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Not an election sop: Chidambaram

P. Chidambaram

NEW DELHI: Finance Minister P. Chidambaram on Saturday conceded that the challenge thrown to Opposition members who were dubbing the Rs. 60,000-crore farm loan waiver programme proposed in the Union Budget for 2008-09 as an election sop “to stand up and be counted and not duck the issue” was, in fact, a political one.

“It is…,” said Mr. Chidambaram in an exclusive interview with The Hindu when asked whether the challenge itself was not a political statement. “You cannot ask for a scheme of relief to the farmer until Thursday and then on Saturday crib about what have been done or try to find fault in what has been done. You ought to stand up and be counted. We have done this for the farmer consciously, deliberately and with full knowledge about the consequences and the burden.”

Explaining how the scheme is to be implemented, he said: “Having done it, it is my responsibility to ensure that adequate and equivalent liquidity is provided to the banks over a period of time and, I say that again, I will provide the liquidity to the banks over a period of time. That is why the banks have welcomed this.”

Admitting that providing liquidity to the banks was not the same thing as wiping out their non-performing assets (NPAs), Mr. Chidambaram noted that there were various classifications and said: “We will sit with the banks and find ways and means to provide adequate and equivalent liquidity.”

On the criticism that the loan waiver could hit at the root of the rural credit structure and farmers who had paid off their debts could feel cheated, Mr. Chidambaram countered: “Why did the critics not raise this issue when the demand was being made. It is always expo-facto that you can crib about a few things. My view is that the farmer is an honourable person, if he has the capacity to pay, he will pay. It’s because he does not have the capacity to pay … he is in debt, he is not being provided further credit, he is being driven to the [private] moneylender and so he sinks further into debt.”

“Looking at this, the government came to the conclusion that we might do a one-time debt waiver for the small and marginal farmer, let him start on a clean slate, provide him fresh credit. Why assume that the farmer is not an honourable person?”

Mr. Chidambaram made it clear that he could do precious little for the farmer who has borrowed from the private money lender. “What can I do about that? Can anyone quantify how much he has taken. The point is we can do what is doable. There’s no point picking the undoable against the doable and then say don’t do the doable. That’s a very strange argument.”

The Finance Minister, however, made it clear that farmers stuck with private debts could go in for a debt swap. “Of course, he can go in for a debt swap that was allowed as part of the June 2004 package. I encouraged farmers who have taken money from moneylenders to come to the bank, take a loan and pay off the moneylender. It is part of the June 16, 2004 package.

On the issue of not leaving a provision for hikes in salaries following the Sixth Pay Commission’s recommendations, Mr. Chidambaram pointed out that he had already provided for the normal increase that are to accrue to government servants in 2008-09. “It is the increment that has to be provided for. And for that, either I can depend on additional revenue or I have to overdraw.”

Evidently, Mr. Chidambaram has left “headroom” by way of a 0.5 per cent cushion in the fiscal deficit target. Instead of the target of three per cent of the GDP in 2008-09, he has budgeted for 2.5 per cent. That cushion of nearly Rs. 27,000 crore would come in handy.

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