And how will the government generate revenue to waive these loans? It has hiked fuel, electricity, excise and alcohol rates.

Karnataka Budget HDK announces farm loan waiver of 34K crores but conditions apply
news Karnataka Budget 2018 Thursday, July 05, 2018 - 13:12

Karnataka Chief Minister HD Kumaraswamy announced a conditional waiver of farmer loans, setting aside Rs 34,000 crore in the first Budget presented by the JD(S)-Congress coalition government at the Vidhana Soudha on Thursday.

However, the waiver of loans comes with some conditions attached to it. Only loans up to Rs 2 lakh per farming family will be waived, CM Kumaraswamy, who also holds the finance portfolio in the state, announced. Moreover, the waiver is only institutional credit -- loans taken from private moneylenders will not be waived.

The reason behind this, he explained, was that after speaking to concerned people in the agricultural sector, he found that large landholding farmers had taken loans as high as Rs 40 lakh. “In this background, as per the opinion of the farming community that it is not right to waive higher-value crop loan, I have decided to limit the loan amount to Rs 2 lakh. Due to this crop loan waiver scheme, farmers will get the benefit of Rs 35,000 crore,” the Budget text read.

Kumaraswamy also revealed that all defaulted crop loans up to December 31, 2017, will be waived. "I have decided to waive all defaulted crop loans of farmers up to 31 December, 2017, in the first stage. Farmers who repaid the loan within time, as an encouragement to the non-defaulting farmers, I have decided to credit the repaid loan amount or Rs 25,000 to them, whichever is less," he said.

He added that this waiver came even as his government decided to continue with the pro-farmer schemes announced by the previous Siddaramaiah-led government.

The announcement to waive loans came as no surprise since Kumaraswamy had promised before the Assembly polls to waive loans farmers within 24 hours of coming to power. The Opposition BJP was quick to point out that he hadn’t upheld this promise after coming to power - to this, Kumaraswamy said that coalition compulsions were the reason behind the delay.

In his first action as Chief Minister, Kumaraswamy convened a meeting of farmer group leaders from across the state on May 30 to discuss the waiver of loans. He had announced that a two-phase loan waiver scheme will be implemented soon.

But how will the state generate enough funds to waive these loans?

The government has hiked the fuel rates - petrol is up by Rs 1.14 and diesel by Rs 1.12. The tax on fuel rates is up from 30% to 32%, and diesel from 19% to 21%. The power tariff is also up by Rs 20 paise per unit. Tax on Indian-made liquor has also gone up by 4%.

The Budget also proposes an increase of 50% in Motor Vehicle Tax for private service vehicles. The taxation on energy has been increased by 3%.

The government has increased the Additional Excise Duty on Indian-made liquor (IML) in a bid to generate funds for waiving off farm loans. Now, a carton of IML can cost up to Rs 130 more than what it was.

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