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Wednesday, Aug 21, 2019

States struggle to fulfill loan waivers

Ten states have announced waivers since 2014, the year that the BJP-led National Democratic Alliance assumed office at the Centre. Some states, such as Rajasthan and Chhattisgarh (under both Congress and BJP regimes), have offered multiple waivers.

india Updated: Jan 03, 2019 23:54 IST
Zia Haq
Zia Haq
New Delhi
Some states, such as Rajasthan and Chhattisgarh (under both Congress and BJP regimes), have offered multiple waivers.
Some states, such as Rajasthan and Chhattisgarh (under both Congress and BJP regimes), have offered multiple waivers.(HT File Photo)
         

The debate over whether farmers benefit from populist agricultural loan waivers has reached a tipping point: Punjab Congress party chief Sunil Jakhar arrived in Parliament Wednesday, carrying loads of documents to prove that over 400,000 poor farmers had become debt-free in Congress-ruled state.

Jakhar sought to counter Prime Minister Narendra Modi’s views, aired in an interview to ANI on Tuesday, that farm loan waivers were an “electoral stunt”.

On December 27, a PTI report quoted Modi as telling a rally in Himachal Pradesh that Punjab’s farmers had got next to “nothing” from the Congress’s loan waiver.

 

Modi’s comments followed the Congress wresting power from the ruling Bharatiya Janata Party (BJP) in the key states of Madhya Pradesh, Rajasthan and Chhattisgarh in the latest round of state elections after a campaign in which the grand old party offered farm loan waivers within 10 days of coming to power to address agrarian distress caused by a glut in production and a consequent decline in prices of key commodities.

Rajasthan Congress president Sachin Pilot Thursday said Congress chief Rahul Gandhi will be visiting Rajasthan and address a farmers’ rally in Jaipur on January 9. This will be his first visit to Rajasthan after assembly polls.

“Our government in Rajasthan waived off farm loans in two- days. We will create pressure on central government, when former PM Manmohan Singh and UPA chairperson Sonia Gandhi could, why can’t BJP?” he said.

Ten states have announced waivers since 2014, the year that the BJP-led National Democratic Alliance assumed office at the Centre. Some states, such as Rajasthan and Chhattisgarh (under both Congress and BJP regimes), have offered multiple waivers.

Total agricultural loans until October 2018 stood ~10.5 lakh crore. Waivers since 2014-15 account for 23% of this.

This is higher than the nearly Rs 53,000 crore in farm loans waived during 2008 by the previous Congress-led United Progressive Alliance (UPA) government, which was 18% of the total outstanding farm loans at the time.

There are broadly two yardsticks to assess whether these loan waivers benefit farmers, analysts say. While a one-off waiver may be necessary during a severe farm crisis, evidence shows that merely waiving loans or offering farm subsidies do little to bring people out of poverty traps, most economists argue .

Nearly all loan waivers, irrespective of whether they were in Congress- or BJP-ruled states, came with a lot of conditions and riders. Most states are writing off loans in a phased manner to dissipate their financial impact, which means thousands of farmers are yet to benefit.

In Congress-ruled Punjab, Jakhar claimed that loans of 4,14,285 farmers had been waived. In June 2017, the Punjab government signed off on a Rs 10,000-crore loan waiver. The Punjab CM had said on January 18 last year, 1.02 million farmers were being covered. An official at Punjab’s agriculture directorate, who requested anonymity, said that so far about Rs 3,500 crore or 35% worth of loans (owed by 0.42 million farmers) have been waived.

According to riders specified in Punjab’s package, small farmers with land of between 2.5-5 acres will not get any waiver if their outstanding loan was over Rs 2 lakh. This rule spares farmers owning less than 2.5 acres.

BJP-ruled Maharashtra is struggling too. Its ~34,000-crore package also has riders. Only loans of up to Rs1.5 lakh, with a household as the unit, were to be waived. This upset farmers because many households had separate land-holdings with multiple loans. According to an HT report of May 11,2018, CM Devendra Fadnavis ticked off banks for messing up the waiver’s implementation. According to the latest official figures, Maharashtra has waived Rs16,980 crore — or 49% — of the promised ~34,022 crore of farm loans.

Amra Ram, a leader of the Rajasthan All India Kisan Sabha, told HT that the previous Vasundhara Raje government’s loan waiver of up to Rs 50,000 per farmer was never completed.

HT could not independently obtain figures for other states.

Benefits of waivers or subsidies are short-lived, evidence shows. According to calculations by economist Ashok Gulati, every Rs1 invested in farm research and development (R&D) boosted farm income by Rs 11.2.

A similar amount spent on fertilizer subsidy added only Rs 0.88 to farm GDP.

First Published: Jan 03, 2019 17:32 IST

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