Interest-free loan likely for farmers
After implementing interest-free loan to farmers in Gujarat five years ago, prime minister Narendra Modi is all set to roll out a similar scheme at the national level. This may be unveiled as a part of budget proposals, potentially influencing voters in five states going to polls.
Finance minister Arun Jaitley may announce interest-free loan of up to Rs 1 lakh to small and marginal farmers having less than three hectares land, sources said.
Since BJP-ruled Chhattisgarh, MP and Maharashtra have been implementing zero interest on farm loans, a national level announcement is feasible, an expert said.
In 2012, when Modi was the chief minister in Gujarat, the state government had waived interest on farm loan availed of that year to mitigate farmers’ distress due to delayed monsoon. The state had spent about Rs 300 crore for the one-time waiver scheme.
BJP on January 28 promised to waive interest on small farmers’ loan as well as future lending of Rs 1 lakh at zero per cent interest in its manifesto for the assembly elections in Uttar Pradesh. Agriculture should become the base of development in the state, BJP had said.
The BJP had promised to lend crop loans to farmers at zero interest rate during Bihar assembly elections. Last year, Union agriculture minister Radha Mohan Singh, who hails from Bihar, had asked the state government to free the interest amount of the farmers.
At an election rally at Taraori in Haryana in September 2014, BJP general secretary Kailash Vijayvargiya had promised that his party government would provide interest-free loan to farmers, a promise yet to be implemented in the state.
The Centre provides 2 per cent interest subsidy to farmers availing of loans from banks on the basic lending rate of 9 per cent. Further, those farmers who repay their loans within a year, the Centre provides additional subsidy of 3 per cent interest making the effective agricultural credit at 4 per cent interest. About 75 per cent of farmers avail of the additional subsidy by paying in time, official estimates show.
So, when states announce interest-free loan, they effectively bear the four per cent interest that farmers pay as of now. For meeting the five per cent effective interest subsidy on agriculture loans, the Centre spends about Rs 3,500 crore. The overall crop loans are estimated at Rs 6 lakh crore.
“It is difficult to estimate the burden on the Centre as the zero interest loan is extended to a maximum of Rs 1 lakh,” a government official said. The agriculture credit in 2017-18 may be increased to Rs 10 lakh crore.
Of Rs 9 lakh crore agriculture credit allocated for 2016-17 fiscal, close to Rs 8 lakh crore has already been disbursed and the remaining amount will be released to farmers by March-end. Of the total agriculture credit, about Rs 6 lakh crore was earmarked for crop loan and the remaining Rs 3 lakh crore for term loan.