With the issue of crop loans and farmer suicides fast turning into a political hotspot, the government today decided to extend the interest subvention scheme for 2017-18 with Rs 20,339 crore funds to make available cheaper loans to the farming community. The scheme provides for short-term loan of up to Rs 3 lakh to farmers at a subsidised interest rate of 7 per cent, and at 4 per cent for prompt repayers.
"The Cabinet has approved the total expenditure of Rs 20,339 crore in the current financial year as interest subsidy on short-term crop loans," a senior government official said.
The short-term crop loan of up to Rs 3 lakh will continue to be made available to the prompt payee farmers at 4 per cent interest rate only, the official said.
As an interim measure, the Reserve Bank last month had asked the banks to continue giving the discount on interest on short-term crop loans during the current fiscal.
That apart, farmers will get loans for post-harvest storage of their produce at a subsidised interest rate of 7 per cent for six months.
To provide relief to farmers affected by natural calamities, the government has decided to give 2 per cent interest subsidy for first year on the restructured amount.
These decisions were taken at the Cabinet meeting today, headed by Prime Minister Narendra Modi.
"The Cabinet has approved the Interest Subvention Scheme (ISS) for farmers for 2017-18... The government has earmarked a sum of Rs 20,339 crore for this purpose," an official statement said.
Stating that credit is a critical input in achieving higher farm output, the government said the institutional credit will help in delinking the farmers from non-institutional sources of credit where they are compelled to borrow at usurious rates of interest.
Since the crop insurance under Pradhan Mantri Fasal Bima Yojana (PMFBY) is linked to availing of crop loans, the farmers stand to benefit from both farmer-oriented initiatives of the government.
The interest subvention scheme, which has been running since 2006-07, will continue for the current fiscal and will be implemented by the National Bank for Agriculture and Rural Development (Nabard) and the Reserve Bank.
The Cabinet decision to continue the interest subvention comes at a time when there are farmers protest in several parts of the country, more particularly in Madhya Pradesh demanding farm loan waiver. Uttar Pradesh and Maharashtra have already announced such waiver.
Under the scheme, a subvention of 2 per cent per annum is provided for short-term crop loan of up to Rs 3,00,000 per farmer, provided the lending institutions make available short-term credit at the ground level at 7 per cent per annum to farmers.
An additional interest subvention of 3 per cent per annum is available to the "prompt payee farmers".
The government said all short-term crop loan accounts will be Aadhaar-linked from the current year.
(With PTI inputs)