The electricity bills of farmers of drought-affected areas will also be waived, Chief Minister Devendra Fadnavis told the state Assembly.
"The government stands behind the farmers who are in distress due to drought-like situation prevailing in parts of Vidarbha and Marthwada and a total of Rs 7,000 crore would be spent to tackle it," Fadnavis said.
Admitting lapses on the part of the government in checking suicide by farmers, he said it was a matter of "shame" for any dispensation.
Nearly five lakh farmers from the affected areas have taken such loans, he said.
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The state government will provide financial assistance of Rs 3,925 crore to the farmers affected by drought in districts of Vidarbha and Marathwada, he said.
The package includes Rs 884 crore for horticulture sector spread over 2.45 lakh hectares, Rs 215 crore for paying electricity bills, Rs 425 crore for water supply and Rs 163 crore for wells and private water bodies, Fadnavis said.
Maintaining that water scarcity will be tackled firmly, the Chief Minister said Rs 400 crore would be spent on it. Around 3,000 tankers will be deployed to supply water in drought-hit villages till the situation improves, he said.
The government will also ensure uninterrupted power supply to the farmers and will waive their electricity bills for the September-November quarter as a temporary arrangement, the Chief Minister said.
"I have announced a Rs 7000 crore package as immediate relief for drought-hit farmers of the Marathwada and Vidarbha regions. 50 lakh hectares will be brought under permanent irrigation. We aim to make 5000 villages drought-free over the next year," he later told reporters.