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The Andhra Pradesh Government has sought from the Centre initiatives to boost agriculture production from the State through increased refinance from Nabard, reduction in interest rates and interest subvention.
The State Government has requested the Union Finance Minister to include these issues during his schedule regional reviews for southern States scheduled next month.
Justifying the need for the State to get smoother credit flow for agriculture, the AP Minister for Cooperation, Mr K.V. Krishna Reddy, in a letter to the Union Finance Minister, pointed out that the State’s food production increased to 200 lakh tonnes in 2010-11 and was expected to touch 300 lakh tonnes by 2013. Further, the State contributes about 65 per cent of the country’s hybrid seed production. Also, it is proposed to bring one crore acres to cultivation—it currently has three crore acres under cultivation.
Mr Reddy pointed out that as most of commercial banks were not fully meeting mandatory requirements of 18 per cent direct agricultural credit, they were parking the “massive amounts of shortfall with Nabard”.
“In view of the recent thrust on doubling agricultural credit, there is a need for increase in refinance support from Nabard. At present, Nabard is providing 45 per cent refinance to cooperative credit institutions and the remaining 55 per cent of funds have to be raised by these institutions through deposits from public at market rates. As these institutions have to lend to farmers at the mandated rate of seven per cent, there is huge disincentive in the process,” the Minister pointed out.
The present interest rate structure of Nabard is also an area of concern. While the Primary Agricultural Credit Societies are required to lend at 7 pc, the Nabard refinances at 4 pc and the margin of 3 pc is not sufficient to meet the costs of disbursing crop loans to farmers. “Therefore Nabard needs to consider reduction of the rates to its original level of 2.5 per cent per annum under crop loans,” the letter added.
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