A

PROJECT REPORT
ON
WRITTING OF FARMERS LOAN: IMPACT ON
ECONOMIC DEVLOPMENT

SUBMITTED BY:
RAHUL KHADIWAR
SHIVANI.P.PATEL
VARUN JAIN

SUBMITTED TO:
MAYANKA SINGH

SCHOOL OF MANAGEMENT AND ENTREPRENEURSHIP

AURO UNIVERSITY
SURAT-395007
MARCH 2013

ACKNOWLEDGMENT
We heartily wish to extend heartfelt appreciation and gratitude to
numerous Mentors, benefactors, and constituents who have collectively
endowed the Wherewithal, faith and encouragement for me to navigate
and complete our presentation journey.
To Professor Kamlesh Mishra, our primary advisor and
unflagging advocate, who mustered devoted, continuing, innovative and
adaptive mentorship to impel and shepherd my checked efforts through
diverse and abounding challenges, we extend are deep and abiding respect
and many, many thanks. To Professor Mayanka Singh, my supporting
advisor, who gently and patiently endured this academic tardiness, we
offer commensurate veneration? To all the respondents who have
contributed as our surrogate champions and our friends and family, who
afforded me much beneficial counterpoint to the pecuniary burdens and
administrative vagaries of their institution, we affirm my humble esteem.
To the faculty and staff of the School of Management and
Entrepreneurship, AURO University, Surat.

INDEX
Sr.no
1
1.1
1.2

2
2.1
2.2
2.3
2.4

Content
Chapter:1introduction
Farmers in india face
loan burdon
How farmers get
subsidies
Chapter:2farmers loan
Steps for getting
farmers loan.
Schmes
Advantages and
disadvantages
Yojnas for farmers
3

Pg No.
4
5-6

7-8
9
10
11-12

4
4.1
4.2

Chapter:3
impact on farmers
productivity

13-14

Chapter4
Conclusion
Bibliography

CHAPTER:1 INTRODUCTION
WRITTING OF FARMERS LOAN: IMPACT ON
ECONOMIC DEVLOPMENT
1.1FarmersinIndiafaceloanburden
NearlyhalfthefarmerhouseholdsinIndia,withahighpercentageofthem
inAndhraPradesh,TamilNaduandPunjabarefacingtheburdenofloans,
accordingtoareport.Atotalof43.42millionfarmerhouseholds
constituting48.6percentarereportedtobeindebtedtoeitherformalor
informalorbothsourcesofcredit,asperthereportonthe"Indebtednessof
FarmerHouseholds"(NSSOreport498ofNSS59thRound).Ministerof
StateforAgricultureHarishRawatsaidinawrittenreplytotheLokSabha
yesterdaythatfarmerstakeloanforthepurposeofcapitalorcurrent
expenditureinfarmbusinesscombinedwithsuccessivecropfailures.
Besides,hesaid,theyhavetotakeloansformeetingrequirementsrelated
tohealth,marriagesandothersocialobligations.Givingstatewisebreak
4

15
16

upfromthereport,RawatsaidthemaximumpercentageisinAndhra
Pradesh(82percent).ItisfollowedbyTamilNadu(74.5percent),Punjab
(65.4percent),Kerala(64.4percent)andKarnataka(61.6percent).Other
stateswithhighpercentageofindebtedfarmersincludeMaharashtra(54.8
percent),Haryana(53.1percent),Rajasthan(52.4percent),Gujarat(51.9
percent)andWestBengal(50.1percent).Highlypopulatedstateslike
UttarPradesh,BiharandJharkhandhadlowerpercentageat40.3percent,
33percentand20.9percentrespectively.Ithasbeenwidelyreported
recentlythatloanburden,particularlyathighrateofinterestfromprivate
lenders,hasbeenamajorreasondrivingfarmerstosuicideindifferent
partsofthecountry.asshowninfigure:1

figure:1
states having burdon on loan (percentage)
Percentage

1.2 How farmers get subsidies

A subsidy is money given to help a business. A farm subsidy is an
economic tool that governments use to influence prices and maintain the
food supply. The funds are often given in the form of a grant or cash
payment to the business. Some subsidies are in the form of zero- or lowinterest loans. Traditionally, farmers receive cash payments each year.
These payments or subsidies are issued for several reasons. India govt
announces seed, diesel subsidy for farmers Diesel Subsidy Scheme has
5

