HD Kumaraswamy's Rs 34,000-crore farmer loan waiver is a gift to Opposition
HD Deve Gowda has always projected himself as a leader of farmers. On Thursday, his son HD Kumaraswamy decided to walk the talk by waiving farm loans of up to Rs 2 lakh per farmer household, borrowed till December 31, 2017. This would mean that Rs 34,000 crore will get transferred from the farmer's head to the state of Karnataka.
Everyone knew this was coming. After all, the JD(S) had promised in its manifesto that it will waive all farm loans totalling Rs 53,000 crore within 24 hours of assuming office. However, with just 38 seats in its kitty, Kumaraswamy promised to do a phased roll-out, citing the reason that Karnataka did not give him a full majority to fulfil his promise.
Where will the money come from, was the concern everyone had. After all, in his budget presented in February, former chief minister Siddaramaiah had estimated revenue receipts at Rs 1.62 lakh crore. Assuming that is more or less the figure that the Karnataka exchequer gets by March 2019, the farm loan waiver is close to 20 per cent of that amount.
Kumaraswamy has decided to pinch just about everyone's pocket in order to partially fund this largesse. Tax on fuel has been hiked by two per cent — which means petrol prices have been increased by Rs 1.14 per litre, diesel by Rs 1.12 per litre.
Excise tax on liquor is up by 4 per cent while the power tariff is up by 20 paise per unit. He has not spared the poor households either, reducing the rice given under the Anna Bhagya scheme from 7 kg to 5 kg.
What the budget announcement does is pit the Congress-JD(S) against the BJP in the constituency of the farmer. The battle is about who will win the agrarian vote in 2019. The announcement inside the Vidhana Soudha is significant because this comes within hours of the NDA government hiking the Minimum Support Price (MSP) on crops.
Kumaraswamy's budget is the opposition's riposte to tell the farmer, not just in Karnataka but also across the country, that Narendra Modi is not the sole friend of the farmers. Don't forget, the Karnataka model of coalition governance is the Congress’s way of telling the country that it can help replicate a similar arrangement in New Delhi in 2019 as well.
Kumaraswamy has tried his best to please the farm sector but it is unlikely that everyone will be happy. By fixing the loan waiver upper limit at Rs 2 lakh per farming family, Kumaraswamy has made it clear that he wants to help the small and marginal farmer who, in most cases, would be either a tenant farmer or someone with very small landholding.
And as is the case with most farm loan waivers, it applies only to institutional credit — which means loans borrowed from private moneylenders will not be waived.
This decision was taken based on National Crime Records Bureau (NCRB) data released in 2017 that showed that though local moneylenders are portrayed as instrumental in pushing indebted farmers to suicide, 80 per cent of farmers killed themselves in 2015 due to inability to repay loans borrowed from banks or microfinance institutions.
The reason is that banks are usually inflexible with regard to delaying repayment dates while the moneylender, who is many a time a relative or a neighbour in the village, is more adjusting if he is promised a further hike in the rate of interest.
In order to ensure the waiver does not discourage the non-defaulting farmer, the government will credit the repaid loan amount or Rs 25,000, whichever is less.
But what is most certain to happen is that farmers will now expect the next tranche of loan waiver in the next budget in February-March and that may make several farmers default on payments. PSU banks with huge exposure to farm loans feel this will not help the credit culture and are only hoping the government will reimburse their money within this fiscal.
Siddaramaiah initially was not in favour of Kumaraswamy presenting a full budget because the former CM perhaps felt it would steal the thunder from his February budget and also perhaps cut funds for the welfare schemes of the previous Congress government.
But barring the tinkering with the quantity of rice, Kumaraswamy has not taken anything away from the Congress budget. In fact, he has decided to add another 247 Indira canteens at a cost of Rs 211 crore, in order to please his coalition partner.
It is obvious this is an election budget. The focus is clearly on rural Karnataka and Bengaluru city, where the Congress-JD(S) will hope to wrest seats from the BJP. Among other sops for the capital city, the budget promises to build a peripheral ring road around Bangalore for Rs 11,000 crore and six elevated corridors for Rs 15,800 crore.
Perhaps keeping the JD(S) stronghold of south Karnataka in mind, the budget goodies seem skewed in the region's favour. Among other projects, Mysore city will receive Cauvery water, Mandya will get Rs 50 crore package to develop the city, Chikkaballapur will get a science centre and a silk trading centre will be set up in Mysore.
A film university for Rs 30 crore will also be set up in Kumaraswamy's constituency, Ramnagara on the outskirts of Bangalore. No one will grudge film producer-turned-politician Kumaraswamy's choice of place because Ramnagara after all is Sholay territory, where Ramesh Sippy's iconic film was shot in the 1970s.
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