The Hindu Business Line : Wider waiver

Nearly 4.3 crore farmers are likely to get a reprieve with the loan waiver, but it would be naïve to believe that such schemes will automatically transform agriculture.

Just as the dust had settled on the controversy over the Debt Waiver and Debt Relief Scheme for farmers announced as part of the 2008-09 Budget, the Government may have willy-nilly raked it up again. The Finance Ministry has expanded the scheme’s scope and coverage. Small and marginal farmers will get a full debt waiver of their short-term crop loans as well as all the overdue instalments on the investment credit. Other farmers (with more than 5 acres) will get a one-time settlement, with a waiver of 25 per cent of the debt, while the category of ‘other farmers’ in 237 drought-prone districts can look forward to a more favourable one-time relief of 25 per cent, or Rs 20,000, whichever is higher. Limiting the waiver on the basis of acreage alone was unfair to farmers in dry belts where large expanses do not necessarily imply high output or reliable incomes for owners. The Government has done well to correct that bias. Activities allied to agriculture, such as dairy, poultry, sheep-rearing, and so on are included. Nearly 4.3 crore farmers are likely to get the reprieve. Result? The cost is set to balloon by nearly a fifth to Rs 71,680 crore, versus the preliminary estimate of Rs 60,314 crore.

The banking institutions concerned — scheduled commercial banks, regional rural banks and co-operative credit institutions — have reason to smile; their balance sheets will be cleaner once the government pays for the loans, even those considered, but not officially labelled, non-performing assets or bad/doubtful debts. Given the management track-record of some of the institutions and the huge amounts to be written off — the money will come from future taxpayers — it is critical that the implementation is above board and transparent, and that it is audited. The Finance Minister is on record that the key to the scheme’s implementation is the accuracy of the list of borrowers or beneficiaries. Importantly, to reimburse the lending institutions, the Government has created a Farmers’ Debt Relief Fund, with an initial corpus of Rs 10,000 crore. Mr Chidambaram has stated that Rs 40,000 crore (instead of Rs 25,000 crore) will be provided this year; and further instalments in subsequent Budgets until 2011-12.

Even as the Government offers the waiver as succour to the crores of farmers stuck in an increasingly unviable occupation, it must realise that precious little has been done to make conditions any better for farming in recent years. Quality inputs, sufficient and timely irrigation and efficient market access are what farmers deserve, yet few have them all. It would be naïve to believe that schemes such as the loan waiver will automatically transform agriculture or result in higher output.

Related Stories:
Loan waiver gets bigger with inclusion of ‘other’ farmers
The waiver and its burden
After the debt waiver, what?

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