all the protagonists of the silk industry, from the rearers to the silk traders,
      have to be licensed by the department and license fees are collected at every
      stage. The types of license required and the fees collected are as follows :
                                                                    (in Rs.)
              Sl. no.        Category of License          Fee per annum
                  1     Rearer                                            5
                  2     Chawki Rearer                                    10
                  3     Seed Preparer                                 1000
                  4     Reeling
                        a. for each Charaka                              20
                        b. for each cottage basin                      100
                        c. for each filature basin                     100
                  5     To purchase cocoons for                        100
                        reeling
                  6     Silk Trader [issue of license]                1000
                  7     Renewal                                        500


4.6   The justification given by the department for the licensing of rearers, chawki
      rearers and seed preparers is that in the absence of licensing it may not be possible
      to ensure that they use only certified seeds. This is necessary in order to keep a
      check on the pebrine disease which devasted the sericulture industry in the 1980s.
      The rearers get a license cum pass book, wherein entries are made relating to eggs
      purchased from the licensed egg producers and government grainages, the inputs
      provided and the technical guidance given by department officials. Information is
      also recorded in the passbook with regard to the quantum and the price of cocoons
      sold in the cocoon market. Similarly, the seed area market officers make entries
      regarding the seed supplied to the egg producers in the pass books given to them.
      In addition to license fees, the government collects market fees from the regulated
      markets and the silk exchanges. Income is also realized from the sale of silkworm
      eggs and from the activities of the silk farms. Penalties levied for violation of the


                                           121
      provisions of the Act are other sources of income for the government. The
      maximum penalty that can be imposed for offences in violation of the Act is Rs.
      50,000/- or confiscation of goods.


4.7   The details of revenue realized from the activities of the department of Sericulture
      during the last five years are given in Annexure-I. Market fees is the major
      source of income which amounted to Rs. 1408.754 lakhs in 1998. It declined to
      Rs. 1228.412 lakhs in 2002-03. Next in importance is the grainage receipts which
      also declined from Rs. 882.860 lakhs in 1998-99 to Rs. 349.754 lakhs in 2002-03.
      Farm receipts which amounted to Rs. 13.320 lakhs in 1998-99 declined to Rs.
      3,597 lakhs in 2002-03. Income from licenses remained more or less stagnant at
      the level of about Rs. 12 lakhs between 1998-99 and 2001-02 and increased to Rs.
      18,393 lakhs in 2002-03.      Income under other items which increased from
      Rs.23.812 lakhs in 1998-99 to Rs. 67.126 lakhs in 2001-02 declined to Rs. 53.061
      lakhs in 2001-02 and to Rs. 36.778 lakhs in 2002-03. The total income declined
      from Rs.2341.494 lakhs in 1998-99 to Rs. 1636.934 lakhs in 2002-03. Even the
      income from the penalties has decreased over the years. The number of cases
      booked declined from 4040 in 2000-01 to 393 in 2002-03 and the income from
      the penalties declined from Rs. 82.80 lakhs in 2000-01 to Rs. 17.86 lakhs in 2002-
      03. Thus, the revenue from fees and penalties is not only very limited, but it is
      also declining.


SERICULTURE FARMS


      Government has established sericulture farms which discharge the following
      functions :
         a. Supply of improved variety of mulberry cuttings/saplings to farmers
         b. Conducting of field trials of the findings of the Research Institutes
         c. Conducting of demonstration cum training programmes




                                           122
4.8    There are 94 government silk farms. The total area of these farms is 2808 acres,
       out of which the area actually utilized for sericultural activities is only 208 acres.
       The department now proposes to retain about 1300 acres of land along with
       buildings, wells, etc. and the remaining area of 1500 acres is proposed to be given
       back to the government. The 1300 acres of land proposed to be retained by the
       department includes 330 acres under social forestry.

4.9    Government sericulture farms have been developed for production of pure
       Mysore basic seed and also for production of bivoltine seed cocoons. There are
       nine sericulture farms in Mysore seed area which produce the basic female parent
       required for production of commercial eggs.          The remaining 85 farms are
       involved in the production of bivoltine seed cocoons. However only forty five of
       these farms are active.

4.10   Sericulture farms are classified into four categories for the production of seed at
       different levels. They are:

                      P4 – Breeder stock
                      P3 – Parental stock
                      P2 – Basic seeds
                      P1 – Commercial parent

4.11   Annexure-II gives details about the production, income and expenditure of the
       government sericulture farms.        It may be seen from the statement that the
       activities of the farms have been continually declining during the last few years.
       The amount of leaves harvested decreased from 759040 kgs in 1998-99 to 568186
       kgs in 2002-03. The number of cocoons harvested decreased from 182.478 lakhs
       in 1998-99 to 120.651 lakhs in 2002-03. The income          realized decreased from
       Rs. 47.534 lakhs in 1998-99 to Rs.23.809 lakhs in 2002-03. At the same time, the
       expenditure increased from Rs. 474.562 lakhs in 1998-99 to Rs. 544.394 lakhs in
       2002-03. In 1998-99, the revenue generated by the farms was only 10 percent of
       the expenditure of the farms. In 2002-03, it decreased still further to 4.37 percent.



                                             123
4.12   According to the department of Sericulture, the reasons for the perceptible decline
       in the performance of the government sericulture farms are as follows:


   1. Insufficient water supply due to depletion of water level in bore wells
   2. Insufficient labourers in the department due to regularization and deputation of
       workers to other Departments
   3. Insufficient allotment of funds to farms
   4. Power cut and reduction of office staff.


4.13   The need to reorganize the government sericulture farms has been recognized by
       the Department of Sericulture. The committee on Reorganisation of Sericulture
       Department [December 2002] has identified thirty three farms which can be
       retained and strengthened and sixty one farms which can be transferred to others.
       There is no specific recommendation as to who should take over these redundant
       farms.


Terms of reference:


4.14   The terms of reference for the Commission are to suggest improvements in the
       revenue obtained from the sericulture industry and from silk filatures.
       However, after holding discussions with the officers of the department, with the
       Member Secretary of the Central Silk Board and with many experts in the field
       of sericulture, the Commission is of the opinion that it is not possible to restrict
       the scope of the study to the revenue from licence fees and silk filatures. The
       revenue will not increase substantially by revision of the fees or even by
       improving the government silk filatures, which are all running under loss.
       Revenue can be increased from sericulture only by addressing the more basic
       issues plaguing this industry.




                                           124
4.15   The Commission therefore decided to study the obstacles in the path of the rapid
       development of the sericulture industry in the State and the changes required in
       the role of the government.


4.16   Sericulture in Karnataka continues to be dominated by the activities of small and
       marginal farmers and 13,500 small silk reelers. These farmers and reelers are too
       small and their activities too restricted for them to obtain credit from banks.
       Sericulture in Karnataka therefore remains a subsidiary occupation and not an
       agro business with big stake holders. The sweeping changes of liberalization
       which have taken place in the production and marketing of agricultural and
       horticultural crops have not taken place in sericulture. The role of the State
       government with regard to sericulture continues to be protectionist. However,
       with the opening of trade permitting the import of silk, Indian silk will have to
       compete with silk in both the world and domestic markets. In order to do so, our
       silk has to improve in quality, it has to be produced more economically and in
       much greater quantities. The quality and productivity levels of silk in Karnataka
       are not comparable to those of China.


4.17   It is a matter of concern that although Karnataka is supplying over 65 percent of
       the country’s silk, it is sliding in terms of productivity and growth rate in
       comparison with other silk producing States in India. For instance, the average
       growth rate in productivity in the last two years in Karnataka is only 2.2 percent,
       whereas it is 20.6 percent in Tamilnadu and a whopping 49.5 percent in West
       Bengal. Karnataka’s share in the production of silk in the country has decreased
       from 80 percent to 56 percent.


4.18   The Commission is of the opinion that there is urgent need for the State
       government to examine the reasons for the poor progress of sericulture in the
       State and to take remedial action. The greatest difficulty in the production of
       quality silk efficiently and economically has been the fact that the silk weavers in
       Karnataka are unable to get large quantities of silk yarn of uniform quality. This



                                           125
       is because they need to get the silk yarn from a large number of small reelers, and
       that too, only in the Silk Exchanges established by the government. The reelers in
       turn are required to buy the silk cocoons only in the regulated cocoon markets.
       The conditions under which these cocoon markets operate are not conducive to
       their purchasing large numbers of cocoons of uniform quality. The single biggest
       obstacle, therefore, to the obtaining of large quantities of good yarn of uniform
       quality is the restricting clauses of the Karnataka Silkworm Seed, Cocoon and
       Silk Yarn [Regulation of Production, Supply, Distribution and Sale] Act 1959
       which have made it an offence to buy or sell silk cocoons or silk yarn in the open
       market, thereby erecting barriers between the silk farmers, reelers and weavers.
       Because of the Act the processors [reelers and weavers] have to obtain their raw
       material from many producers [farmers and reelers] and by accessing many
       markets. This is conducive to neither quality nor efficiency.


