Ball set rolling on cheap farm credit, says FM

'Agriculture ministry working on a modified crop insurance scheme'

Finance Minister P Chidambaram today ruled out reduction in rate of interest on agricultural loans to the levels suggested by the Swaminathan Committee but announced that farmers would not have to pay more than 7 per cent interest on loans taken before the forthcoming kharif season.

Replying to the debate on Budget in the Rajya Sabha, the finance minister said for this purpose, he had convened a meeting of chairmen of banks on March 23.

He also announced that a modified national crop insurance scheme was being worked out by the agriculture ministry in consultation with the Planning Commission. He said until it was worked out, the existing scheme, however inadequate, would continue.

Under the new scheme, a proposal of some Left members that a village and not block should be treated as a unit, would be considered, Chidambaram said. Once the scheme was formulated, it would go to the Cabinet, he added.

Chidambaram termed as ''outrageous" the allegation of Sharad Joshi (Swatantra Bharat) that a farmer would get only Rs 150 to Rs 180 under a Budget proposal to credit two percentage points of interest paid on crop loans in the current year.

To deal with suicides by farmers due to indebtedness, Chidambaram had announced that banks would credit into the account of every farmer 2 per cent of interest on crop loans he had taken for rabi and kharif crops in the current year. This is expected to cost the exchequer Rs 1,700 crore.

"By March 31, every farmer will have credited to his account two percentage points of the interest paid on the crop loan taken by him," he said.

Chidambaram said the government would approach the World Bank and the Asian Development Bank (ADB) to fund a Rs 4,400 crore Budget proposal to renovate and restore 20,000 water bodies in the country.

Charging the previous NDA government with fiscal extravagance, Chidambaram said the UPA government has retrieved the lost ground and promised to keep tax rates "moderate and stable" to keep up the investment boom.