Farm loan waiver: Maharashtra to seek Centre’s help to raise ₹34,022 crore from banks
Mumbai city news: State finance minister Sudhir Mungantiwar is scheduled to meet Union finance minister Arun Jaitley on Wednesday to request his intervention to facilitate the loan from nationalized banksmumbai Updated: Jun 28, 2017 13:50 IST
Four days after announcing a loan waiver of Rs34,022 crore, the Maharashtra government is still uncertain about the source of funding and is scouting for ways to raise the money.
The state will seek the central government’s help to direct the Reserve Bank of India (RBI) to allow nationalised banks to lend Rs34,000 crore at 7%-7.5% interest, with a repayment schedule staggered over four years. If it gets this loan, the state plans to repay it through Rs10,000 crore provision in its annual budget for four years. However, if this option doesn’t work out, the state government will have to cut its developmental funds by more than 25% and also raise another Rs16,000 crore through different means to fulfil its promise of a waiver. The central government has already refused any financial aid to the state to write off the loans. Significantly, the state finance department had cautioned the government that raising funds would be difficult if the loan waiver amount went beyond Rs15,000 crore.
State finance minister Sudhir Mungantiwar is scheduled to meet Union finance minister Arun Jaitley on Wednesday to request his intervention to facilitate the loan from nationalized banks. State officials said the state expects the banks to readily come forward to lend because they are getting an opportunity to write off the loans that would otherwise be considered as bad loans.
“We are requesting the Centre for a staggered loan, which will result in the repayment of around Rs10,000 crore a year, including interest. If the request is conceded by the Central bank, there would be no need of more than 15% cut to the development fund in the annual budget. We will raise the rest of the amount from other sources and by saving through austerity measures,” Mungantiwar said.
However, if the Centre refuses to help the state government, the latter would face a stiff challenge, said finance officials.
In such a scenario, the government will have to initiate a cut to the budget to the extent of 25% to 30%. It will have to raise an additional loan of Rs16,000 crore to the proposed debt of Rs35,000 crore in the current fiscal. “Besides the additional loan, we will raise Rs5,000 crore from savings, Rs5,000 crore from non-tax revenues and the rest from other sources,” the minister said.
Other sources would mean using the deposits of the government infrastructure undertakings such as the Mumbai Metropolitan Region Development Authority (MMRDA) and City and Industrial Development Corporation Limited (Cidco). The government plans to constitute a non-banking finance corporation (NBFC) to park the additional funds with these government undertakings that are currently deposited with nationalised banks. The government, by making amendment in the existing laws, will it make mandatory for its undertakings to keep their deposits with the proposed NBFC. “The MMRDA has Rs16,500 crore, MIDC has Rs5,500 crore, the health department’s personal ledger account has Rs290 crore and Cidco has Rs5,000 crore deposited with various banks. We will offer these undertakings the same interest rate they have been drawing from the banks. We can raise Rs40,000 crore in the next couple of months under this corporation,” said Mungantiwar.
Chief minister Devendra Fadnavis, while admitting that the state is facing a financial challenge after announcing the loans, said the government was capable of raising the funds required. “The finance department had warned us not to extend the loan waiver beyond Rs15,000 crore because it would disturb the financial discipline, but we have accepted the challenge in the interest of the farmers,” he said on Tuesday. A group of farmers from Puntambe, the tehsil in Ahmednagar district where the farmers agitation began last month, met Fadnavis and congratulated him for the waiver. Another delegation from the tehsil had met NCP chief Sharad Pawar and expressed discontent over the waiver.
Meanwhile, Congress state chief Ashok Chavan termed the loan waiver arithmetical jugglery. “There is no uniformity in the figures of the loan waiver beneficiaries announced by various ministers of the government. The waiver was announced without proper homework and it will not benefit as many farmers as is being claimed by the government,” he said.