The Hindu Business Line : Loan waiver gets bigger with inclusion of ‘other’ farmers

New Delhi, May 23 The Centre on Friday unveiled the guidelines for the implementation of its debt waiver/relief scheme for farmers as proposed in the 2008-09 Union Budget.

The scheme, to be taken up by banks before June 30, is expected to cost the exchequer a total of Rs 71,680 crore against Rs 60,000 crore projected initially in the Budget.

The Agricultural Debt Waiver and Debt Relief Scheme, 2008, approved by the Union Cabinet here, covers all direct agricultural loans by banks to farmers disbursed between March 31, 1997 and March 31, 2007 and overdue as on December 31, 2007 and remaining unpaid until February 29, 2008.

The banks include scheduled commercial banks, regional rural banks, co-operative credit institutions (inkling urban credit banks) and local area banks, while the loans cover crop loans and investment credit for both agricultural and allied activities (dairy, poultry farming, bee-keeping, etc).

The beneficiary farmers have, in turn, been clubbed under two broad categories of ‘marginal and small’ and ‘other’ farmers. The former have been identified as cultivating up to 2.5 acres (‘marginal’) or 5 acres (‘small’) of land, whether as owners or tenants or sharecroppers (and not solely as owners, going by the original Budget proposal).

The ‘marginal and small’ farmers would be granted a complete waiver of the eligible loan amounts due (together with the applicable interest). According to the Finance Minister, Mr P. Chidambaram, an estimated 3.69 crore ‘marginal and small’ accounts would be covered under the scheme, involving an overdue amount of about Rs 60,416 crore. The Budget had assumed there will be three crore ‘marginal and small’ farmers (who were strictly landowners) beneficiaries and an outgo of Rs 50,000 crore under this category.

The ‘other’ farmers, on the other hand, (cultivating as owner or tenant or share cropper above 5 acres) will be entitled to a 25 per cent waiver. They will be given a one-time settlement (OTS) rebate of 25 per cent on the overdue loans, subject to their paying the balance 75 per cent in not more than three instalments by June 30, 2009. The amount of OTS relief will be credited upon these farmers paying their share in full, with banks not allowed to charge any interest on the eligible amount between February 29, 2008 and June 30, 2009.

The ‘other’ farmer accounts eligible for the OTS relief have been estimated at 59.75 lakh, with an overdue amount of Rs 31,839 crore, translating into a cash outgo of Rs 7,960 crore for the Centre (@ 25 per cent). But there is an additional sweetener: In respect of 237 identified (mostly dry) districts, the OTS relief will be 25 per cent of the overdue amount or Rs.20,000 whichever is higher.

Thus, if a farmer’s overdue was Rs 60,000, he would have got Rs 15,000 written off in the original proposal, which will now be enhanced to Rs 20,000. “In many dry and un-irrigated areas, holdings are usually more than two hectares. So, if you limit the relief to 25 per cent, it would not benefit a large number of farmers”, Mr Chidambaram noted.

The modified OTS relief package in the 237 districts would cost another Rs 3,304 crore. That would take the total package – the waiver/relief sums to be reimbursed from taxpayers’ money to the banks – to Rs 71,680 crore.