4.19   Other States in the country have recognized the need to encourage free market
       transactions in the industry. West Bengal has made impressive progress in the
       recent past because there are no restrictions on the purchase or sale of cocoons or
       yarn.   The government of Andhra Pradesh is in the process of setting up a
       mechanism which will ensure vertical integration of all levels in the industry.


4.20   The Karnataka Silkworm Seed, Cocoon and Silk Yarn [Regulation of Production,
       Supply, Distribution and Sale] Act 1959 had a useful role to play at the time of
       enactment when the sericulture industry needed to be nurtured carefully and the
       interests of small farmers and reelers had to be protected. However the Act is
       now outdated.    The restrictive clauses need to be removed and the role of
       government in sericulture reviewed if silk industry in the State is not to be
       relegated to a backwater.




                                           126
4.21   The present role of government in the development of sericulture in the State is
       briefly described below:


  1. Government research institutions produce P4 breeder stock


  2. These eggs are multiplied in P3 and P2 silk farms and grainages. The P2 cocoons
       are processed in P1 grainages to produce P1 disease free layings [dfls] or the
       commercial parent stock. The P1 dfls are reared by 53 P1 farms and by seed
       farmers in 38 taluks have been identified as seed areas. The seed area farmers
       rear P1 dfls to produce P1 cocoons under the supervision of the department.


  3. Government pays heavy subsidy for the production of these seed cocoons
       although these are produced in far greater quantities than required. Despite this
       there is pressure on the government to include more and more taluks in the seed
       areas.


  4. Licensed seed producers and government grainages purchase the P1 cocoons from
       the cocoon markets in the seed areas and produce commercial layings [F1 layings]


  5. Farmers purchase the commercial layings from the regulated cocoon markets.
       However the cocoon markets are not uniformly popular. Some of the cocoons
       markets, such as those at Ramanagaram and Siddlaghatta, are over crowded and
       no quality checks are possible while purchasing the cocoons. In addition, because
       of the restrictions placed on the purchase of cocoons only in the cocoon markets,
       it is difficult for reelers to obtain reeling cocoons in commercially viable lot sizes.
       The same problem applies to the purchase and sale of the yarn prepared by the
       reelers, which can be bought and sold only in the silk exchanges. The difficulty is
       particularly acute in the case of bivoltine cocoons and silks which are produced in
       small quantities and get scattered into different cocoons and yarn markets. The
       result is that not only do the reelers not get cocoons of a uniform quality in large
       enough lots, but the weavers do not get uniform quality of silk yarn in large



                                            127
       quantities. For these reasons most of the silk product exporting units located in
       the State do not source their silk from within the State. For example, leading
       exporters like Himmatsinghka Siede import all their silk from China.


   6. The government has imposed licenses at every stage of the industry.           Thus
       farmers require a license from the government even to grow mulberry and raise
       silkworms.    Licenses are also required by the rearers, chawki rearers and seed
       preparers, for each charaka, for each cottage basin and for each filature basin.
       Licenses are required for purchasing cocoons for reeling and by the silk traders.
       Much of the time and energy of the department is spent on inspections to ensure
       that the licenses are held and renewed by the different stake holders.


4.22   The World Bank projects and the enormous amount which has been spent on the
       development of sericulture has resulted in some positive achievements. Some of
       them are as follows :

       a.     Karnataka already produces about 500 tonnes of bivoltine silk annually.
       b.     Karnataka has more than 150 modern multiend reeling units that can
              produce internationally gradable silk yarn.
       c.     Karnataka has the maximum number of sericulture quality clubs with
              progressive sericulturists as members.
       d.     In recent years a large number of engineers, lawyers and doctors have
              taken up sericulture.
       e.     Mechanization in sericulture has been receiving the special interest of
              farmers.
       f.     The Central Sericultural Research and Training Institute in Mysore has
              evolved sturdy bivoltine hybrids for tropical areas, and has also developed
              a new mulberry variety called V-1, which is the biggest leaf yielder in the
              world.




                                           128
Recommendations

     Karnataka is poised for a big leap forward in the area of sericulture provided
     the government introduces much needed reforms. The most important of these
     is to remove the restrictions with regard to the sale of cocoon and silk yarn and
     allow free market operations to come into force. Government should however
     continue to play an important role in encouraging the maintenance of quality
     and improved standards and in disseminating the spread of technology and
     innovation. The following steps are required to be taken :

  1. The concept of silk worm seed area should be given up. While P4, P3 and P2
     seeds should continue to be produced in government seed farms, the
     responsibility of commercial seed production should move towards the private
     sector.   A Silkworm Seed Regulatory Authority should be set up by the
     government to certify the quality of the seed. The Central Silk Board has
     already proposed to the Government of India the creation of a National
     Silkworms Seed Regulatory Authority.

  2. Since sericulture can prosper in the State only if Karnataka can offer large
     volumes of silk of uniform quality in adequate lot sizes, it is necessary for the
     government to create an enabling environment for the private sector to set up
     large integrated silk factories.   These silk factories will require to enlist a
     required number of mulberry farmers on contract basis to supply the cocoons
     directly to them and not through the cocoon market. The silk factories can be
     made responsible for remitting the market fee for the cocoons. This model of
     direct linkage between the producer and the processor will be similar to that
     which is already in place with regard to agricultural and horticultural
     commodities.

  3. The Karnataka Silkworm Seed, Cocoon and Silk Yarn [Regulation of
     Production, Supply, Distribution and Sale] Act 1959 should be amended to
     allow direct linkages between the producer and the processor at all stages -



                                        129
   graineur and seed cocoon farmer, reeler and farmer and weaver and reeler.
   This will help to improve the quality of silk by allowing the market to determine
   the pricing for the produce and will allow entry of large scale integrated soil to
   silk production units.

4. It is also necessary to lift all restrictions on the movement of cocoons and yarn
   into the State or from Karnataka to other States. When silk imports from China
   are being permitted, it would be unreasonable to prevent free flow of cocoons
   and yarn from all parts of India.


5. All modes of government licensing should be removed. Instead of licensing,
   the government should put in place a mechanism for registration of rearers,
   reelers and weavers. The registration need not be compulsory. However
   registration will enable the government to access the stake holders to give them
   technological inputs, extension services and government subsidies.           It is
   expected that with this changed perception of government’s role, most of the
   silkworm rearers and reelers will opt for registration. Fees may be charged by
   the department only for services rendered.

6. The cocoon markets and silk exchanges should continue, but in a different
   setting. They will be places where small farmers and rearers as well as others
   will have a forum for selling their produce. However, the cocoon markets and
   silk exchanges need to be modernized. They should serve as centres which
   foster quality transactions and which render information and assistance and
   not as institutions which stifle free exchange between producers and
   purchasers. For example, the cocoon markets and silk exchanges should be
   computerized. They should provide information on prevailing market rates.
   Quality assessment should be done in a scientific manner. The cocoon markets
   and silk exchanges should become places where one can be certain of obtaining
   products of good or superior quality.




                                       130
   7. New marketing concepts like online buying and selling and a futures market in
       cocoon and silk yarn will help farmers and reelers in planning ahead their
       production programme. The State government should support the proposal of
       the Central Silk Board to set up an All India online trading system for cocoon
       and silk yarn.


   8. Sericulture should in fact become a thriving agro business, if Karnataka is to
       become a producer of world class silk. The Sericulture department should
       concentrate on improving the breeder stock and basic stock of seeds, in
       modernizing the cocoon markets and silk exchanges and in improvement and
       expansion of extension services.


