T’gana plans SPV to raise funds for its crop loan waiver scheme | Latest News India - Hindustan Times
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T’gana plans SPV to raise funds for its crop loan waiver scheme

By, Hyderabad
May 19, 2024 07:24 AM IST

Crop loan waiver was one of the six guarantees of the Telangana Congress before it was voted to power in the Assembly elections last year.

The Telangana government headed by chief minister A Revanth Reddy is planning to float a special purpose vehicle (SPV) in the form of a statutory corporation to raise funds for the implementation of its crop loan waiver scheme, under which it plans to waive farm loans up to 2 lakh at one go, people familiar with the matter said.

CM Revanth Reddy held a high-level meeting with top revenue and finance department officials to work out various methods to mobilise resources for the implementation of the loan waiver scheme. (PTI)
CM Revanth Reddy held a high-level meeting with top revenue and finance department officials to work out various methods to mobilise resources for the implementation of the loan waiver scheme. (PTI)

Crop loan waiver was one of the six guarantees of the Telangana Congress before it was voted to power in the assembly elections last year.

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During his rallies for the Lok Sabha elections, Revanth Reddy reiterated his government’s resolve to waive all crop loans in one go before August 15.

The floating of a new corporation – Telangana State Farmers’ Welfare Corporation (TSFWC) – to raise funds for the crop loan waiver scheme – was supposed to be discussed and approved at the state cabinet meeting scheduled on Saturday.

“However, the cabinet meeting could not be held, as the Election Commission of India did not give permission for the same because of the Model Code of Conduct (MCC) in force for the by-elections to the state legislative council on May 27,” people familiar with the matter said.

On May 15, CM Reddy held a high-level meeting with top revenue and finance department officials to work out various methods to mobilise resources for the implementation of the loan waiver scheme.

A statement from the Chief Minister’s Office said Revanth Reddy asked the officials to study the policies adopted in Maharashtra, Rajasthan and other states regarding farmer loan waiver and come up with a model that suits the financial position of the state government.

A senior state government official, on condition of anonymity, said that the crop loan waiver scheme implemented in Maharashtra and Rajasthan would not be replicated in Telangana because of the huge burden and precarious financial situation of the state government.

“In Maharashtra, the state government could waive 20,250 crore in a phased manner, starting from 2020 under the Mahatma Jyotiba Phule Shetkari Karjmukti Yojana by transferring money to the banks in a phased manner,” he said.

“In Rajasthan, the Ashok Gehlot government in 2019 implemented crop loan waiver scheme, but it was restricted to farmers with a landholding of a maximum of two hectares (around 5 acres),” the official added.

In Telangana, the burden on the state government to waive all pending crop loans till the last Rabi season is around 32,000 crore.

In all, around 175,000 farmers, mostly small and marginal, who obtained loans from banks – commercial and cooperative banks – between April 1, 2019, and December 10, 2023, up to a maximum of 2 lakh, would get the benefit from the scheme.

“As the chief minister wants to waive the entire loan at one ago, it requires huge money, which cannot be met from the budgetary allocations,” the official quoted above said.

The best option suggested by the officials to CM Reddy is to float a special purpose vehicle in the form of farmers’ welfare corporation and go in for off-budget borrowings through this corporation to fund the loan waiver scheme.

“This is going to be on the lines of Andhra Pradesh State Development Corporation (APSDC) floated by the YS Jagan Mohan Reddy government to raise funds to meet the expenditure for implementation of its Nava Ratnaalu schemes,” the official said.

The corporation, which would be given a statutory status through passing a legislation in the state, would raise long-term loans from banks, financial institutions, non-banking financial companies, investors, contributors and capital markets.

In the case of Andhra Pradesh State Development Corporation , the Jagan government proposed to transfer all its properties and assets of the entrusted schemes, movable and immovable, to the corporation. The corporation would create an escrow account into which the revenues from these assets would be diverted, and from there, the money would be transferred into the accounts of the lenders towards loan repayment.

“The Telangana government will stand guarantee for the loans obtained by the corporation from various banks and other financial institutions. Instead of government properties and assets, it can transfer vacant lands to the new corporation, which would sell the lands as and when required, to repay the loans to the banks and other financial institutions,” the official quoted above said.

Alternatively, the government can also transfer the revenues from agriculture market cess and part of the revenues from the excise department and stamps and registration department to the corporation to pay the interest and principal to the lending institutions.

However, the government might have to take clearance from the Reserve Bank of India (RBI) to float the corporation and open an escrow account in the name of lenders, he added.

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