been introduced with a view to provide irrigation through diesel pump sets
to save the standing crops. Given the deficient rainfall and drought
situation in 2012 season, India Government has hiked the ceiling on seeds
subsidy for farmers from Rs.500 per quintal to Rs.700 for cereals.Ceiling
for pulses has been hiked from Rs.1200 per quintal to Rs.2000 and coarse
cereals from Rs.800 per quintal to Rs.1000 to provide relief to farmers,
said a government release. Further government has introduced the Diesel
Subsidy Scheme with a view to provide irrigation through diesel pump
sets to save the standing crops Meanwhile, for increasing the productivity
and production of rice in the country and consequent improvement in
global trade, India has been implementing several crop development
programmes such as National food Security Mission Rice (NFSM-Rice),
Integrated Cereals Development Programme in Rice Based Cropping
Systems Areas under Macro Management of Agriculture, Bringing Green
Revolution in Eastern India - a sub scheme of Rashtriya Krishi Vikas
Yojana (RKVY).The aim of NFSM was to enhance foodgrain production
by 20 million tons (10 million tons of rice, 8 million tons of wheat and 2
million tones of pulses). The total production of rice has increased from
93.35 million tons (in pre NFSM year 2006-07) to 104.32 Million tons in
2011-12 (4th Advance Estimate) with an increase of nearly 10.97 million
tons against the target of 10 million tons.Besides, Indian council of
Agricultural Research (ICAR) also undertakes research programmes to
increase the production and productivity of rice through development of
high yielding varieties and hybrids having high yield potential and
tolerance to abiotic and biotic stresses.India is the second largest producer
and consumer of rice in the world. Rice is the staple food for two third
population of the country. Its trade in the global market during 2011-12
was about 7 million tones (provisional).Rice occupies about 22.4 percent
of the gross cropped area in the country. As per the report of Food and
Agriculture Organization (FAO) for the year 2010, the productivity of rice
in terms of paddy is 3264 kg per hectare in India against worlds average
productivity of 4374 kg per hectare.The major reasons for less productivity
of paddy in India is due to small and fragmented land holdings, lack of
irrigation facilities, improper use of nutrients and pest management, low
replacement rate of seed, low mechanization etc.
Illustration: example of tamil-nadu
TheGovernmentissanctioningtheprojectproposalsofTamilNaduAgricultural
UniversityatacostofRs.1006.29lakhsforimplementationofAgricultural
MechanisationinTamilNadu.OutofthissanctionedamountofRs.1006.29lakhs,an
amountofRs.772.98lakhswassanctionedtowardsdistributionandintroductionof

AgriculturalMachinerythroughincentivesbytheAgriculturalEngineeringDepartment
asindicatedbelow:

(RupeesinLakhs)
Sl.
No.

Particulars

Qty

Price/unit

*I

IntroductionofNewlyDevelopedAgriculturalMachinery/Implements

MinicombinedHarvester

26

2.50

MulticropThrasher(Highcapacity)

33

2.10

Powerweederwithattachment

57

1.00

PowerThrasher

20

1.00

PaddyTransplanter

80

1.40

Postholedigger

92

0.85

Shredder(Heavy)

1.00

Shredder(Medium)

0.40

MaizeHuskerSheller

100

0.90

Proposed
subsidy

CoconutDehusker

Groundnutdecordicator

Chiselplough

Genderfriendlyequipments

II

GrantSupporttotheStateGovernmentInstitutions

PurchaseofHeavyDutyTrailorwith
PrimeMovertotransportbulldozersandheavyequipmentsof
Agricultural
EngineeringDepartment

