The Hindu : Karnataka / Bangalore News : Agricultural distress in the spotlight again

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Karnataka

Karnataka - Bangalore

Agricultural distress in the spotlight again

V. Sridhar

Nearly seven lakh State farmers have benefited from loan waiver announced in the State Budget for 2007-08

Bangalore: With elections round the corner, the issue of agricultural distress and indebtedness is again on the political agenda of parties. In Karnataka, all three major political parties — Congress, Janata Dal (S) and the Bharatiya Janata Party — are engaged in debate on the two major crop loan waiver schemes introduced by the State government and the Centre.

The first was the loan waiver package announced by the H.D. Kumaraswamy-led government in its 2007-08 budget, and the second is the loan waiver of Rs. 60,000 crore announced in the Union Budget.

Nearly seven lakh farmers in the State, according to sources in the Karnataka State Apex Cooperative Bank, have benefited from the loan waiver package announced in the State Budget for 2007-08, for which the State government made an allocation of Rs. 2,000 crore.

The district-level cooperatives have spent more than Rs. 1,700 crore on the scheme, of which the State Government has released Rs. 1,355 crore.

By contrast, under the Union Government’s farm loan waiver scheme, the Karnataka component is only around Rs. 131 crore, according to sources.

They said that the size of the package distributed by the State government in the current financial year makes the task easy for the Union Finance Minister.

The waiver package was aimed at four types of beneficiaries of loans from cooperative banks. In the first, short-term loans of up to Rs. 25,000, which were drawn from April 1, 2006 and which remained outstanding on December 31, 2006, were eligible for waiver.

The second set of beneficiaries were those who were offered a complete interest waiver on short, medium and long-term loans if they repaid all the principal outstanding before March 31, 2007. The amount spent on waiver of loans up to Rs. 25,000 each accounted for nearly half the cost of the entire package. This set of borrowers was the “most vulnerable”, according to sources in a cooperative bank.

Besides, 46 per cent of the cost of the package went towards the waiver of interest payments on loans. The loan waivers of these two groups of beneficiaries thus accounted for more than 95 per cent of the total cost of the package.

The loan waiver package was also applicable to those farmers who had repaid their loans in April-December 2006.

The last Budget offered to convert the amount repaid into a three-year fixed deposit with interest at four per cent.

The last component of the package was applicable to small and medium loans whose loans were long overdue.

The waiver in this case applied to the interest component, provided the repaid the principal.

The average size of each loan waived amounts to a little over Rs. 25,000 per farmer in the state.

Sources clarified that the district credit cooperative banks had only waived the short and medium-term loans of farmers. The waiver scheme did not apply to loans extended by Regional Rural Banks (RRB) and commercial banks.

“The cooperative credit institutions in the State only provide 30-32 per cent of short term crop loans to farmers,” said the sources. “Obviously, the bulk of those who deserve the waiver have been outside the ambit of the scheme,” he added.

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