Bengaluru: Karnataka Chief Minister H D Kumaraswamy has kept his election promise and waived off farm loans of Rs 34,000 crore in the maiden budget of the Congress-JD(S) coalition.

Kumaraswamy, who also holds the finance portfolio, said in his budget speech that he had decided to write off defaulted crop loans of farmers made up to December 31 last year in the first stage.

"Apart from this major announcement, to help farmers who repaid the loan within time, as encouragement to the non-defaulting farmers, I have decided to credit the repaid loan amount or Rs 25,000, whichever is less, to each of the farmers account," he said.

Explaining what made him limit the loan waiver amount to Rs 2 lakh, Kumaraswamy said, “Larger holding farmers have loans of Rs 40 lakh. It is not right to waiver higher value crop loan. So I have decided to limit the loan amount to Rs 2 lakh. Total benefit to farmers form all this will be Rs 34,000 crore.”

But the families of government officials and officials of cooperative sector who own farm lands are not eligible for this waiver. Farmers who have paid Income Tax for the last three years are also not eligible.

Kumaraswamy said he was planning a “compete with China” scheme. “A programme mission unit will be established to compete with Chinese made goods, spare parts will be manufactured at village level and assembled at taluk level. Malls will be established for these goods,” he said.

The CM also unveiled a plan to develop various towns into industrial hubs. “Chitradurga will be developed as LED light hub, as a lot of LED lights are being imported from China now,” he added.

Hassan will be developed as a bath-floor tiles and sanitary goods manufacturing district. Koppal will get a cluster to manufacture mechanised toys which will compete with Chinese toys. Mysore will be developed ICB manufacturing hub in Mysore (80% of ICB chips are currently imported from Taiwan). Industry of mobile phone components to be established in Chikkaballapur district that will focus on separating original components from old phone.

During his poll campaign, Kumaraswamy had promised to waive off all farm loans if the JD(S) was voted to power. After he formed the coalition government with the Congress in last May the loan waiver had become a major bone of contention between him and the Congress.

Fearing that the loan waiver credit would go to the minor party which leads the government, former CM Siddaramaiah had openly opposed it. After several rounds of talks and a JD(S)-Congress coordination committee meeting. the Congress had agreed to loan waiver.

The opposition BJP which had also promised loan waiver and demanded that Kumaraswamy walk the talk by writing off farm loans immediately.

Since the state finances are not really in a very good shape, Kumaraswamy had to burn the midnight oil to arrange the huge money required to keep the poll promise. The JD(S) and the Congress feel that loan waiver will help them in the 2019 Lok Sabha polls.

Last year, Siddaramaiah had waived off farm loans up to Rs 50,000.