Finance Minister of India P. Chidambaram on Friday unveiled a Rs.60,000-crore debt waiver and debt relief scheme for four crore small, marginal farmers and other institutional loanee farmers.
But his proposals did not indicate any provision in the Agriculture Ministry’s budgetary allocation, nor was there any explanation on resource mobilisation for the one-time waiver.
The Minister later said the government would provide the banking sector liquidity, equivalent to the amount being written off, over three years.
The budget ignored 42.3 per cent farmers in the informal sector who are indebted to moneylenders and middlemen and pay phenomenal rates of interest.
Their debt stood at Rs. 48,000 crore in 2003 and a majority of farmers who committed suicide borrowed from the informal sector after becoming defaulters in the banking system.
No new scheme
Nor has any new scheme been announced in this year’s agriculture budget.
In fact, there have been cuts in the allocations for the National Crop Insurance Scheme and the pilot weather-based crop insurance scheme.
At the same time, the Minister did not give in to the wide-scale demand for reduction in the institutional interest rate on farm loans from seven to four per cent.
Announcing the never-before debt waiver scheme, Mr. Chidambaram said it was a measure of expressing the nation’s gratitude to the farming community.
All agricultural loans disbursed by scheduled commercial banks, regional rural banks and cooperative credit institutions up to March 31, 2007 and overdue as on December 31, 2007 will be covered under the scheme.
For small and marginal farmers with a holding of up to two hectares, there will be a complete waiver of all loans that were overdue on December 31, 2007 and which remained unpaid till February 29, 2008.
OTS for others
In respect of other farmers, there will be a one-time settlement (OTS) scheme for all loans that were overdue on December 31, 2007 and which remained unpaid till February 29, 2008.
Under the OTS, a 25 per cent rebate will be given against payment of the balance of 75 per cent.
The agricultural loans restructured and rescheduled by banks in 2004 and 2006 through special packages and other loans rescheduled in the normal course as per the reserve Bank of India guidelines will also be eligible for either waiver or the OTS on the same pattern.
The total value of the overdue loans being waived is estimated at Rs. 50,000 crore and the OTS relief, at Rs. 10,000 crore.
Over three crore small and marginal farmers and about one crore other farmers will benefit from the scheme.
The farmers, after being granted debt waiver or on signing an agreement for OTS relief, will be entitled to fresh loans from banks in accordance with normal rules.
Source: http://www.hindu.com/2008/03/02/stories/2008030260041000.htm
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