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Crop insurance and interest subsidies at the top of the Centre’s agricultural expenditure


Actual total spending on the Centre’s major agricultural projects and missions increased from 30,167 crore yen in 2016-17 to 41,417 crore yen in 2020-21. However, 75 percent of actual spending is on two programs – Pradhan Mantri Fasal Bima Yojana (PMFBY) and the interest subsidy for short-term credit to farmers. Major initiatives such as mechanization of agriculture, micro-irrigation and organic farming planned to introduce a paradigm shift in agriculture received a tiny share of the total expenditure. Over the past five years, the government has spent 1,75,533 yen on 13 major projects, according to data from the Ministry of Agriculture and Farmer Welfare presented to Lok Sabha last month.

Many programs implemented by the Ministry of Agriculture provide subsidies outside of other components, on various aspects of agriculture such as credit, insurance, mechanization, marketing, irrigation, seeds. and other interventions.


Public spending on PMFBY represents 36% of total spending on schemes over the past five years. The program was intended to provide an overall risk solution at the lowest uniform premium for farmers. The cost of the premium beyond the farmer’s share is subsidized equally by the States and the Center. The Indian government is sharing 90 percent of the premium subsidy for the northeastern states to promote adoption in the region. The average sum insured per hectare increased from 15,100 under pre-PMFBY regimes to ₹ 40,700 under PMFBY. The PMFBY launched in 2016 has seen public spending increase over the past three years.

Also read: Telangana: HC orders state to compensate farmers for crop losses

Interestingly, the data available from the Ministry of Agriculture shows that of the total number of farmers in the group of marginal, small and other farmers who opted for crop insurance during the Kharif season, the number of marginal farmers fell from 18.08% in 2018 to 16.55. percent in 2020. For the Rabi season, it fell from 19.18 percent to 17.39 percent over the same period.

Credit flow

The government sets the annual target for credit flow to the agricultural sector. The agricultural credit flow target has been set at 13.50 lakh crore for fiscal year 2019-20, 15 crore lakh for fiscal year 2020-21 and 16.50 crore lakh for fiscal year 2021-22. . To extend the reach of institutional credit to farmers, the government provides a 2 percent interest subsidy on short-term agricultural loans up to ₹ 3 lakh. Currently, a loan is offered to farmers at an interest rate of 4 percent per annum with prompt repayment. According to Raju Shetti, farmer leader and former MP for Maharashtra, even as the government claims to help farmers obtain credit, large numbers of small and marginal farmers are trapped in debt from private lenders. Natural disasters, volatile markets and the machinery of government approach are forcing farmers to rely on private lenders, he said.

Mechanization last on the list

The promotion of agricultural mechanization for in situ management of crop residues has received only 1,749 crore from the government in the past five years, which represents only 1% of the total expenditure on agricultural projects, while the Submission on agricultural mechanization received 4,220 crore (2%) during this period. The Indian government has released funds for various agricultural mechanization activities such as establishing custom rental centers, agricultural machinery bank, high-tech centers and distributing various agricultural machinery in different states. The government has planned this mission to maximize the productivity of the available arable land and make agriculture a more profitable and attractive profession.

The Pradhan Mantri Krishi Sinchan Yojana micro-irrigation project received a relatively higher amount (₹ 12,991 crore) compared to projects other than PMFBY and an interest subsidy for short term credit.

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