The government today announced a 20-per cent increase in the farm loan waiver package, from Rs60,000 crore to Rs71,000, to bring in more farmers in the ambit of the debt relief scheme.

Under the expanded scheme, all farmers, including those with large holdings in the 237 identified districts, will be eligible for debt relief of 25 per cent of the outstanding amount or Rs20,000, whichever is higher, finance minister P Chidambaram said after a cabinet meeting.

The revised scheme approved by the cabinet envisages complete loan waiver for small and marginal farmers, whether they are in identified districts or other areas, and will benefit a total of around 43 million farmers.

"Small and marginal farmers will get full debt waiver while 60-65 per cent of large farmers also will get full debt waiver," he said.

The debt relief scheme will be implemented by the end of the next month, Chidambaram said, adding that instructions would be issued to all bank branches to prepare a list of beneficiary farmers for display at their respective premises.

The increase in debt relief package comes ahead of state elections due this year and the general elections scheduled for May next.

Chidambaram denied any poll links to the scheme and said unaudited estimates put the project cost higher at Rs71,680 crore, against the projected cost of Rs60,000 crore when it was announced in the union budget.

Farmers constitute a major vote bank with nearly 65 per cent of the more than one-billion population drawing all or part of their income from agriculture.

The hike in loan waiver package is sure to undermine the government's efforts to bring the country's fiscal deficit to 2.5 per cent of gross domestic product in the 2008-09 financial year, below the projected 3.1 per cent in 2007-08.

For the purpose of eligibility. 'marginal farmer' means a farmer cultivating (as owner or tenant or share cropper) agricultural land up to 1 hectare (2.5 acres).  'Small Farmers' means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 1 hectare and up to 2 hectares (5 acres).  'Other Farmer' means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 2 hectares (more than 5 acres).

The amount eligible for debt waiver or debt relief, as the case may be, shall comprise:
(a) In the case of a short-term production loan, the amount of such loan (together with applicable interest):
(i) Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;
(ii) Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or  not; and
(iii) Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities, whether  overdue or not.

In the case of an investment loan, the instalments of such loan that are over due (together with applicable interest on such instalments) if the loan was:
(i) Disbursed up to March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008;
(ii) Restructured and rescheduled by banks in 2004 and in 2006 through the special packages announced by the Central Government, whether overdue or  not; and
(iii) Restructured and rescheduled in the normal course up to March 31, 2007 as per applicable RBI guidelines on account of natural calamities.

Loans NOT to be included in the eligible amount:
(i) Advances against pledge or hypothecation of agricultural produce other than standing crop; and
(ii) Agricultural finance to corporate, partnership firms, societies other than cooperative credit institutions and any similar institution.

Loan disbursed before 31 March 1997 are not eligible for relief

In the case of a small or marginal farmer, the entire 'eligible amount' will be waived.  In the case of 'other farmers', there will be a one time settlement (OTS) Scheme under which the farmer will be given a rebate of 25 per cent of the 'eligible amount' subject to the condition that the farmer pays the balance of 75  per cent of the 'eligible amount'.

The lending institutions will not charge any interest on the 'eligible amount' for any period after February 29, 2008.  However, in the case of an 'other farmer' who defaults in paying his shares of the eligible amount on or before June 30, 2009 and becomes ineligible for OTS relief, the bank may charge interest for the period after June 30, 2009.

The provisional figures so reported by RBI / NABARD show that about three crore sixty-nine lakh small / marginal farmer accounts and about five core ninety-seven lakh and five thousand "other farmer" accounts with an overdue amount of about Rs.60,416 crore and about Rs31,839 crore respectively are covered under the scheme.  The cash outgo from central government towards reimbursement of the amount of waiver / relief to the lending institutions has been estimated by RBI and NABARD at around Rs60,416 crore for small and marginal farmers and about Rs7,960 crore for 'other farmers'.

The salient features of the scheme are:
(i) All direct agricultural loans (crop loans, investment credit for direct agricultural activities and investment credit for allied activities) disbursed to farmers between March 31, 1997 and March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008 are covered under the scheme.
(ii) Farmers cultivating agricultural land up to 1 hectare are classified as 'marginal farmers' and those cultivating agricultural land between 1 to 2 hectares are classified as 'small farmers'. This classification will apply in the case of crop loans and investment credit for direct agricultural activities. However, in the case of investment credit for allied activities, the land holding is not germane and, hence, those farmers whose principal loan amount is Rs50,000 or less will be classified as 'small and marginal farmers.'

Farmers cultivating agricultural land in excess of 2 hectares are classified as 'other farmers'.  This classification will apply in the case of crop loans and investment credit for direct agricultural activities. In the case of investment credit for allied activities, farmers whose principal loan amount is more than Rs.50,000 will be classified as 'other farmers'.
(iii) Full debt waiver of the eligible amount will be given to small & marginal farmers. This will benefit around 3,69,00,000 small & marginal farmer accounts.
(iv) OTS rebate of 25 per cent will be extended to 'other farmers' against payment of balance 75 per cent in not more than three instalments by June 30,  2009. This will benefit around 59,75,000 farmer accounts.
(v) In respect of 237 districts falling under DPAP or DDP or PM's Special Relief Package, OTS relief will be 25 per cent of the overdue amount or  Rs20,000 whichever is higher. This will enable graded relief to 'other farmers' as shown below:

The estimate of the additional cost of the more liberal package to 'other farmers' in the 237 districts will be of the order of Rs.3,304 crore.
(vi) Groups of farmers, borrowing as a group such as SHG or JLG, are covered under the Scheme, provided banks maintain disaggregated data of the loan  extended to each farmer belonging to that group.
(vii) Direct agricultural loans disbursed under Kisan Credit Card (KCC) would be eligible for debt waiver/debt relief.
(viii) The Scheme provides debt waiver/debt relief to farmers whose loans were rescheduled and restructured by the banks up to March 31, 2007 as per applicable RBI guidelines or through the special packages announced by the Central Government in 2004 and 2006.
(ix) Farmers will not be required to make any application for debt waiver/debt relief. Relief would be based on the total landholding of the farmer as per records maintained by the lending institution at the time of sanction. The lending institutions shall display on the Notice Boards of each branch the list of farmers eligible for debt waiver and the list of farmers eligible for debt relief and specifically mention the amount of debt waiver or debt relief proposed to be granted in each case.
(x) Immediately after the debt waiver/debt relief is finalised, all 'small and marginal farmers' and such 'other farmers' of DPAP, DDP and PM's Special Relief Package Districts whose total loans have been waived will be eligible for fresh short-term production loan as well as investment credit.
(xi) The 'other farmers' will be required to pay one-third of their share before they become eligible for fresh short-term production loan. They will be eligible for investment credit only after they pay their full share is not more than three instalments on or before June 30, 2009.
(xii) The Scheme does not cover instalments of investment credit which fall overdue after December 31, 2007. Lending institutions may recover such instalments along with the applicable interest in the normal course. However, they may, in appropriate cases, reschedule these instalments in accordance with the normal policy of the lending institution concerned.