'Interest waiver on farm loans a farce'

By Our Special Correspondent

BANGALORE, JULY 3. The floor leader of the Janata Dal (United) in the Legislative Assembly, Mr. P. G. R. Sindhia, and the former Minister for Cooperation, and MLA, Mr. S. S. Patil, today said that the recent announcement by the State Government on waiver of interest on farm loans was a `farce.'

They told presspersons here that the announcement by the Cooperation Minister, Mr. D. K. Shivakumar, was a publicity gimmick since the total interest due on the farm loans did not amount to Rs. 252 crores as made out by the minister. The total penal interest due on the farm loans was Rs. 4.60 crores. Obviously, this was the amount that the Government had decided to waive. ``It is possible that the primary bank officials have misled the Cooperation Minister.''

Mr. Shivakumar had stated that the Government would waive the compound and continuing interest on farm loans which amounted to Rs. 252 crores if the farmers repaid the principal along with simple interest within a month from June 27. The farmers had obtained these loans from the Karnataka State Cooperative Agricultural and Rural Development Banks and it was said that the cooperative land banks would make up for the waiver of interest.

Mr. Sindhia and Mr. Patil said the cooperative banks, under the relevant Act, could not charge compound interest or continuing interest as made out by the minister. They could only charge a penal interest on the farm loans if repayment was delayed. Thus, farmers did not owe interest of Rs. 252 crores to the cooperative banks. The banks charged simple interest of 14.5 per cent on farm loans and a penal interest of 2 per cent.

Mr. Patil said the then State Government had waived interest (simple and penal interest) on farm loans in 1995 and had paid up Rs. 136 crores to the land banks and the Apex Bank which had given the loan to the farmers. Despite being given six months, only around 78 per cent of the loans given by the Apex bank was repaid, while the land banks received only around 42 per cent. Thus, the Government's direction to the farmers to avail themselves of the discount within a month would not work.

Referring to the Government's move to waive the interest on farm loans at the cost of the cooperative banks, Mr. Patil said most of the primary land banks and the Apex Bank were themselves running at a loss. The gap between advances and recoveries was over Rs. 600 crores and, along with the present scheme, the banks would end up with a loss of over Rs. 850 crores. The already weak land banks would be liquidated in a short time.

He said the previous Government had come up with a proposal for one-time financial assistance to help the cooperative banks. Under the scheme, the growing gap between advances and recoveries (over Rs.600 crores) would be made good by the Union Government (70 per cent) and the State Government (30 per cent). There was another proposal that the cooperative banks concerned should also participate with a payment of 10 per cent. ``This scheme was not followed up by the present Government and, consequently, there has been no move by the Centre to assist the primary land banks and the Apex bank. The Centre set up a fund of Rs. 3,500 crores in the last budget to help the primary banks and even now it is not too late for the State Government to revive the proposal,'' he said.

Mr. Sindhia, referring to the ``Antyodaya Anna Yojana'' scheme launched by the Centre and the State Government, said it was yet another ``fraud'' on the poor people. The rice sold by the ration shops under the Public Distribution System was not merely of poor quality but its price was almost the same as the price in the open market.

Mr. Sindhia said the State Government was yet to announce a concrete plan to tackle the crisis arising out of the failure of the monsoon in most parts of the State. It had not even sent a report to the Union Government in this connection.

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