Debt relief process to be completed by June 30: FM

Finance Minister P Chidambaram today said that the accounts of farmers benefiting from the Rs 60,000-crore farm loan waiver...

Finance Minister P Chidambaram today said that the accounts of farmers benefiting from the Rs 60,000-crore farm loan waiver will be cleaned up by June 30 this year. The package will be fully financed through cash payments in 36 months between July 2008 and June 2011. The FM also added that he and Prime Minister Manmohan Singh will not venture into taking an examination without having done their homework.

8220;The financing package is largely front loaded. As much as Rs 25,000 crore will be disbursed to lending institutions in July-August 2008, and another Rs 15,000 crore in June-July 2009,8221; the FM told the Lok Sabha during a marathon discussion on the Union Budget. He added that completing the process of debt relief by June 30 would ensure that farmers who will benefit from the waiver will become eligible for fresh credit immediately thereafter.

The FM said that at less than 0.25 per cent of the gross domestic product GDP 8212; which he said would decline every year 8212; the total burden will be within manageable limit. He said 8220;the government is confident of financing the package as part of the regular budget exercise.8221; He said that additional borrowing for this purpose will be the last resort and in the unlikely event of resorting to borrowing, it will be well within the fiscal responsibility and budget management FRBM limits.

Spelling out the contours of financing the package, Chidamabaram added that following the request from the government, RBI and Nabard had asked scheduled commercial banks, regional rural banks and cooperative institutions to submit branch-wise particulars of the overdue accounts by March 14. 8220;After the RBI and Nabard have examined the data, they have been requested to submit it to the government by March 20, 2008,8221; he said.

The FM said provisional estimates indicate that the relief to be offered will be around Rs 60,314 crore. This will comprise of Rs 50,524 crore of debt waiver to small and marginal farmers and Rs 9,790 crore as relief to other farmers as a one-time settlement OTS at 25 per cent of their overdues. He added that provisional estimates indicated that about three crore small and marginal farmers and one crore other farmers will benefit if they had overdues as on December 31, 2007.

Stating that he already has provided Rs10,000 crore in the third supplementary this year itself 8212; the zero year 8212; the FM said that the compensation released to the lending institutions would be in four installments of Rs 25,000 crore immediately after June 30, 2008, Rs 15,000 crore in the 2009-10 budget, Rs 12,000 crore in the 2010-11 budget and Rs 8,000 crore in the 2011-12 budget.

Tilling the loans

8226;At 0.25 per cent of the GDP it is manageable, says FM

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8226;Debt waiver for small and marginal farmers to be Rs 50,524 crore and Rs 9,790 crore as a one-time settlement at 25 per cent of their overdues to other farmers.

8226;Farmers to be eligible for fresh loans immediately after June 30

8226;Lending institutions to get compensation in 4 installments between 2008- 11