   9. Adoption of new technologies by rearers and reelers should be assisted by
       government subsidies.

   10. The Sericulture department should give up unviable sericulture farms and
       grainages and utilize the staff in extension services where there is great need of
       capable workers. The sericulture farms which the department does not wish to
       retain can be leased on the basis of open tenders to private companies which
       intend to set up large integrated silk factories. The grainages could be put to
       public use, such as schools and hostels

4.23   Other States in India, for example Andhra Pradesh and Tamil Nadu, have already
       commenced setting up two major large scale soil to silk projects based on contract
       farming arrangements. Karnataka should take immediate action to change its
       policy with regard to the sericulture industry if it is not to be left behind.
       Recognizing the need for reform, the State government in Karnataka has prepared
       a draft amendment to Section 7 of the Karnataka Silkworm Seed, Cocoon and
       Silk Yarn [Regulation of Production, Supply, Distribution and Sale] Act 1959.
       The proposed amendment indicates that a person or an organization which has
       established more than 250 silk reeling basins with a capacity to produce 200
       kilograms of silk in a day may purchase silk worm cocoons outside the cocoon



                                          131
       market from contract farmers with prior approval of government in accordance
       with the following conditions:

       a. “The person or organization shall enter into a contract with the farmers and
          such contract shall be approved by government.

       b. The rearer will have the option to sell his cocoons either directly to such
          person or organization directly or through a cocoon market.

       c. The person or organization will have the option to purchase cocoon directly
          from the contract farmers or through a cocoon market by participation in open
          auction.

       d. The person or organization shall furnish accounts relating to purchase of
          cocoons outside the market every month before the 5th day of the subsequent
          month.

       e. The person or organization shall pay a market fee at the rate of two percent on
          the value of the cocoons purchased outside the market along with the
          statement of accounts.”

4.24   The Commission feels that as a reform measure, this amendment does not go far
       enough.   It should not be necessary for the contract with the farmer to be
       approved by the government. It is not necessary to place a restriction on the
       capacity of the silk reeler while permitting him to purchase silk directly from a
       contract farmer. It should also not be necessary for the reelers to furnish accounts
       to the government relating to purchase of cocoons outside the market every
       month. These conditions will lead to harassment and corruption and effectively
       suppress any genuine open market transactions. These conditions in the proposed
       amendment should be removed and the reelers, whether as individuals or as
       organizations, should be permitted to enter into contract with farmers and
       purchase cocoons from them without the necessity of obtaining the prior
       permission of the government and without the necessity of coming back to the



                                           132
       government for the rendering of accounts. The market fee at 2 percent is also on
       the higher side, since initially at least the reelers would have some difficulty in
       entering into contract agreements with farmers. If big players are to enter the
       sericulture industry in Karnataka, the government should have the same
       supportive and liberal policy that they have adopted in the case of other industries.
       This will help sericulture in Karnataka to prosper and will in the long run increase
       the revenues of the government.


SILK FILATURES


4.25   Silk filatures in Karnataka have been under public ownership since 1956. When
       the Karnataka Silk Industries Corporation was established in 1980, government
       silk filatures at Kanakapura and T-Narasipura were handed over to the
       Corporation. The remaining filatures at Kollegal, Mamballi, Santhemarahalli and
       Chamarajnagar remained with the government. The establishment of the silk
       filatures under the public sector was another effort of the government to protect
       the interests of small sericulture farmers. As bulk purchasers of cocoons, filatures
       contributed to the stability of cocoon prices and protected sericulturists against
       exploitation by unscrupulous private reelers. It was also thought that since silk
       yarn produced by the filatures was superior to charaka yarn, filatures will
       contribute to the production of better quality of silk fabrics.


4.26   However, in the course of time, the silk filatures, which should have brought in
       revenue to the government through their profits, have become a drain on the
       exchequer because of their persistent losses. They have incurred losses almost
       from the time of inception. The financial losses suffered by the four units under
       the department of Sericulture are shown in the following table :




                                            133
                   Financial losses of Government Silk Filatures
                            Kollegal      Mamballi     S.Marahalli   Ch.Nagar
1998-99

Total cost of production
                                2689          2418        2570         2650
[Rs.per Kg]

Average selling price
                                1432          1407        1618         1451
[Rs. per Kg]

Loss [Rs.per Kg]
                                1257          1011        952          1199


                               114.89         56.63      116.73       112.30
Total loss [Rs. lakhs]


1999-00
Total cost of production        2600          2122        2564         2441
[Rs.per Kg]

Average selling price
[Rs. per Kg]                    1253          1428        1373         1407

Loss [Rs.per Kg]
                                1347           694        1191         1034

Total loss [Rs. lakhs]
                               88.56          92.38      118.28       117.38
2000-01
Total cost of production
[Rs.per Kg]
                                2991          2399        2662         2599

Average selling price
[Rs. per Kg]                    1401          1423        1359         1418

Loss [Rs.per Kg]
                                1590           976        1303         1181

Total loss [Rs. lakhs]         146.70         107.35      99.66       110.04


                                        134
4.27   It may be seen from the statement that in all the four units under the department of
       Sericulture, the average selling price for one kilogram of silk yarn is much lower
       than the cost of production and consequently the units are running under loss.
       Each unit is making a loss of about Rs. 100 lakhs annually.


4.28   The two units under the Karnataka Silk Industries Coporation have also been
       working under loss. The silk filature at T.Narasipura suffered a net loss of Rs.
       131.49 lakhs in1999-00, Rs. 169.69 lakhs in 2000-01 and Rs. 184.37 lakhs in
       2001-02. The silk filature at Kanakapura suffered a net loss of Rs. 175.20 lakhs in
       1999-00, Rs. 176.79 in 2000-01 and Rs. 197.01 in 2001-02.


4.29   The government silk filatures prove once again the folly of the government in
       entering into the area of production in the face of private competition. The major
       causes for the persisting losses of the government silk filatures are old and
       obsolete machinery, technical deficiencies of present practices, excess manpower,
       old and dilapidated buildings, increase in the cost of coal and power charges and
       the inability of the filatures to compete with private reelers.          Under the
       circumstances, it would appear that the best thing to do would be to close down
       the filatures. As loss making units they do not serve the purpose for which they
       were set up.   However, there are reasons for continuing at least some of them
       since most of their workers are from the weaker sections. As a measure of
       reducing the losses the government has decided to close some of the filatures and
       merge some of the others and rejuvenate them.


4.30   A team of scientists headed by the Director, CSTRI conducted a technical study
       of the four filature units at Kollegal, Mamballi, Santhemarahalli and
       Chamarajanagar and the Silk Twisting and Weaving factory at Mudigundam
       [Technical report on the functioning of Government Silk Filatures and
       Government Silk Twisting and Weaving Factory]. The study report contains
       useful suggestions for the technological upgradation of the filatures which could
       help to make them profitable concerns. The report has indicated how almost all
       the activities of the filatures such as stifling, storage, sorting, cooking, reeling,
       silk skiening and twisting should be improved.            The report also makes
       suggestions for improving the process of cocoon purchase, improving the quality


                                           135
       of water used in the filatures for reeling, cost reduction, improvement in the use of
       machinery and the steps to be taken for full capacity utilization.


4.31   As part of the rejuvenation strategy the filature units at Chamarajanagar and
       Kollegal, which were difficult to revive, were merged with the Santhemarahalli
       and Mamballi units respectively. It has also been decided to close the Silk
       Twisting and Weaving unit at Mudigundam and to redeploy the workers in the
       units at Santhemarahalli and Mamballi.      However, unless this reorganization is
       followed up by the implementation of the recommendations of the study report
       the working of the two units that remain will not improve.


4.32   Reorganisation of the filature units under KSIC is also necessary. As per the
       Government order dated 28-8-2003, it has been decided to close the filature unit
       at Kanakapura and the Spun Silk Mill at Channapatna. A plan for the revival and
       diversification of the T-Narsipura silk filature unit has been prepared by Gemini
       Professional Services Pvt. Ltd. One of the suggestions made in this report is to
       procure    cocoons during the season at a lower price for the entire year with
       arrangements for proper storage.


Recommendations


       Since it is not possible to immediately privatise the government silk filatures
       because the units are in such a terribly bad shape, the action initiated already to
       close down some of the filatures, merge others and rejuvenate them should be
       taken up and implemented expeditiously.


       However, if the government removes restrictions on cocoon rearing and reeling
       as already suggested, it is likely that large private reeling units will be
       established in the State. Free market competition will take care of the problem
       of protecting the interest of sericulture farmers. When this happens it will be
       best to hand over the government silk filatures to the private sector or to close
       them since it is now accepted that it is not desirable or profitable for the
       government to engage in production activities which can be easily and more
       efficiently done by the private sector.


