New Delhi: The union cabinet which met here on Tuesday with Prime Minister Narendra Modi in the chair approved the interest subvention scheme for farmers for 2016-17. "The government has earmarked a sum of Rs 18,276 crore for this purpose. This will help farmers getting short term crop loan payable within one year up to Rs 3 lakhs at only 4 per cent per annum," said a cabinet communique. According to the scheme, the central government will provide interest subvention of 5 per cent per annum to all farmers for short term crop loan upto one year for loan upto Rs 3 lakh borrowed by them during 2016-17. "Farmers will thus have to effectively pay only 4 per cent as interest. In case farmers do not repay the short term crop loan in time, they would be eligible for interest subvention of 2 per cent as against 5 per cent available above," the release added. In order to give relief to small and marginal farmers who would have to borrow at 9 per cent for the post harvest storage of their produce, the central government has approved an interest subvention of 2 per cent i.e an effective interest rate of 7 per cent for loans upto 6 months. To provide relief to the farmers affected by natural calamities, the interest subvention of 2 per cent will be provided to banks for the first year on the restructured amount.