Modi Pledges Higher Compensation for Farmers Facing Crop Damage

India, the world’s second-biggest grower of wheat and rice, eased rules to allow farmers claim state compensation after unseasonal rains and hailstorms damaged about 20 percent of the nation’s winter crops.

Farmers will be paid 50 percent more compensation than the norm and growers with 33 percent damage to their crops can stake claim for state aid compared with 50 percent stipulated earlier, Prime Minister Narendra Modi said in New Delhi on Wednesday. The government has also ordered banks to restructure loans taken by farmers, he said.

Damage to crops from wheat to rapeseed and vegetables is threatening to stoke food inflation in Asia’s third-largest economy, where agriculture accounts for about 15 percent of the gross domestic product. Modi is already facing the wrath of farmers who are opposed to a bill that seeks to ensure easy acquisition of land for industrial projects and failure to ensure timely payment for crops amid falling commodity prices.

Unseasonal rains and hailstorms this year damaged crops including wheat, rapeseed and gram in 11.3 million hectares (27.9 million acres), Agriculture Minister Radha Mohan Singh said April 7. Wheat production may fall as much as 5 percent this year from a near-record 95.8 million tons estimated by the government in February, he said. The harvest was a record 95.9 million tons in 2013-14, ministry data show.

The government, which targets to buy 30 million tons of wheat from farmers this year, will consider relaxing grain quality norms to help rain-hit farmers, the Food Ministry said in a statement on Tuesday. Modi has also asked insurance companies to settle farmers’ claims at the earliest.

The damage to crops poses risks to food inflation in the next three months and consumer price inflation may rise to 6 percent in the second quarter of 2015, 80 basis points more than the current estimate, Sonal Varma and Aman Mohunta, Mumbai-based analysts at Nomura Holdings Inc., wrote in a report on April 6.

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