The Union Cabinet on Thursday approved the farmers' debt relief fund with an initial corpus of Rs 10,000 crore (Rs 100 billion). The scheme, for small farmers, was announced in the Budget.

The fund will be enhanced by Rs 15,000 crore (Rs 150 billion) in 2008-09, Rs 15,000 crore in 2009-10, Rs 12,000 crore (Rs 120 billion) in 2010-11 and Rs 8,314 crore (Rs 83.14 billion) in 2011-12. The total cost of the write-off will be Rs 60,314 crore (Rs 603.14 billion).

The scheme, widely seen as a populist measure ahead of the general elections in 2009, will be implemented by June 30, 2008. The farmers will be entitled to fresh agricultural loans from banks after June 30.

The Cabinet Committee on Economic Affairs (CCEA) also approved a joint venture between the Hero group and Daimler AG Germany. Daimler will own 60 per cent in the company and invest Rs 1,650 crore (Rs billion).

"The joint venture will be for designing, manufacturing and selling commercial vehicles for sale in India and overseas," the government spokesperson said, adding that the joint venture would also source components from India for Daimler's global requirements. The new company will also undertake research and development of new products and variants of commercial vehicles.

The CCEA also removed the ceiling of Rs 1,000 crore (Rs 10 billion) for investment by power utility NTPC Ltd [Get Quote] in joint ventures and subsidiaries in India and abroad.  "This will facilitate NTPC's participation in bidding for power projects and result in greater competition and establishment of more public sector power projects," said a press statement.

The Cabinet also approved an agreement with Japan to swap $3 billion in respective domestic currencies to meet balance of payment mismatches. The swap agreement would be for an initial period of 90 days, up to a maximum period of 630 days, PK Bansal, Minister of State for Finance, had told the Lok Sabha earlier this month.

"Such swap agreements are additional arrangements outside the International Monetary Fund to maintain dollar liquidity for balance of payment requirements," said a government official.

The CCEA also approved extension of the Social and Infrastructure Development Fund beyond the current financial year. The fund, in which the government will deposit Rs 6,000 crore (Rs 60 billion) this year, will meet expenditure for social and infrastructure development. These include upgrading 1,396 ITIs, training of farmers, jobs for physically challenged, scholarships, among others.

The Cabinet also approved changes in the list of items covered by the Comprehensive Economic Cooperation Agreement (CECA) with Singapore. In November 2007, India had allowed preferential tariffs on an additional 555 items as Singapore sought more access for these products.

"After the Union Cabinet decision was notified, the Singapore government asked India to exclude 16 items from the list of 555 items," said a source in the know.

The Cabinet approved the deletion of these 16 items from the list. In addition, the Cabinet approved transfer of 14 chemical items from the normal track 1 list (tariff elimination by 2011) to the normal track 2 list (tariff elimination by 2015).

These items include digital storage discs for laser-based electronic systems like compact discs and DVD discs, still and video cameras, electronic signaling equipment, loudspeakers and some chemical products.

In addition, the Cabinet approved transfer of 14 chemical items from the normal track 1 list (tariff elimination by 2011) to the normal track 2 list (tariff elimination by 2015). This was done at the request of the chemical and fertiliser industry, sources said. Even these goods were part of the 555 items on which the tariff structure was liberalised in November.

India and Singapore signed the CECA in June 2005. The agreement, a first of its kind for India, was effective from August 2005. India has put more than 6,550 items in the negative list so far.

Other decisions

North Eastern Institute of Ayurveda and Homoeopathy to be set up in Shillong at a cost of Rs 67.51 cr

Increase in grant to the seven IITs and IISc by Rs 145.5 cr

Expenditure of Rs 535.91 cr for upgrading ports and constructing roads under the Aid to Myanmar fund approved

Expenditure of Rs 257.41 cr for upgrading and renovating venues for Commonwealth Games