The much-hyped loan-waiver promise made by Andhra Pradesh Chief Minister N Chandrababu Naidu is turning out to be too costly political gimmick to be implemented.

Reports suggested that the new Government was actively considering issuing bonds to banks against the loan dues. However, this is not likely to happen as the Reserve Bank of India (RBI) is unwilling to grant permission for the State Government to issue any fresh bonds for the purpose as the state finances are already over-leveraged.

RBI Governor's stand

Though the Government has put up a brave face stating it would convince RBI, its Governor Raghuram Rajan is likely to take a very tough stand on the issue.

According to reliable sources, bankers have almost indicated to him, in the series of meetings Naidu had with bankers, including the one held today, that there was no way to execute the scheme in its original shape.

There are diverse reasons why it cannot be implemented completely. Bankers said that there had been a massive intake of loans in the last three years after Naidu began to talk on loan waivers as a run-up for poll campaign.

Crop, gold loans

The number of crop loans, which aggregates over Rs 1.07 lakh crore, far outnumber the number of farmers clearly indicating multiple loans in each farmer’s family instead of one loan that it is eligible.

The same is the case with gold loans. That one family had taken a total of 13 gold loans, totalling Rs 4.5 crore, in a leading bank indicates the enormity of the problem.

CM's suggestions

However, the Chief Minister has been offered some suggestions to tweak the offer. First, weed-out all ineligible farmers and limit the debt waiver applicable only to one loan per family. This would limit the liability to around Rs 30,000 crore.

Secondly, offering a new scheme with crystallising the liability. Government passbooks can be given to farmers with a credited amount of Rs 1 lakh which can be utilised by the farmers in a phased manner, say Rs 20,000 or Rs 25,000 per year against their expenses on fertilisers and other inputs.

However, the tough part of the option is that all farmers and self-help groups would have to pay their loans first to get fresh loans which might trigger agitation and political criticism.

But if the promise was to be restricted to Rs 1 lakh benefit like a post-dated cheque, Naidu can later claim that it was honoured in a different way. The burden for the State exchequer would be lesser than Rs 10,000 crore per annum which could be managed, it has been suggested.

Panel report

The committee formed by the State Government to decided on the modalities of loan-waiver is keen on coming up with a first report by this week-end after a final meeting with the bankers and officials later this week.

In Telangana, however, it might be easier to do this as the State Government is in a position to foot the expected Rs 19,000 crore burden of promised waiver on its own.

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