In a bid to address farmers’ distress ahead of 2019 general elections, the government is considering waiving interest on crop loans for farmers who pay on time, costing an additional Rs 15,000 crore to the exchequer, according to sources.
There is also a proposal to completely waive premium for taking insurance policy for food crops. The premium on horticultural crops could also be reduced, they said.
To provide immediate relief, one of the proposals being studied is to waive 4 per cent interest rate on farmers repaying farm loan promptly within the due date.
At present, farmers get for short-term farm loan of up to Rs 3 lakh at 7 percent interest rate. An additional incentive of 3 percent is being given to farmers for prompt repayment.
The government has set a target to provide Rs 11 lakh crore credit to farmers in the current fiscal. It extended Rs 11.69 lakh crore credit to farmers last fiscal, surpassing the target of Rs 10 lakh crore.
The Centre bears a cost of around Rs 15,000 crore annually for the interest subsidy of 2 per cent in normal cases and 5 per cent in case of prompt repayment of farm loans.
Sources said that the interest burden could double to Rs 30,000 crore if the interest is completely waived for prompt repayment of farm loans.
According to sources, farmers are paying currently about Rs 5,000 crore as insurance premium to cover their kharif and rabi crops. The farmers’ burden will reduce if the premium is further subsidised.
Political experts said that farmers distress will be a major electoral issue in the 2019 Lok Sabha polls after a setback in Madhya Pradesh, Chhattisgarh and Rajasthan assembly elections.