The Finance Department is yet to work out details of the farm-loan waiver plan which was promised by the Janata Dal (Secular).
The party had said it would implement the farm-loan waiver within 24 hours of coming to power. The issue has resulted in a tussle between the coalition government headed by Chief Minister H.D. Kumaraswamy and the Opposition BJP.
According to political parties, farmers have taken crop loans estimated at over ₹53,000 crore. Of this, 80% (about ₹42,000 crore) has been obtained from nationalised and regional rural banks and the remaining 20% (₹10,736 crore) from cooperative banks. This constituted more than 50% of the State’s tax resources (₹1,01,550 crore) estimated during the 2018–19 budget.
In a move to implement the loan waiver proposal, Mr. Kumaraswamy held a meeting with department officials soon after winning the vote of confidence on Friday to obtain first-hand information about the fiscal situation of the State.
But till now, there is no clarity on waiver of farm loans taken from cooperatives and nationalised banks, cut-off date, amount of loan, and category of farmers (marginal and small), official sources in the government told The Hindu .
Sources said, “The details of the scheme will be worked out in the next one week. We have to obtain data from the State-Level Bankers’ Committee to work out the finer details.”
The government would study the models adopted by the Uttar Pradesh, Maharashta and Punjab governments for waiver of loans.
The Siddaramaiah government had announced crop-loan waiver of up to ₹50,000 per farmer borrowed from cooperatives, and it cost the State exchequer ₹8,165 crore.
Three options
Experts in the finance and banking sectors pointed out that the government has three options. First, it can mobilise more resources for waiver of loans; second, it can prepare a plan for staggering of waiver of loans in phases, and third, introduction of cuts in capital/revenue expenditures.
Since financial institutions are granting loans largely for capital expenditure, the government is unlikely to raise funds for waiver of farm loans, a banker said.
Moreover, this year, the government’s salary expenditure too would grow since it had effected 30% hike in salary of its 5.2 lakh employees and pension of 5.73 lakh pensioners.
The additional expenditure incurred by the government owing to revision of pay, allowances, and pensions, is estimated to be ₹10,508 crore a year.
RBI’s caution
The Reserve Bank of India too has cautioned Karnataka and other States against “jumping on the farm-loan waiver bandwagon” by observing that loan waivers impact credit discipline and vitiates credit culture.
However, on a positive note, nationalised banks would use the bailout as an opportunity to “clean the books”. With no clarity on the decision yet, a banker said banks would be ready to compromise a portion of interest if the government reimburse loans in one go.