                                           136
                                    Annexure-I

          Sericulture – Receipts for the period from 1998-99 to 2002-03
                                                                            [Rs. in lakhs]
   Year       Market       Farm        Grainage       Licence     Other         Total
               Fee        Receipt       Receipt         Fee       items
 1998-1999    1408.754      13.320       882.860       12.838      23.812     2341.494

 1999-2000    1221.605      12.294       781.654       12.647      38.158     2066.358

 2000-2001    1270.448      42.705       940.472       10.794      67.126     2331.545

 2001-2002    1594.794       7.200       461.240       12.338      53.061     2128.633

 2002-2003    1228.412       3.597       349.754       18.393      36.778     1636.934




                                  Annexure-II
                            State Silk Farms Details

 Year       Leaves      DFLs           Cocoon            Income           Expenditure
          harvested    brushed        harvested          realized
           [in Kgs]    [in nos]     [nos. in lakhs]    [Rs. in lakhs]     [Rs. in lakhs]
1998-99      759040      73198             182.478              47.534          474.562

1999-00      721780      58128             156.042              39.101          578.228

2000-01      658108      48458             137.743              40.848          573.038

2001-02      653968      41407             133.070              32.923          600.253

2002-03      568186      40568             120.651              23.809          544.394




                                         137
    CHAPTER V
CO-OPERATIVE AUDIT
                                     CHAPTER 5

                            CO-OPERATIVE AUDIT

                        Sub: Audit fees of co-operative societies

Introduction

5.1   The department of Co-operative Audit came into existence in the year 1977 on the
      basis of the recommendations of the Public Accounts Committee. The objective
      in setting up the department was to ensure independent and fair statutory audit of
      all the co-operative societies in the State.


5.2   The department is required to conduct the audit of the accounts of all co-operative
      institutions at least once in a year, as envisaged under Section 63 of the Karnataka
      Co-operative Societies Act 1959. The department collects audit fee from every
      co-operative society at rates approved by the government.           In addition to
      statutory audit, the department can also, under rule 441 of the Karnataka Co-
      operative Societies Act 1959, conduct concurrent audit for which they can charge
      separate fees.


Terms of reference


5.3   The mandate given to the Commission is to suggest the policy for enhancement
      of the audit fees and recovery of the cost of audit.


5.4   The cost of auditing is basically the salary of the officials in the department who
      are involved in the task of auditing, along with expenditure on establishments
      costs and traveling allowances.


5.5   The sanctioned staff of the department as at the end of 2002 was 1915, of which
      1572 are permanent posts. 343 posts are vacant. The work in the department has


                                            141
      increased since the total number of co-operative societies for audit has increased
      from 27246 in 1995-96 to 31173 in 2002-03. Because of the increase in the
      number of co-operative societies, the increase in the number of vacant posts and
      increase in the volume of business of the societies, the department has not been
      able to audit all the societies at least once in a year as is required to be done. The
      percentage of societies audited by the department has declined steeply from 74
      percent in 1995-96 to 59 percent in 2001-02. This in turn has reduced the revenue
      generated by the department.


Revenue and expenditure of the department


5.6   Audit fees and audit costs collected from co-operative societies form the revenue
      of the department. The revenue and expenditure figures of the department for the
      last five years is presented in the following table


  Revenue and the Expenditure of the department of Co-operative Audit from
                                  1997-98 to 2001-02


                  Year          Revenue Expenditure          +Surplus
                                                             -Defecit

             1997-98                947.4          1212.9        -265.5
             1998-99               1039.7          1314.5        -274.8
             1999-2000             1027.2          1647.3        -620.1
             2000-2001              986.3          1513.2        -526.9
             2001-2002             1213.9          1614.7       -400.00


5.7   It is seen that the expenditure has always been more than the revenue and that this
      deficit amounts to about Rs. 5 crores annually. It may also be noted that there is a
      substantial gap between the demand raised and the actual amount collected. The
      recovery from the co-operative societies towards fees payable for audit is only
      around 65 percent of the demand.


                                            142
Audit fee structure


5.8         Prior to the year 2001, the rates for audit fee as fixed by the government, was 15
            paise for every one hundred rupees of the working capital or business turn over.
            This has been increased subsequently. As per government order dated 17/2/2001
            and 16/5/2003, the rates are fixed as follows:


      i.          20 paise for every one hundred rupees of the working capital or business
                  turnover for a co-operative society, whichever is more
      ii.         Irrespective of the financial position of the society, the minimum audit fee
                  shall be ;


                  a. Rs.5000/- for building co-operative societies
                  b. Rs.20,000/- for a co-operative sugar factories
                  c. Rs.500/- in respect of co-operative societies other than housing societies,
                      co-operative sugar factories, spinning mills and primary co-operative
                      agricultural and rural banks [PCARDBS]


5.9         Several types of co-operative societies are exempted by the government from the
            payment of audit fees. They are the following:


            1.        Student’s Co-operative Societies
            2.        SC/STs Co-operative Societies
            3.        Medical Aid Co-operative Societies
            4.        Primary Fishermans Co-operative Societies
            5.        Pottery Co-operative Societies
            6.        Leather Works Co-operative Societies
            7.        Mat Weavers Co-operative Societies
            8.        Basket Weavers Co-operative Societies
            9.        Hand Pounding Co-operative Societies
            10.       Sports Promotion Co-operative Societies



                                                 143
       11.      Woman Co-operative Societies
       12.      Co-operative Societies under liquidation
       13.      Co-operative Societies which are defunet/dormant
       14.      Co-operative Societies whose members are only Ex-serviceman
       15.      Washermen’s Co-operative Societies
       16.      Stone cutter’s Co-operative Societies
       17.      Barber’s Co-operative Societies


5.10   When a co-operative society avails of the services of auditors under rule 441 of
       the Karnataka Co-operative Societies Act 1959 for the conduct of concurrent and
       final audit, audit cost in lien of audit fee is recovered on “per diem basis” that is,
       audit cost is calculated on the number of days taken by such auditors to assist or
       complete the audit, together with traveling and daily allowances.


5.11   Fifteen co-operative institutions have filed a writ petition before the High Court of
       Karnataka objecting to the enhancement of the audit fee prescribed by the
       government.


5.12   The department of Co-operative Audit has, in the course of audit, reported
       approximately 300 cases of misappropriation every year approximating to Rs. 500
       lakhs.


5.13   The department has, on 7/2/2003 proposed for enhancement of the audit fee in
       order to increase the revenue of the department and to rationalize the audit fee.
       The proposed rates are as follows:




                                            144
         Sl.         Range of Working capital              Rates of audit fee leviable
        No.
       1        Working capital up to Rs. 10 For every 100, 20 ps
                crores
       2        Working capital of more than Rs. 1.5 lakhs + 15 P. for every
                Rs.10 crore up to Rs. 50 crores Rs.100 in excess of Rs. 10 crores

       3        Working capital exceeding Rs.50 Rs.6.3 lakhs + 12 P. for every
                crore                           Rs.100 in excess of Rs. 50 crores

       4        Primary co-operative agricultural 75 percent of audit fee calculated
                and rural banks [PCARDBS]         at the rate of 20 P. per Rs.100 of
                                                  loan advanced subject to minimum
                                                  of audit fee of Rs.30,000/-

       5        House      building     co-operative 25 P. per Rs.100 to minimum of
                societies [HBCS]                     Rs. 2000

       6        Sugar factories and spinning mills     Minimum audit fee leviable is
                                                       Rs.20,000 for sugar factories and
                                                       Rs.10,000 for spinning mills.

       7.                                              Rs.250 for co-operative societies
                                                       which do not fall under the above
                                                       categories



5.14        The details of co-operative societies with their share capital are indicated in
            Annexure-1.


5.15        The department has been waging a losing battle to ensure that all the co-operative
            societies in the State are audited regularly. As indicated above, the department is
            able to audit less than 60 percent of the societies every year. There are several
            societies which have not been audited for years together. The remedy, according
            to the department, is to fill all the vacant posts. The argument of the department
            is that the increase in expenditure will be compensated by the increase in societies
            covered under audit and the increased audit fee structure proposed to the
            government. However after discussion with the department, with the officials of
            the office of the Registrar of Co-operative Societies with representatives of the


                                                145
Institute of Chartered Accountants and with the officers from the office of the
Accountant General, the Commission is of the opinion that it is necessary to
review the role and functions of the department of Co-operative Audit in order to
conduct audit of the co-operative societies in a more efficient and helpful manner.
This cannot be done merely by filling the vacant posts in the department. The
additional expenditure incurred by doing so can never be compensated by
increased revenue since the salaries of government staff will only increase and the
government will have to continue incurring expenditure on them even after
retirement. The need for reforms in co-operative auditing is brought out by the
following points.


a. The expenditure of the department outstripped revenue from Rs.265 lakhs in
   1997-98 to Rs. 400 lakhs in 2001-02


b. The percentage of un-audited co-operative societies has increased from 20
   percent in 1992-93 to 41 percent in 2001-02.


c. Many co-operative societies are exempted from payment of audit fee.


d. There is no concurrent or performance auditing of co-operative societies.
   Only statutory auditing is done by the department without any test auditing.


e. Sixty five percent of the total co-operative societies have an average share
   capital of less than Rs. 5 lakh or working capital of Rs. 7.5 lakhs. Auditing of
   such small societies by the department consumes most of the time of the audit
   staff, placing a heavy burden to the government.


f. Audit reports should be prepared within one or two months immediately after
   the end of the financial year. This practice is not followed.




