In a move that may provide relief to 21 lakh debt-ridden farmers tackling severe drought, the state government on Tuesday decided to restructure the crop loans taken by farmers in 26,670 drought-hit villages in Maharashtra. While the government said it would restructure loans amounting to Rs11,000 crore, sources said the claim might be contentious.
Restructuring a loan involves extending the duration of repayment, which, in this case, will be extended from one year to five years. This will give the farmers, especially who had taken heavy loans last year and the due date for which is May 30, time extending up to five years. It will also ensure banks don’t turn away the farmers by terming them ‘ineligible’, when they apply for fresh crop loans for the sowing season starting in June.
According to government estimates, the loans to be restructured include last year’s crop loans amounting to Rs5,000 crore and Rs3,503 crore loans taken for the 2014 kharif sowing season.
The government also plans to ask the Reserve Bank of India to restructure Rs2,438 crore worth of outstanding loans taken by 4.4 lakh farmers from drought-hit villages in 2012-13 and 2013-14.
The state plans to pay Rs1,272 crore over the next five years as interest on last year’s loans, while it will pay Rs300 crore as interest towards loans taken in 2014. It hasn’t yet drawn up an estimate of how much the restructuring of loans taken in 2012-13 and 2013-14 loans would cost the exchequer.
The state hopes the move, along with the good monsoon predicted this year, will help stem the agrarian crisis and kickstart the rural agriculture-based economy.
Chandrakant Patil, state cooperation minister, said, “Being held ineligible for a loan jeopardises a farmer’s chance of being able to cultivate crops for the coming sowing season. The government will cover loans borrowed from nationalized and district co-operative banks last year and some part of the loans borrowed in 2014 too. As the drought has reduced the spending power of farmers, they would have defaulted on the loans. The restructuring will help them take fresh loans this year.”
The state government will pay the first installment of these loans this year at 12% interest and will pay 6% interest from the second year, with an equal amount to be paid by the farmer.
Patil said the state was positive of waiving off farm loans, but not yet. “This issue has been constantly discussed and the CM has clarified that such a step didn’t help in stemming suicides in the past. We need to make the farmer self-reliant. We will waive off loans but only after putting the farmer in a better position,” he said.
The immediate impact will be felt by drought-hit farmers who had taken heavy loans last year, with the government extending the duration of the repayment period, about to end by May 30, by five years. This would give farmers more time to make the repayment, as large sections of farmers have suffered crop losses due to the paucity of rainfall in these areas.
More importantly, this would ensure that banks don’t turn away these farmers from fresh crop loans for the sowing season starting in June.
“This will cover loans borrowed from nationalized and district co-operative banks last year and some part of the loans borrowed in 2014 as well. Since the drought has reduced the spending power of farmers, they would have defaulted on these loans. Hence, this restructuring will them take fresh loans this year,” he said.
The State government will pay the first installment of these loans this year at 12 per cent interest and from the second year onwards, will pay 6 per cent interest with an equal amount to be paid by the farmer.
Patil also said that the State government was positive of waiving off farmer loans, but not yet. “This issue has been constantly discussed and the CM has clarified that such a step didn’t help in stemming suicides. Hence, we need to make the farmer self-reliant by being able to be independent enough to borrow again. We will waive off loans but only after enabling the farmer better,” he said.