III

PopularisationofAgriculturalMechanisationthroughconventionalmachinery/equipments

PowerTiller

551

1.16

Rotovator

384

0.90

Cultivator

262

0.16

Offsetdischarrow

25

0.47

123

0.60

27

0.35

132

0.12

1478

0.08

18.00

Discplough

202

0.35

*Backendedsubsidy
Duringthereviewmeetingheldon25.04.2008,theProfessorandHead,Agricultural
MachineryResearchCentre,TamilNaduAgriculturalUniversityhasstatedthatkeeping
importanceofimplementationofmechanizationindifferentpartsofTamilNaduthe
approvalwassoughtfortheentirestate,butapprovalwasgiventoimplementtheproject
in9focusdistrictsonclusterbasis.Therefore,hehasrequestedthatnecessaryordersmay
beissuedforimplementationoftheschemesinthefocuseddistrictsaswellasintheother
districtsasgivenbelow:

TheBudgetcomponentsforfocuseddistricts
Rs.352.41lakhs
(Salem,Namakkal,Dharmapuri,Krishnagiri,Perambalur,Ariyalur,Dindigul,Ramnad,
CoimbatoreandVillupuram)

TheBudgetforother/restofdistricts
Rs.420.57lakhs
(Vellore,Tiruvannamalai,Kancheepuram,Cuddalore,Thanjavure,Tiruvarur,Trichy,
Pudukottai,Karur,Erode,Tiruvallur,Nilgiris,Theni,Madurai,Sivaganga,Virudhunagar,
Tuticorin,Tirunelveli,andNagapattinam

Total

Rs.772.98lakhs

TheGovernmentaftercarefulexaminationaccepttheproposaloftheTamilNadu
AgriculturalUniversityinpara2aboveanddirectthattheamountofRs.772.98lakhs
sanctionedinAnnexureIItotheG.O.firstreadaboveshallbeutilisedformplementation
oftheschemeinthefocuseddistrictsaswellasinother1
ApplyforafarmownershiploanorafarmoperatingloanfromtheFSA,orFarm
ServiceAgency,whichispartoftheU.S.DepartmentofAgriculture.districtsas
indicatedbelow:

TheBudgetcomponentsforfocuseddistricts
(Salem,Namakkal,Dharmapuri,Krishnagiri,Perambalur,Ariyalur,Dindigul,Ramnad,Coimbatoreand
Villupuram

TheBudgetforother/restofdistricts
(Vellore,Tiruvannamalai,Kancheepuram,Cuddalore,Thanjavure,Tiruvarur,Trichy,Pudukottai,Karur,Erode
Tiruvallur,Nilgiris,Theni,Madurai,Sivaganga,Virudhunagar,Tuticorin,TirunelveliandNagapattinam)

Total

10

CHAPTER: 2- FARMERS LOAN

2.1 steps for getting the farmers loan
1

Apply for a farm ownership loan or a farm operating loan.

direct loans for farmers from the FSA are available up to a total
of $300,000.
Loans guaranteed by the FSA are available up to a total of
$1,119,000.
the term for repayment for either of the farm ownership loans
cannot be more
than 40 years. Loan repayment schedules for the
farm operating loans are typically between 1 and 7 seven years in
length.
Funds from a farm ownership loan are typically allocated for
purchasing new land, improving existing farmland, improvement
or construction of new farm structures, promoting conservation
projects, and to finance closing costs.
Funds from a farm-operating loan are usually used for standard
operating expenses, equipment, repairs, and to refinance existing
debt.
both types of loans have money allocated each year to be
dedicated to new farmer loans.

Fill out an application for one of the other loans offered by the FSA

The Down Payment Program offers loans to new and socially

disadvantaged farmers.
Emergency Loans are available for farmers who have suffered losses
due to a natural disaster or quarantine.
3 Consult your state Department of Agriculture to determine if there are
grants or new farmer loans
3

Consider a USDA Rural Development Business and Industry

Guaranteed Loan.

11

These loans are available to farmers for a variety of purposes in

amounts of up to $40 million.

The term of the loans vary but generally range between 7 and 30
years.

5 Apply for a loan related to sustainable agriculture and green initiatives.

Many loans are available for improvements related to

sustainability, organic farming, energy efficiency, nutrient
management, agroforestry, sustainable communities, research,
livestock and crop diversity, and weed and pest management.

Money for farmers is available in the form of loans and grants

funding is procured for individual programs. These programs are
not always available and submission dates must be strictly adhered
to.