                                   146
       g. The auditing of a co-operative society is carried out by the same staff of the
          department for over a long period. As a result of this fair auditing of co-
          operative societies is not ensured.


       h. No co-operative audit report is placed on the floor of the House. Hence co-
          operatives are not brought under the scrutiny of the Legislature.


       i. The number of co-operative societies refusing to pay the audit fee is
          increasing. The refusal to pay the audit fees of the department is amounting
          to Rs.116 lakhs.


       j. The qualifications prescribed for the appointment of ‘auditors’ is any degree
          from a recognized university. This does not ensure scientific auditing of
          societies by specialized personnel


       k. No fair trial was given for auditing of co-operatives by chartered accountants
          in the past. Although the Karnataka Co-operative Societies Act, 1959 had
          been amended to permit any co-operative society to engage a chartered
          accountant to audit its accounts, the Act was soon amended again, making it
          compulsory to have the accounts audited by only the departmental auditors.
          The modes of selection of the chartered accountants and the rules governing
          their functioning had not been worked out carefully.


5.16   Many co-operative societies have failed because of bad business practices and
       corruption, there by leading to loss of public money. The need of the hour is
       to strengthen co-operative societies to face competition in the market economy.
       This calls for several reform measures. One such measure is to reform co-
       operative auditing.


5.17   The Commission is of the opinion that the department of Co-operative Audit
       should be a lean and efficient organization which will supervise the audit of co-



                                           147
       operative institutions in much the same way that the Accountant General’s office
       supervises the audit of public sector undertakings and government departments. It
       is also necessary to bring co-operative societies within the purview of the
       Legislature since a lot of public money is given to the societies. Co-operative
       institutions should be audited by chartered accountants just as in the case of
       public sector undertakings and banks. The role of the department of Co-operative
       Audit should be :


       a. to monitor the auditing of the societies by the chartered accountants in order
          to ensure that all co-operative societies are audited according to the time table
          drawn up by chartered accountants. Some of the smaller primary agriculture
          co-operative societies may be audited even by auditors. The auditors can be
          determined at the General Body meeting of the co-operative society.


       b. do a test audit every year of all co-operative societies which have a turnover
          or working capital above a certain amount and a test check every two years of
          the smaller societies.


       c. Do a detailed performance audit of a few societies, especially of those with
          large turn over or where there is suspicion that funds are being mis-used.


5.18   It will be necessary for the government to lay down rules regarding the selection
       of chartered accountants, fees chargeable by the chartered accountants, calendar
       for audit by both the chartered accountants and by the department of Co-operative
       Audit and other details.    The Co-operative Societies Act will also require
       amendment.




                                          148
Recommendations


     1. Co-operative societies, where the government has shares or has given
        financial assistance should be brought under the ambit of the supervision of
        the Legislature

     2. Auditing of the accounts of all co-operative societies with share capital of
        Rs.10 lakhs and above should be entrusted to chartered accountants.

     3. The Comptroller and Auditor General’s office calls for applications every
        year for conducting the audit of public sector undertakings. The state
        government may use the list of chartered accountants short listed by the
        Accountant General’s office to do the audit of co-operative societies. This
        will avoid duplication of work and prevent pressure being brought upon the
        office of the Registrar of Co-operative Societies with regard to the selection
        of the chartered accountants. The selected chartered accountants will then
        have to take up the audit of all the co-operative societies.


     4. A calendar has to be prescribed for the audit of the societies as in the case of
        public sector undertakings. The calendar will include the audit by the
        chartered accountants as well as the accounts certification or test audit to be
        done by the department of Co-operative Audit for all societies having a
        share capital between Rs. 10 and Rs. 50 lakhs annually. In the case of
        societies with share capital of less than Rs.10 lakhs, the test audit may be
        done by the department of Co-operative Audit once in two years. However
        the accounts audited by the chartered accountants or auditors of these
        societies also have to be sent to the department of Co-operative Audit and
        the chartered accountants audit should be completed within the time table
        prescribed.

     5. The department of Co-operative Audit will also do a transaction audit or
        proprietary audit so as to cover all big societies such as the Apex bank, the
        DCC banks and large urban co-operative banks at least once in two years.
        Besides this, a detailed performance review of three or four large societies
        should be taken up by the department of Co-operative Audit every year.


                                        149
6. The department of Co-operative Audit will therefore do
   i.      Accounts certification or test audit
   ii.     Transactions audit or proprietary audit.
   iii.    Performance review

7. Just as the Committee of Papers laid on the Floor of the House monitors the
   completion of the statutory audit of public sector undertakings, in the same
   way the government in the department of Co-operation will be required to
   send a report to the Legislature on the details of co-operative societies.

8. Major observations regarding mis-appropriation and other matters should
   be placed on the floor of the house. This can be discussed by a Legislature
   committee similar to the Public Accounts Committee/Estimates Committee.

9. Since the nature of the transactions of co-operative audit is fairly simple as
   compared to other financial institutions, the audit fee of the chartered
   accountants may be fixed at a lower level than that for commercial banks or
   other financial institutions, the rates of which will be based upon the turn
   over. The ceiling for the rates will be fixed by the department of Co-
   operative Audit and will be revised once in four years.

10. No chartered accountant should be permitted to audit the accounts of a
   society for more than four years. Chartered accountants whose work under
   test audit by the department is seen to be unsatisfactory should be removed
   from the select list of chartered accountants for the audit of co-operative
   societies. The audit of the chartered accountants and the test audit and
   accounts certification by the department of Co-operative Audit should be
   completed by 30th September as in the case of public sector undertakings.
   By 30th December the co-operative society has to submit its annual report
   along with the auditors report through the department of Co-operation to
   the Legislature.



                                   150
       11. The Comptroller and Auditor General has set up a study group to determine
          accounting standards for government departments. The State government
          has to similarly determine accounting and auditing standards for co-
          operative societies. Since the department of Co-operative Audit will now
          work in a supervisory role the quality of the auditors has to be substantially
          improved. They need intensive training in the accounting and auditing
          standards to be prescribed by the State government and also an
          understanding of the functioning of co-operative societies.


       12. The department of Co-operative Audit should function as an autonomous
          body.    It will be renamed as the office of the Auditor General of Co-
          operatives. The office should be headed by an officer from the Indian
          Accounts and Audit Services of the rank of Accountant General.


       13. The Registrar of Co-operative Societies should exercise his statutory powers
          to discipline co-operative societies who do not get their accounts audited in
          time or whose audit reveals serious cases of misappropriation or violation of
          the Co-operative Societies Act.


       14. The government should institute the office of an Ombudsman for
          cooperative societies with powers to enquire into cases of frauds and
          irregularities as in the case of commercial banks.


5.19   If these recommendations are accepted and put into practice, it will bring
       discipline and transparency into the functioning and audit of co-operative
       societies. It will ensure that all the societies are regularly audited every year. It
       will also ensure that these audits are subjected to a test check. It will enhance the
       prestige of the department of Co-operative Audit and make it more responsible for
       quality auditing and performance appraisal.          It will also ensure detailed
       transaction audit or proprietary audit of the larger societies at least once in two
       years as well as the detail performance review which will help them to improve
       their performance. The expenditure will be reduced and the revenue increased
       since higher fees can be charged for transaction audit and performance review.



                                            151
                                Annexure-I

                     DEPARTMENT OF CO-OPERATION

                                                                    Rs. in lakhs

Sl.     Type of Co-operative     Total     Total    Out of Col.4      Average
No.           Societies          No. of   Share      quantum of         share
                                  CS      Capital   Government       capital per
                                                    share capital      society
 1               2                 3        4            5               6
1     DCC Banks                      21    19160           2112         912.38
2     Sugar Factories                39    13798           8640         353.79
3     Spinning Mills (Coop)          20     5899           2221         294.95
4     Urban Banks                   308    31670             ---        102.82
5     Coop Industrial Estates         9       575            ---         63.89
6     PCARD Banks                   177     9053            714          51.15
      Total                         574    80155          13687        1778.99
7     Processing CS                 114     4310           2080          37.81
8     Electricity CS                  7       230            46          32.86
      Total                         121     4540           2126          70.66
9     Women CS                      193     2125            300          11.01
      Total                         193     2125            300          11.01
10    Non-Agri. Credit             3534    29985            151            8.48
11    Marketing CS                  351     2328            621            6.63
12    PACS                         4739    25186           3604            5.31
13    Housing CS                   1539     7712            318            5.01
      Total                       10163    65211           4694          25.44
14    Student Cons CS               142       267              4           1.88
15    Irrigation CS                 253       369            34            1.46
16    Weavers CS                    614       813           224            1.32
17    Transport CS                   30        37              5           1.23
18    Consumers CS                 1677     1389            645            0.83
19    Milk CS                      9331     5391            240            0.58
20    Fisheries CS                  473       248            77            0.52
21    Industrial CS                1369       668           167            0.49
22    Women Multi-purpose CS       1043       365           132            0.35
23    Livestock CS                  317       100            37            0.32
24    Other CS                     4960     1000            284            0.20
25    Labour CS                     207        31              9           0.15
26    Forest Labourers CS           100         8              5           0.08
27    Farming CS                    341        23              6           0.07
      Total                       20857    10709           1869            9.48
      GRAND TOTAL                 31908   162740          22676        1895.58




                                    152
        CHAPTER VI
SUMMARY OF RECOMMENDATIONS
                                    CHAPTER 6

                SUMMARY OF RECOMMENDATIONS


MINOR IRRIGATION

1.   Utilisation of potential under minor irrigation:
     An indepth study is to be carried out to identify the reasons for the abysmally
     poor utilization of the potential created and initiation of immediate action to
     improve the utilisation to acceptable levels.


