Date:12/09/2006 URL: http://www.thehindu.com/2006/09/12/stories/2006091204331300.htm

National

Farm loan interest: differences remain

Gargi Parsai

Ministries fail to hammer out a solution

NEW DELHI: A high-level meeting, presided over by Agriculture Minister Sharad Pawar on Friday failed to resolve the differences between the Agriculture and the Finance Ministries on interest subvention on farm loans to cooperative banks from the kharif 2006-07, as assured in the budget proposals this year.

The meeting was convened at the behest of Prime Minister Manmohan Singh, but the matter remained unresolved. It has now been left to him to decide.

The Agriculture Ministry is backing State Governments' demand for subvention of two percentage points of the farmer's interest liability on the principal amount up to Rs 3,00,000 as assured by the Centre in the budget. Three Chief Ministers attended the meeting.

Short-term credit

Finance Minister P. Chidambaram maintained at the meeting that the difference in the interest liability on farm borrowings from the cooperative credit structure should be borne by the State Governments.

This, despite the fact that in his budget proposal he had observed that farmers obtained short-term credit from the cooperative credit structure and Regional Rural Banks with re-finance from the National Bank for Agriculture and Rural Development (NABARD).

He had said then: "Accordingly...Government has decided to ensure that the farmer receives short-term credit at 7 per cent, with the upper limit of Rs 300,000 on the principal amount.

This would require a certain level of subvention to NABARD. I propose to give the subvention. This policy will come into effect from kharif 2006-07."

However, no decision has been taken so far on this and questions are being raised whether the Centre is going back on its assurance to farmers.

Chief Ministers of Punjab, Haryana, Maharashtra, Gujarat, Rajasthan, Madhya Pradesh, Andhra Pradesh, Karnataka and Orissa were invited to the meeting, but only Chief Ministers of the first three States attended the meeting that had been rescheduled twice.