6 Obtain a business loan or agriculture loan directly from a bank.

Establish a good credit history that shows prompt repayment of

loans.

Develop a business plan and present the bank with hard data about
the type of farm you will run, production projections, and your
personal experience.

Apply for the loan as far in advance of time you need the money as
possible in order to allow the bank to fully evaluate the situation.

2.2- Schemes for farmers loan are:

KISSAN CREDIT CARD
1. Introduction
The Kisan Credit Card has emerged as an innovative credit delivery
mechanism to meet the production credit requirements of the farmers in a
timely and hassle-free manner. The scheme is under implementation in the
12

entire country by the vast institutional credit framework involving

Commercial Banks, RRBs and Cooperatives and has received wide
acceptability amongst bankers and farmers. However, during the last 13
years of implementation, many impediments were encountered by policy
makers, implementing banks and the farmers in the implementation of the
scheme. Recommendations of various Committees appointed by GOI and
studies conducted by NABARD also corroborate this fact. It was,
therefore, felt necessary to revisit the existing KCC Scheme to make it
truly simple and hassle free for both the farmers and bankers. Accordingly,
the GOI, Ministry of Finance constituted a Working Group to review the
KCC Scheme. Based on the recommendations of the Working Group
which were accepted by the GoI, the following guidelines are issued:
2. Objectives/Purpose
Kisan Credit Card Scheme aims at providing adequate and timely credit
support from the banking system under a single window to the farmers for
their cultivation & other needs as indicated below:
a.

To meet the short term credit requirements for cultivation of crops

b.

Post harvest expenses

c.

Produce Marketing loan

d.

Consumption requirements of farmer household

e.

Working capital for maintenance of farm assets and activities allied to

agriculture, like dairy animals, inland fishery etc.

f.

Investment credit requirement for agriculture and allied activities like

pump sets, sprayers, dairy animals etc.
3. Eligibility

i.

All Farmers Individuals / Joint borrowers who are owner cultivators

ii.

Tenant Farmers, Oral Lessees & Share Croppers

iii.

SHGs or Joint Liability Groups of Farmers including tenant farmers, share

croppers etc.

13

KCC holders provided with any one or a combination of the following

types of cards:
Debit cards (magnetic stripe card with PIN) enabling farmers to
operate the limit through all banks ATMs/Micro ATMs
Debit Cards with magnetic stripe and biometric authentication.
Smart cards for doing transactions through PoS machines held by
Business
Correspondents, input dealers, traders and Mandies.
EMV compliant chip cards with magnetic stripe and pin with ISO
IIN.
2.3 ADVANTAGES AND DISADVANTAGES OF FARMERS LOAN

1.Advantages

Lower Interest Rates

Government loans tend to have lower interest rates. In the case of a
government student loan, the interest rates are very attractive
compared to conventional loans. Many students are able to get
Federal Stafford loans and consolidation loans at rates as low as six
percent, whereas an educational loan with a regular bank can cost
more than eight percent annually depending on the student's credit
history. Unlike regular loans, which are usually based on the prime
rate or LIBOR, Federal loans are generally calculated using 91-day
Treasury bills, which tend to be lower than the other common
indices. Back in 2002, rates on federal student loans dropped
substantially to an amazing 4.06% and borrowers were allowed to
locked that rate in going forward. Later on the College Cost
Reduction and Access Act of 2007 cut interest rates for student
borrowers as well. So the government seems to make more efforts
to help the public with affordable loans.

Fast Approvals:
While the application process is sometimes very involved, the
government is usually more quick with their decisions than
14

standard lenders. For example, the Small Business Association

(SBA) has made a commitment to approve SBA loans within 3-5
business days so that business owners can go forward with their
business plans, approved or not. Federal student loans applications
are also commonly approved quickly and the funds released
electronically to allow students to continue with school.
2. Disadvantage

Can't Write off Debt:

No matter what happens in your life, you generally cannot write off
a government debt. You are responsible for paying back this debt
before all others. Even in the case of a bankruptcy, government
student loans, government backed SBA loans, and other debts are
still owed. Keep in mind that when you take out a government
loan, you owe the people of the United States, so you will have to
pay this money back one way or another.

