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MUMBAI, Nov. 15

FARMERS in the drought-affected districts of the country will not have to repay kharif crop loans, including interest, until next year.

The entire loan amounts will also be restructured and repayment deferred by a minimum of four to five years, according to instructions sent out by the Reserve Bank of India (RBI) to banks.

The Central Bank has told banks to not recover kharif crop loans, including interest, from farmers affected by drought due to failure of South-West monsoon during the current financial year.

The India Meteorological Department (IMD) has declared 2002-03 as an all-India drought year and is counting it among the four worst droughts of the century. The last drought was experienced in 1987.

A Central Bank circular issued on Friday directed banks to convert the principal amount of the kharif 2002-03 advances to term loans. In the case of small and medium farmers, the loans will be recovered over a minimum of five years and for others the repayment period will be minimum four years. Existing guidelines allow rescheduling only for three years.

Interest due in the current financial year on crop loan should also be deferred. No interest should be charged on the deferred interest, the circular said.

The RBI had, on August 3, directed banks to provide all possible relief to farmers affected by drought.

In its mid-term review of the credit policy, the RBI had lowered agriculture GDP growth forecast by about 1.5 per cent. "Taking into account the performance of the South-West monsoon, it is expected that production of foodgrains this year will be lower than last year by about 5 per cent," the bank had said in the review.

However, the Centre for Monitoring Indian Economy (CMIE) is a bit more pessimistic about foodgrains production. In its October review of the Indian economy, the economic watchdog estimates that foodgrains production will decline by nearly 9 per cent and overall agricultural production will likely be lower by 7 per cent.

According to the latest Agriculture Ministry estimates, all kharif crops during 2002-03 are below the previous season's levels. Production of foodgrains is down by 20 million tonnes and that of oilseeds is down by 1.5 million tonnes. Sugarcane production has declined by 6.6 million tonnes while cotton output has dropped by 2.8 million bales. The crop loss is attributed to drought in 13 major States.

CMIE, however, said in its November review of the economy that the rains in the South had brightened rabi crop prospects. Though sowing began on a cautious note, due to the low levels of water in reservoirs, good rains in September and early October in the southern States have spurred activity, it said.

Rabi foodgrains production is likely to be near 103 million tonnes against the previous year's 100 million tonnes, it said.

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