Bangaluru: Karnataka chief minister H.D. Kumaraswamy on Thursday announced an increase in the incentives given to farmers who have repaid loans taken from cooperative societies from 25,000 to 1 lakh.

The increase of incentives, which appears to be a step to include large farmers, has increased the total farm loan package by around 5,000 crore and taken the total to around 40,000 crore, including pending amount of the previous loan waiver announced by his predecessor.

There are more than 4.3 million farmer loan accounts, of whic amounting to over 48,090 crore, Kumaraswamy said. Of this, the government had promised to waive overdue amounts of more than 1.473 million farmers amounting to 22,095 crore, he said.

However, the chief minister, whose three-hour-long speech was inconsistent with his earlier farm loan waiver guidelines, failed to answer how the government would fund the waiver. His move to accommodate more beneficiaries and dole out higher incentives without addressing key aspects like specifying the source of the funds for the waiver and the exact impact, has thus thrown up more questions than answers.

The state cannot raise debt to pay off farmer loans and will have to squeeze existing revenue generating sources to fund the waiver.

The coalition government is now hoping that nationalized banks, with who they will meet on 24 July, will help them save more by waiving non-performing assets (NPAs) as well as interest on outstanding loans that amount to a few thousand crore.

On 5 July, the Kumaraswamy government had announced that it will waive 34,000 crore worth of farm loans, over the next four years, made up to 31 December 2017 with a limit of 2 lakh per family. The government had added that in the first year, the amount waived would be 10,500 crore and all other eligible farmers would be given “debt-free certificates" to help raise fresh credit. The loan waiver came under heavy criticism as it was alleged to be more favourable for south Karnataka, the Janata Dal (Secular), or JD(S), bastion, with focus on specific districts.

“The figures for the divisions of the state stand at 9,501 crore for farmers from the Belagavi division, 7,454 crore for Bengaluru division, Rs5,563 crore for the Kalburagi division, and Rs6,760 crore for the Mysuru division," the chief minister said, while trying to debunk opposition claims of neglect of north Karnataka, which is home to the second most arid regions of the country with widespread poverty and virtually no irrigation.

“The exact burden (of the farm loan waiver) will be known only at the end of the year," said a senior official in the state finance department, who requested not to be named.

The Kumaraswamy government, which has fallen short of its election manifesto promise of waiving 53,000 crore loans, has come under fire from the opposition which demanded to know the source of funds for its farm loan waiver scheme and also if the government had the approval of the Reserve Bank of India to issue “debt-free certificates" to farmers to raise fresh credit.

Detractors also claim that the increase in incentives seems targeted at benefiting farmers with large land holdings. According to the official quoted above, at least 50% of the total borrowing is in amounts of less than 25,000. “It was felt that the move would not help the cooperative sector much," the official said, adding that this category includes more than 2.2 million farmers. However, the incentive given to commercial bank borrowing remains 25,000.

Kumaraswamy also decided to retain the seven kilograms provision given to poor beneficiaries under the Anna Bhagya (free rice) scheme announced by his predecessor.

Former chief minister Siddaramaiah had shot off a letter to Kumaraswamy asking him to retain provisions of Anna Bhagya and also roll back the 2% additional taxes on petrol and diesel. Kumaraswamy did not roll back the fuel tax increase.

The chief minister said that he will announce all other programmes that were included in the JD(S) election manifesto in the coming days.

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