Govt to propose farm loan package and waive off entire amount

According to sources report the government is thinking of waiving off the entire loans of farmers hit by natural calamities for three consecutive years. The government is working out the proposal which is likely to be a part of the package on farm loan relief.

The government has proposal for those farmers who are hit by calamities for two consecutive years, to waive off the entire interest amount and a third of the outstanding loan amount. According to this any farmer, whose crop has suffered owing natural calamities like drought or flood for three consecutive years, will have his entire agriculture loan liabilities absorbed.

In order to minimize the affect on the lenders, the government is intending to start a fund called the National Agriculture Stabilization Fund with equity participation and annual contribution from the nationalized banks, Nabard and the Reserve Bank of India from their profits. It is also thinking over to levy an annual cess from each loanee farmers for the purpose.

Moreover, the entire loan liability will not be bored by this fund, government sources said.

This proposal has come up at a time when various regions around the country are reporting farmer suicides due to high debts. This also forms a part of the ruling UPA government’s plans to get the support from the agriculture populations, which is over 60% of the country’s total population.

“We have seen that conversion and rescheduling or loans have not worked effectively for the farmers if natural calamities occur consecutively. There should be ways to absorb his loan burden,” said an official.

While the implementation of this move is going to put a huge burden on the banks as the total agriculture loan liabilities of public sector, regional rural banks and cooperatives was at around Rs 1, 75,000 crore at the end of 2006-07. The government expects the banks to give out an additional Rs 50,000 crore as agriculture loans in 2007-08 to take the total loan amount to Rs 25,000 crore.