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  1. Did you know, over 40% interest subsidy for farm credit gets diverted for non-agri use?

Did you know, over 40% interest subsidy for farm credit gets diverted for non-agri use?

Nearly 40% of the funds allocated under the interest subvention scheme for farm credit gets diverted to non-agriculture usage...

By: | New Delhi | Updated: April 11, 2016 9:58 AM
farmers suicide With annual farm credit growth of around 20% and the insufficient budget outlays for the interest subvention scheme, the pending bills have risen to over Rs 44,000 crore by FY16. (Reuters)

Nearly 40% of the funds allocated under the interest subvention scheme for farm credit gets diverted to non-agriculture usage, including money lending while the outlays themselves have over the years been far from adequate, stifling the banking system — a scenario that should compel the shift from subsidising farm credit to direct income transfer to farmer’s bank accounts.

The backlog of unpaid bills to the banking system had swelled to around Rs 35,000 crore by FY15-end.

With annual farm credit growth of around 20% and the insufficient budget outlays for the interest subvention scheme, the pending bills have risen to over Rs 44,000 crore by FY16 and threaten to jump to Rs 55,000 crore by the end of the current fiscal (see table). The funds required for FY16 and FY17 have been estimated at Rs 22,118 crore and Rs 25,878 crore, respectively, while the respective budgetary allocations have been much lower at Rs 13,000 crore and Rs 15,000 crore.

Clearly, behind the disconnect between rising agriculture credit and stagnant farm income is the also massive efficiency losses in the subvention scheme. Under the scheme that started in FY07, farmers who repay their loans on or before the due date get 5% interest subsidy.

Gr1

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