Interest subvention should be phased out central bank panelMUMBAI: The government must do away with the interest subvention scheme and plough back the subsidy into a universal crop insurance scheme for small and marginal farmers, according to a recommendation from a panel constituted by the Reserve Bank of India (RBI).

The move can transform the agriculture sector and promote financial inclusion, according to the panel headed by Deepak Mohanty, executive director, RBI, said digitisation of land records for clear titles and credit linkage are necessary to establish evidence of cultivation. The committee. “A universal crop insurance scheme covering all crops should be introduced starting with small and marginal farmers with a monetary ceiling say of Rs 200,000. The insurance should be mandatory for all agricultural loans,” according to the report.

The panel cited the example of fertiliser subsidies, which increased from around Rs. 18,500 crore billion in 2005-06 to Rs. 73,000 crore in 2015-16. While fertiliser subsidy has succeeded in achieving its objective of increasing fertiliser consumption in agriculture, it has also led to some distortions and may not be financially sustainable in the long run, for example, rich households could benefit more from the subsidisation than their poorer counterparts.

Read full article: The Hindu

By Anupama

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