The announcement was made by Commerce and Industry Minister Anand Sharma, who holds additional charge of Textiles, days after Congress General Secretary Rahul Gandhi wrote him a letter asking concessions for the debt-ridden weavers.
The package, to be implemented from January 2012, includes Rs 3,884 crore debt waiver and Rs 2,350 crore for a six-fold strategy to uplift weavers during 12th Plan.
An individual weaver will get benefit upto Rs 50,000, Sharma said. The scheme will help 15,000 weavers' cooperative societies besides individual weavers.
Addressing a press conference in Varanasi on Saturday, Sharma said the decision for grant of the package was taken on Friday in New Delhi at the meeting of the Expenditure Finance Committee.
"In August, weavers had come to Delhi seeking help," he said adding that the Finance Minister had also announced Rs 3,000 crore loan waiver for the handloom weavers in his budget speech of 2011-12.
However, a large number of individual weavers in Uttar Pradesh were left out of the scheme, which was to mainly benefit the cooperative societies.
Gandhi who has been touring extensively the state ahead of assembly elections next year, said in his letter to Sharma that the handloom sector has come under stress on account of stiff competition and credit unavailability.
Handloom industry weavers are mainly from Uttar Pradesh, West Bengal, Orissa, North East and Southern belt, and a large number of them belong to minority community.
Sharma said that a decision for covering individual weavers, a large number of whom are from Uttar Pradesh, will be sent for consideration to the Cabinet.
Under the six-fold strategy, weavers' credit card will be issued to eligible individual weavers who will be able to access loans up to Rs 2 lakh and generally in the range of Rs 35,000 to Rs 50,000 for a period of three years without any collateral security.
The scheme has been finalised and the banks would be advised for its implementation, he said, adding: "We have recommended interest subsidy of 3 per cent to enable weavers to access loan at 7-8 per cent interest for three years".
Assistance of Rs 4,200-5,400 per weaver has been proposed which will provide them leverage for borrowing loans; loans extended by banks will be guaranteed by the Credit Guarantee Fund Trust for medium and small enterprises to the extent of 85 percent of their outstanding.
Price subsidy of 10 percent is proposed for yarn supplied by the National Handloom Development Corporation and agencies proposed by the state governments in order to overcome the problem of yarn supply, he said.
He also said that enhanced rate of freight reimbursement would be provided for cotton, jute and silk yarn between 2.5 percent to 10 percent for deliveries across the country.
"This will ensure that yarn is easily available at affordable prices to different handloom clusters across the country," Sharma said.
Under the Mega Cluster Scheme being implemented for Varanasi with central assistance of Rs 70 crore, loan will be extended to 10,000 handloom weavers with credit guarantee and 3 percent interest subvention.