Reduction In Concessionality Of Farm Loans Will Be A Retrogade Step : Jaya To PM

21 June, Chennai

Observing that any reduction in the concessionality of farm loans was uncalled for and would be a retrograde measure, Tamil Nadu Chief Minister J Jayalalithaa Sunday sought the immediate intervention of Prime Minister Narendra Modi and urged him to direct the continuance of the interest subvention scheme in the present form, while initiating the process of deliberating on the contemplated changes with the stakeholders to arrive at a more effective and supportive farm credit scheme.

In a Demi-Official letter to Modi, copies of which were released to the media here,she said suggested that the proposed modifications might be discussed either in the National Development Council or in the Governing Council of the NITI Aayog and couldbe implemented thereafter with appropriate modifications on which there was a consensus.

Recalling that her Government had already brought to his notice on the need to continue the existing disbursement model for the interest subvention programme for short term credit to farmers, Ms Jayalalithaa said in this back-drop there were reports about changes being contemplated by the Centre in the scheme. Reiterating some of the key issues for his immediate consideration, the Chief Ministersaid it was learnt that the Union Government was contemplating two major changes in the interest subvention scheme for crop loans.

”First, to allow banks to lend at their normal priority sector lending rates which are linked to the base rate and second, to switch over to disbursing interest subvention on a Direct Benefit Transfer (DBT) based reimbursement after the farmer has settled his liabilities to the lending institutions, as against the present model of releasing the interest subvention to the banks based on their lending performance”, she added. Considering the uncertainty endemic to agriculture, any significant increase in the present lending rates by linking them to the base rate, or any reduction in the concessionality of farm loans was uncalled for and will be a retrograde measure, Ms Jayalalithaa said.

”Further, the change in procedure, which expects the farmer to pay higher interest rates and then receive reimbursement of the interest subvention component through DBT would only needlessly add to the complexity of the scheme and compound the misery of the farmers”,she said, adding, in the earlier system, when the bank loans were disbursed through the farmers accounts, the farmers enjoyed concessional credit even at the initial stage when drawing the loans.

Under these circumstances, switching over to the new model of DBT at the post repayment stage directly to the farmers accounts, would not bring any significant benefit in terms of greater accuracy of targeting, accountability or timely availability of credit to the farmers.

Stating that the proposed move requires detailed deliberation with stakeholders, Ms Jayalalithaa said a considered view needs to be taken only after examining the pros and cons of the proposed change in order to achieve the end objective of effective and foolproof delivery and ultimately farmers welfare.

In the Union Government circular dated 10.4.2015, it has been indicated that, pending the introduction of certain changes, the existing model of interest subvention scheme would continue as an interim measure till June 30 and this has now been further extended up to July 31. The time frame indicated was fast approaching and the uncertainty regarding the continuance of the existing scheme and lack of clarity about the new procedure to be introduced would adversely impact the agriculture sector, especially when the country was facing a delay in the onset of the monsoon and an imminent risk of drought.

”It would be appropriate at this stage to highlight that the Tamil Nadu Government has been providing an additional four per cent interest subvention on crop loans disbursed through co-operatives with State budgetary support, over and above the interest subvention provided by the Centre”, she said .

”This makes short term crop loans in Tamil Nadu interest free to the farmers who repay the loan promptly. As it is time for the country to give a big push to the agriculture sector by ensuring adequate flow of credit, any major changes in the present scheme without adequate consideration of the grass root level realities may prove to be disastrous”, Ms Jayalalithaa cautioned.

Stating that the summer crop in Tamil Nadu was very limited and bulk of the crop loans were availed of by the farmers only during the south-west monsoon period commencing from June and in the north-east monsoon period, Ms jayalalithaa said any further delay in taking a decision on the continuance of interest subvention for crop loans would severely affect agricultural prospects in the State and in the rest of the country as well.

”Considering the utmost importance of this scheme to the farming community in all the States, I once again urge your immediate intervention to direct the continuance of the interest subvention scheme in the present form while initiating the process of deliberating on the contemplated changes with the stakeholders to arrive at a more effective and supportive farm credit scheme”, she said