The working group on risk management in

earning shortfalls, based on gross sum of shortfalls in income for individual crops resulting out of price decline.
The scheme is designed for those, who have availed credit from scheduled commercial banks. It is based on the original loan appraisal report of the financial institutions. For estimating creditworthiness, a particular price and production from the enterprise is used. If the earning plunges below a threshold level of income from a particular crop, for which the loan was availed, due to fall in commodity prices, farmers will become eligible for assistance. The threshold level is suggested as 10% fall in income when initiating repayment, from the appraised amount at the time of loan sanction. Fall in prices alone, will be accounted for in the scheme, to calculate the threshold value of income. Farm harvest prices would betaken as the benchmark price, while calculating income. This price is published for different districts, by the Department of Economics and Statistics, of the state concerned.
The assistance will be in the form of an interest free amount, limited to a maximum of of the loan, further capped at Rs. 50,000/-. The amount will be debited against the loan amount, and will be made available directly to the financial institution, which will help to eventually avoid issues connected with non repayment of loans. This amount will be treated as an advance amount to the farmer, to repay the principal and interest. The remaining 50 percent amount will have to be raised by the farmers.
The farmer will have to payback the amount within a maximum period of five years, based on the gravity of the crisis. Eligible crops and districts, maybe decided at the state level,
dependent on the severity of the crisis. Strict norms could be laid out in deciding the crops and areas covered, like downward movement in prices for at least 2 years, etc.
A corpus fund has to be established with contributions from the Government of India, State
Government and Financial institutions, preferably in the proportion of 20 %: 40% : 40 respectively. The initial corpus, maybe about Rs crores.

The total amount of outstanding credit to farmers, is shown in Table, below. The corpus amount is suggested to address crop specific credit alone, in crisis affected districts of the country. It must be noted, that the outstanding credit to small and marginal farmers, together accounted for 50 percent of the total, during 2003-04.

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