2.   The Commission recommends that all minor irrigation tanks, including those with
     ayacuts of between 40 and 2000 hectares which are presently in the State sector,
     should be handed over to gram panchayat subcommittees constituted under
     Section61 (A) of the Karnataka Panchayat Raj Act, 1993.

3.   Complete administrative reorganization is required to ensure better supervision
     of minor irrigation. The department of Minor Irrigation should be abolished and
     most of the engineers of the department transferred to the zilla panchayat
     divisions and sub-divisions.


4.   The gram panchayat subcommittees should be given one time assistance by the
     government for the restoration of the tank structure by repair and restoration of
     tank bund, sluices, waste weir and main canal. A rough estimate is that these
     basic repairs will require approximately Rs. 15, 000 per hectare. This will require
     a huge one time investment of approximately Rs. 600 crores.


5.   Restoration of tanks should be taken up only after capacity survey,
     determination of yield and assessment of costs and benefits.




                                         155
6.    The water rates for minor irrigation should be 25 percent of the rates for medium
      and major irrigation.
7.    The State government should make a strong case to the Central government for at
      least 50 percent financial assistance to complete basic repairs and restoration of
      minor irrigation tanks as well as to construct new tanks in the drought prone
      areas of the State. The Commission however reiterates that incurring expenditure
      on restoration of tanks or on new tanks is a waste of public money if adequate
      funds are not provided every year for the maintenance of the tanks.


8.    Watershed development is an integral part of the development and maintenance
      of minor irrigation.


9.    People’s involvement and participation is essential for effective watershed
      development.


10.   The Commission recommends formation of watershed Gram Panchayat
      Subcommittee (GPSs) under Section 61 (A) of the Karnataka Panchayat Raj Act
      1993, with the co-option of representatives of people’s groups such as area
      groups and self help groups.


11.   The Irrigation Act should be amended to transfer the power of water users’
      societies to the gram panchayat subcommittees / consortium of gram panchayats
      in case of minor irrigation tank ayacut areas. Similarly, there should be
      amendments of Karnataka Panchayat Raj Act 1993 to provide for powers to be
      given to gram panchayat subcommittees / consortium of gram panchayats to
      undertake all the activities to be entrusted as per recommendations given in this
      report.


12.   Close monitoring with the help of computers is essential with regard to the works
      to be carried out by the gram panchayat subcommittees in the case of both minor
      irrigation tanks and watershed development.



                                         156
13.   While constructing new tanks, thorough field and geo-technical investigations
      have to be carried out and plans and estimates drawn up according due
      consideration to not merely the irrigation system but also to the command area
      development. All this should be completed within a period of one year. The
      construction of a project should be completed within a period of one year to avoid
      cost and time over run and consequent delay in realising the intended benefits.


14.   Private minor lift irrigation using surface waters:


      a) Regularization of all cases of private lifts where permission has not been
      obtained from government for using surface waters, levying a one time penalty of
      Rs. 100 per acre and continuous payment of the annual levy at the rates
      recommended in sub-para (b) below.


      b) Increase    the annual levy on private lifts from the present meager rate of
      Rs. 4 per acre (or Rs. 10 per hectares) to at least Rs. 10 per acre ( or Rs. 25 per
      hectares).


      c) Non-payment of the prescribed levy on such users for a successive period of
      three or more years should be treated as an offence under the Irrigation Act,
      attracting deterrent punishment.


      d) Levy on such users should be collected by the Water Resources department as
      it deals with the subject of according permission for such private lifts using
      surface waters.




                                          157
LABOUR AND EMPLOYMENT


A.   Employment

1.   The Commission recommends that the inter linkage between farmers and agro
     food industry and big business on contract basis should be expanded qualitatively
     and quantitatively throughout the State, so that the dormant employment and
     income generating potential of this sector could be fully tapped. It is also
     recommended that all regulations and bottlenecks which come in the way of such
     linkage between the farm and industry be removed


2.   The Commission strongly recommends that comprehensive development of
     Karnataka’s dry land treatment by watershed technology needs to be supported
     fully and suggests that the proposal of full coverage should be considered on top
     priority. In addition to the manifold benefits of watershed development, it will
     also generate employment and increase the income of the poorest families


3.   The Commission has already recommended separately for the full exploitation of
     the potential under major, medium and minor irrigation projects and reiterates
     that these recommendations should be accepted in toto in the interest of
     employment and higher income and wage which will accrue in greater measure to
     the people of Karnataka.



4.   The Commission recommends that the Animal Husbandry sector which has
     considerable employment generation potential should be encouraged in greater
     measure. KMF activities should be extended to north Karnataka with the same
     intensity as it is done in the south and milk processing units producing export
     quality products should be established in areas of excess production of milk.

5.   The Commission recommends innovative methods of expanding cottage
     industries, artisan units and small service centers in rural and urban areas by



                                        158
     organizing self help groups, who will be financed under various programmes of
     government administered by various development corporations as well as by
     banks directly. At the same time the Commission recommends that consumption
     credit needs of self employed in the weaker sections be met through the working
     out of appropriate insurance products for consumption needs like expenses on
     health, education, death and marriage. Government should also arrange for skill
     development according to changing market trends.


6.   In respect of large medium industries the Commission recommends that
     Karnataka should look beyond IT sector. Now that India is picking up in the
     manufacturing industry, efforts should be made to establish manufacturing
     industries in the State. In order that wide spread development takes place the
     infrastructure needs such as drinking water transport and power need to be taken
     care of in the already identified growth centers. The development of Karwar port
     along with the Hubli-Karwar railway line will greatly help in the expansion of
     industries in northern Karnataka as well as in adjoining areas of Andhra
     Pradesh.


B.   Department of Factories and Boilers

1.   The Commission recommends that the State's Safety Institute may confine its work
     to formulating course material with the help of departmental officers, experts and
     industry managers for different modules and arranging programmes utilizing
     engineering colleges in the districts. The Commission also recommends that the
     course material prepared for different modules should be made utilitarian to the
     industry so that the managements will be interested in sending their employees for
     training by paying the course fee, which should be adequate to meet the cost of
     conducting programmes as well as preparing the course material.


2.   The Central Safety Monitoring Cell needs to continuously update its knowledge
     with regard to modern manufacturing processes. The Commission recommends
     the conducting of workshops jointly by the department and the Indian Institute of


                                        159
     Science or other expert body each year on various modules of knowledge needed
     to run this cell efficiently. The cell should also be enabled to access the latest
     information available in the field by providing it access to relevant scientific
     journals.


3.   The Commission recommends an optional on boiler manufacture and
     management as well as factory safety technology as a paper in BE Mechanical
     course.


4.   The Commission recommends that inspection report proforma should be prepared
     in which information to be secured on all the key components of a factory are
     indicated.   The compliance of observations made by the inspecting officer should
     be watched for implementation.


5.   The Commission recommends that all Class I officers of the department should be
     permitted to purchase vehicles on bank loan, for which some interest subsidy may
     be given by government as also reimbursement of petrol expenses at a reasonable
     level.


6.   The Commission takes serious note of the fact that such essential items of
     inspection kit have not been provided to the inspecting officers, thereby forcing
     them to carry out inspections without tools. This effects the credibility of the
     inspections. The Commission recommends that the department should purchase
     all the inspection tools and equipment required by inspecting officers at all levels
     as indicated in this report very expeditiously.


7.   Since it is a Tenth Five Year Plan scheme of the department the Commission
     recommends that government may examine the merits of the proposal for
     establishment of a work environment center and testing laboratory.




