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Uttar Padesh’s farm loan waiver opens Pandora’s box

BJP government faces uphill task as it cannot impose new tax, get funds from the Centre.

lucknow Updated: Jun 14, 2017 14:04 IST
Pankaj Jaiswal
Pankaj Jaiswal
Hindustan Times, Lucknow
Farm loan,BJP government,Uttar Pradesh
UP government is already facing a tough time in arranging finances to roll out the waiver.

The pre-poll promise by the Bharatiya Janata Party (BJP) and the subsequent cabinet decision to give farm loan waiver in Uttar Pradesh has opened a Pandora’s box across the country.

Uttar Pradesh, which has given a fillip to loan waiver demands in Madhya Pradesh and Maharashtra, itself faces a difficult road ahead.

The UP government is already facing a tough time in arranging finances to roll out the waiver. Even if the government executes the cabinet decision, it will have to face the ire of the farmers and the opposition for shrinking the scope of its promise.

Officials of finance, institutional finance and agriculture departments are putting their heads together to find out ways to arrange money for the scheme. The task has become tougher as the Union government will not fund the loan waivers declared by the states, and the state government will also not be able to impose any new tax or cess as the GST will come into force from July 1.

Additional chief secretary Anup Chandra Pandey, who also heads the finance department, said the officials were working out a plan and budget for the waiver scheme.

The UP government had announced the waiver of a staggering Rs 36,000-crore loan in its first cabinet meeting on April 4.

Development economist and retired director of Giri Institute, Lucknow, Dr AK Singh said: “UP government has limited budgetary choices. As the options of central funding and new taxes are closed, there is hardly any way out other than public borrowing and going in for extreme austerity measures to cut government expenses.”

“Most economists say loan waiver is not a solution but only a temporary relief. I also believe this. Look at the Madhya Pradesh where farmers’ agitation has taken a violent turn. It all happened at a time when there was bumper crop because we do not have a good marketing strategy for agriculture produce. Moreover, the waiver is for small and marginal farmers who do not get institutional loans easily,” he said.

Prem Singh, a farmer in Badokhar Khurd in Banda, said: “Loan waiver doesn’t help. It creates more dissatisfaction. Farmers want lower input costs and higher rates for their produce.”

While the government is still working out the ways to execute loan waiver scheme, voices of protest are growing in the state.

The Rashtriya Kisan Manch (RKM) has warned CM Yogi Adityanath of a Mandsaur-like agitation if he did not resolve the problems of the farmers.

“Farmers are not getting minimum support price (MSP). Loan waiver is not a solution to the problems that plague the farming community,” said national president of RKM Shekhar Dixit.

He demanded that Kisan Ayog, a commission for farmers and agriculture sector, should be constituted in the country.

Referring to the difference between the BJP’s pre-poll promise and the cabinet decision, former UP chief minister and national president of the Samajwadi Party (SP) Akhilesh Yadav said the BJP government had cheated the farmers.

In the poll manifesto, the BJP had promised loan waiver to small and marginal farmers but the cabinet decision fixed a ceiling of up to Rs 1 lakh.

Read more: Farm loan waivers raise risk of fiscal slippages, inflation: RBI

The scope of UP government’s loan waiver is also less than the UPA-I government at the Centre. The UPA’s loan waiver covered both crop loans and investment loans but the UP government’s scheme covered crop loan only.

As it is almost certain that the Yogi government will go for public borrowing to meet the loan waiver expenses, the state may sink deeper into debt trap.

The state government’s total debt was Rs 2,09,227.32 crore as on March 31, 2012 (the SP government took over on March 15, 2012).

The debt has reached Rs 3,75,049.45 crore as on March 31, 2017.

A decision to borrow more from the market to waive farm loan may push the state government into a debt trap.

“Borrowing is still the best option as the burden is spread over several years,” said Dr AK Singh.

First Published: Jun 10, 2017 15:07 IST