AP Govt. ties itself in knots over crop loan waiver

The most important election promise of the Telugu Desam Party, the ambitious crop loan waiver scheme, is yet to be fully implemented While the bankers continue to grapple with seeding with Aadhar and ration cards in connection with the crops loans availed of by farmers in Andhra Pradesh to enable the government to speedily implement its poll promise, an expert has warned that such schemes would “destroy credit culture” and ruin the economy in the long run.

As the Telugu Desam government marks completion of 100 days in office on Tuesday, it is eagerly awaiting the final figure from the banks to go ahead and implement its flagship scheme, which did not get the nod of the Reserve Bank of India. The RBI also did not accede to the request of the State government to reschedule loans in 575 mandals in the State, which were hit by natural calamities last year.

With the RBI agreeing to reschedule crop loans only in four districts, the cash-strapped State government was left with no choice but to find ways to mobilise resources to implement the scheme.

Official sources said the government was expecting the final waiver amount to be around Rs. 25,000 crore and expressed confidence of “closing the issue” in a few weeks. Once the amount was quantified by the banks, the planning would be done. Converting a majority portion of the VAT collected on liquor into cess and putting that into escrow account, securitising the lands belonging to the Andhra Pradesh Industrial Infrastructure Corporation (APIIC) and red sanders plantations were among the different options being planned by the government.

Criticising the loan waiver scheme, Rajesh Chakrabarti, Executive Director, Bharti Institute of Public Policy, Indian School of Business, Mohali, said it would destroy the credit culture and trigger a race to the bottom. It was one of the dangerous things to do and should not be allowed. “It is a bad idea to begin with and Andhra Pradesh Chief Minister N. Chandrababu Naidu should not have promised it,” he averred.

Referring to the State’s securitisation and other plans to mobilise resources, he said the government would be creating long-term debt by seeking to fund out of future earnings. Terming it an “impractical idea,” he said legally questions would be asked of the government’s access to future funds. “The question for Andhra Pradesh in particular is whether the State finances have such resources to take,” he said.

Meanwhile, former economic advisor to the State government and central governing council member of YSR Congress Party, D.A. Somayajulu said the loan waiver scheme was something that could not be implemented except by cheating people and that was the reason why YSRC did not make a promise during elections. The Telugu Desam has made the promise and it is for it to fulfil the commitment.