Jaitley says no to Central help for farm loan waiver by states

Amid growing farmers' protests for loan waivers, Finance Minister Arun Jaitley Monday ruled out any Central help for farm loan write-offs to states.

"I have already made the position. States which want to go for these kinds of schemes will have to generate them from their own resources. Beyond that as the central government, I have nothing to say," Jaitley told reporters when asked if the Centre will intervene on the issue of farm loan waivers and related protests.

Jaitley was interacting with reporters after an annual review of public sector banks here. On Sunday, the BJP government in Maharashtra had announced a loan waiver for over one crore farmers who have land holdings of less than five acres. According to estimates, it would cost the state exchequer Rs 30,000 crore.

Farmers in major parts of Maharashtra resorted to strike and violent protests demanding loan write-offs, free electricity, grants for irrigation and pension for farmers above 60 years.

Madhya Pradesh was also on the boil with state-wide farmers' agitation after five farmers were gunned down in police firing last week.  Earlier, Uttar Pradesh Chief Minister Yogi Adityanath had announced crop loan write-offs of not more than Rs one lakh costing the exchequer to the tune of Rs 36,000 crore.

Recently, the drought-hit farmers of Tamil Nadu also agitated in here for more than a month demanding Rs 40,000 crore package. The Centre had to provide a relief of Rs 1,712 crore following that.

The Reserve Bank of India, however, warned of the fiscal situation getting out of hand if states unabatedly continued to waive farm loans.  In a post-policy press conference last week, Governor Urijit Patel said the move will also stoke inflation in going forward. He said waiver could dissipate the important gains that the states made in fiscal rectitude over the last 2/3 years.

Patel also urged government's to restrain from making such loan waiver promises. Soon after RBI's warning, a report by Bank of America Merrill Lynch cautioned that $ 40 billion, equivalent to 2% of GDP, will be written off in the run-up to 2019 election of such populist moves were adhered to.