Budget 2025-26: Centre may give agriculture boost with loan reforms and credit limit hike | Mint

New Delhi: The upcoming budget is expected to ease repayment norms and raise credit limits among several initiatives to bolster agriculture amid weather-related challenges, two people aware of the matter told Mint.

In the past few years, monsoon disruptions have impacted agriculture, leading to shortages and food price inflation apart from hurting farmers’ livelihoods.

The Centre is considering easing repayment norms for farmers by allowing them to settle the entire loan interest at one-go at the end of the tenure instead of having to make periodic payments. The idea is to mitigate liquidity constraints during cultivation, the first person mentioned above said, requesting anonymity.

“The government is also considering raising the agricultural loan credit limit, unchanged at ₹3 lakh since 1998, to ₹4- ₹5 lakh reflecting rising input costs and current financial needs,” the person mentioned above added.

The move aims to support the agricultural sector amid escalating costs and provide farmers with more accessible and flexible credit options.

Several benefits

The Kisan Credit Card (KCC), with a credit limit of up to ₹3 lakh, offers several benefits, including interest subvention, repayment incentives, crop security, and insurance.

Loans for seasonal agricultural operations, such as growing foodgrains, have repayment schedules aligned with the crop harvesting cycle. The tenure for such loans is typically about 12 months, enabling farmers to repay after selling their produce.

In cases of natural calamities like drought or floods, the repayment tenure may be extended with approvals.

Agricultural associations and farm economists at a pre-budget consultation with the finance minister Nirmala Sitharaman, and top officials of the Ministry of Finance, also suggested the scrapping of the Goods and Services Tax (GST), on agricultural inputs, such as seeds, manure and pesticides, enhancing the cash benefit under the PM Kisan scheme on the back of rising inflation, in addition to a financial package for improving pulses and oilseed production.

Other suggestions included doubling the minimum income support provided to farmers under the PM Kisan Samman Nidhi scheme to ₹12,000 annually, bringing more crops under the Minimum Support Price (MSP), which is the floor price set by the Centre for certain crops that farmers can receive for their produce.

At present, there are about 22 crops, which have a minimum support price set by the government, including paddy, jowar, bajra, ragi, maize, moong, urad, cotton, jute and wheat.

Recommendations heard

The second person mentioned above said the finance ministry has engaged with various stakeholders associated with the agriculture sector and heard their recommendations ahead of the upcoming budget.

“The agri sector is a priority. Centre will announce measures to support farmers amid weather-related challenges,” the second person mentioned above said, requesting anonymity. 

“For instance, discussions are ongoing for increasing allocation to various schemes supporting farmers and increasing farm output.  Major announcements for the sector can be expected in the upcoming budget,” the person added.

Spokespersons of the Finance and Agriculture ministries didn’t respond to emailed queries.

The Union Budget 2024-25 allocated ₹1.32 trillion to the agriculture sector, a 4.58% increase from the Revised Estimates (RE) for 2023-24.

Of the total allocation, ₹1.23 trillion was earmarked for the Department of Agriculture and Farmers Welfare, and ₹9,941 crore for the Department of Agricultural Research and Education.

According to a November report by rating agency Infomerics Ratings, Indian farmers face profitability challenges as input costs, rising at 6.1% annually have outpaced the MSP growth of 5.36% during FY2024–25.

Labour costs, accounting for half of production expenses, have been increasing at 6% annually further hurting the sector, the report added.