More Red Tape :

Government agencies are held to a standard by the public and
lawmakers, so they are usually more thorough with their loan
application processes. When applying for a government loan, you
will probably be met with more steps, more paperwork, and tighter
requirements in order to be approved. The government has to be
100% assured that you are eligible for the loan before releasing any
funds.

2.4 Yojnas for farmers

Gramin Bhandaran Yojna:Creation of scientific storage capacity with allied facilities in rural areas to
meet the requirements of farmers for storing farm produce, processed farm
produce and agricultural inputs. Improve their marketability through
promotion of grading, standardization and quality control of agricultural
produce.

15

 Soil and Water Conservation in the catchments of River Valley

Project:25% on cost of works in Patta Land is provided as subsidy and remaining
75% is treated as loan. The loan amount with interest is recovered in ten
equal instalments after a moratorium of two years.
Agricultural Mechanisation Programme:Subsidy assistance is provided to farmers for procuring
Agricultural Machinery and implements such as Tractors, Power
Tillers, Self propelled Paddy Transplanters, Self propelled paddy
reapers, Rotavator, Cultivator, Disc Plough, Chisel Plough etc.,
Soil and Water Conservation under Hill Area Development
Programme :100% grant is provided for Soil Conservation measures. However,
beneficiaries are required to contribute at the rate of 10% for
individual works and 5% for community works. It is 5% in case of
SC/ST, for individual works. This contribution shall be deposited
in the Watershed Development fund. The landslide treatment
measures are executed with 100 % grant.
Minor Irrigation Scheme:Selection of sites for construction of openwell and Borewells.
Construction of tubewells in alluvial soil.
Revitalisation of wells by side boring and blasting in hard rock
areas.
Construction of Borewells in hard rock areas.

Land Development Scheme :Land Shaping

Land Levelling
Land Reclamation
Ploughing, Puddling
Paddy Harvesting by Combin Harvester.

16

 National Agriculture Development Programme (NADP):a) Introduction of newly developed agricultural1 machinery /
implements
b) Popularizing conventional machinery / implements.
Pradhan Mantri Adarsh Gram Yojana:Integrated development of Schedule Caste majority villages in four
states
Pradhan Mantri Gram Sadak Yojana:Good all-weather road connectivity to unconnected villages
Rashtriya Krishi Vikas Yojana:Achieve 4% annual growth in agriculture through development of
Agriculture and
its allied sectors during the XI Plan period

CHAPTER: 3
IMPACT ON FARMERS PRODUCTIVITY

IMPACT ON AGRICULTURAL PRODUCTION AND

PRODUCTIVITY
Farm mechanization is regarded as sine-qua-non to reduce the human
drudgery and enhance the agricultural productivity. During the post-green
revolution period, the impact of farm mechanization on agricultural
production and productivity has been well recognised in India. Depending
upon the use of other inputs such as irrigation, high yielding seed varieties,
chemical fertilizers, herbicides and pesticides, different States in India
have attained different levels of mechanization. Consequently the
17

agricultural production & productivity has witnessed three to four fold

increase. Studies have been conducted by various organisations &
individuals which have highlighted the impact of agricultural
mechanization on farm production and productivity.
IMPACT ON CROPPING INTENSITY
Agricultural mechanization has made significant contribution in enhancing
cropping intensity. The growth in irrigated areas and tractor density has
had direct bearing on the cropping intensity. Findings of the studies
conducted in the past are briefly presented to highlight the contribution of
mechanization in enhancing the cropping intensity.
IMPACT ON EMPLOYMENT OF HUMAN LABOUR
The impact of farm mechanization on labour employment, particularly in a
labour surplus country like India, has been a matter of concern and debate.
The available evidences suggest that mechanization had helped in overall
increase in employment of human labour.
IMPACT ON SUBSIDIARY AND NON-FARM EMPLOYMENTDifferent studies conducted on farm mechanization
indicated that net human labour displacement in agricultural operations
was not significant and it was more than compensated by increased
demand for human labour due to multiple cropping, greater intensity of
cultivation and higher yields. On the other hand, the demand for non-farm
labour for manufacture, services, distribution, repair and maintenance as
well as other complementary functions increased substantially and helped
in relieving rural unemployment to some extent. Mechanization in
agriculture provided indirect employment to skilled and unskilled persons
engaged in operation, repair and maintenance of prime movers and farm
equipment.
IMPACT ON GROSS FARM INCOME AND NET RETURN
Farm mechanization has greatly helped the farming community in the
overall economic upliftment. The studies conducted on impact of
mechanization on farm income clearly support this view point. AERC
(1970 & 1971) conducted a series of studies related to economics of
mechanization. These studies revealed that the gross income was higher on
mechanized farms than non-mechanized farms. The gross crop output per
18

