By Bizodisha Bureau, Bhubaneswar, November 20, 2015 : A day after announcing a package of Rs 35,000 crore for western Odisha to tackle drought, Odisha Chief Minister Naveen Patnaik on Friday shot off a letter to prime minister Narendra Modi requesting him to reduce the interest rate on crop loans in view of the widespread crop damage due to drought situation prevalent in the state.

“Keeping in view the prevalent drought situation, my government has decided to further reduce the rate of interest on crop loan from existing 5% to 4% through interest subvention by the state government for small, marginal and medium farmers. This will ultimately reduce the effective rate of interest on crop loans from the existing 2% to 1% in the case of prompt paying farmers. I would like to bring this to your kind notice and request Central Government’s intervention and timely financial assistance for combating the drought situation prevalent in my state”, the letter said.

Interestingly, the letter follows Modi government’s letter to the affected states to submit memorandum for drought assistance.

The chief minister earlier in the day also had written a letter to union finance minister Arun Jaitley urging him to trim down the interest rate and extend the interest incentive of 3 percent admissible on farm loans to Medium Term (Conversion) loans considering the widespread damage caused to the standing crops due to the drought situation prevalent in Odisha.

“The Union government provides interest incentive at 3 percent to the prompt paying farmers in respect of crop loans. This facility, however, is not made available in case of conversion of such crop loans on account of natural calamities as a result of which, the interest rate on the converted loans remains at a high level putting an additional financial burden on the farmers. As crop loans are converted into Medium Term loans, the interest rate should remain at the same level instead of charging higher rate of interest. Similarly, the incentive made available to prompt paying farmers of crop loans should also be extended to the Medium Term (Conversion) loans to provide relief to the affected farming community,” Naveen’s letter to Jaitley added.

“As part of the package announced for the farming community, we have decided to convert the crop loans advanced during Khariff, 2015 season as Medium Term (Conversion) loans. In case of crop damage between 33% and 50%, the crop loans shall be converted to Medium Term (Conversion) loans repayable within a period of two years with a moratorium of one year. Similarly, where the crop damage is 50% and more, the conversion facility of the crop loans can be allowed for a maximum period of five years with one year moratorium,” the letter added.

More than 33 percent crop loss has been reported in 139 blocks in 21 districts in the state as per government’s eye estimate reports. Based on this report, the state government had announced water cess waiver on farmers in the drought-hit areas in the state. Besides, it also announced to reschedule agricultural loans by extending the time limit for repaying crop loans.