                                         160
8.    The Commission recommends that the inspection officers be assisted to
      continually upgrade their skills through workshops, training programmes and
      library facilities.


9.    The Commission recommends the acceptance of the proposal of e-governance as
      suggested by the department with the condition that suitable systems should be
      evolved which will enable the department to function effectively.


10.   The Commission recommends that the inspection fee across the board be raised
      by 50 percent for all items for which fee is charged.


C.    Labour

1.    The Labour department should negotiate with insurance companies and the postal
      department for taking up multi benefit insurance policies for the unorganized
      sector which will provide along with life insurance some essential benefits such as
      health care, accident relief, education fund, housing loan and temporary
      unemployment dole for which the premium could be paid at the nearest post
      office. The premium could be as low as Rs. 50 per month (with options to
      subscribe higher premium,) in order that a wide segment of the unorganized
      sector both from rural and urban areas is covered.


2.    The Commission recommends that instead of having a slab system for assessment
      of fee payable by each establishment, the system proposed by the department in
      which assessment is made on the basis of a formula be accepted. The additional
      revenue generated should be given to the department of Women and Child
      Development to run residential ‘bridge’ courses for child labourers so as to
      enable them to join normal schools thereafter.




                                          161
CROP HUSBANDRY


A.   Agriculture Farms
1.   The Agriculture department has graded the farms into categories B, C, D and E in
     terms of reducing viability. Only two farms are graded as ‘B’, seven as ‘C’ and
     the rest of the forty are ‘E’. The Agriculture department should study the farms in
     detail and determine whether they would like to retain any with the department.
     This may not be more than one in each agro –climatic zone.

2.   The remaining farms should be given on 15 years' lease to private seed
     companies on the basis of open tenders. Only those companies which are
     registered with the government as seed companies will be eligible to participate
     in the tender. The tender document should indicate details of each farm such as
     the area, type of soil, irrigation facilities, buildings etc. The lowest amount
     acceptable for tender should be specified in the tender document. The lease deed
     should be a carefully drafted legal document which should specify the conditions
     of the lease. One of the conditions should be that the land should be utilized only
     for seed production and research activities. Another condition should be that the
     company should make maximum use of the irrigation potential in the land and
     also make economic use of water through the use of sprinkler and drip irrigation
     techniques.

3.   Those farms for which there are no takers at all and which are totally unviable
     may be handed over to the Forest department for raising social forestry.


B.   Horticulture Farms
1.   The department of Horticulture should study the matter carefully and decide
     which of the farms they need to retain.


2.   The government should provide enough funds for these limited number of farms
     so that they may realize fully the purpose for which they were set up. The farms


                                         162
     could be permitted to retain a part of the income generated by them so as to
     encourage them to become self sufficient. The remaining farms should be leased
     to horticulture companies on the basis of open tender on a national basis for the
     setting up of horticulture based businesses. This will not only bring investment
     into the State, but it will help our farmers by training them in the use of improved
     technology in the growing of fruits and vegetables and by purchasing the crops
     from them. The lease should be given for a maximum period of 15 years. The
     department may determine the lowest tender which is acceptable for each farm. It
     is suggested that many of the farms which are making nominal profits may also be
     given on lease.


3.   In addition to leasing the farms on the basis of open tender, the department may
     also decide to enter into joint ventures with private companies in improving
     certain farms. The land could be the government’s share in the enterprise and the
     profits could be shared on an agreed basis.



SERICULTURE AND SILK FILATURES

A.   Sericulture Farms
1.   The concept of silk worm seed area should be given up. While P4, P3 and P2
     seeds should continue to be produced in government seed farms, the responsibility
     of commercial seed production should move towards the private sector.             A
     Silkworm Seed Regulatory Authority should be set up by the government to certify
     the quality of the seed. The Central Silk Board has already proposed to the
     Government of India the creation of a National Silkworms Seed Regulatory
     Authority.

2.   Since sericulture can prosper in the State only if Karnataka can offer large
     volumes of silk of uniform quality in adequate lot sizes, it is necessary for the
     government to create an enabling environment for the private sector to set up
     large integrated silk factories.   These silk factories will require to enlist a


                                         163
     required number of mulberry farmers on contract basis to supply the cocoons
     directly to them and not through the cocoon market. The silk factories can be
     made responsible for remitting the market fee for the cocoons. This model of
     direct linkage between the producer and the processor will be similar to that
     which is already in place with regard to agricultural and horticultural
     commodities.

3.   The Karnataka Silkworm Seed, Cocoon and Silk Yarn [Regulation of Production,
     Supply, Distribution and Sale] Act 1959 should be amended to allow direct
     linkages between the producer and the processor at all stages - graineur and seed
     cocoon farmer, reeler and farmer and weaver and reeler. This will help to
     improve the quality of silk by allowing the market to determine the pricing for the
     produce and will allow entry of large scale integrated soil to silk production
     units.

4.   It is also necessary to lift all restrictions on the movement of cocoons and yarn
     into the State or from Karnataka to other States. When silk imports from China
     are being permitted, it would be unreasonable to prevent free flow of cocoons and
     yarn from all parts of India.


5.   All modes of government licensing should be removed. Instead of licensing, the
     government should put in place a mechanism for registration of rearers, reelers
     and weavers. The registration need not be compulsory. However registration
     will enable the government to access the stake holders to give them technological
     inputs, extension services and government subsidies. It is expected that with this
     changed perception of government’s role, most of the silkworm rearers and
     reelers will opt for registration. Fees may be charged by the department only for
     services rendered.

6.   The cocoon markets and silk exchanges should continue, but in a different setting.
     They will be places where small farmers and rearers as well as others will have a
     forum for selling their produce. However, the cocoon markets and silk exchanges



                                        164
      need to be modernized. They should serve as centres which foster quality
      transactions and which render information and assistance and not as institutions
      which stifle free exchange between producers and purchasers. For example, the
      cocoon markets and silk exchanges should be computerized. They should provide
      information on prevailing market rates. Quality assessment should be done in a
      scientific manner. The cocoon markets and silk exchanges should become places
      where one can be certain of obtaining products of good or superior quality.


7.    New marketing concepts like online buying and selling and a futures market in
      cocoon and silk yarn will help farmers and reelers in planning ahead their
      production programme. The State government should support the proposal of the
      Central Silk Board to set up an All India online trading system for cocoon and
      silk yarn.


8.    Sericulture should in fact become a thriving agro business, if Karnataka is to
      become a producer of world class silk.       The Sericulture department should
      concentrate on improving the breeder stock and basic stock of seeds, in
      modernizing the cocoon markets and silk exchanges and in improvement and
      expansion of extension services.


9.    Adoption of new technologies by rearers and reelers should be assisted by
      government subsidies.

10.   The Sericulture department should give up unviable sericulture farms and
      grainages and utilize the staff in extension services where there is great need of
      capable workers. The sericulture farms which the department does not wish to
      retain can be leased on the basis of open tenders to private companies which
      intend to set up large integrated silk factories. The grainages could be put to
      public use, such as schools and hostels




                                         165
B.   Silk Filatures
1.   Since it is not possible to immediately privatise the government silk filatures
     because the units are in such a terribly bad shape, the action initiated already to
     close down some of the filatures, merge others and rejuvenate them should be
     taken up and implemented expeditiously.


2.   However, if the government removes restrictions on cocoon rearing and reeling
     as already suggested, it is likely that large private reeling units will be established
     in the State. Free market competition will take care of the problem of protecting
     the interest of sericulture farmers. When this happens it will be best to hand over
     the government silk filatures to the private sector or to close them since it is now
     accepted that it is not desirable or profitable for the government to engage in
     production activities which can be easily and more efficiently done by the private
     sector.



CO-OPERATIVE AUDIT

1.    Co-operative societies, where the government has shares or has given financial
     assistance should be brought under the ambit of the supervision of the Legislature


2.   Auditing of the accounts of all co-operative societies with share capital of Rs.10
     lakhs and above should be entrusted to chartered accountants.

3.   The Comptroller and Auditor General’s office calls for applications every year
     for conducting the audit of public sector undertakings. The state government may
     use the list of chartered accountants short listed by the Accountant General’s
     office to do the audit of co-operative societies. This will avoid duplication of
     work and prevent pressure being brought upon the office of the Registrar of Co-
     operative Societies with regard to the selection of the chartered accountants. The
     selected chartered accountants will then have to take up the audit of all the co-
     operative societies.




