In its Budget wish-list, the Agriculture Ministry has demanded lowering of interest rate on crop loans to 3% for those farmers who pay in time, from the existing 4%.
According to sources, the ministry has suggested an additional 1% interest subvention (subsidy) on short-term crop loans of up to Rs 3 lakh to farmers who pay their dues on time. Other farmers get crop loans at seven% interest rate.
The 2012-13 Budget will be presented on March 16.
Farm experts are of the view that cheaper crop loan facility has played an equally significant role in enhancing the country's foodgrains production, which is seen at a record 250.42 million tonne in 2011-12 crop year (July-June).
Since 2006-07, the government has been providing interest subvention to all public sector banks, regional rural banks and cooperative banks for short-term crop loans of up to Rs 3 lakh, so as to ensure that short-term agriculture credit was available at 7% to farmers.
From 2010-11, an additional 2% interest subvention was provided to those farmers, who repay their short-term crop loans in time. Thus, the short-term crop credit was available to farmers at 5% in 2010-11.
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In the last Budget, the Finance Minister had announced an additional 1% interest subvention on short-term crop loans and farmers repaying on time are getting loans at 4% interest rate during the current fiscal.
Sources further said the ministry has suggested that the target of credit flow to agriculture sector by banks and financial institutions be continued at Rs 4,75,000 crore in the 2012-13 fiscal as well.
However, it has sought some mechanism to be evolved to ensure smooth credit access to farmers in the Eastern states, where the government is trying to usher in the second Green Revolution. Currently, credit flow to eastern states is lower as compared to other states, sources said.