Official deputed to study loan waiver model in UP: Devendra Fadnavis

With political rivals increasingly pushing it to a corner on the issue, the government is struggling to balance out the economics of the waiver, if it is forced into it.

The government will have to shell out Rs 1.14 lakh crore for total crop loan relief to benefit 1.08 lakh farmers across Maharashtra. Seen against the state’s overall budget of Rs 2.57 lakh crore, of which committed and essential expenditure is Rs 1.77 lakh crore, the waiver will mean only Rs 0.80 crore is left for other expenses, which is financially near-impossible.

The Rs 1.77 lakh crore committed/essential expenditure that cannot be tampered with includes salaries/pensions of Rs 1.40 lakh crore; state-Centre driven projects in various sectors worth Rs 34,000 crore; loan repayments/ interests of Rs 28,000 crore and allocations to local bodies amounting to Rs 11,000 crore.

An official in the Maharashtra government said preliminary reports from Uttar Pradesh officials seem to indicate that there was no concrete economic model to adequately back up their declaration of loan waiver. However, the move has increased the Fadnavis government’s difficulties.

The last three loan waivers in Maharashtra, by the Congress-NCP governments, together have not extended Rs 25,000 crore.

The Fadnavis government has been trying to get around announcing a waiver by stressing on how it has already made investments of Rs 26,000 crore through various irrigation and agriculture schemes to help farmers.

The issue is also how to go about the loan waiver, if the government does cave in to its political rivals’ demand. According to government data, there are a total of 1.08 lakh farmers who have taken crop loans worth Rs 1.14 lakh crore in the state. But these farmers are repaying their loan installments regularly.

There are 31.57 lakh farmers with an outstanding debt of Rs 30,500 crore who are out of crop loan credit category. It includes 24.92 lakh small and marginal farmers whose debt amount is Rs 23,837 crore. Now, unless their debt is wiped out, these farmers will not be entitled to seek fresh crop loans from financial institutions.

However, the CM has said that if the state were to favour these 31.57 lakh farmers and pull them from their debt, those repaying loans regularly would feel discriminated against, and hence some incentives would have to be extended to them too.

Financially, whether the loan waived off is Rs 30,500 crore or Rs 1.14 lakh crore, the move looks impossible without the Centre stepping in.