cultivated hectare was reported to be Rs.3144 for tractor-operated farms as

compared to value Rs.2677 for bullock operated farms
Thrust Areas
Soil health care and increasing the productivity per unit area.
Raising the income of farmers.
Strengthening and improving agriculture infrastructure.
Promoting Micro Irrigation to increase Water Use Efficiency.

Increasing the cropping and irrigation intensity.

Providing access to quality inputs.
Bringing fallow lands under cultivation.

19

CHAPTER: 4

4.1-CONCLUSION
Most of the studies either supported distributing subsidies or
withdrawal of subsidies. However, the present study reveals that
some subsidies should be given and some others can be withdrawn
without harming the farmers. Withdrawal of subsidies should be
carried out in phased manner. Following are the some suggestions
emerging out of the present study:The centre government should
adopt some criteria to give away subsidies to states either on the
basis of gross cropped area or productivity.From the study it has
been noted that subsidies which have direct relationship on
productivity and income like seeds, fertilizers should be given to
farmers, on the other hand, subsidies on electricity can be withdrawn
as supply of electricity in Punjab is irregular moreover farmers prefer
regular supply of power even if they have to pay for it. If
implemented, it will reduce state electricity boards burden and this
amount can be used for production of more electricity, reducing the
need of purchasing electricity at very high prices, which adds to the
deficit of state finance.Government should formulate farmer friendly
agriculture price policy, under which the price of farm produce should be
fixed keeping in view the rising costs of farm inputs; this will help in
making the farmers financially independent.In view of drought/deficit
rainfall in certain regions (Bihar, Jharkhand, Orissa and West Bengal), it
was decided by centre government to implement a diesel subsidy during
kharif (in 2010) to save standing crops in the field, same pattern should be
followed in states where this problem occurs.Government should keep

aside its motive to please voters or strengthen the vote bank, it

should frame rational policy in which small size category farmers, who
are not actual beneficiaries of subsidies, could get more and subsides,
which they do not want should be withdrawn.Subsidies should be given to
those who actually need, like small and medium size category farmers.
Subsidies, which they do not need should be withdrawn but in a phased
manner. On the other hand, instead of subsidies, the government should
focus on just three things - electricity generation, infrastructural
development and water supply. The accompanying development will take

20

care of the rest. The subsidies should be replaced with constructive

schemes that empower people and give them that one push they need

to get out of poverty.

4.2 BIBLIOGRAPHY

www.planningcomission.com
http://www.ehow.com/about_6725861_do-farmerssubsidies_.html
Advantages & Disadvantages of a Government Loan |
eHow.com http://www.ehow.com/about_4745137_advantagesdisadvantagesgovernment-loan.html#ixzz2Ms8fCGI0
http://agritech.tnau.ac.in/agricultural_engineering/
agriengg_govt_schemes.html

http://agritech.tnau.ac.in/agricultural_engineering/agriengg
_govt_subsidy.html
http://en.wikipedia.org/wiki/Subsidies_in_India

http://en.wikipedia.org/wiki/List_of_government_sc
hemes_in_India
http://www.livemint.com/Opinion/1FEnH9OVJlyGwe
MNnsdaGO/Views--The-farm-loan-waivercontinues-to-destroy-the-credit.htm

21

http://www.wikihow.com/Get-Farmer-Loans
http://www.eximguru.com/budget_2011_12highlights.aspx

22