Karnataka CM Kumaraswamy announces Rs 34,000-cr farm loan waiver in budget
Karnataka chief minister H D Kumaraswamy presented his coalition government’s first budget on Thursday.india Updated: Jul 05, 2018 22:19 IST
The Karnataka government on Thursday unveiled a much-awaited farm loan waiver of up to Rs 34,000 crore, giving relief to millions of farmers across the state, capping the waiver at Rs 2 lakh per family, as chief minister HD Kumaraswamy presented a Rs 2.18 lakh crore budget that made fuel more expensive.
“I have decided to waive all defaulted crop loans of farmers up to 31 December 2017 in the first stage,” Kumaraswamy said. “( For) farmers who repaid the loan within time, as an encouragement to the non-defaulting farmers, I have decided to credit the repaid loan amount or Rs 25,000, whichever is less,” he said.
The loan waiver package is an attempt to stick to the Rs 53,000 crore write-off Kumaraswamy had announced in the election manifesto of his Janata Dal (Secular), which came to power in an alliance with the Congress party after the May 12 assembly elections.
The chief minister also announced provisions to allow farmers to avail of new loans. “To facilitate farmers to avail new loans, action will be taken by the government to issue clearance certificate by waiving the arrears form the defaulting account. For this purpose, Rs 6,500 crore is earmarked in 2018-19 budget,” Kumaraswamy said.
The repayment of loans will be staggered over four years, Kumaraswamy said later at a press conference. In the first year, the government is set to spend Rs 10,500 crore towards the waiver package.
Additionally, the government has also reiterated its commitment to allocate Rs 4,000 crore as part of the farm loan waiver announced by the previous Siddaramaiah-led government in July 2017.
Siddaramaiah had announced waiver of up to Rs 50,000 on agricultural loans taken from cooperative banks, worth Rs 8,165 crore. Only Rs 4,165 crore was released as of last year, Kumaraswamy said.
However, a separate set of guidelines issued later was at variance with the Budget announcement. According to the guidelines, the state government is set to waive Rs 30,266 crore of farm loans, benefitting 1.73 million farmers. Additionally, 2.76 million farmers who have made prompt payments on their loans are set to benefit from the incentive scheme of Rs 25,000 per farmer, amounting to Rs 6,893 crore.
In total, the package, according to the guidelines, will amount to Rs 37,159 crore and will benefit all 4.48 million farmers who have availed of credit.
The budget has also expanded in size since Siddaramaiah’s pre-election Budget in February from Rs 2.09 lakh crore to Rs 2.18 lakh crore. Receipts have increased from Rs 2.02 lakh crore in the February Budget to Rs 2.13 lakh crore.
The fiscal deficit has increased from 2.49% of gross state domestic product (GSDP) to 2.89% of GSDP. The state’s liabilities have increased by around Rs 6,000 crore, from Rs 2.86 lakh crore to Rs 2.92 lakh crore, or an increase from 20.36% of GSDP to 20.75% of GSDP.
The loan waiver has come at a cost. To mobilise additional resources, the government has increased tax on petrol and diesel. For petrol the increase on tax is from 30% to 32%, and for diesel it is 21% from the earlier 19%. This will mean that petrol will be more expensive by Rs 1.14 per litre and diesel by Rs 1.12 per litre. Additional excise duty has also been increased on all slabs of Indian-made liquor by 4%.
Responding to criticism that this was a supplementary budget in the garb of a new one, Kumaraswamy said the coalition had sketched out its vision for the state through the documents. “I appeal to people to look at the Budget documents presented by Siddaramaiah and me and look at the vision we have set forth,” he said. “This is a full budget, there is no doubt about it. There is an increase in the budget size.”
In the run up to the budget, former chief minister Siddaramaiah had expressed his opinion that a supplementary budget should be presented, as he had presented a budget only in February, in the lead-up to the polls.
While loan waivers are not very good for the economy, political compulsions had made one necessary in Karnataka’s case, economist D Rajashekhar of the Institute of Social and Economic Change said. Even so, he said, the announcement was a mere eyewash because there are likely to be many hurdles in its implementation.
“The troubling aspect of the budget, however, is the increase in taxes on fuel. This is likely to have a cascading effect and will contribute to inflation,” Rajashekhar said.
The chief minister found support among some farmers’ organisations. Maruti Manpade, a member of the Karnataka Prantha Raitha Sangha, said the budget was a welcome step.
Manpade also commended the chief minister for stating that he will look at increasing government procurement and raising support prices for crops. “This, more than the waiver, is the long-term solution for indebtedness,” he said.
State Bharatiya Janata Party chief BS Yeddyurappa criticised the Budget, calling it a betrayal of the farmers and the state.
“This a Budget that has betrayed the farmers of the state. It is a budget limited to Ramanagara (one of two constituencies Kumaraswamy contested from) and Hassan (the district from which the Deve Gowda family hails),” he said. “Where is the provision for the Rs 34,000 crore waiver?”
First Published: Jul 05, 2018 12:44 IST