Crop loan burden to be more than Rs 300 cr a year

Sop opera: Not an easy act for new govt

The interest subsidy burden to be borne by the new state government on crop loans is estimated to be over Rs 300 crore a year.

The Congress party in its election manifesto has promised to subsidise interest on crop loans to the farmers by six per cent so as to ensure that the interest rate is not more than three per cent to the farmers.

However, the Congress party has not explained whether the interest rate of three per cent will be applicable to all crop loans, irrespective of the size and the period. It is also not clear whether these rates will apply to the existing loans as well.

At present, 80-90 per cent of the crop loans fall under the Rs 50,000 segment and carry a simple interest rate of nine per cent for the first year. Higher loan amounts carry up to 11 per cent interest.

Co-operative banks and regional rural banks get refinance from National Bank for Agriculture and Rural Development (Nabard) at six per cent and disburse loans to farmers at the rate of nine per cent and more.

To give an indication of the amount of subsidy amount to be paid by the state government to the banks, the year 2002-03 may be taken as an example.

As per a report of the state-level bankers' committee (SLBC), Rs 6,332 crore crop loans were disbursed in Andhra Pradesh during 2002-03. Of this, 80 per cent amounting to Rs 5,065 crore carried an interest of Rs 455.85 crore at the rate of nine per cent a year. If the interest rate is brought down to three per cent, the interest would amount to Rs 157.95 crore.

However, to effect this interest rate reduction of six per cent, the government will have to bear a subsidy burden of Rs 303.9 crore accounting for the six per cent difference. If the approximate figure of up to Rs 50,000 segment is taken to be 90 per cent, the subsidy burden on Rs 6,332 crore crop loans would amount to Rs 341.88 crore.

For the financial year 2003-04, the banks in the state kept a disbursal target of Rs 9,667 crore towards crop loans.

The SLBC is yet to come out with the performance report and actual disbursements achieved. Nabard estimates that there would be demand for Rs 11,005.72 crore crop loans during 2004-05.