April 24, 2008

Sri Lanka to subsidize dairy credit as interest rates surge

The Sri Lankan government pledged to allocate interest subsidies for banks to lend up to INR5 billion (US$125 million) to dairy farmers, the country's central bank said.

The rural credit department of the central bank said the subsidy comes after sharp increases of milk and food crops were seen in the global market.

Under the scheme, an interest subsidy of five percent a year will be given for loans from INR50,000 (US$1,254) to INR400,000 (US$10,031) for five years.

The bank said dairy farmers could use the funds to buy cattle, cross-breed animals, construct cattle sheds, purchase better feed, build bio-gas tanks or other upgrades recommended by veterinary surgeons.

Furthermore, Sri Lanka's central bank will assist in boosting sales agreements with dairy companies so that farmers are assured of a market and stable prices.

Milk processing industries could get loans up to INR300 million (US$7.5 million) as a five year loan. The industry has to make deals with 2,000 to 10,000 farmers to buy milk through forward contracts.