LAHORE, Oct 16: The federal and provincial governments have planned to constitute village councils in 1,000 villages and lend them a revolving fund of Rs4 million in order to solve financial problems of farmers for purchase of inputs.

This was said by agriculture secretary Fayyaz Bashir in a briefing to members of the Agriculture Journalists Association here on Monday.

He said the lending would be interest-free, enabling the councils to purchase inputs in bulk for growers.

Farmers would return the money after selling the crop. The Punjab government had experimented in two villages and found 50 per cent increase in yield as a result, he said.

In both the villages, the secretary said, the council charged the farmers two to three per cent interest to meet their own overhead expenditure. The results were so encouraging that both the centre and the province had now decided to replicate the plan in 1,000 villages - 500 villages sponsored by each, he said.

This should solve the credit problem at least in these 1,000 villages. The government would increase the number of villages progressively, he said.

The federal government had also enhanced credit limit for farmers to Rs160 billion for year 2006-07, and 78 per cent of it would be disbursed in Punjab, he said.

The federal government had reserved Rs15 billion for promoting sprinkle and drip irrigation in the province. Since it was a costly proposition, the government would subsidise 80 per cent of the cost. The private companies installing the system would also provide two-year after-sale service and training to farmers, he said.

Mr Bashir said the Punjab government had also amended Agri-Produce Marketing Act for allowing setting up of fruit markets by private parties. Hitherto, only the government was entitled to set up fruits markets. The government would share profit with the private parties, which would not be more than 25 per cent, he said.