Odisha asks Centre to reduce crop loan interest due to drought

With Odisha affected by crop loss in over 5.32 lakh hectare of land due to drought and subsequent series of farmer suicides, Odisha government today asked the Centre to reduce the interest rates on agricultural loans and extend interest incentive on crop loan.

"I request you to consider the reduction in the interest rate and extend the interest incentive of three per cent admissible on crop loans to medium term (conversion) loans taking into account the wide spread damage caused to the standing crops due to the drought situation prevalent in Odisha," Chief Minister Naveen Patnaik wrote to Union Finance Minister Arun Jaitley.

Stating that the Central government provides interest incentive at three per cent to farmers, who promptly repay the loans in respect of crop loans, Patnaik pointed out that the same facility is not available in case of conversion of such crop loans on account of drought.

As a result of which, the interest rate on the converted loans remained at a high level which will have additional financial burden on the drought-hit farmers, Patnaik mentioned in the letter.

"As crop loans are converted into Medium Term Loans, the interest rate should remain at the same level instead of charging higher rate of interest," Patnaik said.

Patnaik informed the Centre that as part of the state's drought package, the state government has already decided to convert the crop loans advanced during the Kharif season, 2015, as Medium Term (conversion) Loan.

As per the state government's decision, in case of crop damage between 33 per cent to 50 per cent, the crop loan will be converted to Medium Term (conversion) Loan payable within a period of two years with a moratorium of one year.

Similarly, where the crop damage is 50 per cent or more, the conversion facility of the crop loan can be allowed for a maximum of five years with a moratorium of one year.

The state government, meanwhile, identified that crop loss to the tune of 33 per cent to 66 per cent has been witnessed in over 4.69 lakh hectare of land while 63,020 hectare land sustained crop damage to the extent of 66 per cent or more.