Mumbai: As pressure rises from allies and opposition parties to help drought-affected farmers in Maharashtra, the Bharatiya Janata Party-led state government is planning a 10,000 crore relief package that includes both short-term and long-term measures.

A senior government official, who did not wish to be named because the legislature is in session and the government has not yet announced the plan, said the package would allocate more money for some of the existing schemes and raise direct monetary compensation to farmers.

Chief minister Devendra Fadnavis, who has refused to waive farm debt, may announce this package during the ongoing winter session, the official said.

This official also said the state government may have to raise value-added tax (VAT) on some items by 1-2 percentage points to finance this package. VAT in Maharashtra is currently capped at 12.5%.

In September, the state government increased VAT on liquor, diamond jewellery, gold and soft drinks and imposed a surcharge of 2 per litre on petrol and diesel, to raise 1,600 crore for the government’s drought relief measures.

“VAT on different items is in the range of 1% to 12.5% in Maharashtra. In states like Karnataka and Andhra Pradesh, many items including tobacco products and aerated drinks are taxed at more than 15% and there is also surcharge on automobile fuel. Maharashtra still has some leeway to increase VAT on some items," the official said.

The state government is under immense pressure from the opposition Congress-Nationalist Congress Party alliance and ally Shiv Sena to write off farm debt. Fadnavis has so far resisted the pressure, insisting debt waiver is not a long-term solution.

However, a protest march organized by the Congress in Nagpur during the ongoing winter session and a similar demonstration by Shiv Sena on Monday seem to have forced the government to think of alternatives to debt waiver.

“Debt waiver is still not on the agenda, but there are some alternative measures which cost much less and which can provide short- and long-term relief," a senior BJP minister said.

He said several BJP legislators have demanded debt waiver but have also conceded that it may not be economically feasible.

“The BJP legislators are saying that at least interest on farm debt should be waived off in Vidarbha," the minister said.

In October, when the government declared drought in 14,708 villages in the state, it waived interest on farm debt in these villages.

“The government is bearing a burden of 1,200 crore on account of this relief. Recovery of debt in the drought-hit region has been stayed and loans have been restructured to ensure that farmers have relief during the drought period," another senior official said on condition of anonymity as he is not authorized to speak on the issue.

The package being discussed may include measures like increase in direct financial compensation to farmers, expansion of the crop insurance scheme, farm debt interest waiver or stay on recovery of interest, and loan restructuring.

Of the 14,708 villages declared drought-affected, more than 13,000 are in Marathwada and North Maharashtra regions. The state is planning to extend similar benefits to Vidarbha region also and estimates that it would cost at least 10,000 crore.

“The state government is already implementing the 8,000 crore farm package declared in 2014. But we had not officially declared drought in 2014 and the farm situation has worsened this year, leading to rural distress," said the first government official cited earlier. “We need to implement short- and long-term measures, which may cost more than 10,000 crore."

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