As the southwest monsoon remains deficient in some parts of the country, raising the spectre of drought, the government is working on a comprehensive contingency package for certain areas. As relief to farmers, their short-term crop loans, particularly of small and marginal growers, could be restructured and interest subvention extended.
So far, the monsoon has been 22 per cent below normal. Even as no state has officially been declared drought-hit, pockets of Maharashtra, Karnataka, Gujarat and Rajasthan would be teetering on the brink of drought if rains continue to be deficient in the next 7-10 days.
Senior government officials said to contain the effects of a weak monsoon, restructuring of short-term crop loans by banks could be considered, besides an agriculture package that includes early-maturing varieties of seeds, rational use of canal water and judicious use of fertiliser.
SF: Small farmer; MF: Marginal farmer; A/cs: Accounts financed
|No of SF/
|% of SF/MF
|*Provisional; number of accounts in million Source:Ministry of finance
“We see there could be deficient rains or drought in some parts of the country. Short-term loans of affected farmers may be restructured to increase the repayment period,” said a government official on the condition of anonymity.
Restructuring short-term crop loans involves deferring payments, re-classification of non-performing asset (NPAs) and additional interest subvention, or complete waiver. Farmers who have taken short-term loans for one-year periods might be given the leeway to repay over three to five years, without their loans being classified as NPAs.
“I believe the best way to help farmers is to restructure their loans. It will definitely help. Talking about providing irrigation when there is no water is not the right approach,” said CARE Ratings chief economist Madan Sabnavis.
Official recast of short-term crop loans might not be difficult since Reserve Bank norms have provisions on such restructuring for farmers in difficult times.
The government might also look at relaxing additional interest subvention criteria for farmers. Failure of a crop due to drought may hamper their chances of timely repayment. The government might extend the subvention, even if the repayment period is extended. The expenditure towards the subvention is estimated at about Rs 11,000 crore this year.
A complete waiver of debt, like the one announced in 2008, is ruled out at this juncture.
The Commission for Agricultural Costs and Prices Chairman Ashok Gulati said, to compensate farmers who had lost their income, a part of the drought relief should go directly to them — in the form of monetary compensation in affected blocks, free fodder and diesel or power subsidy.
According to a working group of the Planning Commission, the target of Rs 5,75,000 crore of agricultural credit would be met this year if the farm sector grows by four per cent. Of this, short-term credit would be 70 per cent, at around Rs 4,00,000 crore. Half of the short-term credit generally goes to small and marginal farmers.