Telangana concludes last phase of Rs 17,000-cr farm loan waiver

A poll promise on these lines was made in 2014 in the then undivided Andhra

Even as the recently elected Bharatiya Janata Party government in Uttar Pradesh prepares to implement the farm loan waiver to keep its election promise, the Telangana government has issued orders for the release of the full and final tranche of Rs 4,000 crore to banks towards a similar loan waiver scheme costing Rs 17,000 crore to the state exchequer.

Though such waivers are nothing new for other states, the Telangana government was among the first to execute the farm loan waiver scheme in an innovative manner through a staggered payment mode as the state Budget could not handle such a huge financial burden in one go.

Both the Telangana Rashtra Samithi (TRS) and Telugu Desam Party (TDP) went into the elections in 2014 promising a farm loan waiver, among other things, to the electorate. This was just ahead of the formal bifurcation of the then undivided Andhra Pradesh, wherein TRS emerged victorious in Telangana and TDP in truncated Andhra, respectively.

The Telangana government had identified 3.6 million beneficiaries for a waiver of loans not exceeding Rs 1 lakh to each family, while the Andhra government identified 4.9 million families for a waiver of loans not exceeding Rs 1.5 lakh per family.

After the Reserve Bank of India rejected a request for the rescheduling of farm loans, a facility available only when drought is declared in a particular area, made by the Andhra and Telangana governments for the purpose of a loan waiver, both the governments had decided to repay farmers' loans in instalments.

With the latest orders, the settlement of the entire Rs 17,000 crore under the loan waiver scheme as committed by Telangana government comes to a close, while the Andhra government, so far, has deposited 50 per cent out of Rs 22,000 crore it had committed to repay the banks under its debt waiver scheme.

However, the tweaking of the original promise in terms of staggered payment, among other things, drew criticism in both the states as the repayment in instalments led to hurdles in the way of availing of fresh loans from banks by the farmers. Furthermore, the interest costs on the balance outstanding had to be borne by the farmers in some cases.

Fresh agriculture credit disbursal were registered at a record low in the initial years before the banks partly restored the credit facility of farmers to the extent of repayment by the governments in later years.

Loan waivers had been a prominent vote catcher in undivided Andhra during the 2014 elections, encouraging some political parties to promise loan waivers across the board, including on gold loans taken by rural households. During the United Progressive Alliance government's nationwide loan waiver scheme in 2008, more than Rs 6,000 crore worth of farm loans were waived in then undivided Andhra, helping the then ruling Congress party to win the elections for the second consecutive time in the state in 2009.