PM panel suggests lowering crop loan for farmers to 4%

The Prime Minister-appointed working group on agricultural production has recommended crop loan to farmers be given at four per cent, as against the current five per cent.

At present, crop loan under the priority sector lending to agriculture is offered by banks at 7 per cent. Under this, the borrower pays five per cent and the other two per cent is subsidised by the central government as subvention. Under the new proposal, the government subsidy will go up to 3 per cent of crop loan as farmers will be required to pay only four per cent.

“If agricultural production is to be improved, the farmer should get funds at a cheaper rate. This is because there is a huge gap between the market price of the produce and what a farmer gets as yield on the crop once it is sold in the market. Development of that infrastructure to bridge this gap will take time. Till then, at least farmers should be charged lower rates,” explained a source closely associated with the committee.

The working group is also of the view that a separate contingency fund for unforeseeable events should be created under each state. This will help in dealing with such events promptly without waiting for funds to come from the central government. The recommendation further states that till such time this fund is created, five per cent of Rashtriya Krishi Vikash Yojana (RKVY) allocations be set aside in the first six months of the year. In case, no such contingency occur by September of the financial year, funds should be transferred to states for use in proportion to their RKVY entitlements.

Currently, there are two centrally monitored and administered funds which take care of such events — Contingency Relief Fund and National Calamity Fund.

The home ministry, on the other hand, administers various disaster management schemes but the states do not have direct access to any of these, which handicap the monitoring and implementation work in case of any contingency.

“The state government as a stakeholder, should have a direct access to a fund to take care of such contingencies as and when it occurs, without waiting for the central government to come, assess and then release the grant,” added the source.