The Maharashtra government may have ended the farmers' protest in the state by announcing a loan waiver but the road ahead for Chief Minister Devendra Fadnavis and his administration is not easy. Union Finance Minister Arun Jaitley has made it clear that the Centre will not help the states' fiscal leverage in waiving farm loans and that the cost of loan waiver has to be borne by the states.
While Maharashtra’s public debt stock was estimated to touch Rs 4.13 lakh crore in 2017-18, the loan waiver will push the amount further up. The state’s debt stock was Rs 3.71 lakh crore in 2016-17, up from Rs 1.6 lakh crore in 2008-09.
According to initial estimates, the loan waiver will put an additional burden of at least Rs 30,000 crore on the state exchequer. The Maharashtra government will have to provide Rs 1.14 lakh crore to write off the entire loan burden of all 1.36 crore farmers in the state though a cap on the benefit of the waiver up to Rs 75,000 to Rs 80,000 will minimise the burden.
Here is how Maharashtra government plans to fund farm loan waiver scheme:
Cap and criteria on benefits
The government is considering other criteria to minimise the amount of loan waiver. State minister Chandrakant Patil hinted yesterday that "rich farmers" will not be provided the benefits of the loan waiver. He, however, clarified that the scheme would not be linked to the size of the farmers' land holding.
Maharashtra Finance minister Sudhir Mungantiwar yesterday said the government would appoint a committee comprising farmer leaders and government officials, which would work out the eligibility criteria and then arrive at the quantum of loan waiver package.
The high-level committee to implement the scheme will decide on the criteria of debt relief.
Convince banks to stagger loan amounts
The state government is looking to rope in banks to stagger the loan amounts over the next five years so that the yearly burden is reduced to Rs 6,000 crore. According to a report in the Hindustan Times, a senior minister said that the government will give banks the guarantee in the form of bonds with future validity, an idea agreeable to financial entities.
Additional tax revenue
Mungantiwar said that the state's income is set to rise by Rs 14,000 crore after the Goods and Services Tax (GST) comes into effect from July 1. Besides this, the government could also plug the leakages to collect taxes as its fullest capacity.
There is very little scope of raising taxes to fund the scheme as the state has reached a saturation point on this front.
Mungantiwar said the government can raise additional funds through raising non-tax revenue (NTR), which is generated out of fines, government fees and other charges. At present the government NTR income is Rs 16,000 crore, which it intends to raise to Rs 26,000 crore, he added.
The HT report quoted a minister as saying that there is huge potential of revenue from land monetisation. The redevelopment of a Bandra colony owned by the government may fetch us Rs 10,000 crore in the near future, the minister said. Leased properties in Mumbai and its suburbs could also generate huge revenue.
Unutilised funds from govt bodies
Mungantiwar also pitched the idea to fund the loan waiver scheme by using the unutilised funds from government bodies.
"The Mumbai Metropolitan Region Development Authority (MMRDA) has about Rs 16,000 crore of unutilised funds and City and Industrial Development Corporation (CIDCO) has about Rs 40,000 crore of such funds," he said.
However, the government faces many other challenges and the implementation of the Seventh Pay Commission is among them.
Sources in the finance department said that the government will have to weigh in the factor of allocation for the arrears of Seventh Pay Commission. Sources added that the amount would be around Rs 15,000 crore and the arrears are payable from January 2016.