Interest subsidy on short-term crop loans raised to Rs20,339 crore
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New Delhi: In a bid to make formal credit more accessible to farmers, the government on Wednesday raised the amount set aside for interest subsidy on short-term crop loans to Rs20,339 crore in 2017-18, about 36% more than the Rs15,000 crore allocated in the budget. Farmers will continue to pay an interest of 4% on timely repayment of crop loans, like in previous years.
The total outlay on interest subsidy on crop loans for 2017-18 is 49% higher than the revised estimate of Rs13,619 crore spent in 2016-17.
The decisions, approved by the cabinet on Wednesday, come against the backdrop of farmer protests across the country.
They have been demanding farm loan waivers and better crop prices.
The government’s objective is to make short-term credit available to farmers at an affordable interest rate to boost farm production and productivity, said an official statement.
It added that higher “institutional credit will help in delinking farmers from non-institutional sources of credit, where they are compelled to borrow at usurious rates of interest.”
In the budget presented in February the government raised the target of agricultural credit disbursal to Rs10 trillion in 2017-18, up from the target of Rs9 trillion the year before. In 2016-17, short-term crop loans advanced to farmers stood at Rs6.23 trillion, higher than the targeted Rs6.15 trillion.
“Whether higher allocations will increase offtake of crop loans remains to be seen. The move may either widen or deepen (meaning same farmer accessing more formal credit) penetration of rural credit, but this will be clear only by the end of the year,” said Himanshu, associate professor at Jawaharlal Nehru University and a Mint columnist.
According to the statement, if farmers are unable to repay a loan on time, they will still be eligible for an interest subsidy of 2%. The subsidy can also be availed by farmers who are unable to repay their crop loans due to natural calamities.