Naidu Govt Feels Loan Waiver Heat

Published: 30th July 2014 08:21 AM  |   Last Updated: 30th July 2014 08:21 AM   |  A+A-

HYDERABAD:  With the Reserve Bank of India not inclined to give nod for rescheduling of crop loans citing good yield, the Andhra Pradesh Government is thinking of alternatives to mobilise resources to keep its promise of waiving bank loans of farmers for agricultural operations.

The financial position of the new state is not good as it is left with a fiscal deficit of more than `15,000 crore after its separation from Telangana. The chances of the Centre coming to its aid on this matter could be ruled out, going by what Union Minister M Venkaiah Naidu had said during his visit to Hyderabad a couple of days ago.

Further, the Fiscal Responsibility and Budget Management Act limits the state’s borrowing capacity, which would be somewhere around `15,800 crore, while it requires nearly `42,000 crore to fulfil its promise of loan waiver to farmers, weavers and self-help groups.

Experts say loan repayment capacity of the state is almost non-existent given its financial position and the chances of raising security bonds are also bleak. So what are the options the state would be left with in case the RBI refuses to entertain the plea for rescheduling of crop loans? How would it mobilise money for the purpose?

According to experts in governmental financial strategies, there are some options available to the government to mobilise the resources to fund the loan waiver scheme, which Chief Minister N Chandrababu Naidu mentioned, in case the RBI does not allow loan rescheduling.

One of those options is to sell away the red sanders seized by the forest department over the years from smugglers. Huge stocks of the sandalwood logs, about 11,000 tonnes, have got piled up at various stock yards of forest department in the state. The revenue from their sale in a global auction could fetch an income of `1,500 crore to `1,600 crore. The preliminary process of getting permission for the sale and calling for global tenders has already been initiated and is in progress.

Another option is using the annual surplus income generated from state-run corporations such as Beverages Corporation for about 10 years and get advances from banks. “Supposing the surplus income from such corporations is to be around `8,000 crore per annum, it will come to `80,000 crore for 10 years. A 70 to 80 per cent of that amount could be taken as advance from banks. The amount can be repaid along with interest in instalments,” a banking expert said.

The government is also expecting substantial revenues from taxes, more so from the companies and corporations engaged in liquor, fuel and transport. But the revenues so earned cannot be expected to be used for financing the loan waiver and other populist schemes, as other needs of the state too should be taken care of apart from building the state capital.

Meanwhile, government sources claim that doors on RBI rescheduling the crop loans are not closed yet. The central bank has sought certain information pertaining to farmers, which the government would be providing. Discussions are still going on, it is said.

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