Bishwa Bhaskar Choudhary
SMALL agricultural producers worldwide perform multiple roles — entrepreneurs, traders, investors and consumers; and they seek to utilise available financial instruments to enhance productivity and make optimal investment and consumption decisions for their families. Unfortunately, the range of financial services offered to small farmers in developing countries such as India is restricted, particularly for those residing in remote regions without basic market infrastructure. Limited saving and borrowing options constrain poor farmers’ investment plans, making it difficult for them to escape poverty.
Several states with a substantial livestock population, including UP, West Bengal, Telangana and Bihar, do not feature among the toppers in terms of sanctioned Kisan Credit Cards.
This disparity underscores the need for policy intervention. Concerns have also been raised over the authenticity of the number of issued KCCs. Multiple deliveries to the same household, counting of KCCs even after the end of the validity period, and counting of ‘renewed’ cards as ‘fresh’ ones are some of the critical issues.
Timely credit is an indirect input in agriculture as it enables the farmer to redirect agricultural activities and adopt modern production technologies; this has a bearing on his farming and, ultimately, on his income and livelihood.
The Kisan Credit Card (KCC) scheme was launched by the Union Government in 1998 with the aim of providing hassle-free credit to farmers for agricultural and allied activities. The KCC has proven to be a game-changer, empowering farmers with affordable and timely credit, simplifying the loan process and promoting financial inclusion. With its flexible credit limit, lower interest rates and easy repayment options, the KCC has helped farmers overcome financial constraints, invest in modern agricultural practices, purchase high-quality inputs and improve their crop yield and income. The KCC has also reduced farmers’ dependence on informal credit sources and prevented them from falling into the clutches of moneylenders. For instance, a recent study by the International Food Policy Research Institute (IFPRI) for eastern Indian states reports that access to KCC reduces the farmer’s dependency on moneylenders for borrowing credit by 25 per cent. Empirical studies have also indicated that the KCC has immensely contributed to rural development by promoting investments in farm mechanisation, agri-infrastructure and value-added activities.
The livestock sector is integral to Indian economy today; it comprises one-third of the agriculture and allied sectors’ Gross Value Added (GVA) and has a compound annual growth rate of over 8%. The fisheries’ sector contributes about 1% to India’s gross domestic product (GDP) and 5.3% to the agricultural GDP and provide livelihoods to around 28 million people at the primary level and almost twice the number along the value chain. Animal husbandry, dairying and fisheries (AHDF) activities play a significant role in generating farmers’ income, particularly among the landless, small and marginal farmers and women, besides providing cheap and nutritious food to millions of people. In view of the need to support this important economic activity, which has traditionally suffered from a lack of organised credit, the Union Government, in the 2018-19 Budget, had announced to extend the facility of KCC to farmers for activities related to animal husbandry, dairying and fisheries (AHDF-KCC) to help them meet their working capital requirements. A separate target of Rs 61,650 crore was earmarked for animal husbandry and fisheries within the overall term loan target of Rs 6,80,000 crore for agriculture during 2021-22. The AHDF-KCC can take three forms — as an add-on credit facility to existing crop KCC holders; as a standalone card with collateral free credit limit of up to Rs 1.6 lakh, for which neither land ownership nor any processor tie-up needs to be furnished; or as a standalone card with credit limit above Rs 1.6 lakh up to Rs 3 lakh on the basis of collateral or collateral-free with proof of direct tie-up with the processor. KCC holders who are engaged in animal husbandry activities will be able to take advantage of interest subvention and prompt repayment incentives up to a credit limit of Rs 3 lakh. The interest subvention will be provided at the rate of 2% per annum during loan disbursement and another 3% per annum will be offered as an incentive on timely repayments.
A significant number of KCCs, around 3.3 lakh in total, have been sanctioned to support farmers engaged in AHDF activities all over India. Tamil Nadu leads the pack in terms of the number of KCCs sanctioned to farmers in the livestock and fisheries sectors, followed by Madhya Pradesh and Gujarat. Uttar Pradesh — the state with the largest livestock population in India — stands fourth on the list. Similarly, states such as West Bengal, Bihar and Telangana, which also have substantial livestock population, do not feature among the top states in terms of KCCs sanctioned. This disparity underscores the need for policy intervention.
Several concerns have been raised over the authenticity of the number of issued KCCs. Multiple deliveries to the same household, counting of KCCs even after the end of the validity period, and counting of ‘renewed’ cards as ‘fresh’ ones are some of the critical issues. When these distortions will be taken into account, the number of issued KCCs would be probably reduced.
The purpose behind launching a variant of KCC is to facilitate adequate and hassle-free credit to all farmers for allied activities. Therefore, concerted efforts will have to be made to popularise the scheme and expedite the process of reaching the intended beneficiaries, particularly in states with a notable livestock population. Deploying field officers and local resource persons from various departments and agencies — animal husbandry & dairying departments, milk unions, agricultural extension machinery, State Rural Livelihood Mission personnel, including Pashu Sakhis and Bank Sakhis, for identifying eligible farmers and assisting them in filling KCC forms would be imperative for expanding the coverage of beneficiaries. Digitisation of KCC lending would play a key role in facilitating credit flow to the underserved rural population by making the credit process faster and more efficient.
The author is a scientist (agri economist) at ICAR-Indian Grassland & Fodder Research Institute, Jhansi. Views are personal
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