| Sweet tidings
New Delhi, Oct. 21: The government today announced a cut in interest rate on loans to the plantation sector to stimulate credit flow to the coffee plantations and said it would soon announce a separate package for the tea gardens.
Commerce and industries minister Arun Jaitley said the lending rate on advances up to Rs 50 lakh for plantation farming would attract a maximum interest rate of 9 per cent while there would be a moratorium on interest payment.
Currently, advances for coffee plantation farming attract interest ranging between 11-14 per cent.
“This has been done to pass on the full benefit of declining interest rates to the tea and coffee growers and offset poor price realisations due to sliding global coffee prices,” Jaitley told reporters after a meeting with finance minister Jaswant Singh.
In April, the Reserve Bank had cut its benchmark bank rate by a quarter percentage point to 6 per cent to revive economic growth after the worst drought in 15 years dented economic growth to 4.3 per cent.
The drought last year caused agriculture production to contract 3.1 per cent in the fiscal year. The farm sector accounts for about a quarter of total output and employs more than two thirds of the country's billion-plus people.
The commerce minister said the moratorium on interest on loans along with the repayment scheme would be worked out shortly by the finance ministry in consultation with the Reserve Bank of India. Earlier, the government had provided a moratorium on loan repayment to the tea and coffee growers.
The cut in the rate on advances along with the moratorium on interest payment comes after the government had reduced in June this year the lending rate on farm advances to a minimum of 9 per cent from the current level of 14-16 per cent. Moreover, banks were directed to provide farm loans up to Rs 50,000 at a maximum interest rate of of 9.0 per cent.