Farm loan waiver triggers state wars

NEW DELHI: Even before the modalities on the planned distribution of farm loan waivers could be announced, a political tug-of-war has started between some states on who���ll get the maximum share. The three state governments in question ��� Punjab, Haryana and Tamil Naidu ��� have sent an informal request to the finance ministry, demanding a larger share of the pie in the recently announced Rs 60,000-crore relief.

According to sources in the finance ministry, while the Haryana government has asked for an immediate allocation of Rs 1,000 crore, Punjab and Tamil Naidu are demanding Rs 2,000 crore and Rs 5,000 crore respectively from the announced corpus. ���The ministry has received communication from these state governments and they���re under consideration,��� a finance ministry official told SundayET.

The states have also sought clarification on how it will affect similar state loan waiver schemes. Notably, the Tamil Naidu government in May 2006, waived loans to the tune of Rs 7,000 crore and Haryana government had announced a package of Rs 850 crore, in which the interest was waived for all farmers. ���It looks like that the state governments wants to combine their own state schemes with the announced loan disbursement,��� the finance ministry official said.

A Tamil Naidu state official, however, differed and said that the waiver the state government had announced was meant only for co-operative banks and for all farmers. However, in the present budget the small and marginal farmers are the major beneficiaries. A senior Haryana government official confirmed that the state has sent an informal request and said that they are currently studying the budget proposal. ���It will be too early to draw conclusions,��� he said.

Meanwhile, the Punjab government has also set up a committee to study the implications of the farm loan waiver scheme. The committee, headed by Punjab chief secretary Ramesh Inder Singh will study the implications of the debt waiver scheme for farmers.

The announced waiver is said to be for Rs 50,000 crore worth of loans owed by small and marginal farmers (farmers who own below two hectares of land) and a settlement scheme for other farmers that would amount to another Rs 10,000 crore. Recently, the Reserve Bank of India (RBI), extended its support and help to the government in implementing the scheme in a manner that would strengthen the banking system rather than weaken it.