Special Correspondent

NEW DELHI: The government on Thursday pruned the interest subsidy extended to farmers on crop loans by 100 basis points to 2 per cent for the current fiscal.

The reduction in payment of interest subsidy to banks is expected to slash the burden on the Central exchequer by Rs. 311 crore.

Information and Broadcasting Minister Ambika Soni told journalists here that as per the Cabinet decision, the government would pay an interest subsidy of 2 per cent to banks this fiscal — as against 3 per cent in 2008-2009 — for granting short-term crop loan to farmers at a concessional rate of 7 per cent.

Accordingly, the financial implication on account of the reduced interest subsidy on short term farm crop loans this fiscal will be Rs.4,000 crore, as compared to Rs.4,311 crore in 2008-2009.

However, farmers who have been prompt in repayment of their dues would continue to get loans at 6 per cent — which works out to an additional interest subsidy of 1 per cent.