Amid growing protests over farm sector distress, the Cabinet has approved the extension of the interest subvention scheme for farmers to 2017-18. Short-term crop loans up to ₹3 lakh will receive a subvention of 5%, effectively reducing the rate for farmers to 4%.
The government has earmarked a sum of ₹20,339 crore for this. The interest subvention scheme will continue for one year and will be implemented by the National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India.
“The Central government will provide interest subvention of 5% per annum to all prompt payee farmers for short-term crop loan up to one year for loan up to ₹3 lakh borrowed by them during the year 2017-18,” the government said in a statement. “Farmers will thus have to effectively pay only 4% as interest.”
Farmers unable to repay the short-term crop loans on time will receive an interest subvention of 2%.
The scheme has been running since 2006-07, under which farmers are eligible for interest subvention of 2% for crop loans of up to ₹3 lakh.
“Just an extension of the scheme would not make much of a difference unless the rate of subvention is substantially increased,” D.K. Srivastava, chief policy adviser at EY India said. “Since the distress is caused by an income failure, this would have a very small effect on the matter.”
“The objective of the scheme is to make available at ground level, agricultural credit for short-term crop loans at an affordable rate to give a boost to agricultural productivity and production in the country,” the statement said.
Under the scheme, the government will also provide an interest subvention of 2% for small and marginal farmers who would have to borrow at 9% for the post-harvest storage of their produce for loans up to 6 months. A 2% subvention will also be provided to banks in the case of farmers affected by natural calamities for the first year on the restructured amount.
“While the farmers are advised to undertake online trade, it is also important that they avail themselves of post-harvest loans by storing their produce in the accredited warehouses,” the government said. “The loans are available to Kisan Credit Card (KCC) holding small and marginal farmers at interest subvention of 2% on such storages for a period of up to six months. This will help the farmers to sell when they find the market is buoyant, and avoid distress sale. It is, therefore, needful for the small and marginal farmers to keep their KCCs alive.”