Now reports suggest that Karnataka has waived farmer loans worth Rs 8,167 crore.
Karnataka is now the fourth state to announce farm loan waiver program following Uttar Pradesh, Maharashtra and Punjab.
Following pressure from farmer groups, the state government on Tuesday made a decision to revise the criteria under which the Rs 10,000 loan advance will be given to prepare for the upcoming agricultural season.
He demanded the Modi government at the Centre to emulate the state government by waiving farm loans obtained from nationalised banks, as done to by the Manmohan Singh government in 2008.
"While loan waivers may give temporary relief to farmers and boost rural consumption, funding of the same would likely worsen the fiscal deficit and leverage levels of the state governments, unless additional resources are mobilised or other expenditure is controlled", credit rating agency ICRA said.
Normally, you would see the impact in the first few days itself and we have not seen any impact in UP and Maharashtra, said Rao.
Earlier in June, the Reserve Bank of India governor Urjit Patel had said that unless the budgets of the state governments allow the fiscal space to waive off loans, it would be a risky path to tread on. Many other states charge for electricity from farmers, whereas in Karnataka, the government pays on behalf of the farmers.
If the Central government does indeed accept the proposal and tell banks to waive farmer loans, it would mean a bigger financial burden for the Central government, which would have to foot the bill. One of the condition was that farmers with four wheelers will not be eligible for the advance loan, This norm has been revised and to say that farmers own who any vehicle up to Rs 10 lakh will be eligible for this instalment.
He added that the Centre will now have to come to the rescue of farmers by waiving the loan obtained by them from nationalised and grameenbanks.
"Farmers have no money to repay loans (above Rs 50,000) to avail fresh crop loans during the current kharif season". I have always said if the Centre is ready to bear half the cost of loan waivers, the state will bear the rest of the amount.