The Hindu : Front Page : Centre ready with loan waiver scheme for farmers

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Wednesday, Jan 23, 2008
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Centre ready with loan waiver scheme for farmers

Gargi Parsai

Sharad Pawar and Chidambaram agree on broad contours of the policy, which will be finalised at the Prime Minister’s level

NEW DELHI: The Union government is set to unveil a debt relief package for farmers, according to sources in the Agriculture Ministry.

The scheme envisages the writing off the unpaid loans of the small and marginal farmers and a big relief to the big farmers over four years.

There are an estimated 30 million farmers, who had gone out of the institutional credit system due to defaults.

Union Agriculture Minister Sharad Pawar and Finance Minister P. Chidambaram agreed on the broad contours of the policy on Monday, which will be finalised at the Prime Minister’s level.

“We had a meeting. We discussed the package. It involves a huge investment but, in principle, we have agreed. Now we will meet the Prime Minister,” Mr Pawar told The Hindu here.

It would be decided at the Prime Minister’s level whether the funds needed should be raised by levying a “farmers’ rehabilitation cess or surcharge” or through budgetary provision by diverting resources. The total outgo over four years is expected to be nearly Rs. 70,000 crore.

The Agriculture Ministry has proposed imposition of 1 per cent cess on direct taxes and 2 per cent on indirect taxes. This is expected to yield about Rs. 8500 crore per annum.

Credit risk fund

A credit risk fund, called the National Agriculture Stabilisation Fund, will be set up to cover the risk of future default due to reasons beyond the farmers’ control.

Under the package to be announced in the Budget proposals, the Ministry has proposed the waiver of the entire overdue from the small and marginal farmers owning land up to two hectares with an outgo of about Rs 25,000 crore. Seventy per cent of the loanee farmers come under this category.

For the rest, there will be a one time settlement (OTS) scheme. It will be shared among the government, farmers and banks over four years. Those given debt relief will be eligible for fresh credit.

It is estimated that the total overdue in the case of direct agriculture advances is to the tune of Rs 91,200 crore.

Of this, the Non-Performing Assets is estimated at Rs 31,200 crore, the overdue above one year at about Rs 30,000 crore and the less-than-one-year overdue at Rs 30,000 crore.

The Ministry has also proposed that those paying back their loans regularly should be given a 3 per cent interest subvention, such as bringing down the rate of interest from 7 to 4 per cent. This will be in line with the recommendation of the National Commission on Farmers.

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