Chidambaram woos young voters with loan subsidy

Similar to the 2009 poll sop formula of waiving off farmers’ loans, the Congress-led United Progressive Alliance (UPA) government on Monday announced moratorium on payment of interest on all education loans availed up to March 31, 2009 to benefit about nine lakh students across the country.

The move is a clear attempt to win over young voters as the forthcoming parliamentary elections may see at least 1.27 crore young voters exercising their newly obtained right.
Presenting the interim budget for 2014-15, Finance Minister P Chidambaram said government will take over the liability for outstanding interest as on December 31, 2013. “But, the borrower would have to pay interest for the period after January 1, 2014,” he added.

Pledging to take over the liability for the outstanding interest, the minister said a sum of Rs 2,600 crore will be transferred to the Canara Bank, designated for implementation of the central scheme for interest subsidy on education loans.

“I intend to provide the funds in the current financial year itself. Ten years ago, only a few thousand students, mostly the well-connected, got education loans. At the end of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding was Rs 57,700 crore,” Chidambaram said.

The scheme for interest subsidy was first announced by former finance minister Pranab Mukherjee, now President of India, in the budget for 2009-10. It was, however, applicable to those education loans disbursed after April 1, 2009. Under the scheme, the government took over the burden of interest for the duration of the period of study and a little beyond.

Interest burden

“The scheme brought great cheer to student-borrowers and their families. However, I have noticed a sense of discrimination among students who had borrowed before March 31, 2009, struggled to pay interest during the period of study, and continued to service the loans afterwards. I think they deserve some relief,” Chidambaram said.

 “It is estimated that nearly nine lakh student borrowers will benefit to the tune of approximately Rs 2,600 crore,” he said, adding the details of the scheme will be announced shortly.

The minister also earmarked a little over Rs 81,441 crore for the Human Resource Development Ministry. Out of this, about Rs 54,485 crore was marked for school education and Rs 26,956 crore for higher education.

“Ten years ago, the central government’s expenditure on education was Rs 10,145 crore; this year, we allocated Rs 79,451 crore,” Chidambaram said.