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The H.D. Kumaraswamy government joins a list of seven states that have announced farm loan waivers since 2014.

New Delhi: In a relief for farmers, the H.D. Kumaraswamy-led Karnataka government approved a partial farm loan waiver of Rs 34,000 crore in the budget announced in the state assembly Thursday.

Post 2014, Karanataka is the eighth state to have announced a farm loan waiver taking the total cost to the exchequer to Rs 1.9 trillion. The UPA government in 2008 had waived the loans of small and marginal farmers at a central level covering the whole nation that cost the exchequer Rs 60,000 crore.

According to data available with the Reserve Bank of India (RBI), Karnataka is one of the top five states where the level of agricultural debt is the highest. Tamil Nadu (11.4 per cent), Uttar Pradesh (11.3 per cent), Maharashtra (9.0 per cent), Karnataka (8.7 per cent) and Andhra Pradesh (8.5 per cent) are the top five, which together account for about half of the total agriculture credit.

Here is a brief look at the various farm loan waivers that have been approved by state governments since 2014:

Andhra Pradesh

The N. Chandrababu Naidu government had passed a Rs 43,000 crore scheme in 2014 under which loans of farmers, weavers and Development of Women and Children in Rural Areas (DWCRA) up to Rs 1.5 lakh were waived. The government also gave concessions to those who had outstanding loans of more than Rs 1.5 lakh.

Telangana

The K. Chandrasekhar Rao-led Telangana government too announced a farm loan waiver in 2014 to the tune of Rs 17,000 crore. The government identified 3.6 million beneficiaries for a waiver not exceeding Rs 1 lakh per family. The government fulfilled the promise and paid all the dues by April 2017.

Tamil Nadu

Then chief minister J. Jayalalithaa announced a farm loan waiver worth Rs 5,780 crore in 2016 that would clear outstanding principal, interest and penal interest of the farmers who had taken loans from cooperative banks until 31 March, 2016.

Uttar Pradesh

After coming to power, chief minister Yogi Adityanath fulfilled a pre-electoral promise and announced a farm loan waiver of Rs 36,359 crore in his maiden budget in 2017. The government announced waiving debt of up to Rs 1 lakh for small and marginal farmers.

However, it received criticism when 4,814 farmers got certificates of waivers worth Rs 1-100 and around 12 lakh farmers received certificates in which loans of more than Rs 10,000 were waived.

Maharashtra

In June 2017, chief minister Devendra Fadnavis announced a Rs 30,500-crore loan waiver to benefit 89 lakh farmers. The ceiling for the said agricultural loans was set at Rs 1.5 lakh and was to provide concession to the farmers having loans more than Rs 1.5 lakh in a one-time settlement facility.

Karnataka

The Siddaramaiah-led Karnataka government announced a Rs 8,165 crore scheme in June 2017 to waive crop loans of around 22 lakh farmers — up to Rs 50,000 per farmer. Finance minister Arun Jaitley ruled out the waiver saying the central government would adhere to its fiscal targets. The state government then proceeded to borne the waiver cost.

Punjab

Captain Amarinder Singh, just like other CMs before, announced a crop loan waiver in 2017, fulfilling his pre-electoral promise. The Rs 10,000-crore waiver promised to clear crop loans of up to Rs 2 lakh for small and marginal farmers, who own up to 5 acre of land.

Rajasthan

Last month, chief minister Vasundhara Raje too announced a Rs 8,500 crore farm loan waiver which will clear the debts of small and marginal farmers, worth up to Rs 50,000.

Economists say

In 2017, after Fadnavis announced the farm loan waiver in Maharashtra, RBI governor Urijit Patel said loan waivers engender ‘moral hazard’. However, this year he seems to have changed his tone on the issue saying the waivers announced by states will have no impact on the NPAs of the banks.

In its mint street memo published in September 2017, the RBI said that if all the states started waiving all the agricultural loans of small and marginal farmers, it could cost the exchequer nearly Rs 2.2 trillion, which it says is seemingly becoming a reality.

“Loan waiver is not good for economic or credit culture. Every political party in India has given farm loan waiver in some state or the other or at all India level. So, ultimately it is a political decision, it cannot be justified in the longer run”, former RBI governor Y.V. Reddy Reddy said in November 2017.

Even though economists call them a hazard for the credit culture, politicians continue to promise waivers in their election manifestos.

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