New Delhi: The Indian government has announced a reduction of interest rates on crop loans of up to Rs 50,000 to 9 per cent from the current 14-18 per cent per year.

In addition, instructions have been issued to the National Bank for Agriculture and Rural Development (NABARD) to directly refinance district central cooperative banks (DCCBs) so that their lending rates too come down to 9 per cent.

Indian Finance Minister Jaswant Singh says he has also followed up on his Budget promise to make agricultural credit available through post offices and a pilot project for this will be launched in Tamil Nadu from 1 September. "Based on the experience gathered, the scheme will subsequently be expanded to other states."

Regarding another of his Budget promise, of providing loans for tractors and agricultural machinery on terms similar to loans for motor cars, a consortium led by State Bank of India has been set up to negotiate with manufacturers and dealers of tractors and other equipment to obtain the maximum possible discounts and concessions.

Indian Agriculture Minister Rajnath Singh released a statement saying the reduction in interest rates on agricultural loans will benefit farmers to the extent of Rs 2,500 crore in the current year and the benefit is likely to go up to Rs 7,000 crore by 2006-07.