UP farm loan waiver fallout: Now Maharashtra farmers too want it, reluctant to repay debts

After CM Devendra Fadnavis hinted at a waiver, farmers are reluctant to repay their loans anticipating relief from the government.

The growing clamour for farm loan waiver in Maharashtra, in the wake of a similar announcement in Uttar Pradesh, has affected recovery of dues as are reluctant to repay their loan anticipating relief from the government.

Opposition parties and farmers shout slogans during a protest rally from Chanda to Bandra, demanding loan waiver and compensation for crop failure in Nagpur. (HT Photo)

According to bank officials, the debate over debt waiver and Devendra Fadnavis government hinting at a ‘populist’ decision has led to sharp fall in repayment of loan in Maharashtra.

During 2016-17, banks had disbursed farm loan worth Rs 40,000 crore to the state’s 13.7 million farmers. The loan disbursement has been 80% of the overall agriculture credit target which was set at Rs 51,000 crore for the fiscal.

Anticipating non-repayment of loans, the state government has made it clear that those paying their dues will get bigger benefits through different schemes.

“The government plans to bring a scheme under which those farmers repaying their agriculture loan on time will get bigger benefits,” state finance minister Sudhir Mungantiwar told HT.

“What we have seen is a growing tendency among borrowers who are otherwise capable to repay loan but postpone their decision. The repeated loan waiver is hampering the culture of repayment of dues as honest people do not see any incentive in paying back the money they borrowed from the bank,” Rajkiran Bhoir, general manager, Bank of Maharashtra, said.

In western Maharashtra, where farmers produce sugarcane, the recovery of loans has gone down from the previous year, officials said.

Solapur district, which has highest number of sugar factories, recorded farm loan recovery of up to 65% till March, compared to 77% during the previous year, according to district central cooperative bank officials, who did not wish to come on record since they were not authorised to speak to the media.

In Ahmednagar district, farm loan recovery for the outgoing financial year was just 33%, slightly less compared to previous year, an official of Ahmednagar District Central Cooperative Bank, which through its network of agriculture credit societies along with other financial institution distributed agriculture loan, said.

“When there is a demand for farm loan waiver, people naturally prefer to wait, hoping they get relief. But there are many borrowers who repay their dues,” said Charudatta Arkatkar, secretary, State Level Bankers Committee (SLBC), a representative body of all lending institutions in the state.

The fall in loan recovery has been recorded despite a good monsoon this year with the economic survey predicting a 12.5% growth rate for agriculture in 2016-17 from the minus 4.6% in 2015-16.

Congress workers raising slogans with Tamil Nadu farmers during a protest against Centre in Coimbatore on Wednesday, demanding farm loans waiver.

The UP government on Tuesday decided to waive farm loan worth Rs 36,369 crore. The same day Madras High Court, while hearing a plea, asked the Tamil Nadu government to provide relief to all the farmers by waiving farm loan.

Coming under pressure from opposition and ally Shiv Sena, chief minister Fadnavis said his government is in favour of loan waiver and was studying the UP model.

Against growing demand for loan waiver, Reserve Bank of India Governor Urjit Patel cautioned about the “moral consequences” of such a scheme saying, “waivers undermine an honest credit culture”.

Kishore Tiwari, an agricultural activist and chairman of government constituted task-force on recommending solutions to agrarian crisis, said the relief should be offered only to farmers affected by drought and those who can’t repay dues.

“There is no point extending the farm loan waiver to all the farmers the way government did in 2008. Only those who are financially in bad shape due to successive droughts and other reasons should be given relief,” he said.