Top officials caution against Maharashtra govt move for crop loan guarantees

Maharashtra Chief Minister Devendra Fadnavis’s plan to provide a Rs 2000-crore guarantee to district cooperative banks.

Written by Sandeep Ashar | Mumbai | Published: June 22, 2016 1:49:02 am
Devendra Fadnavis, Maharashtra district cooperative banks, Crop loans, Maharashtra drought, India News With the kharif sowing season for 2016-17 kicking off, the chief minister was keen that his cabinet formally approves the proposal on Tuesday itself.

Maharashtra Chief Minister Devendra Fadnavis’s plan to provide a Rs 2000-crore guarantee to district cooperative banks for disbursing crop loans in the drought-hit belts Tuesday met with resistance from within his government.

Senior bureaucrats with the state’s finance department have cautioned the state’s political leadership that this move would adversely impact the state’s fiscal management and set an unhealthy precedent, sources said. The state’s financial managers are also not convinced about the model proposed to recover the guaranteed loan amount, confirmed a senior official.

With the kharif sowing season for 2016-17 kicking off, the chief minister was keen that his cabinet formally approves the proposal on Tuesday itself.

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But following the finance department’s objection, sources confirmed that a cabinet sub-committee was instead formed to decide on the proposal. Sources also confirmed that Finance Minister Sudhir Mungantiwar was vexed that the cabinet proposal was moved at the last minute and his opinion in this regard wasn’t sought.

That the state government was divided on the issue also became clear when Cooperatives Minister Chandrakant Patil, while speaking to newspersons after the cabinet session, disclosed the government’s plan to provide the Rs 2000-crore guarantee to banks despite the finance department’s opposition.

For now, the cabinet has granted ‘full powers’ to the cabinet sub-committee, which would involve both Chandrakant Patil and Sudhir Mungantiwar, to evolve a consensus on the issue.

The proposal is to issue the guarantee to the state’s apex cooperative bank – the Maharashtra State Cooperative Bank (MSCB) – which would then be responsible of distributing it to 14 district cooperative banks in drought-hit belts in Vidharbha, Marathwada, and North Maharashtra.

The finance department apprehends that the guarantee will set a precedent for issuance of similar guarantees after every year whenever crop production is hit by natural calamities.

Records show that the government had issued such a guarantee for standing crop only once in the past. This was in 2012-13, when the previous Congress-NCP regime had provided this for the district cooperative bank in Nagpur.

Both the previous and the current regime had adopted a policy to discourage government guarantees after rampant discrepancies came to light in the ones issued to cooperative sugar barons.

The state has faced three successive drought spells in four year. With a good monsoon forecast for 2016-17, sources said that the chief minister feels that marginal farmers could be provided a cushion for availing institutional finance for crop loans to better agriculture production. The idea is also to discourage their exploitation from private money lenders.

The BJP is also aiming at scoring political points through the move in rural belts where an acute farm distress has also led to a dip in the ruling regime’s popularity to a certain extent.

Ironically, the MSCB had earlier indicated that it too was “not comfortable” with the government’s guarantee plan. Its reasons, however, were different. Sources confirmed that it was angling for Rs 1000 crore to be pumped by the government in deposits to the bank. The cooperatives department, however, turned down the MSCB’s demand, arguing that it would not be “financially prudent” for the state government.

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