In a move to mitigate the effects of drought on the economy, the government has decided to cut the interest rate on rescheduled crop loans to seven per cent from the current 12 per cent for the first year and guarantee 150 days of work under the rural job scheme in drought-hit districts.
“Both decisions will be applicable in only those districts which have been declared drought-hit by state governments and will be in place for a period of one year,” a senior government official, who did not want to be named, said after the decisions were taken by an empowered group of ministers (EGoM).
An announcement in this regard is likely tomorrow, the official added.
At present, crop loans are given at an annual interest rate of seven per cent. However, during agrarian crises like droughts, the recovery is automatically rescheduled, that is, crop loan is converted into a term loans and farmers get three years to repay.
However, the rescheduling of crop loans does not benefit farmers to a great extent as the interest rate for a term loan is higher at 12 per cent. The agriculture ministry, therefore, proposed making the interest rate on term loans on a par with the crop loan, at seven per cent, for five years, the official noted. However, the EGoM kept it for the first year only.
The Mahatma Gandhi National Rural Employment Guarantee Scheme will be used to give 150 days of work in these areas, up from 100. The government has provided Rs 33,000 crore to implement the scheme this financial year against Rs 31,000 crore in 2011-12.
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Due to deficit rains, Karnataka, Gujarat, Maharashtra and Rajasthan have declared drought in more than 390 talukas (blocks).
The EGoM, headed by Agriculture Minister Sharad Pawar, has Food Minister K V Thomas, Home Minister Sushilkumar Shinde and Urban Development Minister Kamal Nath, among others, as its members.
Monsoon deficiency in the country has come down to eight per cent against almost 20 per cent in the early part of the four-month season. According to the agriculture ministry, usually around 105.7 million hectares (ha) are sown during the kharif season, of which sowing has been completed on 97.3 million ha till last Friday.
Officials say that by the end of this kharif season, 500,000-600,000 ha could be out of sowing coverage.
According to the India Meteorological Department (IMD), the southwest monsoon, after making a slow start in 2012, is now expected to be near normal.
“In our last forecast, IMD had said rains in 2012 would be around 96 per cent of long period average (which is normal) and till date we have received rains which are around 90 per cent of the same.
This means by the time monsoon starts withdrawing, actual rainfall this year would be very close to our forecast,” said D S Pai, director of IMD’s long range forecast division.
The EGoM in its last meeting held in June had announced a Rs 2,000-crore relief package for drought-hit areas and a subsidy on diesel.