The Hindu Business Line : Farm debt waiver: Banks to get two thirds in cash

New Delhi, March 14 About two-thirds of the Rs 60,000 crore farm loan waiver announced in Budget 2008-09 would be reimbursed to lending institutions in cash by August 2009, which is within 14 months of the 36-month period over which the lenders are to be compensated, the Union Finance Minister, Mr P. Chidambaram, said in Lok Sabha today.

Winding up the discussions on the Budget, Mr Chidambaram put up a spirited defence on the debt waiver scheme. “The financing package is largely frontloaded. As much as Rs 25,000 crore will be disbursed to lending institutions in July-August 2008 and another Rs 15,000 crore in June-July 2009,” he said.

In terms of the lending institutions, an estimated 55 per cent of the package would be to borrowers from cooperative institutions, 35 per cent to borrowers from scheduled commercial banks and 10 per cent to borrowers from RRBs.

Sources of funding

Indicating the hierarchy of the means of finance for the debt waiver package, Mr Chidambaram said that the sources of funds to the Government are tax revenues; non-tax revenues i.e dividends, interests, royalties and fees; non-debt capital receipts i.e recovery of loans and advances, premium on sale of sequestered assets and initial listing of public sector enterprises, and finally additional borrowing, if necessary.

“We should be able to finance the package through the regular budget in each year out of the buoyancy in tax revenues alone. If that is not sufficient, we can tap non-tax revenues and non-debt capital receipts in that order. Finally, if even that is not sufficient, there will be enough headroom for the Government to borrow. This, however, will be the last resort,” Mr Chidambaram said.

Noting that he has already provided Rs 10,000 crore in the third supplementary this year —what he called as year zero, Mr Chidambaram said that, after taking into account what has been provided in year zero, he would immediately after June 30,2008 disburse Rs 25,000 crore in cash as soon as the first supplementary for 2008-09 is approved by Parliament. In budget 2009-10, about Rs 15,000 crore would be provided, followed by Rs 12,000 crore in budget 2010-11 and Rs 8,000 crore in budget 2011-12.

Later, the Lok Sabha passed the relevant appropriation Bill (vote on account) for authorizing sum of Rs 4,39,219 crore towards defraying several expenditure that might come up during fiscal 2008-09. The House also passed appropriation Bill for current financial year amounting to Rs 1,40,378 crore for payment of various expenses.

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Mechanics of farm loan waiver
‘Loan waiver not to hit banks’

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