Maharashtra farm loan waiver will help BJP but leave state finances in tatters

Mumbai city news: Move would give BJP a huge advantage in the state; but even Fadnavis acknowledged an increased financial burden on government

The decision taken by the Devendra Fadnavis government on Saturday to waive off farm loans of Rs34,000 crore is likely to have a serious impact on financial health of the state government, but could yield political dividends for the ruling Bharatiya Janata Party.

Maharashtra chief minister Devendra Fadnavis addresses a press conference on loan waiver, in Mumbai on Saturday. (PTI)

The state government has decided to waive off loans of 40 lakh farmers with a cap of Rs1.50 lakh and extend the incentive to farmers who have been repaying their loans. This amount will be equivalent to 25% of the repaid loan with an upper limit of Rs25,000.

“This will cover 90% of farmers in the state,” said Fadnavis while announcing the decision. It is the highest farm loan waiver announced by any state in India’s history, he added.

Farmers form a significant chunk of voters in the state and if majority of them are happy with the waiver, it will become a huge political advantage for Fadnavis and the BJP.

Sources close to Fadnavis say he was initially reluctant to take the decision as he was wary of the financial implications on the state. When the demand was first raised, he had even pointed out how loan waiver would not be a long term solution to farmers’ problems. Further, he was also not sure about the timing of the same. “Such decisions are always political and taken closer to the elections like the Congress did ahead of 2004 general elections,” said a key BJP functionary.

“We did not want to be painted as a party that is not farmer-friendly. Further, we were alarmed when there were attempts to bring all farmers’ outfits together to intensify the protests,” the functionary said.

The decision has now taken away an effective political tool from the hands of the Opposition as well as BJP’s troublesome ally Shiv Sena. The Opposition as well as some farmers’ outfits are not happy with certain conditions such as limit of Rs 1.5 lakh put by the government to write off loans and may even continue protests.

But that is not Fadnavis’ concern. He can handle the same politically. His problem will be the financial burden on state exchequer when the state government already has debt of over Rs4 lakh crore.

Fadnavis himself has admitted to HT that the farm loan waiver would place a stress on the finances of the state for two years. It also means the state government will have fewer funds to spend on developmental work in the run-up to the elections. Finance minister Sudhir Mungantiwar will have to do a tightrope walk while preparing the next annual budget for the state. The Goods and Services Tax has taken away his right to increase taxes at will.

In this background, the decision has now led to fresh speculations that there could be mid-term Assembly elections in Maharashtra.

“Such decisions are taken closer to the elections to take political advantage of the same,” said a senior BJP minister. “If the elections are held as scheduled in 2019, there would be several issues we will have to face as ruling party. The political advantage we get because of the loan waiver may not matter much after two years. If there is bad monsoon next year, there could be fresh demand for loan waiver,” he opined.

So are the mid-term assembly polls likely by the end of the year? Last week, BJP chief Amit Shah indicated that they were not in a hurry for a mid-term poll. But in politics, things change. This is why nobody in the BJP is ruling it out completely.