Hyderabad: The Revanth Reddy-led Congress government in Telangana has begun delivering on its key poll promise of waiving farm loans of up to Rs 2 lakh.
The commitment, set to benefit around 40 lakh farmers across the state, is projected to cost the exchequer Rs 31,000 crore.
Despite the state already being burdened with a debt of Rs 6.71 lakh crore, the Congress government, its top leaders said, took up the “massive, historic, unprecedented” waiver in order to fulfil the promise made by Sonia and Rahul Gandhi in the run-up to the Telangana assembly elections last year.
With the aid of farm loan waiver promises and six welfare guarantees, the Telangana Pradesh Congress Committee (TPCC), under Revanth’s leadership, managed to end the two-term rule of Bharat Rashtra Samithi (BRS) Chief K Chandrasekhar Rao in December last year.
“It is true that the state finances are in a dire condition, but this loan waiver is a promise the government had to fulfil,” development economist Dr D Narsimha Reddy told ThePrint.
“Revanth needs to strike a fine balance,” Reddy, a former dean of the School of Social Sciences, University of Hyderabad, added.
The state is implementing the scheme in three phases. It will first waiving loans of up to Rs 1 lakh, then loans higher than 1 lakh and up to Rs 1.5 lakh later this month, and loans higher than 1.5 lakh and up to Rs 2 lakh by mid- or end-August.
On Thursday, Revanth launched the Runa-Mafi 2024 (loan waiver) scheme from the Telangana Secretariat, handing cheques of Rs 1 lakh to a few identified beneficiaries. The chief minister also virtually interacted with beneficiaries assembled at various centres in the districts.
CMO officials said Rs 6,098 crore was deposited into the bank accounts of 11,50,193 farmers.
Asked how the government is managing the money, a top finance department official told ThePrint, “It is the million dollar question! While we have been tight-fisted on the spending side, funds worth more than Rs 6,000 crore could be gathered from our daily non-tax revenues of Rs 200 to 300 crore accrued by the state over a period of one and a half months. We are exploring every option to meet the rest of the requirements.”
However, former minister and BRS working president KT Rama Rao alleged that the Rs 6,098 crore was diverted from Rythu Bandhu (BRS-launched farm investment support scheme) funds worth Rs 7,000 crore to be disbursed in June to farmers.
ThePrint reached former RBI governor Raghuram Rajan, who the Revanth government is reportedly consulting on matters of revenue and resource mobilisation for welfare promises, for his opinion on Telangana farm loan waivers. This report will be updated if and when a response is received.
Deputy Chief Minister Bhatti Vikramarka, who is also the finance minister, recalled that Revanth, as Telangana Congress chief, and he as Telangana Congress Legislature Party (CLP) chief, had started their assembly election campaigns only after signing a declaration of the loan waiver guarantee.
“Despite the challenges, we are now implementing the promise in letter and spirit. This is a historical moment not just in Telangana but for the country; no state government waived farmers loans to the tune of loans amounting to Rs 31,000 crore,” Bhatti said in a meeting Thursday with bankers on the waiver scheme.
Bhatti remarked that along with farmers, bankers too should celebrate the occasion as “this is the first time in Indian banking history that such a huge amount would be recovered in one go”.
The waiver programme is a huge incentive for the banking sector, the deputy CM said, asking bankers to utilise the funds released for farmers’ loan waiver for that purpose only and not adjust them with any other loans.
Stressing that farmers should not be inconvenienced at any cost, the FM directed bankers to immediately sanction loans to farmers for their future requirements once loan amounts are credited.
Bhatti also said bankers should negotiate with farmers with loans of over Rs 2 lakh for recovery of the amount in excess of the waiver.
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‘BRS govt waived loans worth Rs 28,000 crore’
According to Dr E Revathi, professor and director of the Centre for Economics and Social Studies, Hyderabad, K Chandrasekhar Rao (KCR), in his first term in 2014-18, waived crop loans to the tune of Rs 16,000 crore, benefitting 35 lakh farmers. He had set Rs 1 lakh as the upper limit.
In his second term, loans worth Rs 12,000 crore were waived, benefitting 16.6 lakh farmers. Both times, only loans of up to Rs 1 lakh were waived, that too in tranches ranging from Rs 25,000 to Rs 75,000.
The Congress government is fulfilling the promise made by Rahul Gandhi in May 2022, as part of the Warangal Declaration. Gandhi promised loan waivers of up to Rs 2 lakh for farmers. The declaration itself is a repeat of the party’s election manifesto commitment for the 2018 polls, which it had lost.
The waiver is also in commitment to the September 2023 promise of Sonia Gandhi at a rally near Hyderabad, on farm loan waiver, and six guarantees, Revanth said during the programme Thursday.
The present waiver, which will be conducted in three phases and over one and half months’ time, covers all the loans taken by Telangana farmers from 12 December, 2018, to 9 December, 2023, which is the birthday of Sonia Gandhi, “who gave us the Telangana state”, the chief minister said. He also said that a thanksgiving meeting would be held at Warangal, which Rahul will attend.
Revanth accused KCR of reneging on his waiver promise and “only clearing loans worth Rs 21,000 crore in several phases over 10 years”.
“Since the previous government did not clear their loans in one go, interests accumulated on the principal amounts, giving no relief to many farmers. The situation compelled some of the distressed to end their lives,” Revanth said.
The Congress chief added that “despite facing huge financial challenges, his government has been paying salaries promptly to the government employees and has already spent Rs 29,000 crore in eight months for implementation of the six guarantees”.
“Now, we have taken up the big task of waiving farm loans,” he added.
Revanth said that “at the time of Telangana formation in 2014, the state government was paying Rs 6,500 crore per year as interest on loans.”
“As the previous (BRS-KCR) government put a Rs 7 lakh crore debt burden on the state, we are now paying Rs 7,000 crore as interest on loans every month,” he added.
In December, soon after coming to power, the Revanth-led government had tabled a white paper on state finances in the Telangana assembly, to highlight what it called “poor fiscal marksmanship” during the 10 years of BRS’s rule under KCR.
Bhatti then termed the situation “financial anarchy, pushing the state into a debt trap”.
The finance minister said the rate of accumulation of debt from off-budget borrowings has led to this situation.
In the last 10 years, the total debt of the state and of Special Purpose Vehicles (SPVs), such as for the Kaleshwaram Lift Irrigation Scheme, has gone up to Rs 6,71,757 crore.
The total debt was Rs 72,658 crore in 2014-15.
“This gigantic increase in the debt, almost 10 times, has created an enormous fiscal stress on the state’s finances in terms of its ability to service the debt. Further, no tangible fiscal assets in proportion to the money spent were created in the past 10 years,” Bhatti had said in the house.
‘Need for comprehensive measures’
The total outstanding farm loans in Telangana amounts to Rs 1.12 lakh crore, bulk of it from nationalised banks, followed by regional rural banks and cooperative banks, Dr Revathi told ThePrint, quoting NABARD 2023 data.
“The source of funds to be used for farm loan waiver is still not known. But some reports claim an SPV (Telangana farmers welfare corporation) could be floated to take off-budget borrowings where the state government would stand as guarantee for the loans obtained by the corporation. But this requires RBI clearance,” Revathi added.
Revathi said the policy to waive agriculture loans has come a long way since the 1990s.
“The Telangana government decision, an electoral promise, offers relief and farmers may start obtaining fresh loans from banks instead of high interest private sources of credit. However, studies show waivers are a partial solution, more like a palliative or postmortem solution. More comprehensive policy measures are required to make farming viable,” Revathi added.