The finance ministry has ruled out increasing interest subsidy, which at its present level of 2% will cost the exchequer more than Rs 2,000 crore this fiscal, given for short-term crop loans. "There is no proposal with the government to raise the rate of subvention beyond 2%," a finance ministry official said.The government has been giving subvention of 2% with a ceiling of Rs 3 lakh on the principal amount of crop loans with effect from the kharif season of 2006-07. The scheme has been extended to this fiscal as well.The interest subsidy is provided by the government to public sector banks, co-operative banks and regional rural banks on the involvement of their own funds and concessional refinance to RRBs and cooperative banks through NABARD.This subsidy makes loans, which otherwise would have cost 9%, cheaper at 7%.Minister of state for agriculture Kanti Lal Bhuria had earlier said that his ministry was trying to ensure that farmers get short-term crop loans at 5%.In fact, Standing Committee on Finance has observed that 2% subvention is not adequate, considering the requirements of the farming community.The National Commission for Farmers, headed by Dr. M S Swaminathan, had recommended reduction in interest rate on crop loans to 4%.
