Rural Development Fund

#GS3 #RuralDevelopment

The Union Government’s decision to withhold rural development fee from Punjab, and letters asking the Punjab Government to explain its utilisation of the Rural Development Fund (RDF) that it gets largely from the Food Corporation of India (FCI) has enraged the state government.


What is Rural Development Fund or RDF?

  • RDF is the 3 per cent cess levied on the purchase or sale of agricultural produce under the Rural Development Fund Act, 1987 which is executed by Punjab Rural Development Board (PRDB) with the Chief Minister as its chairman.


What is Rural Development Board (RDB)?

  • The RDB was incorporated in April 1987 under Rural Development Act, 1987 and is mandated with the promotion of better agriculture, and granting relief for the loss and damage to agricultural produce.
  • It also provides the facility of streets lights, dharamshalas, panchayat ghars, canals and drains, government health infrastructure, drinking water, sanitation, and government educational institutions in rural areas.


From where does Punjab get this fund and what is it used for?

  • It comes mainly from central government’s purchase agency, Food Corporation of India, which buys around 13 million tonnes of wheat and 16 million tonnes of paddy every year.
  • Usually Punjab gets Rs 1,750 crore every year — Rs 1,000 crore as 3 per cent RDF for procuring paddy and the rest for wheat. This year, some estimates had put the total at Rs 1,850 crore.
  • This fund is supposed to be used for the creation and maintenance of rural infrastructure in and outside mandis. But there have been charges in the past that it was diverted by the state for other purposes.


Why has the central government suspended this fund?

  • The central government, in a letter from the Union Ministry of Consumer Affairs, Food and Public Distribution, has observed that the fund is being diverted, and has asked the state government to explain how it is utilising this money. 
  • It has also not made any provision for this fund in the cost sheet that it has sent to the state.
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