Devpt works take fund cut as govt sews up loan waiver

Chief Minister H D Kumaraswamy might have endeared himself to the farming community by announcing the state’s biggest ever crop loan waiver scheme. But the scheme has, however, gradually started taking a toll on development works.

The total crop loan waiver scheme, including loans availed by farmers from cooperative institutions and nationalised banks, works out to Rs 43,611 crore, which the government has proposed to repay in four instalments (four years).

Recruitments hit

The adverse effect of the scheme on development works and administration has started to show.

The government has started going slow on new recruitments and new proposals for clearances submitted to the Finance Department are being sent back with queries. The government has already asked departments to adopt cost-cutting measures.

The government has not released the Rs 2,500 crore grant earmarked for BBMP so far, making it difficult for the cash-strapped civic body to take up development works. A proposal to take up repair works of classrooms in government schools has been put on the backburner.

Reason: There is no clarity yet on how the government will foot the crop loan waiver bill of Rs 13,000 crore this financial year.

As things stand now, farmers have been told that they need not repay loans availed by them up to Rs 2 lakh with a cut-off date of December 31, 2017. Besides, crop loans up to Rs 1 lakh borrowed from the cooperative sector till July 10, 2018, will be waived.

Cooperative banks come under the ambit of the government and there is not much of a problem in this sector. However, the government is still in touch with representatives of nationalised banks on the waiver scheme. Bankers are reluctant to give exemption to the government from repaying the interest component, which works out to nearly Rs 7,000 crore.

However, the moot question is how the government will foot the Rs 13,000 crore loan waiver bill (for break-up see infographic).

The flip side

Kumaraswamy, who also holds the Finance portfolio, has earmarked Rs 6,000 crore in the budget presented by him in July this year with a total outlay of Rs 2.18 lakh crore. The is no clarity yet on how the government will mobilise the balance amount.

He has stated that unspent amount on various programmes and projects will be channelled for the loan waiver scheme. However, a host of senior officers with whom DH interacted say it is inevitable that there will be a 15% to 20% cut in allocation to various departments.

Kumaraswamy recently told DH that he was anticipating a 24% growth in state revenue.

This amount could be utilised to fund the loan waiver scheme. However, economists feel this is quite an ambitious target given the present state of the economy.