UP Government To Use Kisan Rahat Bonds To Finance Farm Loan Waiver, Says State Minister
UP government will raise funds through bonds to compensate banks for farm loan waiver.
The newly elected Bharatiya Janata Party government in Uttar Pradesh (UP) has announced a Rs 36,359-crore farm loan waiver fulfilling a promise made during its election campaign.
The waiver will be applicable to around 1.5 crore small and marginal farmers in the country’s most populous state, if they have borrowed money for cultivation, Siddharth Nath Singh, the state’s health minister told BloombergQuint in an interview.
Below is the edited transcript of the telephonic conversation with Singh.
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What is the total quantum of the farm loan waiver that has been announced?
If we include the NPAs (non performing assets) it amounts to Rs 36,500 crore. NPAs are around Rs 5,600 crore, and the loan waiver to the farmers who have taken on debt for for cultivation is about Rs 30,000 crore.
How many farmers are likely to benefit from the farm loan waiver?
The total number of marginal and small farmers in UP is about 2.15 crore. So whoever has taken those loans for cultivation will be included.
Is the waiver amount up to Rs 1 lakh per farmer?
We felt that generally the small farmer doesn’t have the capacity to take more (large ticket) loans. So we took a call, because otherwise we would have had to go into an estimation. And you have to always put a figure. So we felt that Rs 1 lakh would be a safe bet and on a higher side. Yes, it is up to Rs 1 lakh.
How will state pay the banks for the farm loan waiver?
We are going to raise it through Kisan Rahat Bonds. When we raise bonds, I am sure the banks’ outstanding amount will be taken care (of) with that. We will then gradually ease the money out.
Will farmers have to apply for the loan waiver?
We have formed a committee of secretaries. They will be coming up with the blueprint (for the farm loan waiver scheme). And then they will take it forward. But, at the same time, we have to take it up during the state’s Budget session.
By when do you think the entire process will be completed?
Well, by the time the Budget session begins in early June. Dates have not been finalised yet. So once that session starts, by then we’ll be ready with all the plans. Once that happens, it won’t take long.
When will fund raising start through bond issuances?
Again, these are finer details which the committee of secretaries is looking into.
Is there a cutoff for which loans will qualify for the waiver?
We have said loans up to March 2016.
The loan waiver is likely to put a strain on the state’s finances. How will this be managed?
I’m sure we will manage it. The investment coming into the state will be normal. It’s a big state but the investment climate was not very conducive, so it hasn’t gone that well. We should be able to raise the amount now.