Will ₹2 lakh farm-loan waiver become an Albatross around Telangana CM Revanth Reddy’s neck?

Intent on winning the maximum number of LS seats, CM Revanth had "bragged" that he would implement the waiver of loans up to ₹2 lakh availed by farmers.

ByRaj Rayasam

Published May 26, 2024 | 9:00 AMUpdatedMay 26, 2024 | 9:00 AM

Telangana Chief Minister A Revanth Reddy at a rally in Narayanpet on Monday, 15 april, 2024.

Will the crop loan waiver of farmers up to ₹2 lakh in Telangana become the albatross around Revanth Reddy’s neck?

Intent on winning the maximum number of Lok Sabha seats, the chief minister had “bragged” that he would implement the waiver of loans up to ₹2 lakh availed by farmers and took oath in the name of God at almost every election rally.

Now that the Parliamentary elections in Telangana are over, the chief minister has to redeem his promise. But the harsh reality that faces him is that he would require a king’s ransom of ₹33,000 crore to free the farmers from the yoke of the debt.

The Congress, having already announced a slew of welfare schemes including payment of ₹500 per quintal of paddy as a bonus over the minimum support price, has now restricted it to fine variety paddy. In other words, the bonus is available for only 20 percent of the total production of paddy in Telangana.

The state has already begun implementing subsidised LPG cylinder supply scheme as well as providing 200 units of power free. It has to get around to increasing social security pension and Rythu Bharosa among others. Inflows into the state exchequer look like a tickle compared to the outgo, which looks more like the flood tide.

Also Read: EC gives green light to Telangana State Formation Day celebrations on 2 June

Pressure from Opposition BRS, BJP

There is tremendous pressure on A Revanth Reddy from the opposition BRS and the BJP to deliver on his promise. They are biding their time to see him fail, so that they could go for his guts for garters.

Revanth Reddy, who is aware of the political minefields, is pussyfooting around them lest he should set off any of them.

He however, is not ready to get off the high horse he is riding that he would implement loan wavier, come hell or high water, by Independence Day. The chief minister said that he had several aces up his sleeve to deal with the problem.

As soon as polling was over, the chief minister asked the finance and agriculture department to find a way to honour the commitment he had made to the farmers.

Though it’s a very tall order, the officials went the scheme the whole nine yards and discovered that it would be extremely difficult to implement it if not impossible altogether.

Though the back of the envelope calculation works out to ₹33,000 crore, the exact figure will emerge only after the eligibility criteria is fixed.

These criteria include whether only one person in a family would be eligible for the loan waiver or whether it should be restricted to small and marginal farmers or extended to all the farmers.

Also Read: ‘Deleted’ draft TGSRTC logo: Face off between BRS and Congress in Telangana

Suggestions for loan repayment

One option the Finance Department had indicted to Revanth Reddy was to take over the loans of the farmers by floating a corporation. They suggested making allocations in the budget for the corporation to make payments to the banks on a regular basis.

Recently, the officials held talks with the bankers and placed before them their plan of action.

As far as bankers are concerned, they may not have problem since they would get the repayment of loans. However, the problem is that the Reserve Bank of India (RBI) does not approve of repaying farmers’ loans with public money.

The other option before the government is to raise long-term loans. But the banks may not like the idea since they essentially look at the repayment aspect of the loan.

If the loan is raised for creating an asset which generates revenue, the bankers may not have objection. However, in the case of farmers’ loans, there is no asset creation. It is meant to repay the loans of farmers.

Also Read: Harish Rao sees ‘conspiracy’ by BJP-Cong to extend Hyd joint capital status by 10 years

Challenges in state borrowings  

Another problem that the state government might face is that, under the changed rules, even the off- budget borrowings are included in computing the borrowing of the state governments.

This computation decides whether they are overshooting the restriction of four percent of the state GSDP set by the Fiscal Responsibility and Budget Management (FRMB) Act. The other options that officials are looking at are improving efficiency in collecting taxes.

The chief minister has already asked them to focus more on this area as he had come to realize that there was a hemorrhage of GST at various levels and wants the officials to plug them.

Collection of fee for the implementation of the Layout Regularization Scheme (LRS) and the sale of government lands, are among others that the government is looking at to raise the revenue to pay off the farmers’ loans.

In the 2024-25 budget, the state had proposed to raise 59,000 crore loans for various needs, of which the centre has consented to raising loans up to ₹33,000 crore. Of this, the state had already raised ₹8000 crore.

If the state used the entire money from borrowings on crop loan waiver, it would be left with practically nothing to finance the other welfare schemes. To avoid this pitfall, there is a proposal to defer payment of bills to the contractors until the finances are back in the pink.

The government proposes to waive all loans upto ₹2 lakh availed by the farmers between 1 April 2019 and 10 December 2023.

Instructions have already been issued to district central cooperative banks, primary agriculture cooperative societies and grameena vikas banks to compile lists of the farmers eligible for loan waiver and send them to the government.

Also Read: Oppn flays T’gana govt decision to provide bonus only for fine variety paddy

Farmers’ loan waiver struggles 

The BRS government, after coming to power for the second time in 2018, struggled and ultimately failed to fully implement its promise of waiving farmers’ loans up to ₹1 lakh for each farmer’s family under the Crop Loan Waiver Scheme-2018.

The then government had said that the loans sanctioned and renewed on or after 1 April, 2014 and those which stood as outstanding as on 11 December, 2018 were eligible for waiver under the scheme.

The state government had managed to waive loans up to ₹50,000 in two phases but could not complete the remaining loans upto ₹1 lakh fully.

The farmers’ associations look at the crop loan waiver scheme as essential since it is an investment into the agriculture sector. However, they want the government to have a realistic view of the challenge.

The state government is yet to present its full budget in the Assembly. The one that was presented by the Congress government in the last session was a vote on account.

The state wanted to take a close at the allocations made for the state by the central government before finalising the state budget.

Also Read: KTR warns of agitation if Revanth Reddy govt fails to address farmer woes

‘Prioritising small and marginal farmers’

“The priority of the government should be to look at crop loan waiver of small and marginal farmers first. The crop loan waiver should not be made applicable to the big farmers and those whose lands are still recorded as agriculture lands though they had long been used for promotion of real estate business,” Rythu Swarajya Vedika state committee member Kanneganti Ravi told South First.

“For instance, in Hyderabad district, there is not even one inch of agriculture land and yet the records show that ₹1,500 crore had been raised as crop loans,” Ravi said.

“In Medchal district, ₹2,700 crore had been raised as crop loans for an extent of 18,000 acres and in Rangareddy district, ₹3,500 crore for 3 lakh acres,” he said. He said that the crop loan waiver should be restricted for the farmers with not more than five acres.

“After taking care of these five-acre farmers, it could cover famers with land holdings of not more than 7 acres, if funds are available, ” Ravi continued.

“If these two segments are taken care of, most of the farmers are covered. That leaves only the large farmers who may not need the assistance,” he said.

The Revanth Reddy government should look at the problem realistically and try to reduce the bill to make the scheme more practicable.

“If he has to raise ₹33,000 crore all at once, he may not be able to do it. He would greatly serve the farmers by focussing on small and marginal farmers, who are in dire need of government support,” Ravi said.

“If Revanth goes ahead with selling the government lands, he may be able to raise the money. However, he should keep in mind that funds should be allocated to those who are truly in need, rather than benefiting the wealthy landowners,” he added.

(Edited by Shauqueen Mizaj)