In their efforts to show that their hearts bleed the most for farmers, several state governments are turning competitive in providing crop loans at concessional or even zero rates of interest.
The DMK-ruled Tamil Nadu has taken the lead and has decided not to charge interest on cooperative crop loans to farmers who stick to their repayment schedules. Not to be left behind, Maharashtra, which reported a large number of farmer suicides last year, plans to launch a scheme from April under which loans up to Rs 25,000 will attract zero interest provided farmers repay on time. Orissa is charging three per cent and so are cooperative institutions in BJP-ruled Karnataka. These states have made budgetary provisions ranging between Rs 200 crore and Rs 1,500 crore towards such subsidised loans.
Curiously, these rates are below the subsidised interest rate of five per cent announced by Finance Minister Pranab Mukherjee in the Budget proposals for 2010-11. At five per cent, the rate is 2 percentage points less than the rate for farmers who pay their dues on time. Farmers get short-term crop loans of up to Rs 3 lakh at seven per cent.
Sources at the National Bank for Agriculture & Rural Development (Nabard), which coordinates with states and banks to meet the Centre’s credit target for agriculture, told Business Standard that the decision to provide crop loans even below five per cent is purely state-specific.
States are keen to encourage farmers to repay loans on time and avoid defaults.
Nabard officials said Tamil Nadu has made a provision of Rs 140 crore to compensate co-operative banks for the interest component. During the current year, nearly Rs 1,500 crore has been disbursed.
Maharashtra Cooperation Minister Harshavardhan Patil said, “The interest rate for loans of Rs 25,000 will be zero from April 1 and for loan of Rs 3 lakh, it will be 2 per cent."
During 2009-10, the state expects to disburse crop loans worth Rs 13,000 crore which is expected to increase to Rs 15,000 crore in 2010-11. The state’s agriculture credit plan will increase to Rs 35,000 crore in 2010-11 from Rs 28,000 crore in 2009-10.
