Data Focus

States drag their feet on farm-loan waivers

Radheshyam Jadhav Pune | Updated on March 24, 2021

After making announcements, States don’t push for speedy execution

The Tamil Nadu government in 2016 announced a ₹5,318-crore loan-waiver scheme for small and marginal farmers who had taken loans taken from cooperative banks as on March 31, 2016.

After issuing a loan-waiver notification in May 2016, it took almost six years for the government to fulfil its promise. Till September last year, ₹4,529 crore had been waived, and the State achieved the final target only ahead of the upcoming State elections.

Political move?

But Tamil Nadu is not the only State to drag its feet over loan waivers. The Telangana and Andhra Pradesh governments announced loan waiver schemes in 2014, and continued the schemes till last year. Incumbent governments in Uttar Pradesh and Maharashtra announced loan waiver schemes in 2017 ahead of State elections, and the execution of these still continues.

“The timing of loan-waiver announcements during election cycles points to more of political expediency of such waiver programmes that does not really address the long-term issues in agriculture. The nationwide loan-waiver programmes of 1990 and 2008 were announced by the Union government in the run-up to the parliamentary elections of 1991 and 2009, respectively. Similarly, eight out of the 10 loan-waiver announcements since 2014 were made within 90 days of their respective States’ election results,” says RBI’s Report of the Internal Working Group to Review Agricultural Credit.

The data provided by NABARD and States to the Central government show that after making popular loan-waiver announcements, State governments don’t push for its speedy execution, and farmers fail to get immediate relief.

The RBI report adds that the instances and the scale of farm loan waivers have seen an unprecedented increase since 2014-15. This surge in loan waivers is driven by State governments — 10 States have announced loan waivers aggregating ₹2.4-lakh crore since 2014-15.

This is significantly higher than the two nationwide loan-waiver programmes — ₹10,000-crore waiver programme in 1990 and ₹52,500-crore programme in 2007-08.



Delayed execution

As much-talked-about crop loan-waiver schemes don’t materialise on the ground, the loan burden multiplies as distressed farmers opt for new loans, says Pandurang Chavan, a farmer. “By the time the State government waives the loan, distressed farmers take more loans due to crop failures, drought or natural disasters. Immediate execution of loan waiver schemes could help farmers, but banks and government babus create all kinds of hurdles for farmers to get benefits of loan-waiver schemes” he added.

The RBI data show that, cumulatively, for all States, the share of farm loan waivers in total State governments’ expenditure saw a significant rise in 2017-18 and 2018-19.

This could potentially depress the State governments’ capital expenditure in agriculture. Further, the deferment of Budgetary provisions to meet the expenditure towards the announced loan waivers result in an increase in NPA levels. Consequently, it falls on banks to extend fresh loans, according to the RBI report.

Published on March 24, 2021

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