The Madhya Pradesh cabinet is likely to take up for discussion on Wednesday a proposal offering 10 percent discount on the ‘kind’ component of farm loan extended by state cooperative banks to farmers.
The proposal was passed by the finance department in August but the recent spate of farmers’ suicides seems to have spurred the government to begin its implementation urgently. The government is already offering loans to farmers at zero percent interest rate.
Farm loans normally have a 75% cash component and a 25% kind component against which farmers can get seeds and fertilizer on credit.
Presently, nearly 28 lakh farmers across the state would benefit from the scheme as they have taken loans from state cooperative banks.
The state government expects nearly 10 lakh more farmers to take loans from cooperative banks in the next three years expanding the farm credit net to nearly 40 lakh farmers.
Simply put, farmers would have to return 10% less than the due amount for repayment of the kind component. This would cost the exchequer about `1,000 crore over the next three years.
The discount on loans is part of an announcement by chief minister Shivraj Singh Chouhan that he would “make up” for the loss suffered by farmers due to withdrawal of Rs 150 per quintal bonus on procurement of wheat by the Union government in 2015.
A committee was formed earlier under the then agriculture production commissioner (APC) MM Upadhyay to look into various options to compensate farmers for the loss. The CM, however, rejected all the options and decided to go ahead with offering a discount on the loan.
Sources said the reason for choosing the loan option lies in good politics as it would maximize the benefits.
“The loss suffered by farmers because of withdrawal of bonus is far greater but by announcing the discount on loans, the state government plans to offset the political disadvantage by spreading the benefits, albeit thinly, to a larger number,” said an official at the mantralaya