A

PROJECT REPORTON

WRITTING OF FARMERS LOAN: IMPACT ON ECONOMIC DEVLOPMENT

SUBMITTED BY:RAHUL KHADIWARSHIVANI.P.PATELVARUN JAIN

SUBMITTED TO:MAYANKA SINGH

SCHOOL OF MANAGEMENT AND ENTREPRENEURSHIPAURO UNIVERSITYSURAT-395007MARCH 2013ACKNOWLEDGMENT

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.noContentPg No.

11.1

1.2Chapter:1- introductionFarmers in india face loan burdonHow farmers get subsidies

4

5-6

22.1

2.22.3

2.4

Chapter:2- farmers loanSteps for getting farmers loan.SchmesAdvantages and disadvantagesYojnas for farmers

7-8

9

1011-12

3Chapter:3 impact on farmers productivity

13-14

44.14.2Chapter4ConclusionBibliography

1516

CHAPTER:1 INTRODUCTION

WRITTING OF FARMERS LOAN: IMPACT ON ECONOMIC DEVLOPMENT

1.1Farmers in India face loan burdenNearly half the farmer households in India, with a high percentage of them in Andhra Pradesh,Tamil Nadu and Punjab are facing the burden of loans, according to a report. A total of 43.42 million farmer households constituting 48.6 per cent are reported to be indebted to either formal or informal or both sources of credit, as per the report on the "Indebtedness of Farmer Households" (NSSO report 498 of NSS 59th Round). Minister of State for Agriculture Harish Rawat said in a written reply to the Lok Sabha yesterday that farmers take loan for the purpose of capital or current expenditure in farm business combined with successive crop failures. Besides, he said, they have to take loans for meeting requirements related to health, marriages and other social obligations. Giving state-wise break-up from the report, Rawat said the maximum percentage is in Andhra Pradesh (82 per cent). It is followed by Tamil Nadu (74.5 per cent), Punjab (65.4 per cent), Kerala (64.4 per cent) and Karnataka (61.6 per cent). Other states with high percentage of indebted farmers include Maharashtra (54.8 per cent), Haryana (53.1 per cent), Rajasthan (52.4 per cent), Gujarat (51.9 per cent) and West Bengal (50.1 per cent). Highly populated states like Uttar Pradesh, Bihar and Jharkhand had lower percentage at 40.3 per cent, 33 per cent and 20.9 per cent respectively. It has been widely reported recently that loan burden, particularly at high rate of interest from private lenders, has been a major reason driving farmers to suicide in different parts of the country.as shown in figure:1

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 low-interest 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 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

The Government is sanctioning the project proposals of Tamil Nadu Agricultural University at a cost of Rs.1006.29 lakhs for implementation of Agricultural Mechanisation in Tamil Nadu. Out of this sanctioned amount of Rs.1006.29 lakhs, an amount of Rs.772.98 lakhs was sanctioned towards distribution and introduction of Agricultural Machinery through incentives by the Agricultural Engineering Department as indicated below:

( Rupees in Lakhs)Sl.No. ParticularsQtyPrice/ unitProposedsubsidyCost

*IIntroduction of Newly Developed Agricultural Machinery / Implements

aMini combined Harvester26 2.5050%32.50

BMulti crop Thrasher (High capacity)33 2.10 50%34.65

CPower weeder with attachment57 1.0050%28.50

dPower Thrasher20 1.0050%10.00

ePaddy Transplanter801.4050%56.00

fPost hole digger920.8550%39.10

gShredder (Heavy)41.0050%2.00

hShredder (Medium)60.4050%1.20

iMaize Husker Sheller1000.9050%45.00

jCoconut De- husker1230.6050%36.90

kGround nut decordicator270.3550%4.73

lChisel plough1320.1250%7.92

mGender friendly equipments14780.0850%88.68

IIGrant Support to the State Government Institutions

aPurchase of Heavy Duty Trailor withPrime Mover to transport bulldozers and heavy equipments of AgriculturalEngineering Department618.00108.00

IIIPopularisation of Agricultural Mechanisation through conventional machinery / equipments

aPower Tiller5511.1625%159.79

bRotovator3840.9025%86.40

cCultivator2620.1625%10.48

dOff set disc harrow250.4725%2.95

eDisc plough2020.3525%18.18

772.98

*Backended subsidyDuring the review meeting held on 25.04.2008, the Professor and Head, Agricultural Machinery Research Centre, Tamil Nadu Agricultural University has stated that keeping importance of implementation of mechanization in different parts of Tamil Nadu the approval was sought for the entire state, but approval was given to implement the project in 9 focus districts on cluster basis. Therefore, he has requested that necessary orders may be issued for implementation of the schemes in the focused districts as well as in the other districts as given below:-1The Budget components for focused districts(Salem, Namakkal, Dharmapuri, Krishnagiri, Perambalur, Ariyalur, Dindigul, Ramnad, Coimbatore and Villupuram)Rs.352.41 lakhs

2The Budget for other / rest of districts(Vellore, Tiruvannamalai, Kancheepuram, Cuddalore, Thanjavure, Tiruvarur, Trichy, Pudukottai, Karur, Erode, Tiruvallur, Nilgiris,Theni, Madurai, Sivaganga, Virudhunagar, Tuticorin, Tirunelveli, and NagapattinamRs.420.57 lakhs

TotalRs.772.98 lakhs

The Government after careful examination accept the proposal of the Tamil Nadu Agricultural University in para 2 above and direct that the amount of Rs.772.98 lakhs sanctioned in Annexure II to the G.O. first read above shall be utilised for mplementation of the scheme in the focused districts as well as in other 1Apply for a farm ownership loan or a farm operating loan from the FSA, or Farm Service Agency, which is part of the U.S. Department of Agriculture. districts asindicated below :-1 The Budget components for focused districts(Salem, Namakkal, Dharmapuri, Krishnagiri, Perambalur, Ariyalur, Dindigul, Ramnad, Coimbatore and VillupuramRs.352.41 lakhs

2The Budget for other / rest of districts(Vellore, Tiruvannamalai, Kancheepuram, Cuddalore, Thanjavure, Tiruvarur, Trichy, Pudukottai, Karur, Erode, Tiruvallur, Nilgiris,Theni, Madurai, Sivaganga, Virudhunagar, Tuticorin, Tirunelveli and Nagapattinam)Rs.420.57 lakhs

Total Rs.772.98 lakhs

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.

2 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. 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. IntroductionThe 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 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/PurposeKisan 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. Eligibilityi. 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. 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 RatesGovernment 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 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. 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.

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: 3IMPACT 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 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 INTENSITYAgricultural 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 EMPLOY- MENTDifferent studies conducted on farm mechanizationindicated 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 RETURNFarm 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 cultivated hectare was reported to be Rs.3144 for tractor-operated farms as compared to value Rs.2677 for bullock operated farmsThrust AreasSoil 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.

CHAPTER: 4

4.1-CONCLUSIONMost 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 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-farmers-subsidies_.html Advantages & Disadvantages of a Government Loan | eHow.com http://www.ehow.com/about_4745137_advantages-disadvantages- government-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_schemes_in_India http://www.livemint.com/Opinion/1FEnH9OVJlyGweMNnsdaGO/Views--The-farm-loan-waiver-continues-to-destroy-the-credit.htm http://www.wikihow.com/Get-Farmer-Loans http://www.eximguru.com/budget_2011_12-highlights.aspx

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