New Delhi: The Centre has no plan to waive farm loans, said reports on Thursday. In a written reply in the Lok Sabha to Shiv Sena MP Bhavan Gawali Patil, Union Minister of State For Agriculture Parshottam Rupala said, “the Union government at present is not considering any loan waiver scheme for farmers.” (Also read: Rahul Promises Farm Loan Waiver)Also Read - Google, Facebook, Twitter Under Centre's Radar Again Over Anti-Competitive Practices

This was in complete contradiction of the earlier reports that the Narendra Modi government would be waiving farm loans. The Government said it was not considering any loan waiver scheme as it would affect the credit culture, incentivise defaulters, create a moral hazard and perpetuate demands for further waivers. Also Read - Explained | Why India Is Facing Coal Shortage And How It Affects Power Supply?

Earlier, a Reuters report had reported that the Centre was likely to announce loan waivers worth billions of dollars to woo millions of farmers ahead of a general election. Citing sources, it said the Government might waive loans after the BJP’s debacle in Assembly elections. Also Read - ₹18,000 Crore Returned To Banks From Vijay Mallya, Nirav Modi, Mehul Choksi: Centre Tells SC

Sources also said that to curry favour with India’s 263 million farmers and their dependents, the Centre would begin chalking out the plan to allocate funds for waiving of loans.

With the Lok Sabha elections due by May 2019, the Centre doesn’t have much time to announce other popular measures; such as raising the support, or guaranteed, prices for staples such as rice and wheat, farm analysts said.

However, a holistic or selective farm loan waiver could be the “worst solution” to alleviate farmers’ distress, warn economists at SBI Research.

Instead, they suggest that income support schemes might be a more effective alternative and bold steps were needed to address rural distress.

“Considering the farm distress and the lower food inflation resulting in lower revenue generation for the farming community, the Central government may decide on a farm debt waiver scheme, holistically or selectively in some states,” the report said.