Loan waivers in offing for Indian farmers
A massive debt relief package for farmers is being finalised by India’s agriculture ministry. The scheme will provide debt relief to small and marginal farmers who own land up to two hectares and large farmers. The total outgoings over four years are expected to be around INR 700 billion.
According to sources at the agriculture ministry, a massive debt relief package for Indian farmers is being finalised.
The scheme envisages loan waivers for small and marginal farmers and a gradual writing off of debts incurred by large farmers.
The total outgoings over four years are expected to be around Rs 70,000 crore.
Under the package, the ministry has proposed the waiver of total outstanding dues of small and marginal farmers who own land of up to two hectares, entailing an expenditure of around Rs 25,000 crore.
Seventy per cent of farmers who have taken loans fall in this category.
For the rest there will be a one-time settlement (OTS) scheme which will be shared by government, farmers and banks over four years. Those given debt relief will be eligible for fresh credit.
It is estimated that the total overdue in the case of direct agriculture advances is to the tune of Rs 91,200 crore. Of this, non-performing assets is estimated to be Rs 31,200 crore, the overdue above one year at around Rs 30,000 crore, and the less-than-one-year overdue at Rs 30,000 crore.
The ministry has also proposed that farmers paying back their loans regularly should be given a 3% interest subvention, such as bringing down the rate of interest from 7% to 4%. This will be in line with the recommendations of the National Commission on Farmers.
An estimated 30 million farmers across the country have been removed from the institutional credit system because they had defaulted on loan repayments.
Union Agriculture Minister Sharad Pawar and Finance Minister P Chidambaram have agreed on the broad contours of the policy, which will shortly be finalised at the prime ministerial level.
“We had a meeting. We discussed the package. It involves a huge investment but in principle we have agreed. Now we will meet the prime minister,” Pawar said.
At this level it will be decided whether funds required for the scheme should be raised by levying a “farmers' rehabilitation cess or surcharge” or through budgetary provision by diverting resources.
The agriculture ministry has proposed the imposition of a 1% cess on direct taxes and 2% on indirect taxes. This is expected to yield around Rs 8,500 crore per annum.
A credit risk fund, called the National Agriculture Stabilisation Fund, will be set up to cover the risk of future default due to reasons beyond the farmers' control.
