The move was seen hurting state finances with state-owned lenders warning of they being burdened with any waiver.
Union Agriculture Minister Radha Mohan Singh during a discussion on demands for grants for agriculture in the Lok Sabha said that the cost of the promised farm loan waiver in Uttar Pradesh will be borne by the central exchequer.
Dushyant Chuatala (INLD) said the BJP had promised farm loan waiver in Uttar Pradesh but the Finance Ministry had cited Reserve Bank of India expressing reservation about any such move as it will have negative impact on credit quality in farming.
Reacting to the remark, Singh intervened to say that in some states "we provide 3 per cent interest subvention and the states provide subvention for the remaining 4 per cent".
"For Uttar Pradesh, we had said that if we form government in the state, we will waive loans of farmers. The cost would be borne by the central exchequer," Singh said in his intervention.
Prime Minister Narendra Modi during electioneering had promised that the first decision of the UP government under BJP rule would be to waive loans of small and marginal farmers.
The Agriculture Minister dismissed Chautala's allegation of "double standards" being adopted by the Centre saying "if some state is providing interest subvention for farmers, that should be appreciated".
As Chautala sought to corner the government over not waiving farm loan in BJP-ruled states like Haryana and Maharashtra, Deputy Speaker M Thambidurai jumped in to rescue.
He said the loan waiver of farmers in Uttar Pradesh was in the manifesto of the BJP for the state assembly elections.
In the run up to the Uttar Pradesh assembly elections, BJP in its manifesto had promised to waive loans of small and marginal farmers and provide them with zero interest loans.
This was repeated by Prime Minister Narendra Modi in his election rallies.
The BJP and allies swept 325 seats in the 403-member UP assembly -- the biggest victory in the state by any party in four decades.
Congress leader Mallikarjun Kharge too joined the debate on farm loan waiver to say that "since it is Modi government, Modi should do it for the entire country".
To this, Thambidurai again retorted, "Modi is the Prime Minister and not the Chief Minister of Uttar Pradesh. In states where Congress government is in power, how can Centre do it there".
Chautala said he wants the BJP-ruled Centre to not just focus on one state but waive farm loans all over the country.
The Congress-led United Progressive Alliance (UPA) had announced a Rs 60,000 crore loan waiver in 2008 for small and marginal farmers.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)