Cabinet approves subsidy, crop loans to get cheaper

Short-term crop subsidy

Farmers will continue to get loans of up to Rs 3 lakh for a year at a subsidised interest rate of 7%, and those who have a track record of repaying promptly will get it at 4%, the government said on Wednesday.

Moreover, in order to give relief to small and marginal farmers who would have to borrow at 9 per cent interest for post-harvest storage of farm produce, the government has approved an interest subvention of 2 per cent - an effective interest rate of 7 per cent for loans up to 6 months.

"The loans are available to small and marginal farmers holding Kisan Credit Cards (KCC) at interest subvention of 2 per cent on such storages for a period of up to six months".

The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks, the Cabinet said in a statement.

Normally, farm loans attract an interest rate of nine per cent.

Although the government's move to keep the cost of short-term crop loans cheap comes as a breather for farmers struggling to cope with a fall in prices of some commodities, the cost to the government on account of the move is estimated at Rs 20,339 crore in 2017-18.

The Interest Subvention Scheme for 2017-18 was approved at the Cabinet meeting today headed by Prime Minister Narendra Modi.

Officials said the scheme of institutional credit at low interest rates cleared by the Cabinet will delink farmers from non-institutional sources of credit where they are compelled to borrow at usurious rates of interest.

The scheme will apply to short term crop loan upto three lakh rupees and the rate will be four percent.

Lending institutions make available short-term credit at the ground level at 7% per annum to farmers.

Following the recent events of the farmers' agitation in Madhya Pradesh and Maharashtra, the central government has taken a step forward to give some relief to the farmers.

This will help the farmers to sell when they find the market is buoyant, and avoid distress sale.

The scheme has been running since 2006-07.

States that have fared commendably on the fiscal front between 2004-05 and 2013-14 reported slippages since then as their tax revenue growth plateaued; the consolidated fiscal deficit of states is reckoned to be not less than 3.4% of GDP in 2016-17 and the target of 2.6% for the current year looked optimistic even before the loan waiver packages. During the year 2016-17, the volume of short-term crop loans stood at Rs6,22,685 crore, surpassing the target of Rs6,15,000 crore.

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