Agriculture credit is not reaching small farm holders in India, resulting in high level of indebtedness, Assocham said on Friday.
The industry body, in its latest study, has also pitched for consolidation of tiny farm lands for cooperative or corporate farming.
The indebtedness of agri-sector is most critical in Andhra Pradesh as compared to other states. The sister state Telangana is also in much similar condition, it said, adding that institutional credit is largely confined to cultivators with landholdings above one hectare (ha).
“Despite the active presence of banks and cooperative credit institutions, the reported source of farm credit for the tiny plots of below 0.01 hectare is the traditional money lender. He still is equally the giver of last resort for those with landholdings of 0.01-0.40 ha,” the study said.
The most alarming picture that arises from the study is that two-thirds of farm holders have less than one hectare of land and agricultural credit that the government provides, hardly goes to them, it added.
Assocham said that the study — Farm Structure Reform: Structural Changes on Farm Size Needed for Further Successes in Rural Front — was prepared based on the data of the 70th round of survey of the National Sample Survey Organisation (NSSO).
For 2014-15 fiscal, the government has kept farm credit target at Rs 8 lakh crore. Farmers can avail crop loans up to Rs 3 lakh at 7 per cent interest rate. However, the effective rate of interest for farmers who repay on time is 4 per cent.
According to the study, indebtedness among farmers was in “inverse proportion” to the extent of land they held, the smaller ones carrying larger debt burdens in all states.