Government to release Rs5,000 crore for farm debt waiver

The finance ministry is considering the release of Rs5,000 crore to lending institutions as part of the farm debt waiver plan, in a bid to avoid escalation in interest payment, informed sources said, adding, the sum is likely to be released in a couple of months.

The amount, with the remaining Rs10,000 crore to be released later in the fiscal, would reduce the outstanding principal, they added.

The provisions of the 2009-10 interim budget allowed the government disburse Rs15,000 crore during the current financial year to banks and financial institutions.

The cabinet had taken a decision last year for payment of interest amounting to Rs3,872 crore on the second, third and fourth instalments of reimbursable claims of the lending institutions pertaining to the scheme.

A sum of Rs25,000 crore had been reimbursed as the first installment to the institutions under the Agricultural Debt Waiver and Debt Relief Scheme. The scheme for farmers was announced in the 2008-09 budget and was implemented by 30 June last year.

Finance minister, Pranab Mukherjee had said in the interim budget speech that the total debt waiver and debt relief till the budget amounted to Rs65,300 crore and covered 3.6 crore farmers. Under the debt waiver and relief package for small and marginal farmers ( holding up to two hectare) a complete waiver of all loans due on 31 December 2007 and remaining unpaid until 29 February 2008 had been granted.