The task now is to figure out how to pay the cooperatives so they can refinance loans. Image for representation
The state government is looking to cut spending from major departments and borrow money from public sector undertakings to meet its commitment to waive farmers’ loans worth Rs 8,165 crore.
In June, Chief Minister Siddaramaiah waived short-term loans that 22.27 lakh farmers borrowed from cooperative banks, costing the exchequer Rs 8,165 crore. The move was also aimed at gaining political mileage as BJP-ruled Uttar Pradesh and Maharashtra had already announced waivers.
The task now is to figure out how to pay the cooperatives so they can refinance loans.
Payment to the cooperative banks will be staggered over two years as the entire Rs 8,165 crore will not be due for the financial year ending March 2018. Before the end of the fiscal, however, the government has to pay the banks Rs 5,090 crore.
The government has zeroed in on Mysore Minerals Limited (MML), one of the few State-run PSUs with surplus funds. The government will get around Rs 1,400 crore from MML, including profits and reserves. The rest - Rs 3,690 crore - will come from re-appropriation through budget cuts. “We would not like to be specific about cuts now as that can make our job very difficult. Ministers will start lobbying,” said a senior official from the Chief Minister’s Office.
The money from MML will be deposited in the Karnataka State Cooperative Apex Bank Limited in order to capitalise the cooperatives. “Apex Bank will pay the same interest rate or a bit more than commercial banks so that MML is not put to loss,” a senior Finance Department official said.
According to the latest C&AG report, 81 working PSUs in Karnataka earned a profit of Rs 1,425 crore and incurred loss of Rs 1,570 crore. This is why Agriculture Minister Krishna Byre Gowda is not convinced about borrowing from PSUs. “It won’t be enough because they aren't making enough profits,” he said. “There is no squeeze (budget cuts) for now, but there are contingency provisions that you and I aren’t aware of,” he added.
The government plans mooting a supplementary budget in the upcoming Legislative session if the budget cuts do not go well. Also, funds will be set aside in the 2018-19 budget for the Apex Bank to repay the money borrowed from the PSU.
Either ways, if the Congress gets voted out in the 2018 Assembly election, the burden of the farm loan waiver is bound to fall on the next government.