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  • Farm loans at 4 pc; credit target raised to Rs 4,75,000 cr

    Published on February 28, 2011

    In a bonanza to the farming community, the government on Monday announced loans at interest rate of four per cent — three per cent less than market rate — for farmers who pay their dues in time and raised the credit target for farm sector by Rs 1 lakh crore.

    “The existing interest subvention scheme of providing short-term crop loans at seven per cent interest rate will continue during the 2011-12 fiscal,” Finance Minister Pranab Mukherjee said in Budget proposal.

    He also said the credit target for the agriculture sector has been increased by Rs one lakh crore to Rs 4,75,000 crore. Also, banks have been asked to focus on farm credit lending to small and marginal farmers, he added.

    “In the last Budget, I had provided an additional two per cent interest subvention to those farmers who repay their crop loan on time. In order to provide further incentive to these farmers, I propose to enhance the additional subvention to three per cent in 2011-12. The effective rate of interest for such farmers would be four per cent,” he said.

    Faced with high food inflation and the country’s dependence on import of pulses and edible oil, the Finance Minister also announced various schemes for promoting production of vegetables, pulses, oilseeds, fodder and nutrition-rich crops like millets and maize.

    Direct cash subsidy on fuel, fertilizers by March, 2012

    Concerned over the misuse of subsidies provided under various schemes, Finance Minister Pranab Mukherjee said the government will provide a direct cash subsidy on kerosene and fertilisers to the poor from March next year.

    “… To ensure greater cost efficiency and better delivery for both kerosene and fertilizer, the government will move toward direct transfer of cash subsidy for people below poverty line (BPL) in a phased manner,” Mukherjee said during his presentation of the Budget 2011-12.

    The system will be in place by March, 2012, he said.

    A task force headed by Nandan Nilekani is working out the modalities for the proposed system of direct transfer of subsidy for kerosene, LPG and fertilisers, he said.

    “The interim report of this task force is expected by June this year,” he said.

    At present, the government provides kerosene at subsidised rates to families living below the poverty line through the Public Distribution System (PDS). Furthermore, LPG is provided at a subsidised rate to households.

    As regards fertilisers, the government provides subsidy to companies so that farm inputs, which include urea and imported fertilisers, can be provided to farmers at cheaper rates.

    Earlier this month, the government set up a task force under the former chief of Infosys, Nilekani, who at present is Unique Identification Authority of India (UIDAI) Chairman.

    The panel also included secretaries from the ministries of finance, chemicals and fertilisers, agriculture, food, petroleum and rural development.

    The need to set up the task force arose in view of “overwhelming evidence that this (current) policy is resulting in waste, leakage, adulteration and inefficiency.

    Therefore, it is imperative that the system of delivering the subsidised kerosene be reformed urgently,” the government had said.

    Besides designing an IT framework, the task force will align the systems with the issuance of the UID numbers and suggest changes in the administration and supply chain management.

    The recommendations of the task force will be implemented on a pilot basis by the concerned ministries and the final report would include the results of such projects.

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