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Saturday, Mar 15, 2008
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Banks to get cash for loan waiver

Ashok Dasgupta

Chidambaram clarifies on funding for scheme

It will be done over three years to settle burden fully
“Moneylenders could be curbed
by States”

NEW DELHI: Union Finance Minister P. Chidambaram on Friday put at rest doubts over funding for the Rs.60,000-crore farm loan waiver scheme, saying the entire amount would be provided to banks “in cash” over three years to settle the burden fully.

Replying to the debate in the Lok Sabha on the budget for 2008-09, he said: “I have already provided Rs.10,000 crore and will provide another Rs.15,000 crore immediately after June 30. Another Rs.15,000 crore will be given in 2009-10, Rs.12,000 crore in 2010-11 and Rs. 8,000 crore in 2011-12.”

With buoyancy in tax collections, Mr. Chidambaram said he was confident that the government would be able to repay the banks through budgetary provisions. If not, “we can resort to borrowings. But it will be the last resort.”

The initial provision of Rs.10,000 crore was made in the third and final supplementary demands for grants for the current fiscal, which he termed as “year zero.”

The Minister said the provision of funds for the loan waiver would be fully “front-loaded” for cooperative and regional rural banks in view of their liquidity problems.

With the House later passing the Vote-on-Account by voice vote, the first phase of the budgetary exercise was completed.

On members’ demands that something should be done to provide relief to farmers from the clutches of moneylenders, he said the State governments could enforce existing laws to prevent moneylenders from charging high rates of interest as it was a State subject.

A debt swap scheme, introduced by the United Progressive Alliance government, was in operation. Under this, farmers could take loans from banks to clear their private debts.

On a suggestion of members, in particular by Congress MP Rahul Gandhi, on raising the land ceiling limit in dry-land areas such as the Vidarbha in Maharashtra to bring farmers under the purview of the loan waiver, Mr. Chidambaram said the government would try to “incorporate” them to the extent possible when the scheme was finalised in consultation with the Reserve Bank of India, NABARD and other institutions.

As per provisional estimates, the total debt relief package would be around Rs.60,314 crore. This would comprise a debt waiver worth Rs.50,524 crore for small and marginal farmers. A sum of Rs.9,790 crore would be extended as relief to others as a one-time settlement scheme at 25 per cent of their overdues, provided they repaid the balance.

The scheme would benefit about three crore small and marginal farmers and one crore other farmers.

Mr. Chidambaram said the government wanted to complete implementation of the debt waiver scheme by June 30 to enable farmers to become eligible for fresh bank credit before the new cropping season.

Rebutting the BJP’s charge that a communal budget was presented, he said there was nothing wrong in giving “little more” to those left behind.

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