Farmers will continue to get short-term farm loans up to ₹3 lakh at an interest rate of 4 per cent as the Union Cabinet on Wednesday approved an interest subvention scheme, and earmarked a sum of ₹20,339 crore for it.

Under the scheme, which has been in place since 2006, the Centre will provide an interest subvention of 5 per cent per annum to those farmers who repay the short-term crop loan up to one year for a maximum of ₹3 lakh, an official statement said. The interest subsidy, however, would be only 2 per cent for farmers who do not repay on time, it said.

The scheme, however, would not give any additional succour to farmers who are in distress as it is just a continuation of an existing scheme. This scheme comes at a time when farmers in many States are clamouring for farm loan waiver, on the lines announced by Uttar Pradesh and Maharashtra governments,

The government said the interest subvention scheme will continue for a year and will be implemented jointly by Nabard and the RBI. The interest subvention will be given to public sector banks (PSBs), private sector banks, cooperative banks and regional rural banks (RRBs) on use of own funds and to Nabard for refinance to RRBs and cooperative banks, the release added.

Similarly, small and marginal farmers who borrow at 9 per cent for the post harvest storage of their produce will get an interest subvention of 2 per cent, bringing down the interest burden to 7 per cent per annum, the statement said. A similar 2 per cent interest waiver will be available to farmers affected by natural calamities.

Farmer organisations, however, have been demanding higher loans under the interest subsidy scheme. “The interest subsidy should extend to loans up to ₹10 lakh taken by farmers of small and medium holdings so that they do not have to borrow from traders and money lenders at very high interest rates,” said Sukhwinder Singh Sekhon, Secretary of Punjab Kisan Sabha, a farmers’ union associated to the Communist Party of India-Marxist. According to Rajender Singh, a recently retired agricultural extension officer in Haryana, farmers are finding it increasingly difficult to meet their farm-related expenses with ₹3-lakh loans given at discounted interest rates by the government as the input and labour costs have been mounting over the years.

“The situation has really worsened during the last three years of the NDA government,” Singh told BusinessLine .

Farmers are also getting less and less as traders rarely purchase their produce at rates determined by the authorities, said Jaswant Singh, a farmer in Shahpur village, 11 km from Karnal.

“Invariably, a farmer who has a loan of ₹3 lakh one year, will have to increase his loan amount to ₹4 lakh if he has to avail the loan subsidy by repaying the crop loan on time and also to prepare for the next crop. And this cycle goes on and on and thus breaks his back,” said Singh.

Ajay Kakra, Director of agriculture and natural resources at PricewaterCoopers India, said loan waiver, although a burden on the exchequer, can serve as a good stop-gap arrangement for supporting the farming community. “However, the real relief to farmers can only come through systematic structural reforms in the sector , focussed on achieving greater incomes specially for the small and the marginal farmers,” Kakra said in a statement.

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