                                          166
4.   A calendar has to be prescribed for the audit of the societies as in the case of
     public sector undertakings. The calendar will include the audit by the chartered
     accountants as well as the accounts certification or test audit to be done by the
     department of Co-operative Audit for all societies having a share capital between
     Rs. 10 and Rs. 50 lakhs annually. In the case of societies with share capital of
     less than Rs.10 lakhs, the test audit may be done by the department of Co-
     operative Audit once in two years. However the accounts audited by the
     chartered accountants of these societies also have to be sent to the department of
     Co-operative Audit and the chartered accountants audit should be completed
     within the time table prescribed.

5.   The department of Co-operative Audit will also do a transaction audit or
     proprietary audit so as to cover all big societies such as the Apex bank, the DCC
     banks and large urban co-operative banks at least once in two years. Besides
     this, a detailed performance review of three or four large societies should be
     taken up by the department of Co-operative Audit every year.


6.   The department of Co-operative Audit will therefore do
     i. Accounts certification or test audit
     ii. Transactions audit or proprietary audit.
     iii. Performance review

7.   Just as the Committee of Papers laid on the Floor of the House monitors the
     completion of the statutory audit of public sector undertakings, in the same way
     the government in the department of Co-operation will be required to send a
     report to the Legislature on the details of co-operative societies.

8.   Major observations regarding mis-appropriation and other matters should be
     placed on the floor of the house. This can be discussed by a Legislature
     committee similar to the Public Accounts Committee/Estimates Committee.


9.   Since the nature of the transactions of co-operative audit is fairly simple as
     compared to other financial institutions, the audit fee of the chartered
     accountants may be fixed at a lower level than that for commercial banks or other
     financial institutions, the rates of which will be based upon the turn over. The



                                        167
      ceiling for the rates will be fixed by the department of Co-operative Audit and will
      be revised once in four years.


10.   No chartered accountant should be permitted to audit the accounts of a society
      for more than four years. Chartered accountants whose work under test audit by
      the department is seen to be unsatisfactory should be removed from the select list
      of chartered accountants for the audit of co-operative societies. The audit of the
      chartered accountants and the test audit and accounts certification by the
      department of Co-operative Audit should be completed by 30th September as in
      the case of public sector undertakings. By 30th December the co-operative society
      has to submit its annual report along with the auditors report through the
      department of Co-operation to the Legislature.


11.   The Comptroller and Auditor General has set up a study group to determine
      accounting standards for government departments. The State government has to
      similarly determine accounting and auditing standards for co-operative societies.
      Since the department of Co-operative Audit will now work in a supervisory role
      the quality of the auditors has to be substantially improved. They need intensive
      training in the accounting and auditing standards to be prescribed by the State
      government and also an understanding of the functioning of co-operative
      societies.


12.   The department of Co-operative Audit should function as an autonomous body. It
      will be renamed as the office of the Auditor General of Co-operatives. The office
      should be headed by an officer from the Indian Accounts and Audit Services of the
      rank of Accountant General.


13.   The Registrar of Co-operative Societies should exercise his statutory powers to
      discipline co-operative societies who do not get their accounts audited in time or
      whose audit reveals serious cases of misappropriation or violation of the Co-
      operative Societies Act.


14.   The government should institute the office of an Ombudsman for cooperative
      societies with powers to enquire into cases of frauds and irregularities as in the
      case of commercial banks.


                                          168
                                     CHAPTER 7

               ACKNOWLEDGEMENTS & REFERENCES

Minor Irrigation

   1. Sri. A.K.M. Nayak, IAS, Principal Secretary, Water Resources, GOK
   2. Sri. E. Venkataiah, IAS, Secretary Minor Irrigation
   3. Sri. T.R. Raghunandan, IAS, Secretary, RDPR
   4. Sri. T.M. Vijay Bhaskar, IAS, Commissioner, Watershed Department
   5. Sri. G.V. Krishna Rau, IAS, Executive Director, JSYS
   6. Sri. Faroque Sheikh, Deputy. Secretary, Revenue Department
   7. Sri. K. Balraj, Chief Engineer, Minor Irrigation (North)
   8. Sri. H.S. Mahesh, Chief Engineer, Minor Irrigation
   9. Sri. H.D. Ganesh, Director of Economics and Statistics
   10. Sri. Abdul Basith, Director (PP) Planning Department
   11. Sri. M. Jospeh Jayakumar, Joint Director, Minor Irrigation
   12. Sri. V. Ramananda Chadga, Executive Engineer (Design) Minor Irrigation
   13. Sri. S. Nanjunda Rao, Joint Director, Statistics

References

   1. Appraisal Report of the Karnataka Community Based Tank Management Project-
      March –2002
   2. A New Concept for Rejuvenation of Irrigation Tanks- “AMRIT” Model by
      Sri. BC Angadi
   3. Census on Minor Irrigation 2000 – 2001
   4. Tank Irrigation in Karnataka, by Sriyuths. G.S. Dikshit, G.R. Kuppuswamy and
      S.K. Mohan
   5. Irrigation Subsidies in Karnataka: A growing constraint for Reforms by K.V. Raju
      and H.K. Amarnath
   6. People’s Institutions Managing Natural Resources in the context of a Watershed
      Strategy by Aloysius P Fernandez
   7. The Andhra Pradesh Farmers Management of Irrigation System Act 1997



                                           171
Labour and Employment


   1. Ms. Vatsala Watsa IAS, Secretary, Labour Department
   2. Sri. Sanjeev Kumar IAS, Commissioner for Labour
   3. Sri. P.N. Srinivasachari IAS, Director of Employment Training
   4. Sri. K.G. Krishnappa, Director, Factories & Boilers
   5. Sri. Shankar Rao, Director, Manpower & Employment, Planning Department
   6. Sri. C.M. Sitimani, Addl. Labour Commissioner
   7. Sri. B.S. Ramachandra, Joint Director of Factories II Department of Factories and
      Boilers


References


   1. McKinsey Report on Economic Performance of India – August 2001
   2. Report of the Task Force on Employment Opportunities, Planning Commission-
      July 2001
   3. Report of Special Group on Targeting 10 million Opportunities Per Year,
      Planning Commission- 2002

Crop Husbandry


   1. Sri. Shantanu Consul IAS, Principal Secretary, Agriculture & Horticulture
      Department
   2. Sri. Muniyappa IAS, Secretary Horticulture Department
   3. Dr. E.V. Ramana Reddy IAS, Commissioner for Agriculture
   4. Dr. G. K. Vasanth Kumar, Director of Horticulture
   5. Sri. B.R. Shankar, Joint Director of Agriculture
   6. Dr. M. Jayaramaiah, Registrar, University of Agriculture, Bangalore
   7. Sri. V. Gopal, Comptroller, University of Agriculture, Bangalore
   8. Dr. V.K. Prasanna Shetty, Director of Research, University of Agriculture,
      Bangalore

   9. Sri. M.J. Arun, Assistant Director, Agriculture (Retd.)




                                          172
Sericulture and Silk Filatures

   1. Sri. Ashok M. Dalwai IAS, Secretary, Commerce and Industries
   2. Sri. Arvind .R. Jannu, IAS, Commissioner for Sericulture
   3. Sri. P. Joy Oommen IAS, Member Secretary, Central Silk Board, Bangalore
   4. Sri. P. Vijayan IAS, Managing Director, KSSICL
   5. Sri. K.N. Ramadas, Addl. Director, Sericulture
   6. Sri. M.S. Jayaram, CAO, Sericulture
   7. Sri. Moinuddin, Deputy Director of Sericulture (Plan)
   8. Dr. T.H. Somesheker, Director, Central Silk Technology Research Institute
   9. Dr. U.D. Bongale, Director, Karnataka State Silk Research Development Institute
   10. Dr. R. Govindan, Director, Sericulture College, Chintamani
   11. Dr. Benjamin, Director, National Silkworm Seed Project
   12. Dr. R. Raghuraman, Divisional Chief, Sericulture, KSSRDI
   13. Dr. M.A. Shankar, Chief Scientist, Dryland Agriculture Project, UAS
   14. Dr. V.G. Haliyal, Divisional Chief, Silk Technology, KSSRDI
   15. Dr. Mallikarjunappa, Divisional Chief, Moriculture, KSSRDI
   16. Dr. Hanumappa, Retd. Professor, ISEC, Bangalore

Co-operative Audit

   1. Dr. R.G. Nadadur, IAS, former Registrar of Co-operative Societies
   2. Sri. T.A. Parthasarathy, Director of Co-operative Audit
   3. Sri. A. Nayak , Joint Director of Cooperative Audit
   4. Sri. N. Ramakrishnappa, Joint Director Cooperative Audit


   The Commission is grateful for the services rendered by Ms. H.S.P. Rani, PA,
   K.S.F.C, Bangalore for having assisted the Commission in preparing the report.




                                         173

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:78
posted:10/10/2011
language:English
pages:174