The fund has been set up under NABARD, which will provide this amount to States on concessional rate of interest to promote micro-irrigation, which currently has a coverage of only 10 million hectares as against the potential of 70 million hectares.
"The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi has approved an initial Corpus of Rs 5,000 crore for setting up of a dedicated 'Micro Irrigation Fund' (MIF) with NABARD under Pradhan Mantri Krishi Sinchayee Yojana (PMKSY)," an official statement said.
An allocation of Rs 2,000 crore has been made for this fiscal while Rs 3,000 crore has been earmarked for the 2019-20 fiscal.
NABARD will extend the loan to state governments during this period.
"Borrowings from NABARD shall be paid back in seven years including the grace period of two years. The lending rate under MIF has been proposed at 3 per cent lower than the cost of raising the fund by NABARD," the statement said.
This cost would be met from the ongoing scheme of PMKSY-PDMC (per drop more crop component) by amending the existing guidelines.
"The total financial implication on interest subvention comes to about Rs 750 crore," the official statement said.
The dedicated fund would supplement the efforts of PMKSY programme and help bring about 10 lakh hectares under micro-irrigation.
The fund will facilitate States to mobilise resources for their initiatives, including additional (top up subsidy) in implementation of PMKSY-PDMC to achieve the annual target of about 2 million hectares per year during the remaining period of 14thFinance Commission.
Farmers Producers Organization (FPO)/Cooperatives/State Level Agencies can also access the funds with state government guarantee or equivalent collateral. Farmers Co-operatives may access this fund for innovative cluster based community irrigation projects.
The government expects that the States which are lagging behind in adoption of micro irrigation would also be encouraged to take advantage of the fund for incentivizing farmers as being done by the good performing States.
The task force on micro irrigation had estimated a potential of 69.5 million hectare under micro irrigation, whereas the area covered so far is only about 10 million hectare.
Further, the Group of Secretaries, 2017, emphasised on target of 10 million hectare under micro-irrigation over the next 5 years, which would require an additional annual coverage of about 1 million hectare compared to the present pace of implementation.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)